EXHIBIT E United States Securities and Exchange Commission Washington, D .C . 2054 9

FORM 10-Q/A

Amendment No . 1

(Mark One )

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF TH E

SECURITIES EXCHANGE ACT OF 193 4

For the quarterly period ended June 30, 2004 ------OR

] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF TH E

SECURITIES EXCHANGE ACT OF 1934

For the transition period from t o

Commission file number 0-27354

Impax Laboratories, Inc . ------(Exact name of registrant as specified in its charter)

Delaware 65-0403311 ------(State or other jurisdiction of (I .R .S . Employer incorporation or organization) Identification No .)

30831 Huntwood Avenue - Hayward, California 9454 4 ------(Address of principal executive offices) (Zip code)

Registrant's telephone number including area code (510) 476-200 0 ------

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 registrant is an accelerated filer (as defined in Rule 12b-2 of the Act .) Yes X N o

The number of shares outstanding of the registrant's common stock as o f

July 30, 2004 was approximately 58,464,926 . ------EXPLANATORY NOTE

This amendment is being filed to reflect the restatement of the Company's condensed financial statements, as discussed in Note 14 thereto, and other information related to such restated financial statements . Except for Items 1, and 4 of Part I, no other information included in the original report on Form 10-Q is amended by this Form 10-Q/A .

Items not being amended are presented for the convenience of the reader only . This report continues to be presented as of the date of the original Quarterly Report on Form 10-Q and the Company has not updated the disclosure in this report to a later date . Therefore, this amendment should be read together with other documents that the Company has filed with the Securities and Exchange Commission subsequent to the filing of the original Quarterly Report on Form 10-Q . Information in such reports and documents updates and supersedes certain information contained in this amendment . IMPAX LABORATORIES, INC .

INDEX TO FORM 10-Q/ A

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 200 4

PART I . FINANCIAL INFORMATION

PAO.

Item I . Financial statements :

Condensed Balance Sheets as of June 30, 2004 ( as restated) and December 31, 2003 (unaudited) ...... 1

Condensed Statements of Income for the Three Months and Six Month s Rnded June 30, 2004 (as restated ) and 2003 (unaudited ) ...... 2 Condensed Statements of Cash Plow for the Six Months Boded June 30, 2004 (as restated ) and 2003 (unaudited) ...... 3

Notes to Financial statements (unaudited) ...... 4

Item 2 . Management's Discussions and Analysis of Financial Condition and Results of Operations ...... 13

Item 3 . Quantitative and Qualitative Disclosures About Market Risk ...... 23

Item 4 . Controls and Procedures ...... 2 4

PART II . OTHRR INFORMATION AND SIOHATURRS

Item 1 . Legal Proceedings ...... 25 Item 2 . Changes in Securities, Use of Proceeds, and Issuer Purchases of Squity securities ...... 30

Item 4 . Submission of Matters to a Vote of Security Holders ...... 30 ■ Item i . Ixhibit and Reports on Form I-K ...... 31

Signatures ...... 32

Certifications ...... 3 3

i PART I - FINANCIAL INFORMATION

ITEM 1 . FINANCIAL STATEMENTS

IMPAX LABORATORIES, INC . CONDENSED BALANCE SHEETS (UNAUDITED ) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA )

JUNE 30, DRCV)IR 31 , 2004 200 3

(AS RESTATED ASSETS SRI NOTE 14 )

Current assets : Cash and cash equivalents $ 53,312 $ 15,50 5 Short team investments 45,24 4 Accounts receivable, net 19,521 9,15 5 Inventory 37,102 26,47 9 Prepaid expenses and other assets 2,692 1,427

Total current assets 155,171 Restricted cash 55,296 10,000 Property, plant and equipment, net 41,511 35,13 1 ■ Investment and other assets 3,944 1,325 Goodwill, net 27,574 27,574 Intangibles, net 167 379

Total assets $ 232,25 7 $ 132,70 6 ...... LIABILITIES AND STOCID0OLDRRS ' RQDITY

Current liabilities . Current portion of long-term debt $ 915 $ 1,066 Accounts payable 22,312 22,763 Revolving line of credit 5,000 7,642 Accrued expenses and deferred revenues 13,283 10,87 2 ...... Total current liabilities 41,510 42,365 Convertible senior subordinated debentures 95,000 -- Refundable deposit from Teva 5,000 Long Corm debt 7,507 5,554 Deferred revenues and other liabilities 2,760 2,67 9

Total liabilities 146,785 59,09 9

Commitments and Contingencies Handatorily redeemable convertible preferred Stocks series 2 mandatory redeemable convertible preferred stock, $ 0 .01 par value 0 shares outstanding at June 30, 2004 , and 75 , 000 shar es outstanding a t December 31 , 2003 , redeemable at $ 100 per share -- 7,500

Stockholders ' equity : Co mmon stock , $ 0 .01 par value , 90,000,000 shares authorised and 59,463 , 237 and 55 , 307,136 shares issued and outstanding at June 30, 2004 , and December 31, 2003 , respectively 564 553 Additional paid-in capital 163 .930 170,104 Accumulated deficit (99,012) (104,549 ) ------Total ■ tockholders ' equity 55,502 66 .108

Total liabilities and stockholders' equity $ 232,287 $ 132,70 6 ......

The accompanying notes are an integral part of these financial statements .

1 IMPAX LABORATORIES, INC . CONDENSED STATEMENTS OF INCOME (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA )

Three Nontha Ended Six months Ended June 30 , June 30 ,

2004 2003 2004 2003 (As restated - (As restated - see note 14 ) see Note 14 )

Net sales $ 30,033 $ 13,46 0 $ 61,537 $ 24,52 6 Revenue from reversal of refundable deposit from Teva 2,500 . . Other revenue s 541 607 1,07 2 96 6 ------Total revenues 30,564 14,06 7 65,10 9 25,49 2 cost of sales 16,537 9,321 ••' 37,067 17,46 6

Gross margin 12,02 7 4,746 21,022 9,02 4 Research and development 5,439 3,560 10,323 7,10 7 Reimbursements from Teve (76) (22) ( 69) (154 )

Research and development, net 5,361 3,536 10,234 6,95 3 Patent litigation expenses 2,22 6 767 3,646 99 5 Selling expenses 711 43 6 1,437 1,006

General and administrative expenses 3,117 2,053 6,466 4,205 Other operating income (expense), net 4 10 11 21

Net income (loss) from operations 614 (2,090 ) 6,046 (51114 ) Interest incom e 271 70 327 11 2 Interest expens e (564 ) (264) (636) (495 )

Net income (loss) before provision for income taxes $ 321 s (2,264 ) $ 5,537 $ ( 5,497 )

Provision for income taxes

Net income (logs) $ 321 $ (2,264) $ 5,537 $ (5,497 )

Earnings per share, Basic $ 0 .0 1 $ (0 .05) $ 0 .10 $ (0 .11 ) Dilute d $ 0 .01 $•• •(0 .05 ) $ 0 .0 9 $ (0 .11 ) ------Weighted average common shares outstanding, Basi c 56,152,703 50 .606,445 57,543,76e 49 ,250,04 9 Diluted • 62,417 .454 • 5050,608,445.606 61 . 60 . 519 49 250,04 9

The accompanying notes are an integral part of these financial statements .

2 IMPAX LABORATORIES, INC . CONDENSED STATEMENTS OF CASH FLOW S (UNAUDITED) (DOLLARS IN THOUSANDS)

six MONTHS amLD JUNE 30 , ------2004 200 3

(AS RESTATED - 992 ROTS 14 )

CASH PLOWS FROM OPERATING ACTIVITIES : Net income / (10ee ) $ 5,537 $ (5,497 ) Adjustments to reconcile net income (loss) to net Cash used by operating activities : Depreciation and amortization 2,062 1 , 76 2 Reversal of refundable deposit from Teva (2,500) Non-cash compensation charge (options) 67 42 9 Change in assets and liabilities : Accounts receivable (9,936) (2 , 060 Inventory ) (6,623 ) (4,564 ) Prepaid expenses and other assets (172) Accounts payable (127 ) (471) Other liabilities 2 , 65 3 2,300 (981 )

Net cash provided by (used in) operating activities (11 1 696 ) (6,165 ) ...... CASH FLOWS PROM INVESTING ACTIVITI98 : Purchase of short term investments (45,244) (13,920 Purchases of property and equipment ) (6,269) (1,125 ) Net cash (used in) provided by investing activities (51,513) (15,043 ) ------•- CASH FLOWS FROM FINANCING ACTIVITIES : ------Revolving line of credit borrowings (repayments) (2,642) 1,77 9 Additions to long-term debt -- 69 6 Repayment of long-term debt (1,501) (412 ) Proceeds from convertible debentures 95,00 0 Capitalised Financing Costs (3,612 ) Proceeds from sale of comma stock -- 23,12 4 Reversal of Restricted Cash 10,000 - - Proceeds from issuance of common stock (upon exercise o f stock options and warrants) 3,771 27 7 ------Net cash provided by financing activities 101 1 016 25,66 4 Net increase in cash and cash equivalents 37,607 2,654

Cash and cash equivalents, beginning of the period $ .15,505 $ 10,21 9 Cash and cash equivalents, and of the quarter $$~53,312'5 $1 112,672 7 Cash paid for interest $••••266 $••••497 C ash paid for income taxes ' : ......

The accompanying notes are an integral part of these financial statements .

3

Supplemental disclosure of non-cash financing activities : In January 2004, the Company issued 160,751 shares of our common stock t o Teva to satisfy the remaining $2 .5 million refundable deposit to Teva . Also, in January 2004, the holders of the Series 2 Preferred Stock converted their entire 75,000 preferred shares into 1,500,000 shares of common stock . NOTES TO CONDENSED FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 2004 AND JUNE 30, 2003 (UNAUDITED )

NOTE 1 . These condensed financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission . Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations ; however, the Company believes that the disclosures Cr. adequate to make the information presented not misleading . These condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K . The results of operations for the three and six months ended June 30, 2004 are not necessarily indicative of the results of operations expected for the year ending December 31, 2004 .

Impax Laboratories, Inc . ("IMPAX ." "we," "us," or "the Company") focuses on the development, manufacturing, and marketing of specialty pharmaceutical products utilising its own formulation expertise and drug delivery technologies . As of June 30, 2004, the Company is marketing thirty-three generic pharmaceuticals, which represent dosage variations of fourteen different pharmaceutica l compounds, and has fourteen applications under review with the Food and Drug Administration (FDA), including five tentatively approved . Eleven of these pending filings ware filed under Paragraph Iv of the Hatch-Waxman Amendments . The Company has approximately twenty-four other products in various stages of development for which applications have not yet been filed .

Except for the six months ended June 30, 2004, we have experienced operating losses and our future profitability continues to be uncertain . we have also experienced negative cash flow from operations . As of June 30, 2004, our accumulated deficit was $99,012,000 and we had outstanding indebtedness in an aggregate principal amount of $108,422,000 . To remain operational, we must, among other things :

o obtain FDA approvals for our products ;

o prevail in patent infringement litigation in which we are involved ;

o successfully launch our new products ; and

o comply with the many complex governmental regulations that deal with virtually every aspect of our business activities .

We expect to incur significant operating expenses, particularly for research and development, for the foreseeable future in order to execute our business plan . No, therefore, anticipate that such operating expenses, as well as planned capital expenditures for the next twelve months, of $18 to $22 million, primarily in plant capacity expansion, will constitute a material use of our cash resources .

To date, the Company has primarily funded its research and development and other operating activities through equity, debt financings and strategic alliances .

CRITICAL ACCOUNTING POLICY RELATED TO REVENUE RECOGNITION

The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin ("SAB") 101 issued by the SEC in December 1999 . We recognize revenue from the sale of products when the shipment of products is received and accepted by the customer . Provisions for estimated discounts, rebates, chargebacks, returns and other adjustments are provided for in the period the related sales are recorded . In December 2003, the SAD 104 was issued by the SEC . This bulletin clarifies portions of Topic 13 of the Staff Accounting Bulletin to be consistent with current accounting and auditing guidance and SEC rules and regulations, and revises accounting guidance contained in SAAD101 related to multiple element revenue arrangements of Emerging Issues Task Force (EITF) No . 00-21 superseded as a result of the issuance .

Emerging Issues Task Force (EITF) No . 00-21 supplemented SAS 101 for accounting for multiple element arrangements . The Company has entered into several strategic alliances that involve the delivery of multiple products and services over an extended period of time . In multiple element arrangements, the Company must determine whether any or all of the elements of the arrangement can be separated from one another . If separation is possible, revenue is recognized for each deliverable when the revenue recognition criteria for the specific deliverable is achieved . If separation is not possible, revenue recognition is required to be spread over an extended period . Under SITP No . 00-21, in an arrangement with multiple elements, the delivered item should be considered a separate unit of accounting if all of the following criteria are set :

the delive red item has value to the customer on a standalone basis, there is objective and reliable evidence of the fair value of the undelivered it" ; and if the arrangement included a general right of retu rn, or whether delivery or performance of the undelivered item is considered probable .

The Company reviews all of the terms of its strategic alliances and follows the guidance from SA1104 and SIT? No . 00-41 for multiple element arrangements . Upfront and milestone payments from these strategic alliances are deferred and recognised over the life of the agreements as the Company fulfills its contractual obligation to manufacture and supplies products during this period . In addition, in some agreements, the Company receives and records royalty revenue based on a percentage of the strategic partner's total sal es to their customers of the products supplied by IMPAX .

In June 2001, the Company entered into a Strategic Alliance Agreement with a subsidiary of lava for twelve controlled-release generic pharmaceutical products . The agreement granted Teva exclusive U .S . prescription marketing rights for these products for a period of ten years from the date of Teva' ■ first sale of the products . Under the terns of the agreement, Teva has sole and exclusive right to determine all terms and conditions of sale to its customers, including pricing, discounts, allowances, price adjustments, returns and rebates .

Revenues from product sales for these products under our strategic alliance are recognised at the time title and risk of loss transfers to Teva's customers . During the six months ended June 30, 2004, the Company commenced shipping its Bupropion Hydrochloride 100 y and 150 mg Controlled Release Tablets . Teva ships the Bupropion products to its customers and reports the results on a monthly basis . lava provides to IMPAX a financial report detailing its gross sales l es s applicable chargebacks, rebates and other credits to arrive at net sales, cost of sal es information and gross margins for the Bupropion products . The Company is endeavoring to take steps under the Strategic Alliance Agreement to ensure that all such adjustments granted by its strategic partner in the future are reported to the Company on a timely basis . The information on the financial report is used by IMPAX to record its monthly revenue for the Bupropion products . These steps include, but are not limited to, regular discussions with Teva management regarding their monthly financial reports to IMPAX on our products marketed by lava via monthly teleconferences and quarterly meetings . These discussions will cover all the areas of revenue recognition for these products, including but not limited to, sales credits, product returns and internal controls over Teva' ■ financial reporting to IMPAX . Our procedures will include a review of applicable documentation for IMPAX revenue sharing . The Audit Committee of the Company's Board of Directors may take additional steps as deemed necessary . Under the contract terms, the Company has the option to perform an annual audit with our strategic partner . We began estimating returns for prescription products marketed by our strategic partners, such as Teve, called "Rx Partners," based on our internal returns analysis and historical industry statistics . The amount of revenue that IMPAX earns is based on reimbursement of manufacturing costs and or a fixed margin percentage .

Under the July 2003 aclusivity Transfer Agreement with Andrx and Teva pertaining to the lupropion Hydrochloride products, Andrx is entitled to certain payments for the sales of the 150 mg strength for a 240-day period from the product launch date . These payments are made directly by Teva to Andrx .

BARMIMDS PUR SHARi (Spa ) Basic earnings per share is computed by dividing net income by the weighted average common shares outstanding . Diluted earnings per share is based on the treasury stock method and is computed by dividing net income by the weighted average number of common shares and weighted average dilutive potential common shares outstanding, assuming the exercise of all in-the-money stock options . A reconciliation of the numerators and denominators of basic and diluted earnings per share consisted of the following (in thousands, except per share aeounts) t

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Included in the computation of fully diluted earnings per share are outstandin g stock options and warrants with an exercise price l es s than the average market price of the common shares for the period . Excluded from the computation of diluted earnings per share are outstanding common stock options with an exercise price greater than the average market price of the common shares for the period reported . For the three month period ended June 30, 2004 , excluded from the computation of diluted earnings per share were stock options to purchase 969,389 common shares . For the six month period ended June 30, 2003, excluded from the computation of diluted earnings per share were stock options to purchase 969,389 common shares .

The effect of approximately 3 .4 million shares related to the assumed conversion of the $95 million convertible senior subordinated debentures has been excluded from the computation of diluted earnings per share for the three and six months ended June 30, 2004 as none of the conditions that would permit conversion have been satisfied .

STOCK-BASED EMPLOYEE COMPENSATION

The Company accounts for stock-based employee compensation arrangements in accordance with provisions of Accounting Principles Board (APB) Opinion No . 25, "Accounting for Stock issued to Employees ." Compensation cost for stock options, if any, is measured as the excess of the quoted market price of the stock at the date of grant over the amount an employee must pay to acquire the stock . The Company has adopted the disclosure only provisions of SFAS No . 123, "Accounting for Stock- Based Compensation" and SPAS No . 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - An Amendment to FASB Statement No . 123 . "

Had compensation cost for the Company's Plans been determined based on the fair value at the grant dates for the awards under a method prescribed by SFAS No . 123, the Company's income and ea rnings per share would have been decreased to the pro forma amounts indicated below (in thousands, except per share amounts) :

Three Month. laded B1" Month" 6,d"d Jun" 70, Jun" l0 ...... _ . ._ ...... 7004 7007 2004 2003 ......

Net i"cw (1w"1, "" reported 0 331 817,7,41 a 5,537 $ (7,497) Add . NtOCk-baeod *Via"* compensation Included in report ed net inns , .at Ot related tax OCC"ct0 07 -- 07 --

DWUe, Tot"1 "toe"-b.""d ".ploy"" Co.p .n0"tio0 .op.0"" 4KOr .iod under W . orvol .. based r .thod for "11 "card", 501 related tea .10 .et" (1,"!0) .. . (946 1 (7,!!! ) (1, goal ...... Pro torw. set inc ... (10"") $11,507) 017,110. .. . ) 0 7,07! $ (7,10! 1

Zeroing" pet slur . , Basic - an reported 1 0 .01 0 (0 .00) $ 0 .10 $ (0 .11 )

basic pro fore $ (0 .03) 77 ;, s 0 .00 s 70 .1 s 1

Diluted • as reported 0 0 .01 0 (0 .0 5 ) 0 0 .0 9 $ 10 .11 )

Diluted - pro Corr 0 10 .07) 77700) ! I9 .1S 1 L .2.2.

The Company calculated the fair value of each option grant on the date of the grant using Black-Scholes pricing method with the following assumptions : for the six months ended June 30, 2004 and 2003, the dividend yield was 0% and 0% ; the weighted average expected option term was five years ; risk-free interest rate was 3 .5% and 2 .8% ; the stock volatility for the six months ended June 30, 2004 and 2003 was 78% and 69%, respectively . The weighted average fair value of options for June 30, 2004 and 2003 was $14 .17 and $2 .87, respectively .

The Company reports both basic earnings per share, which is based on the weighted-average number of common shares outstanding, and diluted earnings per share, which is based on the weighted- average number of common shares outstanding and all dilutive potential common shares outstanding . NOTE 2 . Convertible Senior Subordinated Debenture s

On April 5, 2004, the Company issued and sold $95 .0 million in aggregate principal amount of its 1 .250% convertible senior subordinated debentures due 2024 . The debentures were sold by the Company to Citigroup Global Markets Inc ., Nachovie Capital Markets, LLC and First Albany Capital Inc ., an initial purchasers, in a private placement exempt from registration under the Securities Act of 1933, as amended (the "Securities Act") . We have been advised by the initial purchasers that they have resold, and/or intend in the future to resell, the debentures to "qualified institutional buyers" (as defined in Rule 144A promulgated under the Securities Act) in transactions exempt from the registration requirements of the Securities Act in reliance on Rule 144A .

The issuance and sale of the debentures resulted in net proceeds to the Company of approximately $91,388,000 . These proceeds are being used for general corporate purposes, including working capital requirements, manufacturing of our products and research and development .

The debentures bear interest at the rate of 1 .250• per year . Interest on the debentures is payable on April 1 and October 1 of each year, beginning on October 1, 2004 . The debentures are convertible by holders into shares of our common stock at a conversion price of $28 .08 per share (which are subject to adjustment upon certain events, but represented a 30% premium over our stock price at the time the debentures were issued) . The debentures are convertible by holders into shares of our common stock if : (1) the price of our common stock reaches a specific threshold, (2) the trading price for the debentures falls below certain thresholds ; (3) the debentures have been called for redemption ; or (4) certain corporate transactions occur .

The debentures mature on April 1, 2024, unless earlier redeemed, repurchased or converted . Before April 5, 2007, we may redeem some or all of the debentures if the price of our common stock reaches a specific threshold, at a redemption price that includes an additional payment on the redeemed debentures equal to $230 .77 per $1,000 principal amount of debentures, less the amount of any interest actually paid or accrued and unpaid on the debentures . on and after April 5, 2007, the Company may redeem some or all of the debentures at certain specified redemption prices .

The debentures are the Company's unsecured obligations and are subordinated in right of payment to ■ ll of the Company's existing and future senior indebtedness . on April 1, 2009, April 1, 2014, and April 1, 2019, and under certain circumstances, holders of the debentures will have the right to require us to repurchase all or any part of their debentures at a repurchase price equal to 100% of the principal amount of the debentures, plus accrued and unpaid interest and liquidated damages, if any, to, but excluding the repurchase date .

In June 2004, the PASS discussed BITE 04-08, The Effect of Contingently Convertible Debt on Diluted Earnings Per Share . The EITF task force has proposed that companies count the shares that could be issued upon conversion of securities like the Company's debentures when calculating fully diluted per share earnings . Had 6ITF 04-08 been effective as of June 30, 2004, the Company's income and earnings per share would have been as indicated below ;

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In connection with the offering of the debentures, we filed a shelf registration statement on June 14, 2004 with the Securities and Exchange Commission (SEC) covering resales of the debentures and of the common stock issuable upon conversion of the debentures . If the registration statement on Form S-3 is not declared effective by the SEC by October 4, 2004, then the interest rate payable on the debentures will be subject to increase . NOTE 3 . Recent Accounting Pronouncement s

In January 2003 , the PASS issued PASS Interpretation No . 46 (" FIN 46"), "Consolidation of Variable Interest Entities ." FIN 46 clarifies the application of Accounting Research Bulletin No . 3 1, "Consolidated Financial Statements," to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties . FIN 46 applies immediately to variable interest entities created after Janua ry 31, 2003 , and to variable interest entities in which an enterprise obtains an interest after that date . It applies in the first fiscal year or interim period beginning after June 15, 2003 , to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003 . FIN 46 applies to public enterprises as of the beginning of the applicable interim or annual period . On October 8, 2003, the PASS decided to defer PIN 46 until the first reportin g period ending after December 15 , 2003 . The provisions of this interpretation did not have a material impact on the Company ' s financial condition or results of operations ,

In December 2003 , the PASS issued PIN No . 46R , Consolidation of Variable Interest Entities , clarifying the application of Accounting Research Bulletin No . 51, Consolidated Financial Statements , to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support . The provisions of this Interpretation do not have a material impact on the Company ' s financial condition or results of operations .

In December 2003 , the PASS revised SFAS 132, "Employers' Disclosure About Pensions and Other Post Retirement Benefits ." This Statement does not change the measurement or recognition of those plans required by PASS 87 , " Employers' Accounting for Pensions ," and No . 106, "Employers ' Accounting for Post Retirement Benefits Other than Pensions .' This Statement retains the disclosure requirements contained in PASS No . 132, "Employers ' Disclosure about Pensions and Other Post Retirement Plans .* The provisions of this Statement do not have a material impact on the Company ' s financial condition or results of operations . During the six months ended June 30, 2004 and 2003 , the employer 401-K match was $ 218,000 and $150 , 000, respectively .

In Februa ry 2004 , the PASS issued revised PASS Staff Positions (" FSP") pertaining to FIN 46(R) . The revised FSPS replace certain previously issued FIN 46 FSP for entities to which FIN 46 ( R) is applicable . This revision to FIN 46 did not have a material impact on the Company ' s financial condition or results of operation .

In February 2004 , the PASS revised SFAS 133, Accounting for Derivative Instruments and Hedging Activities for Implementation issue S2L, A1J, and C6 . The revisions to SFAS 133 did not have a material impact on the Company's financial condition or results of operation .

In June 2004, the FASB discussed SIT? 04-08, The Effect of Contingently Convertible Debt on Diluted Earnings Per Share . The EITF task force has proposed that companies count the shares that could be issued upon conversion of securities like the Company ' s debentures when calculating fully diluted per share ea rnings . This EITP is not yet effective . Howe ver , we disclosed in Note 2 the potential effect of this SITF on the Company's fully diluted BPS calculation .

NOTE 4 . Our gross receivables and related deductions activity for the six months ended June 30, 2004 and 2003 , and the year ended December 31, 2003 was :

C . w"w r•w

Juw ,, . W- r Ii . 11• aoae•1 No0 a001 200

a...... re• ,.a•l.rl. a s .sa . a u .la a 1).OR Y•• : ..r• r r s 1) .a)al Ia .t.11 Ia.,I, ass . Ww0 Y•r"n.w 10 . ..)1 I1 .a0e1 1 ..1011 Y.•~ qbr MWiIM• lea tl 1)aol 1,051

Mt aeaw•t• ,w•1v. Is 1 10 . .31 a a,4N • 5,200 ......

Other deductions include allowance for disputable items, doubtful accounts, and cash discounts .

Net accounts receivable balance at June 30, 2004 includes $5,022,000 due from Teva as compared to zero at December 31, 2003 . Chargebacks and Rebates Accrual activity for the six months ended June 30, 2004 and 2003, and the year ended December 31, 2003 was :

CHARGEBACKS ACCRUAL

six Months Ended ...... Year Ended June 30, June 30, December 31 , (in $0008) 2004 2003 2003

Beginning balance $ 4 .101 $ 1,373 $ 1,37 3 Add, Provision related to sales made in current period 5 ,962 3 1354 10,57 1 Leas, Credits issued during the current period (5,520) (3,527) (7,843 )

Ending Balance $ 4,543 $ 1,200 $ 4,10 1 ...... ------......

REBATES ACCRUAL

Six Months Ended ...... Year Ended June 30, June 30, December 31 , (in $0008) 2004 2003 2003

Beginning Balance $ 2,700 S 11525 $ 1,52 5 Addy Provision related to sales made in current period 3,326 2,603 6,66 0 Leos Credits Issued during the Current period (2,394) (2,163) (5,505 ) ...... Ending Balance $ 3,632 $ 2,165 $ 2 1 70 0 ...... ------...... NOTE S . Our inventory consists of the following,

June 30 . December 31, (in $0008) 2004 200 3

Raw materials ...... $ 22 .247 S 9,671 Mork in process ...... 4,256 5 .303 Finished goods ...... 10,599 13 .50 5 ...... $ 37,102 $ 26,479 ......

The Company, as most companies in the generic pharmaceutical industry, may build inventories of certain ANDA related products that have not yet received FDA approval and/or satisfactory resolution of patent infringement litigation, when it believes that such action is appropriate to increase its commercial opportunity .

As of June 30, 2004, the Company's total inventory of $37,102,000 included $5,343,000 in inventories relating to products pending launch while IMPAX awaits receipt of FDA marketing approval and/or satisfactory resolution of patent infringement litigation, as follows :

(in $0008 ) Raw materials $ 5,343 Work in process -- Finished goods --

Total $ 5,34 3

9 NOTE 6 . Intangibles consist of the following :

aal.ftw .5.141 ua . aw.» . en1 ,u , b"'n tw o . . . . un efee .r ......

teWat flfsef W llqW...... I . t • 1 .en $ 3 .051 On WWInS Wvt IL S ...... 12 .eNl 10 .1171

1 Ifl • 11f

Amortization expense was $96 ,000 for the three months and $192,000 for the six months ended June 30, 2004, respectively . Expected amortization expense for 2004 will be approximately $379,000 .

NOTE 7 . ACCRUED EXPENSES AND DEFERRED REVENUE

JW Ia . ue Neo'n •ee f Isu

ta•~ • 1,111 t 4.101 a,.,.N t rtiuw• Lil l 1,101 Yeru35 1Lrl.. W ~ yn.l .y W.. 2,01 1 1 .400 W.l W frotu.IWl 0. 1,11 . l .f / t YefW01.15. . 5. tWtr• fe e I11 Yee1N 1170115 W 11005 Nalll WtIN .MM.. .ee ttf ►uw~ fru •aW nrrn i n to 5031404 *W1 .t 11 0 aMr fw .wl . lt f t o

• 11.e u 1 11 .111

NOTE 8 . RETURNS ACCRUAL

RETURNS ACCRUAL

Ito 1011Y YM• ...... t54r YM. 11. 1100.1 .I,, . . te . J„30 lo . M.. .Mr Il . 70N l0a] fool ......

Me1WN 141.44 . • 4 .111 I ),lee i I.151 W, .r«ILLaa fined a .1555 5.•Y 1* a.,rrot Arlae I,ate Ill 3.17$ 1.r$, lsNlt . 1 .41.1 4e1M tM 011.041 M+le• 11,11 .1 1110, 11.1111

M".9 415.4 • f,N, I .lee t 4 .10 1 ......

The returns accrual balance at June 30, 2004 includes $1,070,000 for products marketed through Rx Partners, such as Teva, as compared to zero dollars at December 31, 2003 .

NOTE 9 . CONKITMENTS AND CONTINGENCIES

Patent Litigation

There has been substantial litigation in the pharmaceutical, biological, and biotechnology industries with respect to the manufacture, use, and sale of new products that are the subject of conflicting patent rights . One or more patents cover most of the brand name controlled-release products for which we are developing generic versions . Under the Hatch-Waxman Amendments, when a drug developer files an ANDA for a generic drug, and the developer believes that an unexpired patent which has been listed with the FDA as covering that brand name product will not be infringed by the developer's product or is invalid or unenforceable, the developer must so certify to the FDA . That certification must also be provided to the patent holder, who may challenge the developer's certification of non-infringement, invalidity or unenforceability by filing a suit for patent infringement within 45 days of the patent holder's receipt of such certification . If the patent holder files suit, the FDA can review and approve the ANDA, but is prevented from granting final marketing approval of the product until a final judgment in the action has been rendered, or 30 months from the date the certification was received, whichever in sooner . Should a patent holder commence a lawsuit with respect to an alleged patent infringement by us, the uncertainties inherent in patent litigation make the outcome of such litigation difficult to predict . The delay in obtaining FDA approval to market our product candidates as a result of litigation, as well as the expense of such litigation, whether or not we are successful, could have a material adverse effect on our results of operations and financial position . in addition, there can be no assurance that any patent litigation will be resolved prior to the 30-month period . As a result, even if the FDA were to approve a product upon expiration of the 30-month period, we may not commence marketing that product if patent litigation is still pending .

10 Lawsuits have been filed against us in connection with fourteen of our Paragraph IV filings . The outcome of such litigation is difficult to predict because of the uncertainties inherent in patent litigation .

As part of our patent litigation strategy, we obtained two policies covering up to $7 million of patent infringement liability insurance from American International Specialty Line Company ("AISLIC"), an affiliate of AIG International . This litigation insurance covered us against the costs associated with patent infringement claims made against us relating to seven of the ANDA5 we filed under Paragraph IV of the Hatch-Waxman Amendments . Both policies have reached their limit of liability and the company has collected all monies from AISLIC . As of September 30, 2004, IMPAX does not have any accounts receivable due from AISLIC . While Teva has agreed to pay 45% to 50% of the attorneys' fees and costs (in excess of the $7 million covered by our insurance policies) related to the twelve products covered by our strategic alliance agreement with Teva, we will be responsible for the remaining expenses and costs for these products, and all of the costs associated with patent litigation for our other products and our future products .

We do not believe that this type of litigation insurance will be available on acceptable terms for our current or future ANDAs . In those cases, our policy is to record such expenses as incurred .

Although the outcome and costs of the asserted and unasserted claims is difficult to predict because of the uncertainties inherent in patent litigation, management does not expect the Company's ultimate liability for such matters to have a material adverse effect on its financial condition, results of operations, or cash flows .

FIN 4 5

In November 2002, the FASB issued FIN No . 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of others," Guarantees and claims arise during the ordinary course of business from relationships with suppliers, customers, and strategic partners when the Company undertakes an obligation to guarantee the performance of others through the delivery of cash or other assets if specified triggering events occur . Non-performance under a contract by the guaranteed party triggers the obligation of the Company . As of June 30, 2004, all indemnifications included in agreements as of that date are excluded from the scope of FIN No . 45 as they relate primarily to our own future performance and do not require any contingent payments .

As of June 30, 2004, our total contractual commitments on loans, operating leases , and royalty agreements have not materially changed since December 31, 2003, as disclosed in our Report Form 10-K .

NOTE 10 . LOAN AGREEMENTS WITH PIDA AND DRPA

In April 2004, the Company terminated the loan agreements with Pennsylvania Industrial Development Authority (PIDA) and Delaware River Port Authority (DRPA) and repaid the remaining balances totaling approximately $992,000 .

NOTE 11 . LOAN AND SECURITY AGREEMENT WITH WACHOVIA BANK N .A .

In June 2004, the $25 million Loan and Security Agreement with Wachovia Bank N .A . was amended , as follows : o The cash collateral requirement of $10,000,000 was removed . o The Adjusted Excess Availability Covenant was removed . o IMPAX will maintain at Wachovia Bank cash and investments in an amount not less than $ 25,000,000 . o If the amount of cash and investments decline below $25,000,000, then the Cash Collateral requirement of $10,000,000 and Adjusted Excess Availability Covenant will be re-established . o If the Company reports negative free cash flow in any quarter, then rese rv es in the amount of the negative free cash flow will be reported on the Borrowing Base . o The maximum aggregate Capital Expenditures during any fiscal year in the amount of $8,000,000 was amended to permit a maximum cumulative aggregated amount of $45,000,000 for fiscal years 2004 and 2005 .

11 NOTE 12 . INCOME TAXE S

On a quarterly basis, the Company evaluates its projected full year taxable income and related book-to-tax timing difference and the use of NOL carryforwards . The Company estimates that it is not subject to current year income taxes, We evaluate the realizability of deferred tax assets on an annual and quarterly basis or if there is a significant change in circumstance that may cause a change in our judgment about the realizability of our deferred tax assets . At December 31, 2003, the Company had a net operating loss-carryforward totaling approximately $94,600,000, which expires from 2009 through 2023 . NOTE 13 . SUBSEQUENT EVENT S

On July 12, 2004, the Company announced that it has signed a series of agreements with Leiner Health Products, LLC for the supply and distribution of the Company's Loratadine Orally Disintegrating Tablets (ODT) and Loratadine and Pseudoephedrine Sulfate Extended Release Tablets 24 hour products . Both of these products are indicated for the relief of symptoms of seasonal allergic rhinitis (hay fever) . These products will be manufactured by IMPAX and marketed by Leiner as over the counter (OTC) store brand equivalents to both Claritin(R) Reditabs(R) and Claritin-D(R) 24-hour respectively .

NOTE 14 . RESTATEMENT OF CONDENSED FINANCIAL STATEMENT S

Subsequent to the issuance of its condensed financial statements for the three and six months ended June 30, 2004, the Company determined that i) customer credits on sales of bupropion were not recorded in the proper periods, ii) the sales returns reserve was not properly recorded, and iii) sales invoices were prepared by Teva were incorrectly prepared . The impact of correcting these errors and reducing taxable income caused the previous tax provision to be reversed . As a result, the accompanying condensed financial statements for the three and six months ended June 30, 2004 have been restated from the amounts previously reported .

A summary of the effects of the restatement is as follows :

IMPAX LABORATORIES, INC . CONDENSED STATEMENTS OF INCOM E (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA )

Mrs. Month. 0.6.d Six Month. bided Jw lo, 2004 _Juse 30, 200 4 ...... A. Prwieu.d.l y A A . Prwieu.ly Mport . Restated ■ .port td As Restated ......

Me sales $30,104 $30,01 3 $66,116 $61,137 Totw1 revenue. 60,400 05,101 Oro .. eargia 30,64612,100 30'54413,027 12,611 30,017 Not taco.. ( lows) tree Operations 00. 614 10,430 1,04{ Met intaw (loss) 0410te 9rovldon for taco.. taxes 602 121 10,124 5,117 Provision for inc.. taxes 10 504 MK taceu (lw .) 6 073 6 121 $ 9,620 $ 0 .137 drnln~• p.r 0have , la.io 8 0 .01 6 0 .01 S 0 .17 $ 0 .10 Diluted $ 0 .01 $ 0 .01 $ 0 .10 $ 0 .09

CONDENSED BALANCE SHEETS (UNAUDITED ) (DOLLARS IN THOUSANDS , EXCEPT SHARE AND PER SHARE DATA)

June 30 , 200 4 ------As Previously Reported N Restated ...... ------

Accounts receivable $ 23,340 3 19,62 1 Total current assets 161,690 156,17 1 Total assets 235,806 232,26 7 Accrued expenses and deterred revenues 12,719 13,26 3 Total current liabilities 40,946 41 .51 0 Total liabilities 146,221 146,78 5 Accumulated deficit (94,929) (99,012 ) Total ■ tockholders' equity 69,565 65,50 2 Total liabilities and stockholders' equity 235,606 232,26 7

12 CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA )

.ix Month" mad" JuM 10 .

A. vrwiau"1 y hpnrt .d A. R".t .tw ------...... Cuh rlw. Or.. opor"tiny aetivt i"" , I*e 1= (a1w") $ 0.130 t 0,5)7 mhu,y. Sa au"t . M 11ab111t1"" , k000e.ts r.e"Svebl" (13,455) (0 .111) ot1Mr 1i .hiliti." 1,716 2,300

We have reclassified Patent Opinion expense from Patent Litigation expense to Research and Development for the three months and ■ ix months period ending June 30, 2004 and June 30, 2003 .

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

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 218 of the Securities Exchange Act of 1934, as amended . Forward-looking statements include statements about our business strategies, our expected financial position and operating results, the projected size of our markets and our financing plans and similar matters . The words "believe," "expect," "intend,' -anticipate," "plan," "may," "will," "could," "should," "estimate," "potential," "opportunity," "future," "project," "forecast," and similar expressions, as they relate to us, our management and our industry are intended to identify forward-looking statements . No have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business . These forward-looking statements involve known and unknown risks and uncertainties . Our actual results could differ materially from the results discussed in the forward-looking statements . You should not place undue reliance on our forward-looking statements . Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statements for any reason, whether as a result of new information, future developments or otherwise .

Many factors could cause or contribute to a material change from the results discussed in the forward-looking statements . Such factors include, in no particular order :

our ability to successfully develop and commercialize additional products ; changes in the degree of competition for our products ; the difficulty of predicting O .S . Food and Drug Administration (FDA) and other regulatory authority approvals ) our reliance on strategic alliances and the success of such strategic alliances ; the inability to acquire sufficient supplies of raw materials ; litigation and/or threats of litigation ; changes in our growth rates or the growth rates of our competitors ; legislative and FDA actions with respect to the government regulation of pharmaceutical products ; public conce rn as to the safety of our products ; changes in health care policy in the United States ; conditions in the financial markets in general or in general economic conditions ; our inability to raise additional capital when needed ; the impact of competition from brand - name companies that sell their own generic products or successfully extend the exclusivity period of their branded products ; the difficulty in predicting the timing and outcome of legal proceedings , including patent - related matters such as patent infringement cases and patent challenge settlements ; court and FDA decisions on exclusivity periods under the Hatch-Waxman Amendments ; our dependence on revenues from significant customers ; our dependence on revenues from significant products ; and the increasing cost of insurance and the availability of product liability insurance coverage .

13 The accompanying management's discussion and analysis of financial condition and results of operations gives effect to the restatement of the condensed financial statements for the three and six month periods ended June 30, 2004 as described in Note I4 to the condensed financial statements .

GSNSRAL

Impax Laboratories, Inc . was formed through a business combination on December 14, 1999 between Iepex Pharmaceuticals, Inc ., a privately held drug delivery company, and Global Pharmaceutical Corporation, a generic pharmaceutical company . Impax Pharmaceuticals, Inc . merged with and into Global, with Impax stockholders receiving 3 .3351 shares of Global common stock for each share of Impex Pharmaceuticals, Inc . At the conclusion of the merger, Impax Pharmaceuticals, Inc . stockholders held over 704 of the combined company . For accounting purposes, the merger has been treated as a recapitalization of Impax Pharmaceuticals, Inc . with Impax Pharmaceuticals, Inc . deemed the acquirer of Global in a reverse acquisition . As a reverse acquisition, our historical operating results prior to the merger are those of Impax Pharmaceuticals, Inc . and only include the operating results of Global after the merger . In connection with the merger, the surviving company changed its nave to Impax Laboratories, Inc .

We are a technology based, specialty pharmaceutical company applying formulation and development expertise, as well as our drug delivery technology, to the development of controlled-release and niche generics, in addition to the development of branded products . As of June 30, 2004, the Company is marketing thirty-three generic pharmaceuticals, which represent dosage variations of fourteen different pharmaceutical compounds, and has fourteen applications under review with the Food and Drug Administration (FDA) . including five tentatively approved, addressing approximately $S .2 billion in U .S . product sales in the twelve months ended April 30, 2004, according to NOCHealth . Cloven of these pending filings were filed under Paragraph IV of the Hatch-Waxman Amendments . The Company has approximately twenty-four other products in various stages of development for which applications have not yet been filed . These other products are generic versions of pharmaceutical products that had U .S . sales of approximately $14 .6 billion in the twelve months ended April 30, 2004, according to NDCHealth .

CRITICAL ACCOUNTING POLICIS S Revenue Recognition The Company recognises revenue in accordance with SIC Staff Accounting Bulletin ('SAN') 301 issued by the SIC in December 1999 . We recognise revenue from the sale of products when the shipment of products is received and accepted by the customer . Provisions for estimated discounts, rebates, chargebacks, returns and other adjustments are provided for in the period the related sales are recorded . In December 2003, the SAN 104 was issued by the SIC . This bulletin clarifies portions of Topic 13 of the Staff Accounting Bulletin to be consistent with current accounting and auditing guidance and SIC rules and regulations and revises accounting guidance contained in 8AS101 related to multiple element revenue arrangements of Imarging Issues Task Force (ZITP) No . 00-21 superseded as a result of the issuance .

merging Issues Task Force (KIT?) No . 00-21 supplemented SAX 101 for accounting for multiple element arrangements . The Company has entered into several strategic alliances that involve the delivery of multiple products and services over an extended period of time . In multiple element arrangements, the Company must determine whether any or all of the elements of the arrangement can be separated from one another . If separation is possible, revenue is recognised for each deliverable when the revenue recognition criteria for the specific deliverable is achieved . If separation is not possible, revenue recognition is required to be spread over an extended period .

Under LIT? No . 00-21, in an arrangement with multiple elements, the delivered item should be considered a separate unit of accounting if all of the following criteria are wet ,

the delivered item has value to the customer on a standalone basis, there is objective and reliable evidence of the fair value of the undelivered item, and if the arrangement included a general right of return, or whether delivery or performance of the undelivered item is considered probable .

The Company reviews all of the terms of its strategic alliances and follows the guidance from SA2104 AND lITP No . 00-21 for multiple element arrangements . Upfront and milestone payments from these strategic alliances are deferred and recognised over the life of the agreements as the Company fulfills its contractual obligation to manufacture and supplies products during this period . In addition , in some agreements , the Company receives and records royalty revenue based on a percentage of the strategic partner ' s total sales to their customers of the products supplied by IMPAX .

In June 2001 , the Company entered Into a Strategic Alliance Agreement with a subsidia ry of Teva for t we lve controlled - release generic pharmaceutical products . The agreement granted Teva exclusive U .S . prescription marketing rights for these products for a period of ten years from the date of Teva' ■ first sale of the products . Under the terms of the agreement , Teva has sole and exclusive right to determine all terms and conditions of sale to its customers, including pricing , discounts , allowances , price adjustments , returns and rebates . Revenues from product sales for these products under our strategic alliance are recognized at the time title and risk of loss transfers to Teva's customers . During the six months ended June 30, 2004, the Company commenced shipping its Bupropion Hydrochloride 100 mg and 150 mg Controlled Release Tablets . Teva ships the Bupropion products to its customers and reports the results on a monthly basis . Teva provides to IMPAX a financial report detailing its gross sales less applicable chargebacks, rebates and other credits to arrive at net sales, cost of sales information and gross margins for the Bupropion products . The Company is endeavoring to take steps under the Strategic Alliance Agreement to ensure that all such adjustments granted by its strategic partner in the future are reported to the Company on a timely basis . These steps include, but are not limited to, regular discussions with Teva management regarding their monthly financial reports to IMPAX on our products marketed by Teva via monthly teleconferences and quarterly meetings . These discussions will cover all the areas of revenue recognition for these products, including but not limited to, sales credits, product returns and internal controls over Teva's financial reporting to IMPAX . Our procedures will include a review of applicable documentation for IMPAX revenue sharing . The Audit Committee of the Company's Board of Directors may take additional steps as deemed necessary . Under the contract terms, the Company has the option to perform an annual audit with our strategic partner . The information on the financial report is used by IMPAX to record its monthly revenue for the Bupropion products . We began estimating returns for prescription products marketed by our strategic partners, such as Teva, called "Rx Partners," based on our internal returns analysis and historical industry statistics . The amounts of revenue that IMPAX earns is based on reimbursement of manufacturing costs and on a fixed gross margin percentage .

The Company believes it is important for the users of its financial statements to understand the key components , which reduce gross sales to net sales .

14 Returns Reserve The Company estimat es future product returns at the time of sa le . Product return s by wholesalers principally relate to the return of expired products . for product return reserves , we consider volume and mix of product in the marketplace, historical retu rn rates , and the competitive environment, all of which require us to u se estimates and assumptions . IMPAX introduces a number of now products each year . As a result , the Company has been able to monitor historical return rates for now products , Based on our historical data, since we are in one business segment , we have found that generic pharmaceutical product returns are alike and that new product returns have similar characteristics to existing products . Usually, new products are Al rated ( products that demonstrated bioequlvelence with innovator products ), have 24 month expiration dating, and are marketed to the some customers, i .e ., wholesalers, warehousing chains , distributors , etc . The AS rated p roducts are substitutable by the pharmacist for the innovator products . The non - AB rated products, such as the LIPRNI product family, generally, may not be substituted by the pharmacist as they are therapeutic alternatives , not generic substitutes . Any change to a patient's prescription to an alternative product requires the patient 'a physician approval for the substitution . We are monitoring returns by product and, where applicable , we es tablish specific product return r eserves and/or adjust our estimates of the future return rates based on various business and competitive assumptions .

The sales return reserve is calculated wing an historical lag period (that is, the time bet ween when the product is sold and when it is ultimately returned as determined from the Company's syst em generated lag period report ) and return rates , adjusted by estimates of the future return rates based on various ass umptions which may include changes to internal policies and procedures , changes in business practices and commercial terms with customers , competitive position of each product , amount of inventory in the pipeline , the Introduction of now products , and changes in market sales information .

Our returned goods policy requires prior authorisation for the return, with corresponding credits being issued at the original invoice prices, less amounts previously granted to the customer for rebates and chargebacks . Products eligible for return must be expired and returned within one year following the expiration date of the product . Prior to 2002, we required returns of products within six months of expiration date . Because of the lengths of the lag period and volatility that may occur from quarter to qua rter, we are currently using a ro lling 22-month calculation to estimate our product return rate .

We began estimating returns for products marketed by our Rx Partners based on our internal returns analysis and historical industry statistics .

The Company believes that its estimated returns rese rves were adequate at each balance sheet date since they we re formed based on the information that was known and available , which were supported by the Company 's historical experience when similar events occurred in the past , and management 's overall knowledge of and experience in the generic pharmaceutical industry . In estimating its returns reserve , the Company looks to returns after the balance sheet date , but prior to filing its financial statements to ensure that any unusual trends are considered .

Rebates and Chargebacks Generally, sales rebates are calculated at the point of sale, based on pre-existing written customer agreements by p roduct and accrued on a monthly basis . However , we do estima te additional rebates for specific purpos es , i .e ., now pharmacy store openings .

The vast majority of ehargebacks are also calculated at the point of sale as the difference between list price and contract price by product (with the wholesalers ) and accrued on a monthly basis . There are additional chargebacks that are estimated at the point of sale to the wholesaler as the difference bet ween the wholesalers, contract price and the Company ' s contract price with retail pharmacies and buying groups .

Shelf - Stock Reserve A reserve is es timated at the point of sale for certain products for which it is p robable that shelf-stock credits to customers for invento ry remaining on their shelves following a decrease in the market price of th es e products will be granted . When estimating this reserve , we consider t he competitive products, the es timated decline in market prices, and the amount of inventory in the pipeline . Inventory Our inventories are valued at the lower of cost or ma rket . Costs are determined using a standard cost method , first-in, first-out (FIFO) fl ow of goods . Costa include materials , labor , quality cont rol and production overhead . We review and adjust inventory for short-dated product and inventory commitments under supply agreements based on projections of future sales and market conditions . The Company , as do most companies in the generic pharmaceutical indust ry , may build inventories of certain ANDA - related products that have not yet received FDA approval and/or satisfactory resolution of patent infringement litiyation, when it believes that such action is appropriate to increase its commercial opportunity . If our inventory is greater than estimated shipments to our customers , there may be an inventory write-down . Therefore , the Company's management most make significant es timates relating to inventory . Impaired Asset s The Company evaluates the carrying value of long-lived assets to be held and used, including definite lived intangible assets , on an annual basis, when events or changes in circumstances indicate that the carrying value may not be recoverable . The carrying value of a long-lived asset in considered impaired when the total projected undiscounted cash flown from such asset is separately identifiable and is less than its carrying value . In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset . Fair value in determined primarily using the projected cash flows discounted at a rate commensurate with the risk involved . Losses on long-lived assets to be disposed of are determined in a similar manner . As the Company's assumptions related to assets to be held and used are subject to change, additional write-downs may be required in the future .

Goodwil l Prior to the adoption of Statement of Financial Accounting Standards ("SFAS") No . 142, "Goodwill and Other Intangible Assets," we amortized goodwill on a straight-line basis over its estimated useful life . The Company adopted the provisions of SFAS No . 142, effective January 1, 2002 ; no impairment was noted . Under the provisions of SFAS No . 142, the Company performs the annual review for impairment at the reporting unit level, which the Company has determined to be consistent with its business segment, that is, the entire Company .

Effective January 1, 2002, we evaluated the recoverability and measured the possible impairment of our goodwill under SFAS 142 . The impairment test is a two-step process that begins with the estimation of the fair value of the reporting unit . The first step screens for potential impairment and the second step measures the amount of the impairment, if any . Our estimate of fair value considers publicly available information regarding the market capitalization of our Company, as well as (i) publicly available information regarding comparable publicly-traded companies in the generic pharmaceutical industry, (ii) the financial projections and future prospects of our business, including its growth opportunities and likely operational improvements, and (iii) comparable sales prices, if available .

As part of the first step to assess potential impairment, we compare our estimate of fair value for the Company to the book value of our consolidated net assets . If the book value of our net assets is greater than our estimate of fair value, we would then proceed to the second step to measure the impairment, if any .

The second step compares the implied fair value of goodwill with its carrying value . The implied fair value is determined by allocating the fair value of the reporting unit to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combination, and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit . The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill . If the carrying amount of the reporting unit goodwill is greater than its implied fair value, an impairment lose will be recognized in the amount of the excess .

On a quarterly basis, we perform a review of our business to determine if events or changes in circumstances have occurred which could have a material adverse effect on the fair value of the Company and its goodwill . If ouch events or changes in circumstances were deemed to have occurred, we would consult with one or more valuation specialists in estimating the impact on our estimate of fair value . We believe the estimation methods are reasonable and reflective of common valuation practices . We perform our annual goodwill impairment test in the fourth quarter of each year .

RESULTS OP OPERATIONS

Except for the six months ended June 30, 2004, we have incurred net losses in each quarter since our inception . We had an accumulated deficit of $99,012,000 at June 30, 2004 .

16 THREE MONTHS ENDED JUNE 30, 2004, COMPARSD TO THREE MONTHS ENDED JUNE 30, 2003

OVERVIEW

The net income for the three months ended June 30, 2004, was $321,000 as compared to a net loss of $2,284,000 for the three months ended June 30 . 2003 .

REVENUES

Revenues for the second quarter of 2004 were $30,564,000, up more than 1171 compared with revenues of $14,067,000 in the prior year's second quarter . The year-over-year increase for the quarter was primarily due to shipments of our generic versions of Mellbutrin(R) SR (supropion Hydrochloride) 100 no and 150 mg Controlled Release Tablets, and Declomycin(R) (Desieelocycline Hydrochloride) 150 mg and 300 mg Tablets, which commenced during the first quarter of 20041 8yban(R) (supropion Hydrochloride) and Sineeet(R) CR (Carbidopa/Levodopa) Extended Release Tablets, which commenced during the second quarter of 20041 and higher over-the-counter (OTC) product revenues . The sequential quarter decline was due to timing of product shipments and pipeline filling, particularly as related to the launch of Rupropion Hydrochloride in the first quarter . During the 2004 second quarter . IMPAX's revenues from sales of Rupropion Hydrochloride products, through our strategic alliance agreements with Teva and Andrx, were approximately $7,101,000, compared with $19,562,000 in the first quarter . In addition, in the first quarter the Company recognized revenue of $3 .5 million from Teva related to the refundable deposit under its strategic alliance agreement .

The balance of $541,000 of other revenue represents revenues recognized pursuant to strategic agreements with Schering-Plough, Wyeth, and NOvartis . These amounts represent the amortization of the milestone payments received by the Company over the life of the agreements . The following table summarises the activity in net revenues for the three months ended June 30, 2004 and 2003 :

2004 2003 ...... ------(in 000' . )

Product males $ 36,364 $ 17,933 Less , Rebates (2,207) (1,741) Chargebseka (3,614) (2,040) Product return reserve (1,302) (lss) Other credits (1,015) (503 )

Net sales 30,023 13,460 Other Revenues 541 407

Total Revenues $ 30,564 $ 14,06 7 ...... ------

The rebates, chargebacks, returns and other credits decreased for the three months ended June 30, 2004 to approximately 22% of product males as compared to approximately 15% for the comparable period in 2003 . This decrease was due to •upropion Hydrochloride 100 6 9 and 150 mg Controlled Release Tablets and Loratadine and Pseudoephedrine Sulfate (Seg/120wg) 12-hour Extended Release Tablets . Loratadine Pseudoephedrine Sulfate 12-hour Extended Release Tablets are exempt from rebates, chargebaeks and other credits as per the agreements with Schering-Plough, Wyeth, and Novartis . We began estimating returns for products marketed by Rx Partners, based on our internal returns analysis and historical industry statistics . The returns accrual balance at June 30, 2004 includes $1,070,000 for products marketed through Rx Partners, such as Teva, as compared to zero dollars at December 31, 2003 .

Currently, the Company has one reportable operating segment, generic pharmaceutical business . However, we currently market our products through three different channels, es follows : o Direct sale of prescription (Rx) products, such as LIPRAM, Pludrocortisone, Terbutaline, Ninocycline, Deweclocycline, Plavoxate, Carbidopa/Levodopa and others, through our Global Pharmaceuticals division, called •0loba1• i o sale of prescription (Rx) products, such as Dupropion Hydrochloride, exclusively, through marketing partners, pursuant to strategic alliance agreements, such as Teva, called •Rx Partners,• and

0 Sale of Loratadine OTC products through marketing partners, pursuant to strategic alliance agreements, such as Schering, Wyeth, Novartis, and Leiner, called •QTC . •

The following table summarizes the net ales for the three months ended June 30, 3004 compared to the three months ended June 30, 2003 by marketing channel :

2004 200 3

(in 000'1) Global $ 16,649 8 9,709 Rx Partners 0,347 - OTC 5,027 3 .75 1

Total Net sales $ 30,023 $ 13,460 ......

17 The quarter-to-quarter increase of approximately $6 .9 million in Global products were primarily due to new products introduced in 2004 and late 2003, such as Demeclocycline of approximately $3 .6 million, Carbidopa/Levodopa of approximately $0 .6 million, and Flavoxate of approximately $0 .9 million, as well as higher LIPRAN products of approximately $1 .2 million .

Rollforward analyses for each significant revenue dilution item are listed on Note 4 .

COST OF SALES

The cost of sales for the three months ended June 30, 2004, was $18,537,000 as compared to $9,321,000 for the same period in 2003 . The overall increase in cost of sales was primarily due to the increase in cost of materials an a result of increased product sales .

GROSS MARGIN

Gross margin for the three months ended June 30, 2004 was $12,027,000, or approximately 391 of total revenues, compared with gross margin of $4,746,000, or approximately 34% of total revenues, in the prior year's second quarter . The year-over-year increase in the gross margin percentage was primarily due to the introduction of new products since last year with higher margins, such as Bupropion Hydrochloride, Demeclocycline Hydrochloride, Flavoxate, and Carbidopa/Levodopa . The decrease in the gross margin percentage from the first quarter of 2004 to the second quarter of 2004 was primarily due to changes in product mix : higher OTC product revenues that have lower margins and lower Bupropion Hydrochloride product sales that have higher margins in the second quarter, and the $2,500,000 first quarter revenue from Teva related to the refundable deposit .

RESEARCH AND DEVELOPMENT EXPENSE S

The research and development expenses for the three months ended June 30, 2004 were $5,439,000 less reimbursements of $78,000 by a subsidiary of Teva Pharmaceutical Industries, Ltd . under the Strategic Alliance Agreement signed in June 2001, as compared to $3,560,000 less reimbursements of $22,000 for the same period in 2003 . The research and development expenditures in 2004 as compared to 2003 were attributable to higher personnel costs, biostudies, clinical studies, and new product introduction costs (technical transfer, scale-up and validation) .

PATENT LITIGATION COSTS

The patent litigation expenses for the three months ended June 30, 2004, were $2,228,000 as compared to $787,000 for the same period in 2003 . The year-to-year increase for the three months was primarily due to the ongoing Paragraph IV litigation related to our ANDAS for Omeprazole Capsules and Fenofibrate Tablets ANDAS .

SELLING EXPENSES The selling expenses for the three months ended June 30, 2004 were $711,000 as compared to $438,000 for the same period in 2003 . The increase in selling expenses as compared to 2003 was primarily due to higher personnel costs .

GENERAL AND ADMINISTRATIVE EXPENSES

The general and administrative expenses for the three months ended June 30, 2004 were $3,117,000 as compared to $2,083,000 for the same period in 2003 . The increase in general and administrative expenses as compared to 2003 was primarily due to higher professional fees, insurance premiums, and personnel costs .

INTEREST INCOM E Interest income for the three months ended June 30, 2004 was $271,000 as compared to $70,000 for the same period in 2003, primarily due to higher average cash equivalents and short-term investments generated from the net proceeds of the Company's $95 million convertible senior subordinated debentures .

INTEREST EXPENS E

Interest expense for the three months ended June 30, 2004 was $564,000 as compared to $264,000 for the same period in 2003 . The increase in the interest expense for 2004 was primarily due to the 1 .25% interest accrued on the Company's $95 million convertible senior subordinated debentures .

18 INCOME TAXES

On a quarterly basis, the Company evaluates its projected full year taxable income and related book-to-tax timing difference and the use of NOL carryforwards . The Company estimates that it is not subject to current year income taxes . We evaluate the realizability of deferred tax assets on an annual and quarterly basis or if there is a significant change in circumstance that may cause a change in our judgment about the realizability of our deferred tax assets . At December 31, 2003, the Company had a net operating loss-carryforwards totaling approximately $94,600,000, which expire from 2009 through 2023 .

NET INCOME

The net income for the three months ended June 30, 2004, was $321,000 as compared to a net loss of $2,264,000 for the same period in 2003, primarily due to higher sales, partially offset by higher research and development, selling, and general administrative expenses .

SIX MONTHS ENDED JUNE 30, 2004, COMPARED TO SIX MONTHS ENDED JUNE 30, 200 3

OVERVIEW

The net income for the six months ended June 30, 2004, was $5 ,537,000 as compared to a net loss of $5,497,000 for the six months ended June 30, 2003 .

REVENUES

Revenues for the six months ended June 30, 2004 were $ 65,109 , 000 . up more than 155% compared with revenues of $25 , 492,000 in the comparable period of the previous year . The year - over - year increase for the six months was primarily due to shipment s of our generic versions of Wellbutrin( R) SR (Bupropion Hydrochloride ) 100 mg and 150 mg Controlled Release Tablets , and Declomycin(R) (Demeclocycline Hydrochloride ) 150 mg and 300 mg Tablets , which commenced during the first quarter of 2004 , and Zyban ( R) (Bupropion Hydrochloride) and Sinemet(R) CR (Carbidopa /Levodopa ) Extended Release Tablets, which commenced during the second quarter of 2004 .

The Company generated $ 3,572 , 000 of other revenues in the 2004 period compared to $966 , 000 in the 2003 period . Other revenue for the 2004 period included $2,500 , 000 from Teva , which represented the reversal of a portion of the refundable deposit for its exercise of the exclusivity option for certain products .

The balance of $1,072 , 000 of other revenue represents revenues recognized pursuant to strategic agreements with Schering -Plough, Wyeth, and Novartis . These amounts represent the amortization of the milestone payments received by the Company , over the life of the agreement . The following table summarizes the activity in net revenues for the six months ended June 30, 2004 and 2003 :

7004 7001

■ I 76,397 132,01 1 ►r0du00 .1. . "I"too (3 .374 12 .103 ) Ch.rq•back. (5,143) 11,154 ) (3,177) (120 ) ►rodutt to urn ru .rv. other. -Wit (1 .700 ) (1,043 ) ...... ___ Net • .143 61, 5 37 24 , 97 6 pveu• from reversal of refundable dep011t foam T•va 7,100 • - Other MV.nw• - 1,07 2 14 4 ------Total Mvan11 $ ------63,30 : N5 , .97- ......

The rebates, chargebacks, returns and other credits decreased for the six months ended June 30, 2004 to approximately 190 of product sales as compared to approximately 240 for the comparable period in 2003 . This decrease was due to Bupropion Hydrochloride 100 mg and 150 mg Controlled Release Tablets and Loratadine and Pseudoephedrine Sulfate (Smg/120mg) 12-hour Extended Release Tablets . Loratadine and Pseudoephedrine Sulfate 12-hour Extended Release Tablets are exempt from rebates, chargebacks and other credits as per the agreements with Schering-Plough, Wyeth, and Novartis .

The product sales reported by Teva to IMPAX are net of rebates, chargebacks and other credits pursuant to the June 2001 Strategic Alliance Agreement . We began estimating returns for products marketed by Rx Partners, based on our internal returns analysis and historical industry statistics . The reserve for sales returns for products marketed by Rx Partners was $1,070,000 at June 30, 2004 .

ffi The following table summarizes the net sales for the six months ended June 30, 2004 as compared to the six months ended June 30, 2003 by marketing channel :

2004 2003 ------(in 000'0)

Global $ 25,835 $ 16,865 Rx Partners 27,912 -- OTC 7,790 7,66 1 --'------Total Net Sales $ 61,537 $ 24,526 ......

The increase in Global products of approximately $ 9 million in the first six months of 2004 as compared to the same period in 2003 was primarily due to new products introduced in 2004 and late 2003, such as Demeclocycline o f approximately $ 4 .9 million , Flavoxate of approximately $ 1 .4 million, Carbidopa /Levodopa of approximately $ 0 .8 million , and higher sales of previously introduced products , such as Orphenadrine , of approximately $ 0 .8 million, and LIPRAN products of approximately $0 .8 million .

COST OF SALES

The cost of sales for the six months ended June 30, 2004, was $37,087,000 as compared to $17,468,000 for the same period in 2003 . The overall increase in cost of sales was primarily due to the increase in cost of materials as a result of increased product sales .

GROSS MARGI N

Gross margin for the six months ended June 30, 2004 was $28,022,000, or approximately 43% of total revenues, as compared to $8,024,000, or approximately 31t of total revenues, for the same period in 2003 . The year-over-year increase in the gross margin percentage was primarily due to the introduction of new products since last year with higher margins, such as Bupropion Hydrochloride, Demeclocycline Hydrochloride, Flavoxate, and Carbidopa/Levodopa, and the $2,500,000 revenue from Teva related to the refundable deposit .

RESEARCH AND DEVELOPMENT EXPENSES

The research and development expenses for the six months ended June 30, 2004 were $10,323,000 less reimbursements of $89,000 by a subsidiary of Teva Pharmaceutical Industries, Ltd . under the strategic Alliance Agreement signed in June 2001, as compared to $7,107,000 less reimbursements of $154,000 for the same period in 2003 . The higher research and development expenditures in 2004 as compared to 2003 were attributable to higher personnel costs, biostudies, clinical studies, and new product introduction costs .

PATENT LITIGATION EXPENSE S

The patent litigation expenses for the six months ended June 30, 2004 were $3,848,000 as compared to $995,000 for the same period in 2003 . The year-to-year increase for the six months was primarily due to the ongoing Paragraph IV litigation related to our ANDA5 for Omeprazole Capsules, Fenofibrate Tablets and Fexofenadine and Pseudoephedrine Tablets .

SELLING EXPENSES

The selling expenses for the six months ended June 30, 2004 were $1,437,000 as compared to $1,006,000 for the same period in 2003 . The increase in selling expenses as compared to 2003 was primarily due to higher personnel costs .

GENERAL AND ADMINISTRATIVE EXPENSES

The general and administrative expenses for the six months ended June 30, 2004 were $6,468,000 as compared to $4,205,000 for the same period in 2003 . The increase in general and administrative expenses as compared to 2003 was primarily due to higher professional fees, insurance premiums, and personnel costs .

INTEREST INCOME

Interest income for the six months ended June 30, 2004 was $327,000 as compared to $112,000 for the same period in 2003, primarily due to higher average cash equivalents and short-term investments generated from the net proceeds of the Company's $95 million convertible senior subordinated debentures .

20 INTEREST EXPENSE

Interest expense for the six months ended June 30, 2004 was $836,000 as compared to $495,000 for the same period in 2003 . The increase in interest expense for 2004 was primarily due to the 1 .25% interest accrued on the Company's $95 million convertible senior subordinated debentures .

INCOME TAXE S

On a quarterly basis, the Company evaluates its projected full year taxable income and related book-to-tax timing difference and the use of NOL carryforwards . The Company estimates that it is not subject to current year income taxes . we evaluate the realizability of deferred tax assets on an annual and quarterly basis or if there is a significant change in circumstance that may cause a change in our judgment about the realizability of our deferred tax assets . At December 31, 2003, the Company had a net operating loss-carryforwards totaling approximately $94,600,000, which expire from 2009 through 2023 .

NET INCOME

The net income for the six months ended June 30, 2004, was $5,537,000 as compared to a net loss of $5,497,000 for the same period in 2003, primarily due to higher sales, partially offset by higher research and development, selling, and general administrative expenses ,

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2004, we had $98,556,000 in cash, cash equivalents and short-term investments . Only $200,000 of the account balances are insured by the Federal Depository Insurance Company (FDIC) . The balance of the Company's cash equivalents and the short-term investments are held in U .S . Treasury securities and high-grade commercial paper, which are not insured by the FDIC .

The net cash provided by financing activities for the six months ended June 30, 2004, was approximately $101,016,000, consisting primarily of the $95,000,000 proceeds, less capitalized costs of $3,612,000, from the Company's convertible senior subordinated debentures offering completed in April 2004, and proceeds of $3,771,000 from issuance of common stock upon the exercise of options and warrants .

In April 2004, the Company terminated the loan agreements with PIDA and DRPA and repaid the remaining balances totaling approximately $992,000 .

For the six months ended June 30, 2004, significant uses of cash from operating activities included, primarily, the increase in accounts receivable balance of $9,936,000 and inventory buildup of $8,623,000, partially offset by favorable cash flow from operations, (excluding depreciation and amortization) o f $7,619,000 . During the three months ended June 30, 2004, we repaid our partners, Teva and Andrx, approximately $11 .8 million for their portion of funding the inventory buildup for the Bupropion Hydrochloride products .

Our capital expenditures for the six months ended June 30, 2004 were $6,269,000 as compared to $1,125,000 for the same period in 2003 . The net cash used in investing activities included $45,244,000 for the purchase of the short term investments in U .S . Treasury securities and high-grade commercial paper .

In December 2003, the Company transferred the $25 million Loan and Security Agreement from Congress Financial Corporation to Wachovia Bank, N .A ., thereby securing lower interest and less restrictive borrowing terms . The interest rates for the revolving loans are prime rate plus 0 .75%, or eurodollar rate plus 2 .75%, at our option, based on excess availability . The term loan has an interest rate of prime rate plus 1 .51, or eurodollar rate plus 0, at our option . As of June 30, 2004, we borrowed approximately $5,000,000 against the revolving credit line and $2,880,000 against the term loan . In April 2004, the $25 million loan and security agreement was amended, an follows ; (1) the cash collateral requirement of $10 million was removed, (2) the adjusted excess availability covenant was removedl (3) the maximum permitted capital expenditure amount was aggregated to $45,000,000 for the years 2004 and 2005, and (4) as a condition of items (1) and (2) above, INPAX is required to maintain a minimum cash balance at Wachovia of $25,000,000 .

We have no interest rate or derivative financial instruments nor material foreign exchange risks . We are also not party to any off-balance-sheet arrangements, other than operating leases .

We expect to incur significant operating expenses, particularly research and development, for the foreseeable future in order to execute our business plan . We, therefore, anticipate that such operating expenses, as well as planned capital expenditures for the next twelve months ranging from $18 to $22 million, primarily in plant capacity expansion, will constitute a material use of our cash resources .

21 To date, we have primarily funded our research and development and other operating activities through equity and debt financing, and strategic alliances .

We have not paid any cash dividends on our common stock and we do not plan to pay any such cash dividends in the foreseeable future . We plan to retain any earnings for the operation and expansion of our business . Our loan agreements prohibit the payment of dividends without the other party's consent .

RECENT ACCOUNTING PRONOUNCEMENT S

In January 2003, the PASS issued FASB Interpretation No . 46 ("FIN 46"), "Consolidation of Variable Interest Entities ." FIN 46 clarifies the application of Accounting Research Bulletin No . 51, "Consolidated Financial Statements," to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties . FIN 46 applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date . It applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003 . FIN 46 applies to public enterprises as of the beginning of the applicable interim or annual period . On October 8, 2003, the PASS decided to defer PIN 46 until the first reporting period ending after December 15, 2003 . The provisions of this Interpretation did not have a material impact on the Company's financial condition or results of operations .

In December 2003, the FASB issued FIN No . 46R, Consolidation of Variable Interest Entities, clarifying the application of Accounting Research Bulletin No . 51, Consolidated Financial Statements, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support . The provisions of this Interpretation do not have a material impact on the Company's financial condition or results of operations .

In December 2003, the PASS revised SFAS 132, -Employers' Disclosure About Pensions and Other Post Retirement Benefits ." This Statement does not change the measurement or recognition of those plans required by FASB 87, "Employers' Accounting for Pensions," and No . 106, "Employers' Accounting for Post Retirement Benefits Other than Pensions ." This Statement retains the disclosure requirements contained in FASB No . 132, "Employers' Disclosure about Pensions and Other Post Retirement Plans ." The provisions of this Statement do not have a material impact on the Company's financial condition or results of operations . During the six months ended June 30, 2004 and 2003, the employer 401-K match was $218,000 and $150,000, respectively .

In February 2004, the FASB issued revised FSP pertaining to FIN 46(R) . The revised FSPs replace certain previously issued FIN 46 FSP for entities to which FIN 46(R) is applicable . This revision to FIN 46 did not have a material impact on the Company's financial condition or results of operation .

In February 2004, the FASB revised SFAS 133, Accounting for Derivative Instruments and Hedging Activities for Implementation issue 82L, AIJ, and C6 . The revisions to SFAS 133 did not have a material impact on the Company's financial condition or results of operation .

In June 2004, the PASS discussed BIT? 04-08, The Effect of Contingently Convertible Debt on Diluted Earnings Per Share . The SIT? task force has proposed that companies count the shares that could be issued upon conversion of securities like the Company's debentures when calculating fully diluted per share earnings . This BITF in not yet effective . However, we disclosed in Note 2 the potential effect of this SITF on the Company's fully diluted BPS calculation . MAJOR OPERATIONAL HIGHLIGHTS FOR THE SIX MONTHS ENDED JUNE 30, 200 4

On January 28, 2004, IMPAX announced that the U .S . Food and Drug Administration (FDA) granted final approval to the Company's Abbreviated New Drug Application (ANDA) for its generic version of Wellbutrin(R) SR (Bupropion Hydrochloride) 100 mg Controlled Release Tablets and granted tentative approval to the Company's generic version of Wellbutrin SR 150 mg Controlled Release Tablets . OlaxoSmithKline markets Wellbutrin SR for the treatment of depression . According to NDCHeelth, U .S . sales of these dosage forms of Wellbutrin SR Tablets were approximately $1 .2 billion in the twelve months ended June 30, 2004 . On January 29, 2004, IMPAX announced that the Court of Appeals for the Federal Circuit in Washington, D .C . upheld a lower court decision that ruled against certain claims by OlaxoSmithxline in regards to the Company's ANDA for Wellbutrin SR (Bupropion Hydrochloride) 100 mg and 1S0 mg and for Zyban(R) (Bupropion Hydrochloride) 150 mg . OlaxoSmithXline markets Wellbutrin SR for the treatment of depression and Zyban for smoking cessation .

22 o On February 27, 2004, IMPAX announced that the FDA granted tentative approval to the Company's ANDA for its generic version of Allegra(R)-D (Paxofenadine Hydrochloride and Pseudoephedrine Hydrochloride 60mg/120mg) Extended Release Tablets . Aventis Pharmaceuticals markets Allegra-D for the treatment of the symptoms associated with seasonal allergic rhinitis . According to HDCHealth, U .S . sales of Allegra-D were approximately $438 million in the twelve months ended June 30, 2004 . o On March 5, 2004, IMPAX announced that the FDA granted final approval to the Company's ANDA for a generic version of Claritin(R)-D 24-Hour (Loratedine and Pseudoephedrine Sulfate, 10mg/240mg) Extended Release Tablets . Schering-Plough Corporation markets Claritin-D 24-Hour as an over-the-counter (OTC) drug for the relief of symptoms of seasonal allergic rhinitis (hay fever) . According to HDCHealth, U .S . sales of Claritin-D 24-Hour were $7 million for the twelve months ended June 30, 2004 . o On March 0, 2004, IMPAX announced that the FDA granted tentative approval to the Company's ANDA for its generic version of Tricor(R) (Penofibrate) Tablets . Tricor Tablets are marketed by Abbott Laboratories, Inc . to assist patients in managing their cholesterol levels . The drug is indicated for use in reducing elevated LDL cholesterol, total cholesterol, triglycerides and Apo B and increasing HDL cholesterol in patients with primary hypercholesterolemia or mixed lipidemia . The drug has also been approved as adjunctive therapy for the treatment of hypertriglyceridemia, a disorder characterized by elevated levels of very low density lipoprotein (VLDL) in the plasma . According to NDCHealth, V .S . sales of Tricor Tablets were approximately $684 million for the twelve months ended June 30, 2004 . o On March 22, 2004, IMPAX announced that the FDA granted final marketing approval to the Company's ANDA for its generic version of Wellbutrin SR (Bupropion Hydrochloride) 150 mg Controlled Release Tablets . The FDA had previously granted final approval for the Company's application for the 100 mg strength . OlaxoSmithKline markets Wellbutrin SR for the treatment of depression . Both products were shipped to our marketing partner, Teva . o On March 23, 2004, IMPAX announced that the FDA granted final marketing approval to the Company's ANDA for its generic version of Declomycin(R) (Demeclocycline Hydrochloride) 150 and 300 mg . Tablets . ESP Pharma markets Declomycin for the treatment of various infections . According to NDCHealth, U .S . sales of Declomycin were approximately $30 million for the twelve months ended June 30, 2004 . o On May 17, 2004, IMPAX announced that the FDA granted final approval to the Company's ANDA for Carbidopa/Levodopa Extended Release Tablets, its generic version of Sinemet(R) CR tablets . Bristol-Myers Squibb markets Merck & Co .'s Sinemet CR exclusively in the U .S . for the treatment of Parkinsonism . According to NDCHealth, U .S . prescription sales of Sinemet CR and the one currently marketed generic equivalent were $123 million in the twelve months ended June 30, 2004 .

o On May 27, 2004, IMPAX announced that the FDA granted final marketing approval to the Company's ANDA for its generic version of Zyban, Bupropion Hydrochloride 150 mg Controlled Release Tablets . GlaxoSmithKline markets Zyban for smoking cessation . According to NDCHealth, V .S . sales of Zyban were approximately $59 million in the twelve months ended June 30, 2004 .

o On May 26, 2004, IMPAX announced that the FDA granted final marketing approval to the Company's ANDA for its generic version of Proematine(R), Midodrine Hydrochloride 2 .5 and 5 mg Tablets . Shire Pharmaceuticals Group plc markets Proamatine for treatment of symptomatic orthostati c hypotension . According to HDCHealth, U .S . market sales of Proamatine 2 .5 mg and 5 mg and the two other marketed generic versions were approximately $48 million in the twelve months ended June 30, 2004 .

o On June 18, 2004, IMPAX announced that the FDA granted IMPAX a second tier 190-day exclusivity related to its pending ANDA for a generic version of Olucophage XR(R), Metformin HC1 Extended Release Tablets, 500mg . IMPAX has selectively waived its rights to this exclusivity to Teve Pharmaceuticals USA Inc . and will be sharing in the profits of Teva's Metformin HC 1 Extended Release Tablets as provided for in the Strategic Alliance Agreement between IMPAX and Teva signed in June 2001 . On August 2, 2004, the FDA granted final marketing approval to the Company's ANDA for its generic version of Olucophage XR, Metformin HC1 Extended Release Tablets . 500 mg . Bristol-Myers Squibb markets Glucophage XR for the improvement of glycemic control in patients with type 2 diabetes . According to NDCHeslth, U .S . market sales of Glucophage XR 500 mg and other marketed generic versions were approximately $376 million in the twelve months ended June 30, 2004 .

23 ITEM 3 . QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RIS K

The Company ' s cash and cash equivalent s includes U .S . government and short-term high-grade commercial paper stated at cost which approximates market value . The prima ry objective of the Company's investment activitie s is to preserve principal and maximize yields without significantly increasing risk . To achieve this objective , the Company maintains its portfolio in a variety of high credit quality securities , including U .S . Government securities, treasu ry bills, and short-term high-grade commercial paper . One hundred percent of the Company's portfolio matures in less than one year . The car ry ing value of the portfolio approximates the market value at June 30, 2004 . The Company ' s debt instruments at June 30, 2004 , are subject to fixed and variable interest rates and principal payments . We believe that the fair value of our fixed and variable rate long- term debt approximates their car rying value of approximately $108 million at June 30, 2004 . While change s in market interest rates ma y affect the fair value of our fixed and variable rate long - term debt, we believe the effect, if any, of reasonably possible near - term changes in the fair value of such debt on the Company ' s financial statements will not be material .

We have no interest rate or derivative financial instruments nor material foreign exchange risks . We are also not party to any off-balance-sheet arrangements , other than operating leases .

ITEM 4 . CONTROLS AND PROCEDURE S

The Company, under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)), as of the end of the period covered by this report . Based on this evaluation, including consideration of the restatement discussed below, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures are effective in reaching a reasonable level of assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time period specified in the Securities and Exchange Commission's rules and forms .

The principal executive officer and principal financial officer also conducted an evaluation of internal control over financial reporting ("Internal Control") to determine whether any changes in Internal Controls occurred during the quarter that have materially affected, or which are reasonably likely to materially affect, Internal Controls . Based on this evaluation, there has been no such change during the quarter covered by this report .

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met . Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs . Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected . The Company conducts periodic evaluations of its internal controls to enhance, where necessary, its procedures and controls . Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected .

Subsequent to issuance of the condensed financial statements for the quarter ended June 30, 2004, the Company restated its condensed financial statements as described in Note 14 . The Company determined that a material weakness existed in its internal controls . The company is endeavoring to take steps to correct the deficiency that gave rise to this restatement . These steps include, but are not limited to, regular discussions with Teva management regarding their monthly financial reports to IMPAX on our products marketed by Teva via monthly teleconferences and quarterly meetings . These discussions will cover all the areas of revenue recognition for these products, including but not limited to, sales credits, product returns and internal controls over Teva' ■ financial reporting to IMPAX . our procedures will include a review of applicable documentation for IMPAX revenue sharing . The Audit Committee of the Company's Board of Directors may take additional steps as deemed necessary . The Company is endeavoring to take steps under the strategic alliance agreement to ensure that all such adjustments granted by its strategic partner in the future are reported to the Company on a timely basis . Under the contract terms, the Company has the option to perform an annual audit with our strategic partner . The Company has disclosed and discussed this with its Audit Committee . For more information concerning the restatement, see Note 11 in the Notes to Financial Statements contained in the Company's Quarterly Report on Form 10- 0 /A for the quarter ended March 31, 2004 and Note 14 in the Notes to Financial Statements contained in the Company's Quarterly Report on Form 10- 0/A for the quarter ended June 30, 2004 .

24 PART II - OTHER INPORMATICM

ITZM 1 . LEGAL PROCEEDINGS

PATENT LITIGATION

There has been substantial litigation in the pharma ceutical , biological, and biotechnology industries with respect to the manufacture , use, and sale of new products that are the subject of conflicting patent rights . One or more patents cover most of the brand name controlled-release products for which we are developing generic versions . Under the Hatch- Waxman Amendments, when a drug developer files an ANDA for a generic drug, and the developer believes that an unexpired patent which has been listed with the FDA as covering that brand name product will not be infringed by the developer's product or is invalid or unenforceable, the developer must so cert ify to the FDA . That certification must also be provided to the patent holder, who may challenge the developer's certification of nom -infringement, invalidity or unenforeesbility by filing a suit for patent infringement within 43 days Of the patent bolder's receipt of such certification . If the patent holder files suit , the FDA can review and approve the ANDA, but is prevented from granting final marketing approval of the product until a final judgment in the action has been rendered, or 30 months from the date the certification was received, whichever is sooner . Should a patent holder commence a lawsuit with respect to an alleg ed patent infringement by us, the uncert ainties inherent in patent litigation make the outcome of such litigation difficult to predict . The delay in obtaining FDA approval to market our product candidates as a result of litigation , as well as the expense of such litigation, whether or not we are succe ss ful, could have a material adverse effect on our results of operations and financial position . In addition, there can be no assurance that any patent litigation will be resolved prior to the 30-month period . As a result , even if the FDA were to approve a product upon expiration of the 30-month period , we may not commence marketing that product if patent litigation is still pending .

Lawsuits have been filed against us in connection with fourteen of our Paragraph IV filings . The outcome of such litigation is difficult to predict because of the uncert ainties inherent in patent litigation .

ASTRAZLMRCA AD BT AL . V . IMPAX : THE @RPRAZOLS CASES

In May 2000, Astre0ensca AS and four of its related companies filed suit against IMPAX in the V .B . District Court in Wilmington , Delaware claiming that IMPAX's submiss ion of an AMDA for Oweprasole Delayed Release Capsul es, 10 mg and 20 mg, constitutes infringement of six U.S . patents relating to AstraZeneca ' ■ Prilosec product . The action seeks an order enjoining IMPAX from marketing Omsprasole Delayed Release Capsules , 10 mg and 20 eg until February 4, 2014, and reimbursement for costs and attorney fees associated with this litigation .

In February 2001 , Astrarenece and the saes related companies filed the same suit against IMPAX in the sa me federal court in Delaware for infringement , based upon INPAX's amendment to its AMOA adding 40 mg strength Omeprasole Delayed Release Capsules .

AstraZeneca filed es sentially the same lawsuits against nine other generic pharmaceutical companies (Andrx , Oenpharw, Cheminor, Rremers, LRR, Ron , Nylon, Apotex , and Zenith ) . Due to the number of these cases , a sultidistrict litigation proceeding , In re Omeprazole 10 mg, 20 mg, and 40 mg Delayed Released Capsules Patent Litigation, NDL-1291, has been established to coordinate pre-trial proceedings . Both lawsuits filed by Astrafeneca against IMPAZ have been transferred to the sultidistrict litigation .

Early in the multidistrict litigation , the trial court ruled that one of the six patents - in-suit was not infringed by the Bale of a generic oeepresole product and that cert ain other patents were invalid. These rulings effective) y eliminated four patents from the trial of these infringement cas es , although AstraZeneca may appeal these rulings as part of the overall appeal process in the case .

On October It, 2002 , after a trial involving Andrx, Oenpharm, Cheminor, and Zresers, the trial judge handling the wultidistrict litigation ru led on Astrazeneca ' s complaint s that three of these four defendants (First Wave Defendants ) infringed the remaining patent s- in - suit . The trial judge ru led that three of the First Wave defendants, Andrx , Oenpharm, and Cheminor , infringed the remaining two patents asse rted by Astrasenece in its complaints, and that those patents are valid until 2007 . In the same ruling , the trial court ru led that the remaining First Wave Defendant , Rresers , did not infringe either of the remaining two patents . This defendant ' s formulation differed from the formulation used by the other First wave Defendants in several respects . In mid-December 2003, the U .B . Court of Appeal s for the federal Circuit affirmed the October 2002 ruling in all r espects . Subsequent petitions for rehearing have been denied .

The formulation that IMPAZ would employ in manufacturing its generic equivalent of omeprazole has not been publicly announced . IMPAX ' s formulation has elements that resemble those of other First Wave Defendants, but it also has elements that differ . Although the ru ling by the trial court in the multidistrict litigation has a significant effect on the course of AstraZOMCe ' s litigation against IMPAZ, application of the trial court ' s opinion is not certain . IMPAZ believes that it has defenses to Astrateneca ' s claims of infringement, but the opinion rendered by the trial court in the First Wave cases makes the outcome of Astrateneca ' s litigation against IMPAZ uncertain .

Two of the remaining six defendants ( Second Wave Defendants ) filed Motions for Summary Judgment of Mon- Infringement . based upon the October 2002 ruling . The trial court has deferred ruling on those motions until discove ry is completed . In December 2003, the trial court entered a new scheduling order governing pre-trial proceedings relating to the Second Wave Defendants, including IMPAX . The schedule for completion of the litigation in the Second Wave, including AstraZeneca's litigation against IMPAX, now provides that all fact discovery (with certain exceptions) is complete . AstraZeneca' ■ expert reports on issues as to which it bears the burden of proof, including issues of alleged infringement, were produced on February 17, 2004 . IMPM 's responsive expert reports were produced on July 12, 2004 .

Under the December 2003 scheduling order, Astra's reply reports would have been due on August 6, 2004, and expert depositions would have commenced shortly thereafter . Following receipt of IMPAX' ■ six expert reports on July 12, 2004, as well as 17 other reports produced by four other defendants, Astra requested a further modification of the scheduling order . Astra's request for a three-month extension of the time for its reply reports was denied, but the Court granted Astra an additional five-week period to respond to the defendants' rebuttal reports on non-infringement . The schedule for expert depositions must be re-established . Nevertheless, expert depositions will be conducted between September 14, 2004, when reply reports are now due, and the end of 2004 . Given the delays which have thus far occurred in the litigation and the number of experts already designated by the parties, it is uncertain whether the expert depositions can be completed in the time allotted by the present schedule .

Under the December 2003 schedule, Motions for Summary Judgment may not be filed, as of right, until October 19, 2004 . IMPAX has recently requested permission to file an earlier motion for summary judgment on one aspect of the case . Other defendants have also requested permission to file early motions for summary judgment on other aspects of the litigation .

IMPAX may file additional Motions for Summary Judgment, including other Motions for Summary Judgment of Non-Infringement, following the close of all discovery or after October 19, 2004, whichever comes first . If the case is not resolved by summary judgment, the case involving IMPAX will be returned to the U .S . District Court in Delaware for trial . It is likely, given the proceedings in the First Wave cases, that the case against IMPAX will be transferred back to Now York for a consolidated trial before the same judge who decided the First Wave cases . IMPAX believes, however, that any trial that might be scheduled in the case will commence in the first half of 2005 .

If IMPAX does not file a Motion for Suma ry Judgment, or if such a Motion is denied , the court will schedule a date for trial . IMPAX intends to vigorously defend the action brought by Astrazeneca .

In August 2003, the court issued an order dismissing four of the patents - in-suit , three with prejudice . On September 30, 2003 , as a result of the court ' s dismissal , AstraZeneca served each of the Second Wave Defendants, including IMPAX , with an amended complaint . In October 2003, IMPAX filed an answer to the amended complaint in which we asserted a new counterclaim with antitrust allegations . The counterclaim will be severed , and proceedings relating to it will be s tayed until after trial of the patent infringement case .

AVENTIS PHARMACEUTICALS INC ., ST AL . V . IMPAX : THE FSXOFSNADINS CASES

On March 25, 2002 , Aventi ■ Pharmaceuticals Inc ., Merrell Pharmaceuticals Inc ., and Carderm Capital L .P . (collectively referred to as Aventis ) sued IMPAX in the U .S . District Court for the District of New Jersey (Civil Action No . 02 - CV-1322) alleging that IMPAX ' s proposed fexofenadine and pseudoephedrine hydrochloride tablets , containing 60 mg of fexofenadine and 120 mg of pseudoephedrine hydrochloride , infringe U .S . Patent Nos . 6,039 , 974 ; 6 , 037,353 ; 5,738,872 ; 6,187 , 791 ; 5,855 , 912 ; and 6 , 113,942 . On November 7, 2002 , Aventis filed an amended complaint, which added an allegation that IMPAX ' s Fexofenadine and Pseudoephedrine Hydrochloride 60 mg/120 mg Extended Release Tablet product infringes U .S . Patent No . 6,399 , 632 . Aventis seeks an injunction preventing IMPAX from marketing its Pexofenadine and Pseudoe yhedrine Hydrochloride 60 mg/120 mg Extended Release Tablet product until the patents - in-suit have expired , and an award of damages for any commercial manufacture , use, or sale of IMPAX ' s Fexofenadine and Pseudoephedrine Hydrochloride 60 mg / 120 mg Extended Release Tablet product , together with costs and attorneys' fees .

Fact discovery in this action is scheduled to close on October 29, 2004 . IMPAX believes that it has defenses to the claims made by Aventis based on noninfringement and invalidity . A tentative trial date has been scheduled for October 200S .

Aventis has also filed a suit against Barr Laboratories , Inc ., Mylan Pharmaceuticals , Inc ., Dr . Reddy's Pharmaceuticals and Teva Pharmaceuticals USA, Inc . in New Jersey asserting the same patent infringement against these defendants ' proposed Fexofenadine and Pseudoephedrine or Fexofenedine products . The IMPAX case has been consolidated for trial with the Barr , Mylan , Dr . Reddy and Teve cases .

On March 25, 2004, Aventis and AMR filed a complaint and first amended complaint against IMPAX and Ranbaxy, alleging infringement of two additional patents relating to the process for making the active pharmaceutical ingredient, fexofenadine hydrochloride . These patents, United States Patent Now . 5,581,011 and 5,750,703, are owned by AMR and exclusively licensed to Aventis .

M On July 23, 2003, IMPAX filed Summary Judgment motions for non-infringement of U .S . Patent Now . 6,039,974, 6,113,942, and 5,855,9127 and for non-infringement and invalidity of U .S . Patent No . 5,738,872 . Opposition papers were filed on August 11, 2003 . Reply papers were filed on September 24, 2003 . On October 24, 2003, IMPAX filed a brief discussing the impact of the recent Festo decision on their Motions for Summary Judgment of non-infringement . Oral argument for the Summary Judgment Motion regarding the '912, '942, and '974 patents was heard on November 3, 2003 . Oral argument for the Summary Judgment Motion regarding th e 872 patent was heard on December 8, 2003 . On June 29, 2004, the court granted the Company's Motions for Summary Judgment of Non-infringement of the '912 and '942 patents and denied the Company's Motion for Summary Judgment of Non-infringement of the '974 patent . At the same time, the court ordered that a ruling on the Company's motion for Summary Judgment for the Non-infringement of the '872 patent is reserved pending s Markman hearing to be held on September 9, 2004 to assist the court in construing the patent's product-by-process claims .

PURDUE PHARNA L .P . ET AL . V IMPAX : THE OXYCODONS CASES

On April 11, 2002, Purdue Pharma and related companies filed a complaint in the U .S . District Court for the Southern District of New York alleging that IMPAX's submission of ANDA No . 76-318 for 80 mg OxyContin Tablets infringes three patents owned by Purdue . The Purdue patents are U .S . Patent Nos . 5,508,042, 8,549,912 and 5,656,295, all directed to controlled release opioid formulations . On September 19, 2002, Purdue filed a second Infringement Complaint regarding IMPAX's 40 mg OxyContin generic product . On October 9, 2002, Purdue filed a third Infringement Complaint regarding IMPAX's 10 mg and 20 mg OxyContin generic products . IMPAX filed its answer and counterclaims in each case on October 3, 2003 . On November 25, 2003, Purdue submitted their reply to our counterclaims . Purdue is seeking, among other things, a court order preventing IMPAX from manufacturing, using or selling any drug product that infringes the subject Purdue patents .

Purdue previously sued Boehringer Ingelheim/Roxane, Endo and Tevs on the same patents . One or more of these defendants may resolve the invalidity issues surrounding the Purdue patents prior to when IMPAX's case goes to trial . The Boehringer Ingelbeim/Roxene suit is stayed . The Endo action was tried in June 2003 and post trial briefs have been filed . In January 2004, the judge in the Endo action ruled that the three patents in suit, the same patents that Purdue had asserted against IMPAX, are unenforceable because they were inequitably procured and enjoined their enforcement . Purdue has appealed that ruling to the Court of Appeals for the Federal Circuit .

IMPAX V . AVENTIS PHARMACEUTICALS, INC . : THE RILUZOLE CAS E

In June 2002, IMPAX filed suit against Aventis Pharmaceuticals, Inc . in the U .S . District Court in Wilmington, Delaware, seeking a declaration that the filing of an ANDA to engage in a commercial manufacture and/or sale of Riluzole 50 mg Tablets for treatment of patients with amyotrophic lateral scleroses (ALS) does not infringe claims of Aventis' U .S . Patent No . 5,527,814 ('814 patent) and a declaration that this patent is invalid .

In response to IMPAX's complaint, Aventis filed counterclaims for direct infringement and inducement of infringement of the '814 patent . In December 2002, the district court granted Aventis' Motion for Preliminary Injunction and enjoined IMPAX from infringing, contributory infringing, or inducing any other person to infringe Claims 1, 4 or S of the '814 patent by selling, offering for sale, distributing, marketing or exporting from the United States any pharmaceutical product or compound containing riluzole or salt thereof for the treatment of ALS .

The trial was completed on October 30, 2003, and post-trial briefing was completed in December 2003 . IMPAX is pursuing its assertions that claims of the '814 patent are invalid in view of prior art and are unenforceable in view of inequitable conduct committed during the prosecution of the patent before the United States Patent and Trademark Office (USPTO) . On January 30, 2004, the court denied IMPAX's Motion for Summary Judgment on inequitable conduct and, on February 5, 2004, the court denied IMPAX's Motion for Summary Judgment on non-infringement of certain claims . The court has not issued its trial rulings and did not rule on the third pre-trial Motion for Summary Judgment based on invalidity of the patent-in-suit .

If IMPAX is not ultimately successful in proving invalidity or unenforceability, there is a substantial likelihood that the court will enter a permanent injunction enjoining IMPAX from marketing Riluzole 50 mg Tablets for the treatment of ALS in the United States until the expiration of the '814 patent (June 18, 2013) . If IMPAX is ultimately successful in proving either defense, the preliminary injunction would be set aside and IMPAX would be permitted to market its Riluzole 50 mg Tablet product for the treatment of ALS in the United States .

27 ABBOTT LABORATORIES V . IMPAX : THE ►INO ►IBRATB TABLET CASES In January 2003, Abbott Laboratories and Fournier Industrie at Santo and a related company filed suit against IMPAX in the D .B . District Court in Wilmington, Delaware claiming that IMPSX's submission of an AMDA for Fenofibrate Tablets, 160 mg, constitutes infringement of two U .S . patents owned by Fournier and exclusively licensed to Abbott, relating to Abbott's Tricor tablet product . In March 2003, Abbott and Fournier filed a second action against IMPAX in the same court making the same claims against IMPAX's 54 mg ►enofibrate Tablets . These cameo were consolidated in April 2003 .

In September 2003, Abbott and Fournier filed a third action against IMPAX in the U .B . District Court in Wilmington, Delaware, claiming that IMPAX's submission of its ANDA for 54 mg and 160 mg ►enofibrate Tablets constitutes infringement of a third patent recently issued to Fournier and exclusively licensed to Abbott . This action was also consolidated with the two previously consolidated actions in December 2003 . In January 2004, Abbott and Fournier filed a fourth action relating to IMPAX'B 54 mg and 160 m6 ►enofibrete Tablets based upon a claim of infringement of a fourth patent . All four cases were consolidated in March 2004 . Fact and expert discovery in the consolidated cases closet in November 2004 end the trial is currently set for June 2005 . IMPAX has responded to all four complaints by asserting that its proposed generic ►enofibrate Tablet products do not infringe the patents-in-suit and by asserting that the patents-in-suit are invalid .

All four actions seek an injunction preventing IMPAX from marketing its Fenofibrate Tablet products until the expiration of the patents (January 9, 2016) and an award of damages for any commercial manufacture, use, or sale of IMPAX' ■ Penofibrate Tablet product, together with costs and attorney te am .

SOLVAY PHARMACEUTICALS V . IMPAX, THE CARDS CASS

On April 11, 2003, Solvay Pharmaceuticals, Inc ., manufacturer of the Croon line pancreatic enzyme products, brought suit against IMPAX in the U .B . District Court for the District of Minnesota claiming that IMPAX has engaged in false advertising, unfair competition, and unfair trade practices under federal and Minnesota law in connection with the Company's marketing and sale of its Lipson products . The suit seeks actual and consequential damages, including treble damages, attorneys' fees, injunctive relief and declaratory judgments that would prohibit the substitution of Lipram for prescriptions of Croon . On June 6, 2003, IMPAX filed a Notion for Dismissal of Plaintiff's Complaint, which sought to dismiss each count of Solvay's complaint . On January 9, 2004, the U .S . District Court issued a ruling on IMPAX's Notion for Dismissal, dismissing two of the counts met forth in the Complaint, including the count which sought a declaratory judgment that Lipram may not lawfully be substituted for prescriptions of Croon . On January 26, 2004, IMPAX filed its Answer to the Complaint and Counterclaim alleging that Solvay wrongfully interfered with IMPAX's business relationships . On February 17, 2004, Solvay filed its Reply to IMPAX's Counterclaim . On February 24, 2004, the Rule 16 Scheduling Conference was bold and, on February 25, 2004, the Court issued a Scheduling Order setting the deadline for discovery on January 14, 2005, and a trial date for July 1, 2005 . Fact discovery is currently ongoing in this case . IMPAX believes it has defenses to Solvay's allegations and intends to pursue these defenses vigorously .

ALZA CORPORATION V . IMPAX : THE OXYBUTYNIN CABs

On September 4, 2003, Also Corporation (*Also-) filed a lawsuit against IMPAX in the U .S . District Court for the Northern District of California alleging patent infringement of one patent related to IMPAX's filing of an AMDA for a generic version of Ditropen XL (Onybutynin Chloride) Tablets, 9 mg, 10 mB, and 15 my . Also seeks an injunction, a declaration of infringement, attorney's fees and costs . On October 24, 2003, IMPAX filed its Answer to the Complaint, which included defenses to the infringement claim, and counterclaimed for patent non-infringement and invalidity . Discovery is on-going and trial is currently Get for November 2005 .

On October 24, 2003, IMPAX filed a lawsuit against Also in the D .S . District Court for the Northern District of California seeking a declaratory judgment that four Alta patents relating to IMPAX's filing of an ANDA for a generic version of Ditropan XL (Oxybutynin Chloride) Tablets, 5 mg, 10 mg, and 19 mg are invalid and/or not infringed by the commercial manufacture, use, offer for sale, sale, or importation of the IMPAX product . On November 17, 2003, Alta moved to dismiss the Company's complaint for lack of subject matter jurisdiction based on Alma's argument that there is no came or controversy between the parties with respect to these four patents . On April 19 . 2004, the Court denied Alma's motion . On May 11, 2004, the Court ordered the entry of a stipulation of dismissal based on a covenant not to sue issued by Alta to the company with respect to the four Also patents in the case .

SHIRR LABORATORICS INC . V IMPA%, THE ADDRRALL CAB S

On December 29, 3003, Shire Laboratories, Inc ., a subsidiary of Shire Pharmaceuticals Group, PLC, filed a lawsuit against IMPAX in the D .B . District Court for the District of Delaware alleging patent infringement on U .B . Patent Non . 6,322,619 and 6,605,300 related to filing of an AM to market a generic version of Adderall 30 my capsules . IMPAX filed its answer on January 20, 2004, denying infringement and contesting the validity of both patents . All discovery is expected to be completed by March 2005 . A tentative court date has been scheduled for October 11, 2005 . OTHER LITIGATION

STATE OF CALIFORNIA V . IMPAX

On August 7, 2003, IMPAX received an Accusation from the Department of Justice . Bureau of Narcotic Enforcement, State of California (•BNR•), alleging that IMPAX failed to maintain adequate controls to safeguard precursors from theft or lose regarding our pseudoephedrine product in January 2003 . IMPAX Contested the allegations in the Accusation and entered into discussions with the State of California, Department of Justice, to bring resolution to this matter . IMPAX has implemented a number of remedial measures aimed at improving the security and accountability of precursor substances used by IMPAX and regulated by the California Department of Justice, Bureau of Narcotic Enforcement . In March 2004, following a theft of pseudoephedrine from IMPAXIa facilities, the BNi filed an Amended Accusation, again alleging that IMPAX failed to maintain adequate controls to safeguard precursors from theft or lose regarding our pseudoephedrine product . In Nay 2004, a Notice of Hearing was received from INS, which set the hearing of this matter, should one be necessary, for October 10 and October 19, 2004 . IMPAX is continuing its discussions with the State of California, Department of Justice, and hopes to resolve this matter without the need for a formal hearing .

Other than the legal proceedings described above, we are not ware of any other material pending or threatened legal actions, private or governmental, against us . However, as we file additional applications with the FDA that contain Paragraph IV certifications and develop now products, it is likely we will become involved in additional litigation related to those filings or products .

INSURANCE

As part of our patent litigation strategy, we had obtained two policies covering up to $7 million of patent infringement liability insurance from American International Specialty Line Company (•AISLIC•), an affiliate of AIO International . This litigation insurance covered us against the costs associated with patent infringement claims made against us relating to seven of the ANDA5 we filed under Paragraph IV of the Natch•Waxman Amendments . Both policies had reached their limits of liability . While Teva has agreed to pay 4S% to 501 of the attorneys- fees and costs (in excess of the $7 million expected to be covered by our insurance policies for six products) related to the twelve products covered by our strategic alliance agreement with them, we will be responsible for the remaining expenses and costs for these products, and all of the costs associated with patent litigation for our other products and our future products .

We do not believe that this type of litigation insurance will be available to us on acceptable terms for our other current or future ANWS . In those cases, our policy is to record such expenses as incurred . Product liability claims by customers constitute a risk to all pharmaceutical manufacturers . We currently carry $00 million of product liability insurance for our own manufactured products . This insurance may not be adequate to cover any product liability Claims to which we may become subject .

ITEM 2 . CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

On May 17, 2004, we filed an amendment to our Restated Certificate of incorporation, as amended, with the Secretary of State of the State of Delaware, which amendment increased the number of our authorised shares of canon stock from 75,000,000 to 90,000,000 . Our board will generally be able to issue additional shares of common stock without the approval of our stockholders . These future Issuances will dilute the ownership interests of our stockholders .

1 .2501 CONVERTIBLE SENIOR BUSORDINATRD DEBENTURE S

On April 5, 2004, the Company issued and sold $95 .0 million in aggregate principal amount of its 1 .2501 convertible senior subordinated debentures due 2024 . The debentures were sold by the Company to Citigroup Global Markets Inc ., Machovia Capital Markets, LLC and First Albany Capital Inc ., as initial purchasers, in a private placement exempt from registration under the Securities Act of 1933, as amended (the 'Securities Act") . We have been advised by the initial purchasers that they have resold, and/or intend in the future to resell, the debentures to 'qualified institutional buyers' (as defined in Rule 144A promulgated under the Securities Act) in transactions exempt from the registration requirements of the Securities Act in reliance on Rule 144A .

The issuance and sale of the debentures resulted In net proceeds to the Company of approximately $91,390,000 . These proceeds are being used for general corporate purposes, including working capital requirements, manufacturing of our products and research and development .

The debentures bear interest at the rate of 1 .250% per year . Interest on the debentures is payable on April 1 and October 1 of each year, beginning on October 1, 2004 . The debentures are convertible by holders into shares of our common stock at a conversion price of $28 .04 per share (which is subject to adjustment upon certain events, but represented a 301 premium over our stock price at the time the debentures were issued) . The debentures are convertible by holders Into shares of our common stock if, (1) the price of our common stock reaches a specific thresholds (2) the trading price for the debentures falls below certain thresholds : (3) the debentures have been called for redemption ; or (4) certain corporate transactions occur .

29 The debentures mature on April 1, 2024, unless earlier redeemed, repurchased or converted . Before April 5, 2007, we may redeem some or all of the debentures if the price of our common stock reaches a specific threshold, at a redemption price that includes an additional payment on the redeemed debentures equal to $230 .77 per $1,000 principal amount of debentures, less the amount of any interest actually paid or accrued and unpaid on the debentures . On and after April 5, 2007, the Company may redeem some or all of the debentures at certain specified redemption prices .

The debentures are the Company's unsecured obligations and are subordinated in right of payment to all of the Company's existing and future senior indebtedness . On April 1, 2009, April 1, 2014, and April 1, 2019, and under certain circumstances, holders of the debentures will have the right to require us to repurchase all or any part of their debentures at a repurchase price equal to 100% of the principal amount of the debentures, plus accrued and unpaid interest and liquidated damages, if any, to, but excluding the repurchase date .

In connection with the offering of the debentures, we filed a Form S-3 registration statement with the SEC in June 2004 . The registration statement has not yet been declared effective by the SEC . If the registration statement on Form S-3 is not declared effective by the SEC by October 4, 2004, then the interest rate payable on the debentures will be subject to increase .

ITEM 4 . SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER S

At the Company's Annual Meeting of Stockholders held on may 17, 2004, the following actions were approved, by the votes indicated : a) Ten directors were elected :

Leslie Z . Bonet , Ph .D . 43, 846,077 For 732,889 Withhold authorit y Robert L . Burr 43,735, 232 For 643,734 Withhold authorit y Barry R . Edwards 44 , 288,225 For 290,741 Withhold authorit y David J . Edwards 43,791, 680 For 787,286 Withhold authorit y Nigel Fleming, Ph .D . 43, 823,169 For 755,797 Withhold authorit y Charles Haiao, Ph .D . 44 ,186,440 For 392,526 Withhold authorit y Larry Hsu, Ph .D . 44, 287,092 For 291,874 Withhold authorit y Michael Markbreiter 44,204 ,397 For 374,569 Withhold authorit y Oh Kim Sun 44, 405,446 For 173,520 Withhold authorit y Peter R . Terreri 44,402 , 145 For 176,821 Withhold authorit y b) The proposed increase in the authorized shares of the Company's common stock from 75,000,000 to 90,000,000, was approved as follows :

43,025,827 For 1,510,097 Against 10,041 Abstaining c) The appointment of Deloitte & Touche LLP as the Company's independent accountants for the fiscal year ending December 31, 2004 was ratified, as follows :

44,013, 036 For 556 , 763 Against 9,167 Abstaining

30 ITEM 6 . EXHIBITS AND REPORTS ON FORM 8- K

(a) Exhibit s

o 3 .18 - Certificate of Amendment of Restated Certificate of Incorporation of Impax Laboratories, Inc . dated as of May 17, 2004 .

o 10 .65 - Second Amendment to Loan and Security Agreement between Wachovia Bank and Impax Laboratories, Inc . dated June 23, 2004 .

o 10 .66 - Amendment to the Development, License and Supply Agreement between Wyeth Consumer Healthcare Division and Impax Laboratories, Inc . dated as of July 9, 2004 .

o 31 .1 - Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 .

o 31 .2 - Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 .

o 32 .1 - Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 .

(b) Report s

o On May 5, 2004, the Company furnished a report on Form 8-K (Items 9 , 12) announcing earnings for the first quarter ended March 31, 2004 .

o On May 17, 2004, the Company filed a report on Form 8-K (Item 9) announcing that the FDA had granted final approval to the Company's ANDA for Carbidopa/Levodopa Extended Release Tablets .

o On May 27, 2004, the Company filed a report on Form 8-K (Item 9) announcing that the FDA had granted final marketing approval to the Company's ANDA for its generic version of Zyban(R) 150 mg Controlled Release Tablets .

o On May 28, 2004, the Company filed a report on Form 8-K (Item 9) announcing that the FDA had granted final marketing approval to the Company's ANDA for its generic version of Promatine 2 .5 mg and 5 mg Tablets .

31 SIGNATURE S

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 .

IMPAX LABORATORIES, INC .

By : /s/ BARRY R . EDWARDS November 16, 2004 ------Chief Executive Officer (Principal Executive Officer )

By : /s/ CORNEL C . SPIEGLER November 16, 2004 ------Chief Financial Officer (Principal Financial and Accounting Officer)

32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Barry R . Edwards, certify that :

1 . I have reviewed this quarterly report on Form 10-0/A for the three months ended June 30, 2004 of Impax Laboratories, Inc .

2 . based on my knowledge, this quarterly report does not contain any untrue statement of a material fact, or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made , not misleading with respect to the period covered by this report .

3 . Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report .

4 . The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-lS(e) for the registrant and have :

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared ;

b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on our evaluation, and

c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting, an d

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions) :

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information, an d

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting .

/s/ Barry R . Edwards ------Barry R . Edwards Chief Executive Office r

November 16, 2004 ------

Exhibit 31 . 1

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Cornel C . Spiegler , certify that :

1 . I have reviewed this quarterly report on Form 10-Q/A for the three months ended June 30, 2004 of Impax Laboratories, Inc .

2 . Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact, or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report .

3 . Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report .

4 . The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have :

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared ;

b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the and of the period covered by this report based on our evaluation ; and

c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting, an d

5 . The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions) :

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information ; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting .

/a/ Cornel C . Spiegler ------Cornel C . Spiegler Chief Financial Office r

November 16, 2004 ------

Exhibit 32 . 1

CERTIFICATION PURSUANT TO 18 U .S .C . SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THOE SARBANES-OXLEY ACT OF 200 2

Pursuant to 18 U .S .C . Section 1350, as adopted pursuant to Section 906 of the Sarbanes -Oxley Act of 2002, with respect to the Quarterly Report of the Company on Form 10-Q/A for the quarter ended June 30, 2004, (the "Report"), each of the undersigned officers of Impax Laboratories, Inc . does hereby certify that :

1 . The Report fully complies with the requirements of the Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 ; and

2 . The information contained in the Report fairly presents, in all material respects , the financial condition and results of operations of the Company .

/a/ Bar ry R . Edwards Chief Executive Officer Date : November 16, 2004 ------Barry R . Edward s

/e/ Cornel C . Spiegler Chief Financial Officer Date : November 16, 2004 ------Cornel C . Spiegler

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the U .S . Code) and is not being filed as part of the Report or as a separate disclosure document . EXHIBIT F United States Securities and Exchange Commission Washington, D .C . 2054 9

FORM 10- Q

(Mark One )

(XI QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF TH E

SECURITIES EXCHANGE ACT OF 193 4

For the quarterly period ended September 30, 2004 ------OR

E I TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OP THE

SECURITIES EXCHANGE ACT OF 193 4

For the transition period from to

Commission file number 0-2735 4

Impax Laboratories, Inc . ------(Exact name of registrant as specified in its charter )

Delaware 65-0403311 ------(State or other jurisdiction of (I .R .S . Employer incorporation or organization) Identification No . )

30831 Huntwood Avenue - Hayward, California 94544 ------(Address of principal executive offices) (Zip code )

Registrant's telephone number including area code (510) 476-2000 ------

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 registrant is an accelerated filer (as defined in Rule 12b-2 of the Act .) Yes X No

The number of shares outstanding of the registrant's common stock as of

October 31, 2004 was approximately 58,484,718 . ------IMPAX LABORATORIES, INC .

INDEX TO PORN 10- Q

FOR THE QUARTERLY PERIOD ENDED SBP79MBZR 30, 2004

PART I . FINANCIAL INFORMATION

PAGE

Item I . Financial Statements : ...... 1 Condensed Balance sheets as of September 30, 2004 and December 31, 2003 (unaudited)

Condensed Statements of Income for the Three Months and Nine Month s ...... 2 Ended September 3 0, 2004 and 2003 (unaudited) ...... and 2003 (unaudited) ...... 3 Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2004 ...... 4 Notes to Financial Statements (unaudited) ...... 13 Item 2 . Management 's Discussions and Analysis of Financial Condition and Results of Operations ...... 26 Item 3 . Quantitative and Qualitative Disclosures About Market Risk ...... 2 6 Item 4 . Controls and Procedures ......

PART II . OTHER INFORMATION AND SIGNATURE S

...... 2 7 Item 1 . Legal Proceedings ...... 32 Item 6 . Exhibits ...... 34 Signatures ...... 3 5 Certifications ......

1 PART I - FINANCIAL INFORMATIO N ------ITEM 1 . FINANCIAL STATEMENTS

IMPAX LABORATORIES, INC . CONDENSED BALANCE SHEETS (UNAUDITED ) (IN THOUSANDS, EXCEPT SNARE AND PER SHARE DATA) SEPTEMBER 30 , DECEMBER 11 , 200 4 200 3 ...... _------

ASSETS

Current assets : Cash and cash equivalent s $ 44,762 $ 15 .505 Short term investments 44,621 - - Accounts receivable , net 19,730 9,865 Inventory 30 . 232 28,47 9 Prepaid expenses and other assets 2,735 1,42 7

Total current assets 150 , 300 55,290 Restricted cash - 10,00 0 Property , plant and equipme nt , net 43 , 649 36,13 3 Investments and other assets 3,673 1,32 5 Goodwill , net 27 , 574 27,57 4 Intangibles , net 91 37 9

Total assets 5725,467 $ 133,70 6 ......

LIABILITIES AND STOC KHOLDERS ' EQUITY

Current liabilities . Current portion of long-term debt $ 912 $ 1,06 8 Accounts payable 12,641 22,76 3 Revolving line of credit 5,000 7,64 2 Accrued expenses and deferred revenues 15,33 6 10,67 2 ...... __ . .---- - Total current liabilities 33,049 42,36 5 Convertible senior subordinated debentures 95,000 - - Refundable deposit from Teva -- 5,00 0 Long term debt 7,264 6,854 Deferred revenues and other liabilities 2,978 2,67 9

Total liabilities 139,15 1 59,09 6 ------

Commitments and Contingencies Mandatorily redeemable convertible Preferred Stock : Series 3 mandatory redeemable convertible Preferred Stock, $0 .01 par value 0 share s outstanding at September 30, 2004, and 75,000 shares outstanding a t December 31, 2003 , redeemable at $100 per share 0 7 .50 0 ......

Stockholders' equity : Common stock, $0 .01 par value, 90,000,000 shares authorized an d 56,478,671 and 55,307,136 shares issued and outstandin g at September 30, 2004, and December 31, 2003 . respectively 565 55 3 Additional paid-in capital 184,028 170,10 4 Accumulated deficit (96,277 ) (104,549 ) -----•-- ---___-- - Total stockholders' equity $6,336 66,10 6

Total liabilities and stockholders' equity $225,48 7 $ 132,70 6 ......

The accompanying notes are an integral part of theme financial statements .

1 IMPAZ LABORATORIES, INC . CONDENSED STATEMENTS OF INCOM E (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Three Months Ende d Nine Months Ended September 30, September 30 ......

2004 2003 2004 2003

Net sale s $ 30,161 $ 15,90 8 $ 91,798 $ 40,43 4

Revenue from reversal of refundable deposit from Teva -- 2,500 - -

Other revenues 44 3 589 1,51 5 1,555 ...... ------"' --- .__ . .-- -

Total revenues 30,704 16,497 95 .613 41,98 9

Cost of sales 17,592 12 .976 54,679 30,444

Gross margi n 13,112 3,521 41,134 11,54 5

Research and development 4,942 3,356 15,266 10,46 3

Reimbursements from Tava (217 ) (93 ) (306 ) (247 ) ------...... ------...... -

Research and development, net 4,725 3,265 14,960 10 .21 6

Patent litigation expenses 3,299 645 7,146 1,84 2

Selling expense s 906 546 2,345 1 .55 2

General and administrative expenses 3,289 2,321 9,757 6,52 6

Other operating income (expense), no t 4 4 1 5 2 5 ...... ------•------

Net income (1083) from operations 69S (3,452) 6,941 ( 8,566 ) Interest income 387 67 714 199

Interest expens e (547) (243) (1,383) (738 )

Net income (loss) before provision for income taxes $ 735 $ (3,608) $ 6,272 $ (9,105 )

Provision for income taxe s

Net income (1044) $ 73 5 $ (3,606 ) $ 6,27 2 $ (9,105 ) ...... Earnings (loss) per share, Basic $ 0 .01 $ (0 .07) $ 0 .1 1 $ (0 .18 ) ...... ------...... Diluted $ 0 .0 1 $ (0 .07 ) $ 0 .1 0 $ (0 .18 ) ...... ------^'-""------' . . .-- -

Weighted average common shares outstanding : Basi c 59,469 ,272 52,610,366 57,855,63 7 50,382,45 5 ...... Diluted 62,137,37 6 52,610,35 6 61,352,899 50 .383,45 5 ......

The accompanying notes are an integral part of theme financial statements .

2 IMPAX LABORATORIES, INC . CONDENSED STATEMENTS OP CASH PI.ON8 (UNAUDITED) (DOLLARS IN THOUSANDS)

NINE MONTHS ENDED SEPTEMBER 30 , ...... ------200 4 200 3 ...... - -

CASH FLOWS FROM OPERATING ACTIVITIES : Net income (long) $ 6,272 $ (9,105) Adjustments to reconcile net income (loss) to net cash used by operating activities : Depreciation and amortization 3,263 2,71 6 Reversal of refundable deposit from Teva (2,500) - - goo-cash compensation charge (options) 87 43 7 Change in assets and liabilities , Accounts receivable (9,845) (1,375 ) Inventory (9,753) (9,365) Prepaid expenses and other assets (45) (267 ) Accounts payable (10,142) 8,03 5 Other liabilities 4,562 (861 )

Net cash (used in) operating activities (18,101 ) (9,523 ) ------

CASH PLOWS PROW INVESTING ACTIVITIES : Purchase of short term investments (44,621 ) Purchases of property and equipment (8,692) (3,063 )

Net cash (used in) by investing activities (53,513 ) (3,063 ) ^-----' ------

CASH FLOWS FROM FINANCING ACTIVITIES , Revolving line of credit borrowings (repayments) (2,710) 1 .196 Additions to long-term debt -- $96 Repayment of long-term debt (1,656) (674 ) Proceeds from convertible debentures 95,000 - - capitalized Financing Costs (3,612) - - Reversal of Restricted Cash 10,000 Not proceeds from sale of common stock -- 23,296 Proceeds from issuance of common stock (upon exercise o f stock options and warrants) 3,869 43 3

Net cash provided by financing activities 100,691 25 .14 9

Net increase in cash and cash equivalents 29,277 12,26 3

Cash and cash equivalents, beginning of the period $ 15,505 $ 10,21 9

Cash and cash equivalents, and of the quarter $ 44,76 2 $ 22,48 2 ......

Cash paid for interest $ 1,38 3 $ 44 7 ...... Cash paid for income taxes $ - - $ • - ......

The accompanying notes are an integral part of theme financial statements .

3 NOTIS TO CONDENSED FINANCIAL STATM49NTS NINE MONTHS ENDED SEPTEMBER 30, 2004 AND SEPTEMBER 30, 2003 (UNAUDITED )

NOTE 1 . These condensed financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission . Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, however, the Company believes that the disclosures are adequate to wake the information presented not misleading . These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-R . The results of operations for the three and nine months ended September 30, 2004 are not necessarily indicative of the results of operations expected for the year ending December 31, 2004 .

Iwpax Laboratories, Inc . (•IMPAX," "we," "us," or the Company") focuses on the development, manufacturing, and marketing of specialty pharmaceutical products utilising formulation expertise and drug delivery technologies . As of September 30, 2004, the Company marketed thirty-three generic pharmaceuticals, which represent dosage variations of fourteen different pharmaceutical compounds, and has fourteen applications under review with the Food and Drug Administration (FDA), including four tentatively approved . Nine of these pending filings were filed under Paragraph IV of the Hatch-Waxman Amendments . The Company has approximately twenty-five other products in various stages of development for which applications have not yet been filed .

The Drug Price Competition and Patent Term Restoration Act of 1904, referred to es the Hatch-Nexman Amendments, established on abbreviated new drug application (-ANDA") procedure for obtaining FDA approval of generic versions of certain drugs . An ANDA is similar to a new drug application ("Nov) except that the FDA waives the requirement that the applicant conduct and submit to the FDA clinical studies to demonstrate the safety and fetiveness of the drug . Instead, for drugs that contain the same active ingredient and are of the same route of administration, dosage form, strength and indication(s) as drugs already approved for use in the United States, the FDA ordinarily only requires bioavailability data demonstrating that the generic formulation is bioequivelent to the previously approved reference listed drug, and indicating that the rate of absorption and the levels of concentration of the generic drug in the body do not show a significant difference from those of the previously approved reference listed drug product . According to information published by the FDA, the FDA currently takes approximately 1$ to 20 months on average to approve an AMA following the data of its first submission to the FDA .

Patent certification requirements for generic drugs could also result in significant delays in obtaining FDA approvals . First, where patents covering a reference listed drug are alleged to be invalid, unenforceable, or not infringed by an ANDA applicant, the holder or holders of the brand name drug patents may institute patent infringement litigation and obtain a stay of up to 30 months after approval of an ANDA, and for MIDAS of products whose patent information was listed before August 2003, potentially multiple 30 month stays . Second, the first company to submit an ANDA for a given drug, which the FDA accepts for filing, and which certifies that an unexpired patent covering the reference listed brand name drug to invalid, unenforceable, or will not be infringed by its product, can be awarded 160 days of market exclusivity following approval of its ANDR, during which the FDA may not approve any other ANDAS for that drug product .

Except for the nine months ended September 30, 2004 we have experienced operating losses in each quarter since our inception and our future profitability continues to be uncertain . We have also experienced negative cash flow from operations . As of September 30, 2004, our accumulated deficit was $9$,277,000 and we had outstanding indebtedness in an aggregate principal amount of $106,196,000 . To remain operational, we must, among other things ; o obtain FDA approvals for our products i o prevail in the patent infringement litigation in which we are involved ; o successfully launch our new products, an d o comply with the many complex governmental regulations that deal with virtually every aspect of our business activities .

we expect to Inc" significant operating expenses, particularly research and development and patent litigation, for the foreseeable future in order to execute our business plan . We, therefore, anticipate that such operating expenses, as well as planned capital expenditures for the next twelve months ranging from $15 to $20 million, primarily in plant capacity expansion, will constitute a material use of our cash resources .

To date, the Company has primarily funded its research and development and other operating activities through equity, debt financings and strategic alliances . CRITICAL ACCOUNTING POLICY RELATED TO REVENUE RECOGNITION

The Company recognizes revenue in accordance with BBC Staff Accounting Bulletin ("BA)") 101 issued by the 89C in December 1999 . We recognize revenue from the sale of products when the shipment of products is received and accepted by the customer . Provisions for estimated discounts, rebates, chargebacks, returns and other adjustments are provided for in the period the related sales are recorded . In December 2003, SAN 104 was issued by the BBC . This bulletin clarifies portions of Topic 13 of the Staff Accounting Bulletin to be consistent with current accounting and auditing guidance and SEC rules and regulations . This bulletin also revises the accounting guidance contained in SAN 101 related to multiple element revenue arrangements of Emerging Issues Task Force (BITF) No . 00-21 .

BI?P No . 00-21 supplemented SAS 101 for accounting for multiple element arrangements . The Company has entered into several strategic alliances that involve the delivery of multiple products and services over ►n extended period of time . In multiple element arrangement., the Company must determine whether any or all of the elements of the arrangement can be separated from one another . If separation is possible, revenue is recognized for each deliverable when the revenue recognition criteria for the specific deliverable is achieved . If separation is not possible, revenue recognition is required to be spread over an extended period .

Under SIT? No . 00-21, in an arrangement with multiple elements, the delivered item should be considered a separate unit of accounting if all of the following criteria are mat :

the delivered it. . has value to the customer on a standalone basis ; there is objective and reliable evidence of the fair value of the undelivered item, and if the arrangement included a general right of return, whether delivery or performance of the undelivered item is considered probable .

The Company reviews all of the terms of Its strategic alliances and follows the guidance from SAS 104 and SIT? No . 00-21 for multiple element arrangements . Upfront and milestone payments from these strategic alliances are deferred and recognized over the life of the agreements as the Company fulfills its contractual obligation to manufacture and supply products during this period . In addition , in some agreements , the Company receives and records royalty revenue based on a percentage of the strategic partner ' s total sales to their customers of the products supplied by IMPAX .

In June 2001 , the Company entered into a Strategic Alliance Agreement with a subsidiary of Teva for twelve controlled - release generic pharmaceutical products . The agreement granted Teva exclusive U .S . prescription marketing rights for these products for a period of ten years from the date of Teva's first sale of the products . Under the terms of this agreement , Teva has sole and exclusive right to determine all terms and conditions of sale to its customers, including pricing , discounts , allowances , price adj us tments , returns and rebates .

Revenues from product sales for these products under our strategic alliance are recognized at the time title and risk of loss transfers to Teva's customers . Because the terms are FOB destination , title and risk of loss transfer to Teva customers upon their receipt . During the nine months ended September 30, 2004, the Company commenced shipping i ts Bupropion Hydrochloride 100 mg and 1S0 mg Controlled Release Tablets . The Company coewnced shipping its Omeprazole 10 mg and 20 mg delayed release products during the 2004 third quarter . Teva ships the Bupropion and Oweprazole products to i ts customers and reports the r es ults on a monthly basis . Teva provides to INPAR a financial report detailing its gross sales le ss applicable chargebacks , rebates and other credits to arrive at net sales , cost of sales information and gross margins for the Bupropion and Omaprasole products . The information on the financial report is used by IMPAX to record its monthly revenue for the Bupropion and Omeprasole products . The Company is endeavoring to take steps under the Strategic Alliance Agreement to ensure that all such adjustments granted by its strategic partner in the future are reported to the Company on a timely basis . These steps include , but are not limited to, regular discussions with Twa management regarding their monthly financial reports to INPAX on our products marketed by Teva via monthly teleconferences and quarterly meetings . These discussions will cover all the areas of revenue recognition for these products , including but not limited to, ,ales credits , product returns and internal controls over Teva ' a financial reporting to IMPAX . Our procedures will Include a review of applicable docu mentation for IMPAX revenue sh aring . The Audit Committee of the Company'/ Board of Directors may take additional steps as deemed necessa ry . Under the contract terms , the Company has the option to perform an annual audit with our strategic partner . We are also estimating returns for prescription products marketed by our stra tegic partners , such as Teva , called •Rx Partners,- based on our internal returns analysis and historical indust ry statistics . The amount of revenue that IMPAX earns is based on reimbursements of manufacturing cost plus a fixed gross margin sharing percentage .

Under the July 2003 Exclusivity Transfer Agreement with Andrx and Teva pertaining to the Bupropion Hydrochloride products , Andrx is entitled to certain payments for the sales of the 1S0 mg strength for a six month period from the product launch date . These payments are made directly by Teva to Andrx . EARNINGS PER SHARE (EPS )

Basic earnings per share is computed by dividing net income by the weighted average common shares outstanding . Diluted earnings per share is based on the treasury stock method and is computed by dividing net income by the weighted average number of common shares and dilutive potential common share s outstanding, assuming the exercise of all in-the-money stock options . A reconciliation of the numerators and denominators of basic and diluted earnings per share consisted of the following (in thousands, except share and per share amounts) :

Taro. 14ntr lads xtnt 100100 wM • wptrwr )0 , wltWt......

1014 000) 3tw lto w,.. 0.1 wt in.e .. Rota t 0)0 t 10 .0011 f 1 .111 f 11 .00$) wnr•..S . . le wlptt0 .....1. etas„ .Ir•n. wttt .nst. 11 .101 .171 u,q0,lf{ 17.117,5)7 00 .010,411 s ...... - .----•-- .-- It'll, at 4Wtln ",I- uN llrant•

h11Y tl\V..f -IV." o o ofo avers WfM OYt•t•00ty {1,111, 1'11 t9,{10.>M {1. )f) .IN 00.111 .10 { --x----1 .01 ---•~-(0 •..la t.t m b IN W n t I .a f . .071 t . .i1 { 11 .101 . . . - - .40 .07 rutty • " .so ••rslxy Nt Wn t10--••-0. .01. .. II I. .r71 t 0 .10 1 It .11 1

For the three months and nine months ended September 30, 2003, the Company had net losses . Only the weighted average of common shares outstanding has been used to calculate both basic earnings per share and diluted earnings per share as inclusion of the potential common shares would be anti-dilutive . For the three months and nine months ended September 30, 2004, the Company had net income, and excluded from the computation of fully diluted earnings per share are outstanding common stock options and warrants with an exercise price greater than the average market price of the common shares for such periods . For the three and nine months ended September 30, 2004, the Company has excluded from the fully diluted earnings per share computation 1,441,338 common shares .

The effect of approximately 3 .4 million shares related to the assumed conversion of the $95 million convertible senior subordinated debentures has been excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2004 as none of the conditions that would permit conversion have been satisfied .

STOCK- BASED EMPLOYEE COMPENSATIO N

The Company accounts for stock-based employee compensation arrangements in accordance with provisions of Accounting Principles Board (APB) Opinion No . 25, "Accounting for Stock Issued to Employees ." Compensation cost for stock options, if any, is measured as the excess of the quoted market price of the stock at the date of grant over the amount an employee must pay to acquire the stock . The Company has adopted the disclosure only provisions of SFAS No . 123, "Accounting for Stock-Based Compensation" and SFAS No . 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - An Amendment to PASS Statement No . 123 . "

Had compensation cost for the Company's Plans been determined based on the fair value at the grant dates for the awards under a method prescribed by SFAS No . 123, the Company's income and earnings per share would have been decreased to the pro forma amounts indicated below (in thousands, except per share amounts) :

Three Months Salad Mioo Month" tndxd Optoobor 30, txptxohor 30 ,

2004 1003 2004 2003

■•1 I.. - (10 .•), as rport•d 0 729 0 )3,400) $ 6,173 $ (9,100 ) Add : Stork-Wad ..ploy. ooyon••tlon Lnclud"d In rxport.d not boo.. , not at r•lxtxd tax xtf•atx t7 - .

D .dutt, Total •tack-Wxd oxployS xosp•n•xtion sop•nso determined undxr fair V•1iff basal oxthod for all xr.rdo . not of r•lxt•d tax affect. (9 1 171) (919) (5 1 170 ) 11,717 )

P .. far- at 1n-OM (10••) {(1 .43{) 8(1 ,127 4 f 1,109 9111 .932) "151190 paMxlor 5)0 npott"0 1 0 .01 0 10 .07) i 0 .11 $ (0 .11) Basic - pro torn 0 (0 .03) 0 10 .071 0 0 .02 0 (0 .10)

Dilutxd - 00 npurtd $ 0 .01 i (0 .07) t 0 .10 $ (0 .15) Dilutod - pro tors" 0 (0 .011 $ (0 .09 ) $ 0 .02 1 (0 .71 )

N The Company calculated the fair value of each option grant on the date of the grant using Black-Scholes pricing method with the following assumptions for the nine months ended September 30, 2004 and 2003 : the dividend yield was 0% and Ot ; the weighted average expected option term was five years ; risk-free interest rate was 3 .42% and 2 .84% ; and the stock volatility was 79t and 82%, respectively . The weighted average fair value of options for September 30, 2004 and 2003 was $13 .37 and $3 .63, respectively .

The Company reports both basic earnings per share, which is based on the weighted-average number of common shares outstanding, and diluted earnings per share, which is based on the weighted-average number of common shares outstanding and all dilutive potential common shares outstanding .

NOTE 2 . Convertible Senior Subordinated Debenture s

On April 5, 2004, the Company issued and sold $95 .0 million in aggregate principal amount of its 1 .2501 convertible senior subordinated debentures due 2024 . The debentures were sold by the Company to Citigroup Global Markets Inc ., Wachovia Capital Markets, I.LC and First Albany Capital Inc ., as initial purchasers, in a private placement exempt from registration under the Securities Act of 1933, as amended (the "Securities Act") . We have been advised by the initial purchasers that they have resold, and/or intend in the future to resell, the debentures to "qualified institutional buyers" (as defined in Rule 144A promulgated under the Securities Act) in transactions exempt from the registration requirements of the Securities Act in reliance on Rule 144A .

The issuance and sale of the debentures resulted in net proceeds to the Company of approximately $91,388,000 . These proceeds are being used for general corporate purposes, including working capital requirements, manufacturing of our products and research and development .

The debentures bear interest at the rate of 1 .250% per year . Interest on the debentures is payable on April 1 and October 1 of each year, beginning on October 1, 2004 . The debentures are convertible by holders into shares of our common stock at a conversion price of $28 .08 per share (which is subject to adjustment upon certain events, but represented a 30% premium over our stock price at the time the debentures were issued) . The debentures are convertible by holders into shares of our common stock if : (1) the price of our common stock reaches a specific threshold ; (2) the trading price for the debentures falls below certain thresholds ; (3) the debentures have been called for redemption ; or (4) certain corporate transactions occur .

The debentures mature on April 1, 2024, unless earlier redeemed, repurchased or converted . Before April 5, 2007, we may redeem some or all of the debentures if the price of our common stock reaches a specific threshold, at a redemption price that includes an additional payment on the redeemed debentures equal to $230 .77 per $1,000 principal amount of debentures, less the amount of any interest actually paid or accrued and unpaid on the debentures . On and after April 5, 2007, the Company may redeem some or all of the debentures at certain specified redemption prices .

The debentures are the Company's unsecured obligations and are subordinated in right of payment to all of the Company's existing and future senior indebtedness . On April 1, 2009, April 1, 2014, and April 1, 2019, and under certain circumstances, holders of the debentures will have the right to require us to repurchase all or any part of their debentures at a repurchase price equal to 100% of the principal amount of the debentures, plus accrued and unpaid interest and liquidated damages, if any, to, but excluding the repurchase date .

In September 2004, the PASS discussed EITF 04-08, "The Effect of Contingently Convertible Debt on Diluted Earnings Per Share ." The EITF has proposed that companies count the shares that could be issued upon conversion of securities like the Company's debentures when calculating fully diluted per share earnings . Had EITF 04-08 been effective as of September 30, 2004, inclusion of the 3,383,188 common stock shares from the convertible debentures would be anti-dilutive . In connection with the offering of the debentures, we filed a shelf registration statement in June 2004 with the SEC covering resales of the debentures and of the common stock issuable upon conversion of the debentures . In September 2004, the Company filed an amended shelf registration statement with the SEC relating to the debentures . The registration statement was declared effective on Form S-3 on October 1, 2004 .

NOTE 3 . Recent Accounting Pronouncement s in January 2003, the FASB issued FASB Interpretation No . 46 (FIN 46), "Consolidation of Variable Interest Entities ." FIN 46 clarifies the application of Accounting Research Bulletin No . 51, "Consolidated Financial Statements," to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties . FIN 46 applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date . It applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003 . FIN 46 applies to public enterprises as of the beginning of the applicable interim or annual period . On October 8, 2003, the FASB decided to defer FIN 46 until the first reporting period ending after December 15, 2003 . The provisions of this Interpretation did not have a material impact on the Company's financial condition or results of operations .

In December 2003, the FASB issued FIN No . 46(R), "Consolidation of Variable Interest Entities," clarifying the application of Accounting Research Bulletin No . 51, "Consolidated Financial Statements," to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support . The provisions of this Interpretation did not have a material impact on the Company's financial condition or results of operations .

In December 2003, the FASS revised SFAS 132, "Employers' Disclosure About Pensions and Other Post Retirement Benefits ." This Statement does not change the measurement or recognition of those plans required by PASS No . 87, "Employers' Accounting for Pensions," and No . 106, "Employers' Accounting for Post Retirement Benefits Other than Pensions ." This Statement retains the disclosure requirements contained in FASB No . 132, "Employers' Disclosure about Pensions and Other Post Retirement Plans ." The provisions of this Statement did not have a material impact on the Company's financial condition or results of operations . During the nine months ended September 30, 2004 and 2003, the Company's contributions to the 401-K Plan were $335,158 and $213,859, respectively .

In February 2004, the FASB issued revised PASS Staff Positions (FSP) pertaining to FIN 46(R) . The revised FSPs replace certain previously issued FIN 46 FSP for entities to which FIN 46(R) is applicable . This revision to FIN 46 did not have a material impact on the Company's financial condition or results of operation .

In February 2004, the PASS revised SFAS 133, "Accounting for Derivative Instruments and Hedging Activities for Implementation Issue E2L, A1J, and C6 ." The revisions to SFAS 133 did not have a material impact on the Company's financial condition or results of operation .

In September 2004, the FASB discussed EITF 04-08, "The Effect of Contingently Convertible Debt on Diluted Earnings Per Share ." The BITF task force has proposed that companies count the shares that could be issued upon conversion of securities like the Company's debentures when calculating fully diluted per share earnings . This EITF is not yet effective . However, we disclosed in Note 2 the potential effect of this EITF on the Company's fully diluted EPS calculation .

NOTE 4 . Our gross receivables and related deductions activity for the nine months ended September 30, 2004 and 2003, and the year ended December 31, 2003 was . Nine Months Ended Year Ende d ------September 30, September 30, December 11 , (in $0000 ) 200 4 2003 2003 ...... ----•-- - aroo accounts receivable $26,S4S $12,603 $ 17,09 1 Less : Accrued rebates (1,667) (2,429) (2,700 ) Less : Accrued chargebacks (2,744) (2,377) (4,101 ) Len : Other deductions (204) (96) (405 )

Net accounts receivable $19,730 $ 7,699 $ 9,66 5

Other deductions include allowance for disputable items, doubtful accounts, and cash discounts .

Net accounts receivable balance at September 30, 2004 includes $8,367,000 due from Teva as compared to zero dollars at December 31, 2003 .

Chargebacks and Rebates Accrual activity for the nine months ended September 30, 2004 and 2003, and the year ended December 31, 2003 was :

cXARGCBACKS ACCRUAL ...... Nine Months Ended Year Ended ...... _ ._ ._ .__ . . . (in $0008 ) September 30, September 30, December 31,

2004 2003 2003 ...... ------

Beginning Balance $ 4,101 $ 1,373 $ 1,37 3 Add : Provision related to sal es made in current period 7,207 6,000 10,571 Len : Credits issued during the current period (6,564) (4 , 996) (7,$41) ------Ending Balance $ 2,744 $ 2,377 $ 4,101 ------

REBATES ACCRUAL ------

Mine Months Ended Year Ended

(in $000 .) September 30, September 30, December 31, 2004 2003 2003

Beginning Balance $ 2,700 5 .1,525 $ 1,525 Add ; Provision related to sales made in current period 4,441 4, 657 6,660 Less : credits issued during the current period 13,274) ( 3,953 ) ( 5,505 )

Ending Balance $ 3,667 $ 2,429 $ 2,70 0

NOTE 5 . Our inventory consists of the following

September 30, December 31 , (in $0000 ) 2004 200 3

Raw materials $24,740 $ 9,67 1 Work in process 4,219 5,30 3 Finished goods 9,27 3 13,50 5 -- - - - $36,2)- ---2 $ 26,47------9

9 INPAX, as do most companies in the generic pharmaceutical industry, may build pre-launch inventories of certain AMA-related products that have not yet received FDA approval and/or satisfactory resolution of patent infringement litigation when it believes that such action is appropriate to increase its commercial opportunity and if Company's management believes that the approval is pending in the near term . Because the ANDA is, in effect, a copy of the related brand drug, we believe that there are no issues regarding safety and efficacy of generic products . Pre-launch inventory is stated at the lower of cost or market . Cost is determined using a standard cost method, which assumes a first-in, first-out (FIFO) flow of goods . Costs of unapproved products are similar to the approved products and include materials, labor, quality control, and production overhead . Typically, the selling price of a generic pharmaceutical product is a discount from the corresponding brand product selling price which is currently marketed . In all cases, the prelaunch products have inventory costs lower than their related net selling prices . If the market prices become lower than the historical product costs, then the pre-launch inventory value will be written down to market .

As of September 30, 2004, the Company's total inventory of $36,232,000 included $2,648,000 in inventories relating to products pending launch while IMPAX await . receipt of FDA marketing approval and/or satisfactory resolution of patent infringement litigation, as follows ,

U . $000O Avpeove0

Ilan enteri .le { 33,310 $ 1,422 $ 24,740 work in pros.. . 2,793 1, 426 4,219 Finished good. 9,373. . . 0 0127 1 ...... TOTAL $ . .35,314. . . $ 2,844. $3e,23 2 ...... ------

The major components of the unapproved inventory included approximately $1,741,000 of Nethylphenidate and approximately $737,000 of Rilusole (raw materials only) . The average remaining shelf life for Methylphenidate raw material lots approximate thirty-five months and the work-in-process is twenty-three months, The average remaining shelf life of Riluzole raw material lots is approximately twenty-seven months . The remaining unapproved raw material inventory includes products on which we expect approval in the next six months . Typi ca lly, a generic drug is easily substituted for the corresponding brand product and, once a generic product is approved, the pre-launch inventory is sold within the first three months . If the inventory produced exceeds the estimated market acceptance of the generic product and becomes short-dated, it will be written-off . Raw materials generally have a shelf life of approximately three to five years ; finished products generally have a shelf life of approximately twenty-four months . To our knowledge, as of the date of this report, there are no manufacturing, marketing or labeling issues outstanding Belated to unapproved inventory .

Approved inventory in the table above includes approximately $2,121,000 of Oxycodone 60 mg tablets . The FDA has granted final approval to our ANDA for oxycodone . The patent litigation for this product is still ongoing . See additional details in Part II, Its . 1, Legal Proceedings for the current status of this case .

unapproved inventory of Rilusole is approximately $737,000 and the patent litigation for this product is still ongoing . Sae additional details in Part II, Item 1, Legal Proceedings for the current status of this case .

The Methylphenidate unapproved inventory is approximately $1,741,000 and does not have any open patent litigation issues outstanding ; however, INPAX has not received final FDA marketing approval .

When we believe that we are within approximately six months of receiving FDA approval, we begin to schedule process validation studies as required by the FDA to desonstrste the production process can be scaled up and reproduce commercial batches . NOTE 6 . intangibles consist of the following ;

wl. . w Ile 00.011 wet .) 11[. I.rt .* et 10 . **t.a *t It . lywf .l 10*4 10.1 ......

04 .t tiff. Ye ll .Ww 1• s 0 i .atl 0 2 .001

Yw, w.rn,.e« .~ .alwiw (1 .0001 u.llll ~ si t l7f ......

Amortization expense was $96,000 for the three months and $286,000 for the nine months ended September 30, 2004, respectively . Expected amortization expense for 2004 will be approximately $379,000 .

NOTE 7 . ACCRUED EXPENSES AND DI► 6RRUD RIVRNDR Accrued expenses and deferred revenue as of September 30, 2004 and December 31, 2003 consist of the following,

10 September 20, Daeae0r 11 , (in $000• .) ]004 ]00 1

8.1 . . raturna i f,af0 1 .,1] 1 p.[arrad rawnua. 1,767 1,70 1 Mcrwa salaries mad payroll expanse. 2,411 1,641 I+pal and protmoional tea . ],0]t 1,47 5 Meruaa MWte .sa n6aeaa to 61 3 accrued royalty sad stun profit sharing expense f]t 11 6 Accrued .Ml! stock resarva 130 ]1 7 0t0r occrwla 336 af !

$15 ,33 4 810, .7 2 ------......

NOTE B . RETURNS ACCRUAL

Returns accrual as of September 30, 2004 and 2003, and December 31, 2003 consisted of the following ;

azrvml . $ecauac ......

Mina Months Ended year ad.d

in $000.) gapt•ahar 30, September 20, December 11 , 2004 2 001 200 3

s000nning Balance $ 4,121 $3,100 t 3,100 Add, provi s ion related to sales .ad. In currant period 4,714 709 21176 Lose, Credits Issue d during the current period (71147) 1709) (1,295 )

anding 9a1aae0 $ 6,884 03 .100 1 4,121 - ......

The return s accrual balance at September 30, 2004 includes $1,244,000 for products marketed through Rx Partners, i .e ., Teva , as compared to zero dollars at December 31, 2003 . An our product sales continue to increase , the provision for sales returns will also continue to increase .

The sales returns reserve increased by $3,768,000 for the nine months ended September 30, 2004 as compared to the same period in 2003 . This significant increase in the reserve balance related to the Teve products reserve of $1,244,000, an increase in Lipram product reserve of approximately $1,087,000, and Orphenadrine product reserve of approximately $2,414,000, which was partially offset by a decrease in the product reserve for Fludrocortisone of approximately $1,010,000 . The new product returns reserve calculation in a weighted percentage based on limited historical data .

The Lipram product family is not AS rated (products that demonstrated bioequivalence with innovator products) and is not manufactured by IMPAX, but it is packaged and distributed by us . On average, we ship Lipram products with approximately seven months of dating remaining . This can be attributed to both the vendor (sending product with lose than full dating) and our internal packaging priorities . Limited dating, combined with the slow moving nature of these non-AB rated products, create more returns exposure for this product family . Please note that we are monitoring returns by product and, where applicable, we establish specific product returns reserves and/or adjust our estimates of the future return rates based on various business and competitive assumptions .

We instituted an inventory management program for our wholesale customers . Through this program, we use on-hand and usage data from the wholesalers in the form of monthly pipeline inventory reports to help govern fulfillment of purchase orders . This also has helped to keep our returns exposure down by decreasing the potential for expired material on the customers' shelves .

NOTE 9 . COMMITMENTS AND CONTINGENCIES

Patent Litigation

The Company is a defendant in several lawsuits with respect to the manufacture, use, and sale of new products that are the subject of conflicting patent rights . In general, one or more patents tend to cover the brand name controlled-release products for which we are developing generic versions . Under the Hatch-Waxman Amendments, when a drug developer files an ANDA for a generic drug, and the developer believes that an unexpired patent which has been listed with the FDA as covering that brand name product will not be infringed by the developer's product or is invalid or unenforceable, the developer must ■ o certify to the

11 FDA . That certification must also be provided to the patent holder, who may challenge the developer's certification of non-infringement, invalidity or unenforceability by filing a suit for patent infringement within 45 days of the patent holder's receipt of such certification . If the patent holder files suit, the FDA can review and tentatively approve the ARIDA, but is prevented from granting final marketing approval of the product until a final judgment in the action has been rendered, or 3 0 months from the date the certification was received, whichever is sooner . Should a patent holder commence a lawsuit with respect to an alleged patent infringement by us, the uncertainties inherent in patent litigation make the outcome of such litigation difficult to predict . Son if the FDA were to approve a product upon expiration of the 10-month period, we may not commence marketing that product if patent litigation is still pending . The Company's policy is that it does not market its generic version of a brand product until the Company has both final FDA approval and some indication of the patent status from the courts, unless it secures some form of indemnification from a strategic partner or obtains risk mitigation insurance . As a result, the Company, generally, does not have any risk of lose relating to patent infringement lawsuits . According to PAS No . S, there are two conditions that must be met for an estimated loss from a loss contingency to be accrued as a charge to incomes a) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements, and b) the amount of loss can be reasonably estimated . The Company believes that these conditions are not satisfied because no liability was incurred or recognised, as a lose is not probable and Cannot be reasonably estimated, since the Company's policy is not to market its products until it receives both final FDA approval and some indication of the patent status from the courts . However, if INPAX decides to market the product before the patent status is cleared by the courts, the Company will then evaluate its liability and separately assess recovery, if any, from the indemnification arrangement with strategic partners or risk mitigation insurance .

As part of our patent litigation strategy, we obtained two policies covering up to $7 million of patent infringement liability insurance from American International Specialty Line Company l•AISLIC"), an affiliate of AID International . This litigation insurance covered us against the costs associated with patent infringement claims made against us relating to seven of the ANDAs we filed under Paragraph IV of the Hatch-Waxman Amendments . Both policies have reached their limit of liability . While Teva has agreed to pay 45% to S0% of the attorneys' fees and costs (in excess of the $7 million covered by our insurance policies) related to the twelve products covered by our strategic alliance agreement with Tevs, we will be responsible for the remaining expenses and costs for these products, and all of the costs associated with patent litigation for our other products and our future products .

We do not believe that this type of litigation insurance will be available on acceptable terms for our current or future ANDM . In those cases, our policy is to record such expenses as incurred .

Although the outcome and costs of the asserted and unasserted claims in difficult to predict because of the uncertainties inherent in patent litigation, management does not expect the Company's ultimate liability for such matters to have a material adverse effect on its financial condition, results of operations, or cash flows .

PIN 4 5

In November 2002, the PASS issued FIN 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others ., Guarantees and claims arise during the ordinary course of business from relationships with suppliers, customers, and strategic partners when the Company undertakes an obligation to guarantee the performance of others through the delivery of cash or other assets if specified triggering events occur . Non-performance under a contract by the guaranteed party triggers the obligation of the Company . As of September 10, 2004, all indemnifications included in agreements as of that date are excluded from the scope of PIN 4S as they relate primarily to our own future performance and do not require any contingent payments .

As of September 30, 2004, our total contractual commitments on loans, operating leases, and royalty agreements have not materially changed since December 71 . 2003, as disclosed in our Report on Form 10-K .

HOTS 10 . LOAN AQRLSMERTS WITH PIDA AND DRPA

In April 3004, the Company terminated the loan agreements with Pennsylvania Industrial Development Authority ( PIDA ) and Delaware River Port Authority IDRPA) and repaid the remaining balances totaling approximately $992,000 .

NOTE 11 . LOU AND SECURITY AGIR2g)4 rr WITH WACROVIA BANK N .A .

In June 2004 , the $25 million Loan and Security Agreement with Machovis Sank N .A . was amended , as follows :

o The cas h collateral requirement of $10 , 000,000 was removed . o The adjusted excess availability covenant was removed . o IMPA % will maintain at Wachovia sank c as h and investments in an amount not leas than $25 .000,000 . o If the amount of cash and investments decline below $25,000,000, than the cash collateral requirement of $10,000,000 and adjusted excess availability covenant will be re-established . o It the Company reports negative free cash flow in any quarter, then reserves in the amount of the negative free cash flow will be reported in the borrowing base . o The maximum aggregate capital expenditures permitted during any fiscal year in the amount of $8,000,000 was amended to permit a maximum cumulative aggregated amount of 845,000,000 for fiscal years 2004 and 2005 .

NOTE 12 . INCOME TAXE S

On a quarterly basis, the Company evaluates its projected full year taxable income and related book-to-tax timing difference and the use of not operating loss (NOL) carryforwards . The Company estimates that it is not subject to current year income taxes . A. of September 30 . 2004, the Company had net operating loss carryforwards aggregating approximately $112 million expiring from 2009 through 2023 . We evaluate the realizability of deferred tax assets on an annual and quarterly basis or if there is a significant change in circumstance that may cause a change in our judgment about the realizability of our deferred tax assets .

NUTS 13 . SEGMENT INFORMATION

SPAS No . 131, "Disclosures About Segments of an Enterprise and Related Information" establishes standards for reporting of financial information about operating segments in annual and quarterly financial statements . The Company manufactures generic pharmaceutical products . All products have similar characteristics from development, customer demographics, and operating points of view, and are approved by the FDA under the ANDA process described in Note 9 of this Porn 10-0 report . Because of the characteristics mentioned above and how we manage our operations, the Company has one reportable operating segment : generic pharmaceutical business . However, we currently market our products through three different channels, as follows :

o Direct sale of prescription (Rx) products, such as LIPRAN, Pludrocortisone, Terbutaline, Minocyclins, Deaeclocycline, Flavoxate, Carbidopa/Levodope and others, through our Global Pharmaceuticals division, called "Global" ,

o Sale of prescription (Rx) products, such as Bupropion Hydrochloride and Omeprazole, exclusively, through marketing partners, pursuant to strategic alliance agreements, such as Teva, called "Rx Partners," and

o Sale of Loratadine OTC products through marketing partners, pursuant to strategic alliance agreements, such as Schering, Wyeth, Novartis, and Leiner, called "OTC . "

The following table summarizes the net sales for the three and nine months ended September 30, 3004 as compared to the three and nine months ended September 30, 2003 by marketing channel :

fY.f Now ar*d lfn. Fl",tY owe afn.frn fe. !!!..... fe .

If o1 off ) Ieo1 foo) ......

of 0005• . : 01541 t 14 .80 f 14,114 f 40,491 t 34,044 Y "stew lf,»f •• )f .fsf O'fC I,N! . . . li .f)f 1) . . . .

%W Mt lflrf f ff, Nl t 30,00" t 01 .1"1 t If,Il1

ITEM 2 . MANAOB}ISNT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OP OPERATIONS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 211 of the securities Exchange Act of 1934, as amended . Forward-looking statements include statements about our business strategies, our expected financial position and operating results, the projected size of our markets and our financing plans and similar matters . The words "believe," -expect," -intend," "anticipate," "plan," •may,• "will,' *could," "should," ;estimate," "potential," "opportunity," 'future .- project .- "forecast," and similar expressions, as they relate to us, our management and our industry are intended to identify forward-looking statements . We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business . These forward-looking statements involve known and unknown risks and uncertainties . Our actual results could differ materially from the results discussed in the forward-looking statements . You should not place undue reliance on our forward-looking statements . Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statements for any reason, whether as a result of new information, future developments or otherwise .

13 Many factors could cause or contribute to a material change from the r esults discussed in the forward - looking statements . Such factors include, in no particular order :

o our ability to successfully develop and coaeiercialire additional products ; o changes in the degree of competition for our products ; o the difficulty of predicting FDA and other regulato ry authority approvals ; o our reliance on strategic alliances and the success of such strategic alliances ; o the inability to acquire sufficient supplies of raw materials ; o litigation and/or threats of litigation ; o changes in our growth rates or the growth rates of our competitors ; o legislative and FDA actions with respect to the government regulation of pharmaceutical products ; o public concern as to the safety of our products ; o changes in health care policy in the United States , o conditions in the financial markets in general or In general economic conditions , o our inability to raise additional capital when needed ; o the impact of competition from brand - name companies that sell their own generic products or successfully extend the exclusivity period of their branded products ; o the difficulty in predicting the tieing and outcome of legal proceedings , including patent - related mutters such as patent infringement cases and patent challenge settlements : o court and FDA decisions on exclusivity periods under the Hatch - Waxman Amendments ; o our dependence on revenues from significant customers : o our dependence on revenues from significant products ; and o the increasing cost of insurance and the availability of product liability insurance coverage .

GENSML

lopes Laboratories , Inc . was formed through a business combination on December 14, 1999 between Impax Pharmaceuticals, Inc ., a privately held drug delivery company , and Global Pharmaceutical corporation , a generic pharmaceutical company . Impax Pharmaceuticals, Inc . merged with and into Global , with Impax stockholders receiving 3 . 3156 shares of global common stock for each share of Iepax Pharmaceuticals . Inc . At the conclusion of the merger, leper Pharmaceuticals , Inc . stockholders held over 700 of the combined company . Per accounting purposes, the merger has been treated as a recapitalization of Impax Pharmaceuticals , Inc . with leper Pharmaceuticals , Inc . deemed the acquirer of Global in a reverse acquisition . As a reverse acquisition , our historical operating results prior to the merger are those of Impax Pharmaceuticals, Inc . and only include the operating results of global after the merger . In connection with the merger, the surviving company changed its name to leper Laboratories, Inc .

We are a technology based, specialty pharmaceutical company applying formulation and development expertise , as well as our drug delivery technology, to the development of controlled -release and niche generics, in addition to the development of branded products . As of September 30, 2004 , the Company marketed thirty- three generic pharmaceuticals , which represent dosage variations of fourteen different pharmaceutical compounds , and has fourteen applications under review with the FDA, including four tentatively approved , addressing approximately 84 .3 billion in U .S . product sales in the twelve months ended August 31, 2004 , according to NDCHealth . Nine of these pending filings were filed under Paragraph IV of the Hatcb -Waxman Amendments . The Company has approximately twenty- five other products in various stages of development for which applications have not yet been filed . These other products are generic versions of pharmaceutical products that had U .S . sa les of approximately $ 15 .6 billion in the twelve months ended August 31 , 2004 . according to NDCHealth .

The Drug Price Competition and Patent Term Restoration Act of 19 84, referred to as the Hatch - Waxman Amendments , established an abbreviated new drug application procedure for obtaining PDA approval of generic versions of certain drugs . An AMA is similar to a now drug application , sometimes referred to as an FDA, except that the FDA wai ve s the requirement that the applicant conduct and submit to the FDA clinical studies to demonstrate the safety and effectiveness of the drug . Instead, for drugs that contain the some active ingredient and are of the sane route of administration, dosage fors, strength and indication(s) as drugs alread y approved for use in the united states , the MR ordinarily only requires bioavailability data demonstrating that the generic formulation is bioequivalent to the previously approved reference listed drug, indicating that the rate of absorption and the levels of concentration of the generic drug in the body do not show a significant difference from those of the previously approved reference listed drug product . According to information published by the FDA . the FDA currently takes approximately 16 to 20 months on average to approve an ANDA following the date of its first submission to the PGA . Patent certification require ments for generic drugs could also result in significant delays in obtaining FDA approvals . First, where patents covering a reference listed drug are alleged to be invalid , unenforceable . or not infringed by an ANDA applicant , the holder or holders of the brand name drug patents may institute patent infringement litigation and obtain a stay of up to 30 months of approval of an ANDA , and for ANDAS of products whose patent information was listed before August 2003 , potentially multiple 30 month stays . Second, the first company to submit an ANDA for a given drug , which the FDA accepts for filing , and which certifies that an unexpired patent covering the reference listed brand name drug is invalid , unenforceable , or will not be infringed by its product , can be awarded 180 days of market exclusivity following approval of its ANDA, during which the FDA may not approve any other ANDAS for that drug product .

CRITICAL ACCOUNTING POLICIRS

Revenue Recognition

A substantial part of the Company's sales are made to prescription drug wholesalers that call for delivery of our products . Additionally, we have entered into various agreements that contain multiple elements in which we have received up front fees, milestone payments, and/or royalties . Milestone revenues from our strategic alliances are recognized on a straightline basis over the term of the contract .

The Company recognizes revenue in accordance with SAS 101 issued by the SIC in December 1999 . We recognize revenue from the sale of products when the shipment of products is received and accepted by the customer . Provisions for estimated discounts, rebates, chargebacks, returns and other adjustments are provided for in the period the related sales are recorded . In December 2003, SAS 104 was issued by the SIC . This bulletin clarifies portions of Topic 13 of the Staff Accounting bulletin to be consistent with current accounting and auditing guidance and SRC rules and regulations and revises accounting guidance contained in SAS 101 related to multiple element revenue arrangements of RITP No . 00-21 superseded as a result of the issuance .

SIT? No . 00-21 supplemented SAS 101 for accounting for multiple element arrangements . The Company has entered into several strategic alliances that involve the delivery of multiple products and services over an extended period of time . In multiple element arrangements, the Company must determine whether any or all of the element@ of the arrangement can be separated from one another . If separation is possible, revenue is recognized for each deliverable when the revenue recognition criteria for the specific deliverable is achieved . If separation is not possible, revenue recognition is required to be spread over an extended period .

Under LIT? No . 00-21, in an arrangement with multiple elements, the delivered item should be considered a separate unit of accounting if all of the following criteria are met :

1) the delivered item has value to the customer on a standalone basis ; 2) there is objective and reliable evidence of the fair value of the undelivered item ; an d 3) if the arrangement included a general right of return, whether delivery or performance of the undelivered item is considered probable .

The Company reviews all of the term of its strategic alliances and follows the guidance from SAB 104 and EITP No . 00-21 for multiple element arrangements . Upfront and milestone payments from these strategic alliances are deferred and recognised over the life of the agreements as the Company fulfills its contractual obligation to manufacture and supplies products during this period . In addition, in some agreements, the Company receives and records royalty revenue based on a percentage of the strategic partner's total sales to their customers of the products supplied by IMPAX .

In June 2001, the Company entered Into a Strategic Alliance Agreement with a subsidiary of Teva for twelve controlled-release generic pharmaceutical products . The agreement granted Teva exclusive U .S . prescription marketing rights for these products for a period of ten years from the data of Teva's first sale of the products .

The Company believes it is important for the users of its financial statements to understand the key components, which reduce gross sales to net sales,

Returns Reserve ------The Company estimates future product returns at the time of sale . Product returns by wholesalers principally relate to the return of expired products . For product return reserves, we consider volume and mix of product in the marketplace, historical return rates, and the competitive environment, all of which require us to use estimates and assumptions . IMPAX introduces a number of new products each year . As a result, the Company has been able to monitor historical return rates for new products . Based on our historical data, because we have one business segment, we have found that generic pharmaceutical product return s are alike and that nw product returns have similar characteristics to existing products returns . Usually, now products are AS rated (products that demonstrated bioequivalence with innovator products), have 24 month expiration dating, and are marketed to the same customers, i .e ., wholesalers, warehousing chains, and distributors . The AS rated products are substitutable by the pharmacist for the innovator products . The non-AR rated products, such as the LIPRAM product family, generally, say not be substituted by the pharmacist as they are therapeutic alternatives, not generic substitutes . Any change to a patient's prescription to an alternative product requires the patient's physician approval for the substitution . We are monitoring returns by product and, where applicable, we establish specific product return reserves and/or adjust our estimates of the future return rates based on various business and competitive assumptions .

The sales return reserve is calculated using an historical log period (the time between when the product is sold and when it is ultimately returned an determined from the Company's system generated lag period report) and return rates, adjusted by estimates of the future return rates based on various assumptions, which may include changes to internal policies and procedures, changes in business practices and commercial terms with customers, competitive position of each product, amount of inventory in the pipeline, the introduction of new products, and changes in market sales information . In addition, when we become aware of any excess inventory on hand at wholesalers, we reduce the revenue initially recognised to zero dollars for this inventory . For the quarter ended September 30, 2004 we did not become aware of any excess inventory on hand at wholesalers .

Our returned goods policy requires prior authorisation for the return, with corresponding credits being issued at the current invoice prices, less amounts previously granted to the customer for rebates and chargebacks . Products eligible for return must be expired and returned within one year following the expiration data of the product . Prior to 2002, we required returns of products within six months of expiration date . Because of the lengths of the lag period and volatility that may occur from quarter to quarter, we are currently using a rolling 23-month calculation to estimate our product return rate . We are also estimating returns for products marketed by our Rx Partners based on our internal returns analysis and historical industry statistics .

The reserve for sales returns for new products as of December 31, 2003, and for September 30, 2004, was $387,000, and $1,951,000 (which included 01 .244 .000 sales returns reserve for products marketed by Teva), respectively .

The Company believes that its estimated returns reserves were adequate at each balance sheet date since they were formed based on the information that was known and available, and were supported by the Company's historical experience when similar events occurred in the past . and management's overall knowledge of and experience in the generic pharmaceutical industry . In estimating its returns reserve, the Company looks to returns after the balance sheet date, but prior to filing ita financial statements to ensure that any unusual trends are considered .

Rebates and Chargebacke ------Generally, sales rebates are calculated at the point of sale, based a n pre-existing written customer agreements by product and accrued on a monthly basis . However, we do estimate additional rebates for specific purposes, i .e ., now pharmacy store openings .

The vast majority of chargebacks are also calculated at the point of sale as the difference between list price and contract price by product (with the wholesalers) and accrued on a monthly basis . There are additional chargebacke that are estimated at the point of sale to the wholesaler as the difference between the wholesalers' contract price and the Company's contract price with retail pharmacies and buying groups .

Shelf-Stock Reserve ...... A reserve is estimated at the point of sale for certain products for which it i s probable that shelf-stock credits will be granted to customers for inventory remaining on their shelves following a decrease in the market price of these products . When estimating this reserve, we consider the competitive products, the estimated decline in market prices, and the amount of inventory in the pipeline .

Inventory

Our inventories are valued at the lower of cost or market . Costs are determined using a standard cost method, first-in, first-out (FIM) flow of goods . Costs include materials, labor, quality control end production overhead . We review and adjust inventory for short-dated product and inventory commitments under supply agreements based on projections of future sales and market conditions . The Company, like most companies in the generic pharmaceutical industry, may build inventories of certain AMA-related products that have not yet received POP. approval and/or satisfactory resolution of patent infringement litigation, when it believes that such action is appropriate to increase its commercial opportunity . Because the ANOA is, in effect, a copy of the related brand drug, we believe that there are no issues regarding safety and efficacy of generic products . If our inventory is greater than estimated shipments to our customers, there may be an inventory write-down. Therefore, the Company's management must make significant estimates relating to inventory . Impaired Asset s

The Company evaluates the carrying value of long-lived assets to be held and used, including definite lived intangible assets, on an annual basis, when events or changes in circumstances indicate that the carrying value may not be recoverable . The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows from such asset is separately identifiable and is le ss than its carrying value . In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset . Fair value is determined primarily using the projected cash flown discounted at a rate commensurate with the risk involved . losses on long-lived assets to be disposed of are determined in a similar manner . As the Company's assumptions related to assets to be held and used are subject to change, additional write-downs may be required in the future .

Goodwil l

Prior-to the adoption of SPAS No . 143, -Goodwill and Other Intangible Assets,- we amortized goodwill on a straight-line basis over its estimated useful life . The Company adopted the provisions of SPAS No . 142, effective January 1, 2002, no impairment was noted . Under the provisions of SFAS No . 142, the Company performs the annual review for impairment at the reporting unit level, which the Company has determined to be consistent with its business segment, that is, the entire Company .

Effective January 1, 2002, we evaluated the recoverability and measured the possible impairment of our goodwill under SPAS No . 142 . The impairment test is a two-step process that begins with the estimation of the fair value of the reporting unit . The first step screens for potential impairment and the second step measures the amount of the impairment, if any . Our estimate of fair value considers publicly available information regarding the market capitalization of our company, as well as (i) publicly available information regarding comparable publicly-traded companies in the generic pharmaceutical industry, (ii) the financial projections and future prospects of our business, including its growth opportunities and likely operational improvements, and (111) comparable sales prices, if available .

As part of the first step to assess potential impairment, we compare our estimate of fair value for the company to the book value of our consolidated net assets, if the book value of our net assets is greater than our estimate of fair value, we would then proceed to the second step to measure the impairment, if any .

The second step compares the Implied fair value of goodwill with its carrying value . The implied fair value is determined by allocating the fair value of the reporting unit to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combination, and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit . The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill . If the carrying amount of the reporting unit goodwill is greater than its implied fair value, an impairment loss will be recognized in the amount of the excess .

On a quarterly basis, we perform a review of our business to determine if events or changes in circumstances have occurred which could have a material adverse effect on the fair value of the company and its goodwill . If such events or changes in circumstances were deemed to have occurred, we would consult with one or more valuation specialists in estimating the impact on our estimate of fair value . We believe the estimation methods are reasonable and reflective of common valuation practices . we perform our annual goodwill impairment test in the fourth quarter of each year .

RESULTS OF OPERATIONS

Except for the first, second and third quarters of 2004, we have incurred net losses in each quarter since our inception . W. had an accumulated deficit of $95,277,000 at September 30, 2004 .

THREE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO THREE MONTHS SHOED SEPTOOER 30, 300 3

OVERVIEW

The net income for the three months ended September 30, 2004, was $735,000 as compared to a net loss of $3,609,000 for the three months ended September 30, 2003 .

REVEINES

Total Revenues for the third quarter of 2004 were $30,704,000, up more than 96% compared with revenues of $16,497,000 in the prior year's third quarter and slightly higher sequentially from the total revenue of $30 .6 million in the second quarter of 2004 . The year-over-year increase for the quarter was primazily due to shipments of our generic versions of Wellbutrin(R) SR (Declowycin(R) (Deebclocycline Hydrochloride) 1S0 eg and 300 mg Tablets, which commenced during the first quarter of 2004 ; and Eyban(R) (supropion Hydrochloride) and Sineeet(R) CR (Carbidope/Levodopa) Extended Release Tablets, which commenced during the second quarter of 2004 . Oaring the 2004 third quarter, IMPAX's revenues from product shipments through our strategic alliance agreements with Teva and Andrx . were approximately $10,795,000, compared with $8,347,000 in the second quarter of 2004 . The balance of $443,000 of other revenue represents revenues recognized pursuant to strategic agreements with Schering-Plough, Wyeth, Novartis, and Leiner . These amounts represent the amortization of the milestone payments received by the Company over the life of the agreements . The following table summarizes the activity in net revenues for the three months ended September 30, 2004 and 2003 :

Three Months Ende d Septembe r 30 , ------2004 200 3 ------(in 000's )

Product sales $34,651 $21,62 8 Less : Rebates (1,114) (2,054 ) Chargebacks (1,245) (2,646 ) Product return reserve (1,041) (389 ) Other credits (990) (631 ) ------Net sales 30,261 15,90 8 Other Revenues 443 58 9 ------Total Revenues $30,70 4 $16,49 7 ......

For chargebacks and rebates , refer to Note 4 : for product returns rese rve, refer to Note S .

The rebates, chargebacks, returns and other credits decreased for the three months ended September 30, 2004 to approximately 131 of product sales as compared to approximately 26% for the comparable period in 2003 . This decrease was mainly due to Bupropion Hydrochloride) 100 mg and 150 mg Controlled Release Tablets, and Loratadine and Paeudoephedrine Sulfate (Smg/120mg) 12-hour Extended Release Tablets . The Loratadine and Pseudoephedrine Sulfate (Smg/120mg) 12-hour Extended Release Tablets are exempt from rebates, chargebacks and other credits as per the agreements with Schering-Plough and Wyeth . The product sales reported by Teva to IMPAX are net of rebates, chargebacks and other credits as per the June 2001 Strategic Alliance Agreement . We began estimating returns for products marketed by our Rx Partners, such as Teva, based on our internal returns analysis and historical industry statistics .

Currently, the Company has one reportable operating segment : generic pharmaceutical business . However, we currently market our products through three different channels, as follows :

o Direct sale of prescription (Rx) products, such as LIPRAM, Fludrocortisone, Terbutaline, Minocycline, Demeclocycline, Flavoxate, Carbidopa/Levodopa and others, through our Global Pharmaceuticals division, called "Global" : o Sale of prescription (Rx) products, such an Bupropion Hydrochloride and Omeprazole, exclusively, through marketing partners, pursuant to strategic alliance agreements, such as Teva, called "Rx Partners ;" and

o Sale of Loratadine OTC products through marketing partners, pursuant to strategic alliance agreements, such as Schering, Wyeth, Novartis, and Leiner, called "OTC . "

The following table summarizes the net sales for the three months ended September 30, 2004 compared to the three months ended September 30, 2003 by marketing channel : Three Months Ended September 30, ------2004 2003 ------

(in 000's )

Global $14,617 $10,184 Rx Partners 10,795 -- OTC 4, 849 5,72 4 ------Total Net Sales $ 30,261 $15,908 ------......

18 The 2004 third quarter increase of approximately $4 .4 million in Global products over 2003 third quarter was primarily due to new products introduced in 2004 and late 2003, such as Oeweclocycline, with net sales of approximately $2 .7 million, Carbidope/ Levodope, with net sales of approximately $2 .1 million, Orphenadrine, with net sales of approximately $1 .0 million, and Plavoxate, with net sales of approximately $0 .7 million, and vas partially offset by lower sales o f Pludrocortisone of approximately $1 .7 million .

The Rx Partners year-over-year Increase for the third quarter of 2004 was primarily due to shipments of our generic versions of wellbutrin(R) SR (Bupropion Hydrochloride) 100 mg and 150 mg Controlled Release Tablets, which commenced shipffAnt in the first quarter of 2004, and Zyban(R) (Supropion Hydrochloride) 150 mg Extended Release Tablets, which commenced shipment during the second quarter of 2004 . The OTC products sales decreased by approximately $475,000 from the same period in the prior year due, primarily, to the timing of the initial launch in 2003 .

Rollforward analyses for each significant revenue dilution item are listed on Note 4 and Note 5 .

COST OP SALE S

The cost of sales for the three months ended September 30, 2004 was $17,592,000 as compared to $12 , 976,000 for the same period in 2003 . The overall increase in cost of sales was primarily due to the increase in cost of material s as a result of increased product sales and approximately $ 450,000 of various production batches written -off, of which $ 33,000 was for now products . This includes approximately $7,000 for Omeprasole capsules and approxi mately $26,000 for Loratadine and Pseudoephedrine b-24, which were manufactured as part of the validation manufacturing transition effort . The estimated plant capacity utilization during the three months ended September 30, 2004 approximated 71% of total capacity available and we expect to have excess capacity in the fourth quarter of 2004 . The full plant capacity utilisation in 2005 is highly dependent on new product approvals . At this time, we cannot project the effect of potential excess capacity on future operations and liquidity .

GROSS MARGI N

Gross margin for the three months ended September 30, 2004 was $ 13,112,000, or approximately 431 of total revenues , compared with gross margin of $3,521,000, or approximately 21% of total revenues, in the prior year ' s third quarter . The year-over - year increase in the gross margin percentage was primarily due to the introduction of new product s since last year with higher margins , such as Bupropion Hydro chloride , Demeclocycline Hydrochloride, Plavoxate, and Carbidope / Levodopa .

RESEARCH AND DEVELOPMENT EXPENSE S

The res earch and development expens es for the three months ended September 30, 2004 were $4,942,000 less reimbursements of $217 , 000 by a subsidiary of Teva under the Strategic Alliance Agreement signed in June 2001 , as compared to $3,35s,000 lass reimburse ments of $93,000 for the same period in 2003 . The incre ase in research and development expenditures in 2004 as compared to 2003 was primarily attributable to higher personnel costs of approximately $ 461,000, clinical studies of approximately $ 412,000 , biostudies of approximately $350 , 000, supplies of approximately $92,000 and new product introduction costs of approximately $72,000 .

PATENT LITIGATION COST S

The patent litigation expenses for the three months ended September 30, 2004, we re $3,299 , 000 as compared to $645 , 000 for the same period in 2003 . The year-to - year increase for the three months was primarily due to the ongoing Paragraph IV litigation related to our ANOAa for Owepresole Capsules, Penofibrate Tablets , Pexofenadine and Pseudoephedrins Tablets , Oxybutynin Tablets and generic Adderall Capsules . The 2003 expense was partially offset by AIO patent litigation insurance payments .

SELLING EXPENSES

The selling expenses for the three months ended September 30 , 2004 were $908 .000 as compared to $ 546,000 for the saes period in 2003 . The increase in selling expenses as compared to 2003 was primarily due to now leased office expense of approximately $124,000 , higher personnel costs of approximately 8106,000, advertising of approximately $42,000 , Selling sheets of approximately $ 21,000, and freight costs of approximately $ 29,000 .

GENERAL AND ADMINISTRATIVE EXPENSE S

The general and administrative expenses for the three months ended September 30, 2004 were $ 3,269,000 as compared to $2,321,000 for the same period in 2003 . The increase in general and administrative expens es as compared to 2003 was primarily due to higher insurance premiums of approximately $ 645,000 and personnel costs of approximately $536,000 . INTEREST INCOME

Interest income for the three months ended September 30, 2004 was $387,000 as compared to $87,000 for the same period in 2003, primarily due to higher average cash equivalents and short-term investments generated from the net proceeds of the Company's offering of $95 million convertible senior subordinated debentures issued in April 2004 .

INTEREST EXPENS E

Interest expense for the three months ended September 30, 2004 was $547,000 as compared to $243,000 for the same period in 2003 . The increase in the interest expense for 2004 was primarily due to the 1 .25% interest accrued on the Company's $95 million convertible senior subordinated debentures .

INCOME TAXES

On a quarterly basis, the Company evaluates its projected full year taxable income and related book-to-tax timing difference and the use of NOL carryforwards . The Company estimates that it is not subject to current year income taxes . We evaluate the realizability of deferred tax assets on an annual and quarterly basis or if there is a significant change in circumstance that may cause a change in our judgment about the realizability of our deferred tax assets . As of September 30, 2004, the Company had net operating loss carryforward aggregating approximately $112 million expiring from 2009 through 2023 .

NET INCOME

The net income for the three months ended September 30, 2004 was $735,000 as compared to a net loss of $3,608,000 for the same period in 2003, primarily due to higher revenues and gross margins, partially offset by the increases in research and development, patent litigation, selling and general and administrative expenses .

NINE MONTHS ENDED SEPTEMBER 30, 2004, COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 200 3

OVERVIEW

The net income for the nine months ended September 30, 2004 was $6,272,000 as compared to a net loss of $9,105,000 for the nine months ended September 30, 2003 .

REVENUE S

Total Revenues for the nine months ended September 30, 2004 were $ 95,813,000 up more than 128% compared with revenues of $41,989 ,000 in the comparable period of the previous year . The year - over -year increase for the nine months was primarily due to shipments of our generic versions of Wellbutrin (R) SR (Bupropion Hydrochloride) 100 mg and 150 mg Controlled Release Tablets, and Declomycin(R) (Demeclocycline Hydrochloride) 150 mg and 300 mg Tablets, which commenced during the first quarter of 2004 , and Zyban(R) (Bupropion Hydrochloride) and Sinemet(R) CR (Carbidopa/ Levodopa) Extended Release Tablets , which commenced during the second quarter of 2004 , as well as shipments of Flavoxate and Orphenadrine .

The Company generated $ 4,015,000 of other revenues in the 2004 period compared to $1,555,000 in the 2003 period . Other revenue for the 2004 period included $2,500,000 from Teva , which represented the reversal of a portion of the refundable deposit for its exercise of the exclusivity option for certain products .

The balance of $1,515, 000 of other revenue represents revenues recognized pursuant to strategic agreements with Schering-Plough, Wyeth, Novartis and Leiner . These amounts represent the amortization of the milestone payments received by the Company, over the life of the agreement . The following table summarizes the activity in net revenues for the nine months ended September 30, 2004 and 2003 :

20 $10. MNtM 100. 0 • . ft r ]a , ...... Ile $11 .11 a.0. 100 4

Pntn •.Y . 1101 .07. Off .n1 Yn . NNtff 14,4111 14,18 ) CWriNY 11 .]011 If .101 1 fr00Nt Nt„rC NNn~ 14 . $44) 1 10. 1 Ohio) 1M110 11,80) (1, 111 1

Nt NIN 11,110 10,,11 wr [ro rwurl N nlusOYlf YONlt !rv Twf 3 . * Otl,rr Yv~n, N i . fif 1, 1f f

htfl YwNWa $ 01 ,010 N1,sn ......

For chargebacks and rebates, refer to Vote 41 for product returns reserve, refer to note B .

The rebates, chargebacks, returns and other credits decreased for the nine months ended September 30, 2004 to approximately 171 of product sales as compared to approximately 251 for the comparable period in 2003 . This decrease was mainly due to sales of Supropion Hydrochloride) 100 mg and 150 mg Controlled Release Tablets, and Loratadine and Paeudoephedrine Sulfate (5sg/170.9) 12-hour Extended Release Tablets, and Orally Disintegrating Tablets . The Loratadine and Pseudoephedrine Sulfate (5eg/120.9) 12-hour Controlled Extended Release Tablets and Orally Disintegrating Tablets are exempt from rebates, chargebacka and other credits pursuant to the agreements with Schering-Plough, Wyeth, Movartis, and Leiner . The product sales reported by Teva to 1MPAX are net of rebates, chargebacks and other credits pursuant to the June 2001 Strategic Alliance Agreement . We began estimating returns for products marketed by our Rx Partners, such as Teva, based on our internal returns analysis and historical industry statistics . The reserve for sales returns for products marketed by Rx Partners was $1,244,000 at September 30, 2004 .

The following table summarizes the net sales for the nine months ended September 30, 2004 as compared to the nine months ended September 30 . 2003 by marketing channel,

5 140 1041]. 004.0

(Y One• q 1010 aeu

stSll 0 40,011 $11,101 4 NKYn 40 .111 074 11 .1)0 11,011

T0MI 5(1 0011 1 01 . ;10 110 .010

The increase in Global products of approximately $13 .4 million in the first nine months of 2004 as compared to the same period in 2003 was primarily due to new products introduced in 2004 and late 2003, such as Demeclocycline with net sales of approximately $7 .7 million . Plavoxate with net sales of approximately $2 .1 million, Carbidopa/Levodopa with net sales of approximately $2 .9 million, and higher sales of previously introduced product, Orphenadrine with net sales of approximately $1 .6 million, and partially offset by lower sales of Fludrocortisone of approximately $1 .6 million .

The Rx Partners year-over-year increase for the nine months ended September 30, 2004 was primarily due to shipments of our generic versions of Wellbutrin(R) SR )Bupropion Hydrochloride) 100 mg and 150 mg Controlled Release Tablets, which commenced shipment in the first quarter of 2004, and Zyban(R) (Bupropion Hydrochloride) 1S0 mg Extended Release Tablets, which commenced shipment during the second quarter of 2004 . The OTC products sales decreased by approximately $746,000 from the sane period in the prior year due, primarily, to the tieing of the initial launch in 2003 .

Rollforward analyses for each significant revenue dilution item are listed on Note 4 and Note 8 .

COST OF SALE S

The cost of sales for the nine months ended September 30, 2004, was $54,679 .000 as compared to $30,444,000 for the Basle period in 2003 . The overall increase in cost of sales was primarily due to the increase in cost of materials as a result of increased product sales and approximately $1 .9 million of various production batches written-off, of which $135,000 was for new products . This includes approximately $34,000 for Omeprasole capsules and approximately $101,000 for Loratadine and Pseudoephedrine D-24, which were part of the validation manufacturing transition effort . The estimated plant capacity utilisation during the nine months ended September 30, 2004 approximated 71% of total capacity available and we expect to have excess capacity in the fourth quarter of 2004 . The full plant capacity utilization in 2005 is highly dependent on new product approvals . At this time, we cannot project the effect of potential excess capacity on future operations and liquidity .

21 GROSS MARGI N

Gross margin for the nine months ended September 30, 2004 was $41,134,000 or approximately 43% of total revenues, as compared to $11,545,000 or approximately 27% of total revenues, for the same period in 2003 . The year-over-year increase in the gross margin percentage was primarily due to the introduction of new products since last year with higher margins, such as Bupropion Hydrochloride, Demeclocycline Hydrochloride, Flavoxate, and Carbidopa/Levodopa, and the $2,500,000 revenue from Teva related to the refundable deposit .

RESEARCH AND DEVELOPMENT EXPENSE S

The research and development expenses for the nine months ended September 30, 2004 were $15,266,000 less reimbursements of $306,000 by Teva under the Strategic Alliance Agreement signed in June 2001, as compared to $10,463,000 lose reimbursements of $247,000 for the same period in 2003 . The higher research and development expenditures in 2004 as compared to 2003 were primarily attributable to clinical studies of approximately $1,464,000, higher personnel costs of approximately $1,447,000, API of approximately $810,000, biostudies of approximately $164,000, outside development costs of approximately $253,000, and supplies of approximately $177,000 .

PATENT LITIGATION EXPENSE S

The patent litigation expenses for the nine months ended September 30, 2004 were $7,146,000 as compared to $1,842,000 for the same period in 2003 . The year-to-year increase for the nine months was primarily due to the ongoing Paragraph IV litigation related to our ANDAs for Omeprazole Capsules, Fenofibrate Tablets, Fexofenadine and Pseudoephedrine Tablets, Oxybutynin Tablets and generic Adderall Capsules . The 2003 expense was partially offset by AIO patent litigation insurance payments .

SELLING EXPENSES

The selling expenses for the nine months ended September 30, 2004 were $2,345,000 as compared to $1,552,000 for the same period in 2003 . The increase in selling expenses as compared to 2003 was primarily due to new leased office expenses of $219,000, higher personnel costs of approximately $218,000, freight costs of approximately $88,000, market research of approximately $65,000, and selling sheets of approximately $36,000 .

GENERAL AND ADMINISTRATIVE EXPENSES

The general and administrative expenses for the nine months ended September 30, 2004 were $9,757,000 as compared to $6,526,000 for the same period in 2003 . The increase in general and administrative expenses as compared to 2003 was primarily due to personnel costs of approximately $1,222,000, insurance premiums of approximately $1,177,000, higher recruiting expenses of approximately $234,000, supplies of approximately $129,000 and professional fees of approximately $127,000 .

INTEREST INCOME

Interest income for the nine months ended September 30, 2004 was $714,000 as compared to $199,000 for the same period in 2003, primarily due to higher average cash equivalents and short-term investments generated from the net proceeds of the Company's offering of $95 million convertible senior subordinated debentures issued in April 2004 .

INTEREST EXPENS E

Interest expense for the nine months ended September 30, 2004 was $1,383,000 as compared to $738,000 for the same period in 2003 . The increase in interest expense for 2004 was primarily due to the 1 .25% interest accrued on the Company's $95 million convertible senior subordinated debentures .

INCOME TAXES

On a quarterly basis, the Company evaluates its projected full year taxable income and related book-to-tax timing difference and the use of NOL carryforwards . The Company estimates that it is not subject to current year income taxes . We evaluate the realizability of deferred tax assets on an annual and quarterly basis or if there is a significant change in circumstance that may cause a change in our judgment about the realizability of our deferred tax assets . As of September 30, 2004, the Company has operating loss carryforward aggregating approximately $112 million expiring from 2009 through 2023 .

22 NET INCOME

The net income for the nine months ended September 30, 2004 was $6,272,000 as compared to a net loss of $9,105,000 for the same period in 2003, primarily due to higher sales, partially offset by higher research and development, patent litigation, selling, and general administrative expenses .

LIQUIDITY AND CAPITAL RESOURCE S

As of September 30, 2004, we had $69,603,000 in cash, cash equivalents and short-term investments . Only $200,000 of the account balances are insured by the Federal Depository Insurance Company (FDIC) . The balance of the Company's cash equivalents and the short-term investments are held in U .S . Treasury securities and high-grade commercial paper, which are not insured by the FDIC .

The net cash provided by financing activities for the nine months ended September 30, 2004, was approximately $100,591,000 consisting primarily of the $95,000,000 proceeds, less capitalized costs of $3,612,000, from the Company's offering of convertible senior subordinated debentures offering completed in April 2004, and proceeds of $3,869,000 from issuance of common stock upon the exercise of options and warrants .

In April 2004, the Company terminated the loan agreements with Pennsylvania Industrial Development Authority and Delaware River Port Authority and repaid the remaining balances totaling approximately $992,000 .

For the nine months ended September 30, 2004, significant uses of cash from operating activities included, primarily, the increase in accounts receivable balance of $9,845,000 and inventory buildup of $9,753,000, of which $2,648,000 is unapproved inventory awaiting FDA approval, and the decrease in accounts payable and other liabilities of $5,580,000, partially offset by favorable cash flow from operations, (excluding depreciation and amortization) of $10,151,000 . Our raw material purchase commitments as of September 30, 2004 were approximately $11 million . our capital expenditures for the nine months ended September 30, 2004 were $8,692,000 as compared to $3,063,000 for the same period in 2003, due primarily to building improvements and purchases of machinery and scientific equipment .

The net cash used in investing activities included $44,821,000 for the purchase of the short term investments in U .S . Treasury securities and high-grade commercial paper .

In December 2003, the Company transferred the $25 million Loan and Security Agreement from Congress Financial Corporation to Wachovia Bank, N .A ., thereby securing lower interest and less restrictive borrowing terms . The interest rates for the revolving loans are prime rate plus 0 .75%, or eurodollar rate plus 2 .75%, at our option, based on excess availability . The term loan has an interest rate of prime rate plus 1 .5%, or eurodollar rate plus 4%, at our option . As of September 30, 2004, we borrowed approximately $5,000,000 against the revolving credit line and $2,675,000 against the term loan . In April 2004, the $25 million loan and security agreement was amended, as follows : (1) the cash collateral requirement of $10 million was removed ; (2) the adjusted excess availability covenant was removed ; (3) the maximum permitted capital expenditure amount was aggregated to $45,000,000 for the years 2004 and 2005, and (4) as a condition of items (1) and (2) above, IMPAX is required to maintain a minimum cash balance at Wachovia of $25,000,000 .

We have no interest rate or derivative financial instruments nor material foreign exchange risks . We are also not party to any off-balance-sheet arrangements, other than operating leases . we expect to incur significant operating expenses, particularly research and development and patent litigation, for the foreseeable future in order to execute our business plan . We . therefore, anticipate that such operating expenses, as well as planned capital expenditures for the next twelve months ranging from $15 to $20 million, primarily in plant capacity expansion, will constitute a material use of our cash resources .

To date, we have primarily funded our research and development and other operating activities through equity and debt financing, and strategic alliances .

We have not paid any cash dividends on our common stock and we do not plan to pay any such cash dividends in the foreseeable future . We plan to retain any ea rn ings for the operation and expansion of our business . Our loan agreements prohibit the payment of dividends without the lender ' s consent .

23 RECENT ACCOUNTINO PRONOUNCEMENTS

In January 2003, the PASS issued PASS Interpretation No . 46 (FIN 46), 'Consolidation of Variable Interest Entities .- FIN 46 clarifies the application of Accounting Research Bulletin No . 51, -Consolidated Financial Statements,' to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties . FIN 46 applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest attar that date . It appli es in the first fiscal year or interim period beginning after June 1S, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003 . FIN 46 applies to public enterprises as of the beginning of the applicable interim or annual period . on October 6 . 2003, the PASS decided to defer FIN 46 until the first reporting period ending after December 15, 2003 . The provisions of this Interpretation did not have a material impact on the Company's financial condition or results of operations .

In December 2003, the PASS issued FIN No . 46(R), -Consolidation of Variable Interest Entities,' clarifying the application of Accounting Research Bulletin No . 51, -Consolidated Financial Statements .' to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support . The provisions of this Interpretation did not have a material impact on the Company's financial condition or results of operations .

In December 2003, the PASS revised SFAS 132, •Eepleyera' Disclosure About Pensions and Other Post Retirement Benefits .- This Statement does not change the measurement or recognition of those plans required by PASS No . e7, 'Employers' Accounting for Pensions,- and No . 106, 'Employers' Accounting for Post Retirement Benefits Other than Pensions .' This Statement retains the disclosure requirements contained in PASS No . 132, "Employers' Disclosure about Pensions and Other Post Retirement Plans ." The provisions of this Statement did not have a material impact on the company's financial condition or results of operations . During the nine months ended September 30, 2004 and 2003, the Company's contributions to the 401-K Plan were $335,156 and $213 .654, respectively .

In February 2004, the PASS issued revised rSPe pertaining to FIN 46(R) . The revised PEPS replace certain previously issued FIN 46 PEP for entities to which FIN 46(R) is applicable . This revision to FIN 46 did not have a material impact on the Company's financial condition or results of operation .

In February 2004 . the PASS revised SPAS 133, "Accounting for Derivative Instruments and Hedging Activities for Implementation Issue 52L, A1J, and C6 . 1 The revisions to SFAS 133 did not have a material impact on the Company's financial condition or results of operation .

In September 2004, the PASS discussed EITF 04-OS, 'The Effect of Contingently ." The EIT task force has Convertible Debt on Diluted Earnings Per Share ► proposed that companies count the shares that could be issued upon conversion of securities like the Company's debenture when calculating fully diluted per share earnings . This EITP is not yet effective . However, we disclosed in Note 2 of our condensed Financial Statements the potential effect of this EITP on the Company's fully diluted EPS calculation .

MAJOR OPERATIONAL HIGHLIGHTS FOR THE MINE MONTHS ENDED SEPTEMBER 30, 200 4

o On January 26, 2004, IMPAX announced that the FDA granted final approval to the Company' s ANDA for its generic version of Nellbutrin(R ) SR (Rupropion Hydrochloride ) 100 mg Cont rolled Release Tablets and granted tentative approval to the Company ' s generic version of Wellbutrin SR 150 mg Cont rolled Release Tablets . OlaaoSmithKlina markets Wellbutrin SR for the treatment of depression . According to NDCHealth , O .S . sales of these dosage form of Nellbutrin SR Tablets and their generic equivalents were approximately $ 1 .1 billion in the twelve months ended August 31, 2004 .

o On January 29, 2004 , IMPRE announced that the Court of Appeals for the Federal Circuit in Washington, D .C . upheld a lower court decision that ruled against certain claims by Olaxoi'withxline in regards to the Company's ANDA for Welibutrin SR (Eupropion Hydrochloride ) 100 mg and 150 mg and for Eyban(R ) ( Supropicn Hydrochloride ) 150 eq . OlexoSeithKline markets Nellbutrin SR for the treatment of depression and Zyban for smoking cessation .

o On February 21, 2004, IMPAX announced that the FDA granted tentative approval to the Company ' s ANDS for its generic version of Allegra(R)-D (rexofenadine Hydrochloride and Pseudoephedrine Hydrochloride 60mg/120mg) Extended Release Tablets . Aventis Pharmaceuticals markets Allegra - D for the treatment of the symptoms associated with se asonal allergic rhinitis . According to NDCHealth , O .S . sales of Allegra- 0 were approximately $433 million in the twelve months ended August 31, 2004 . o On March 5, 2004 , IMPAX announced that the FDA granted final approval to the Company ' s AMDA for a generic version of Claritin ( R)-D 24-Hour (Loratadine and Peeudoephedrine Sulfate , 10mg / 240mg ) Extended Release Tablets . Schering-Plough Corporation market s Claritin-D 24-Hour as an over-the-counter ( OTC) drug for the relief of symptoms of seasonal allergic rhinitis ( hay fever ) . According to NDCXealth , U .S . sales of Claritin-D 24-Hour and its generic equivalent were $5 . 6 million for the twelve months ended August 31, 2004 . o On March 6, 2004 , IMPAX announced that the FDA granted tentative approval to the Company ' s AIM for its generic version of Tricor ( R) (Penofibrate) Tablets . Tricor Tablets are marketed by Abbott Laboratori es, Inc . to assist patients in managing their chol es terol levels . The drug is indicated for use in reducing elevated LOL cholesterol , total cholesterol , triglycerides and Apo B and increasing ((DL cholesterol in patients with primar y hypercholesterolamia or mixed lipidemia . The drug has also been approved as adjunctive therapy for the tr eatment of hypertriglyceridemia, a disorder characterised by elevated levels of ve ry low density lipoprotein ( VLDL) in the plasma . According to HDCHealth . U .S . Bales of Tricor Tablets were approximately $716 million for the t we lve months ended August 31, 2004 . o On March 22, 2004 , IMPAX announced that the FDA granted final marketing approval to the Company ' s AMDA for its generic version of Mellbutrin SR (Supropion Hydrochloride) 150 mg Controlled Release Tablets . The FDA had previously granted final approval for the Company ' s application for the 100 eg strength . OlaxoSmithXlins markets Wellbutrin SR for the treat ment of depression . Both products were shipped to our marketing partner, Teva . o On March 23 , 2004, IMPAX announced that the FDA granted final marketing approval to the Company ' s AMA for its generic version of Declemycin(R) (Demeclocycline Hydrochloride ) 150 and 300 mg . Tablets . RSP Pharms markets Declomycin for the treatment of various infections . According to MDCHealth, U .S . sales of Declomycin and its generic equivalent were approximately $32 million for the t we lve months ended August 31, 2004 . o On May 17 , 2004 , IMPAX announced that the FDA granted final approval to the Company ' s AMDA for Carbidopa/Levodopa Extended Release Tablets , its generic version of Sineset ( R) CR tablets . Bristol -Myers Squibb markets Merck S Co .' ■ Sinemet CR exclusively in the U .S . for the treatment of Parkinsonism . According to NOCHealth , U .S . prescription sales of Sinemet CR and its generic equivalents were $121 million in the twelve months ended August 31, 2004 . o On May 27 , 2004 , IMPAX announced that the FDA granted final marketing approval to the Company ' s AMDA for its generic version of Zyban ( Bupropion Hydrochloride ) 150 mg Controlled Release Tablets . OlaxoSmithXline markets Zyban for smoking cessation . According to MDCMealth , U .S . sales of Zyban and its generic equivalents were approximately $55 million in the t we lve months ended August 31, 2004 . o On May 26, 2004 , IMPAX announced that the FDA granted final marketing approval to the Company ' s ANDA for its generic version of Proametine(R), Midodrine Hydrochloride 2 .S and 5 mg Tablets . Shire Pharmaceuticals Group plc markets Proematine for treatment of symptomatic orthostatic hypotension . According to R001ealth , U .B . market sales of Proamatine 2 .5 mg and S mg and their generic equivalents and the two other marketed generic versions were approximately $46 million in the twelve months ended August 31, 2004 . o On June 11, 2004 , IMPAX announced that the FDA granted IMPAX a se cond tier 160-day exclusivity related to its pending AMDA for a generic version of Olucophage )R(R), Mettormin HCl Extended Release Tablets , 500mg . IMPAX has se lectively waived its rights to this exclusivity to Teva Pharmaceuticals USA Inc . and will be sharing in the pro fits of Teva's Metformin ((Cl Extended Release Tablets as provided for in the Strategic Alliance Agreement between IMPAX and Sava signed in June 2001 . On August 2, 2004, the FDA granted final marketing approval to the Company's AMDA for its generic version of Olucophage XR, Metformin ((Cl Extended Release Tablets . 500 eg . Bristol -Myers Squibb markets Olucophage XR for the improvement of glycemic control in patients with type 2 diabetes . According to MDCMeelth, U .S . market sales of Glucophage XR 500 mg and other marketed generic versions were approximately 6346 million in the t welve months ended August 31, 2004 . o On July 12, 2004 , IMPAX announced that it has signed a series of agreements with Leiner Health Products , LLC for the supply and distribution of the Company ' s Loratadine Orally Disinte grating Tablets ( OPT) and Loretadine and Psaudoephedrine Sulfate Extended Release Tablets 24 hour products . Both of these products are indicated for the relief of symptoms of seasonal allergic rhinitis they fever) . These products will be manufactured by IMPAX and marketed by Leiner as over the counter ( OTC) store brand equivalents to both Claritin ( R) Reditabe (R) and Claritin - D(R) 24 - hour respectively . o On August 2, 2004 , IMPAX announced that the FDA has granted final marketing approval to the Company ' s Abbreviated Now Drug Application for its generic version of Olucophage XR(R), Hetformin ((Cl Extended Release Tablets , 500eg . Bristol - Myers Squibb markets Olucophage XR(R) for the improvement of glycemic control in patients with type 2 diabetes . o On September 8, 2004, IMPAX announced that its Omeprazole Delayed Release Capsules 20mg have been commercially launched by Teva Pharmaceutical Industries Ltd . Omeprazole Delayed Release Capsules are a generic version of Prilosec(R) marketed by AstraZeneca for the treatment of duodenal/gastric ulcers and GERD (gastro-esophageal ref lux disease) . According to NDC Health, U .S . sales of Prilosec 20mg and its generic equivalents were $1 .1 billion for the twelve months ending August 31, 2004 .

On September 28, 2004, IMPAX announced that the FDA has granted final approval to the Company's Abbreviated New Drug Application for a generic version of OxyContin(R) (Oxycodone Hydrochloride) Controlled Release 80mg Tablets . Purdue Pharma markets OxyContin for the management of moderate to severe pain . According to NDCHealth, U .S . sales of OxyContin Controlled Release 80mg Tablets and its generic equivalent were $685 million for the twelve months ended August 31, 2004 .

ITEM 3 . QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RIS K

The Company's cash and cash equivalents includes U .S . government and short-term high-grade commercial paper stated at cost which approximates market value . The primary objective of the Company's investment activities is to preserv e principal and maximize yields without significantly increasing risk . To achieve this objective, the Company maintains its portfolio in a variety of high credit quality securities, including U .S . Government securities, treasury bills, and short-term high-grade commercial paper . All of the Company's portfolio matures in less than one year . The carrying value of the portfolio approximates the market value at September 30, 2004 . The Company's debt instruments at September 30, 2004 are subject to fixed and variable interest rates and principal payments . We believe that the fair value of our fixed and variable rate long-term debt approximates their carrying value of approximately $108 million at September 30, 2004 . While changes in market interest rates may affect the fair value of our fixed and variable rate long-term debt, we believe the effect, if any, of reasonably possible near-term changes in the fair value of such debt on the Company's financial statements will not be material .

We have no interest rate or derivative financial instruments nor material foreign exchange risks . We are also not party to any off-balance-sheet arrangements, other than operating leases .

ITEM 4 . CONTROLS AND PROCEDURES

The Company, under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a- 15(e)), as of the end of the period covered by this report . Based on this evaluation, including consideration of the restatement discussed below, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures are effective in reaching a reasonable level of assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time period specified in the Securities and Exchange Commission's rules and forms .

The principal executive officer and principal financial officer also conducted an evaluation of internal control over financial reporting ("Internal Control") to determine whether any changes in Internal Controls occurred during th e quarter that have materially affected, or which are reasonably likely to materially affect, Internal Controls . Based on this evaluation, there has been no such change during the quarter covered by this report . A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met . Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs . Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected . The Company conducts periodic evaluations of its internal controls to enhance, where necessary, its procedures and controls . Because of the inherent limitations in a cost-effective control system , misstatements due to error or fraud may occur and not be detected .

Subsequent to issuance of the condensed financial statements for the quarter ended June 30, 2004, the Company restated its condensed financial statements as described in Note 11 . The Company determined that a material weakness existed in its internal controls . The Company is endeavoring to take steps to correct the deficiency that gave rise to this restatement . These steps include, but are not limited to, regular discussions with Teva management regarding their monthly financial reports to IMPAX on our products marketed by Teva via monthly teleconferences and quarterly meetings . These discussions will cover all the areas of revenue recognition for these products, including but not limited to, sales credits, product returns and internal controls over Teva's financial reporting to IMPAX . Our procedures will include a review of applicable documentation for IMPAX revenue sharing . The Audit Committee of the Company's Board of Directors may take additional steps as deemed necessary . The company is endeavoring to take steps under the Strategic Alliance Agreement to ensure that all such adjustments granted by its strategic partner in the future are reported to the Company on a timely basis . Under the contract terms, the Company has the option to perform an annual audit with our strategic partner . The Company has disclosed and discussed this with its Audit Committee .

For more information concerning the restatement, see Note 11 in the Notes to Financial Statements contained in the Company's Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2004 and Note 14 in the Notes to Financial Statements contained in the Company's Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2004 .

26 PART II - OTHER INFORMATION ------

ITEM 1 . LEGAL PROCEEDINGS

PATENT LITIGATION

There has been substantial litigation in the pharmaceutical, biological, and biotechnology industries with respect to the manufacture, use, and sale of new products that are the subject of conflicting patent rights . One or more patents cover most of the brand name controlled-release products for which we are developing generic versions . Under the Hatch-Waxman Amendments, when a drug developer files an ANDA for a generic drug, and the developer believes that an unexpired patent which has been listed with the FDA as covering that brand name product will not be infringed by the developers product or is invalid or unenforceable, the developer must so certify to the FDA . That certification must also be provided to the patent holder, who may challenge the developer's certification of non-infringement, invalidity or unenforceability by filing a suit for patent infringement within 45 days of the patent holders receipt of such certification . If the patent holder files suit, the FDA can review and approve the ANDA, but is prevented from granting final marketing approval of the product until a final judgment in the action has been rendered, or 30 months from the date the certification was received, whichever is sooner . Should a patent holder commence a lawsuit with respect to an alleged patent infringement by us, the uncertainties inherent in patent litigation make the outcome of such litigation difficult to predict . The delay in obtaining FDA approval to market our product candidates as a result of litigation, as well as the expense of such litigation, whether or not we are successful, could have a material adverse effect on our results of operations and financial position . In addition, there can be no assurance that any patent litigation will be resolved prior to the 30-month period . As a result, even if the FDA were to approve a product upon expiration of the 30-month period, we may not commence marketing that product if patent litigation is still pending .

Lawsuits have been filed against us in connection with fourteen of our Paragraph IV filings . The outcome of such litigation is difficult to predict because of the uncertainties inherent in patent litigation .

ASTRAZENECA AE ET AL . V . IMPAX : THE OMEPRAZOLE CASES ------

In May 2000, AstraZeneca AS and four of its related companies filed suit against IMPAX in the U .S . District Court in Wilmington, Delaware claiming that IMPAX's submission of an ANDA for Omeprazole Delayed Release Capsules, 10 mg and 20 mg, constitutes infringement of six U .S . patents relating to AstraSeneca's Prilosec(R) product . The action seeks an order enjoining IMPAX from marketing Omeprazole Delayed Release Capsules, 10 mg and 20 mg until February 4, 2014, and reimbursement for costs and attorney fees associated with this litigation .

In February 2001, AstraZeneca and the same related companies filed the same suit against IMPAX in the same federal court in Delaware for infringement, based upon IMPAX's amendment to its ANDA adding 40 mg strength Omeprazole Delayed Release Capsules .

Astrazeneca filed similar lawsuits against nine other generic pharmaceutical companies (Andrx, Genpharm, Cheminor, Rremers, LEX, Eon, Mylan, Apotex, and Zenith) . Due to the number of these cases, a multidistrict litigatio n proceeding, In re Omeprazole 10 mg, 20 mg, and 40 mg Delayed Released Capsules Patent Litigation, MDL-1291, has been established to coordinate pre-trial proceedings . Both lawsuits filed by AstraZeneca against IMPAX have been transferred to the multidistrict litigation jurisdiction .

Early in the multidistrict litigation, the trial court ruled that one of the six patents-in-suit was not infringed by the sale of a generic omeprazole product and that certain other patents were invalid . These rulings effectively eliminated four patents from the trial of these infringement cases, although Astrazeneca may appeal these rulings as part of the overall appeal process in the case .

On October 11, 2002, after a trial involving Andrx, Genpharm, Cheminor, and Kremers, the trial judge handling the multidistrict litigation ruled on AstraZeneca's complaints that three of these four defendants ("First Wave Defendants") infringed the remaining patents-in-suit . The trial judge ruled that three of the First wave defendants, Andrx, Genpharm, and Cheminor, infringed the remaining two patents asserted by AstraZeneca in its complaints, and that those patents are valid until 2007 . In the same ruling, the trial court ruled that the remaining First Wave Defendant, Kremers, did not infringe either of the remaining two patents . Kremers' formulation was held to differ from the formulation used by the other First Wave Defendants in several respects . In mid-December 2003, the U .S . Court of Appeals for the Federal Circuit affirmed the October 2002 ruling in all respects . Subsequent petitions for rehearing have been denied .

27 The formulation that IMPAX employs in manufacturing its generic equivalent of omeprazole has not been publicly announced . IMPAX's formulation has elements that resemble those of other First Wave Defendants in certain respects, but it also has elements that differ . Although the ruling by the trial court in the multidistrict litigation has a significant effect on the course of AstraZeneca'a litigation against IMPAX, application of the trial court's opinion as to IMPAX is not certain . IMPAX believes that it has defenses to AstraZeneca's claims of infringement, but the opinion rendered by the trial court in the First wave cases makes the outcome of AstraZeneca-s litigation against IMPAX uncertain .

Two of the remaining six defendants ('Second wave Defendants") filed Motions for Summary Judgment of Non-Infringement, based upon the October 2002 ruling . The trial court has deferred ruling on those motions until discovery is completed .

In August 2003, the court issued an order dismissing four of the patents-in-suit, three with prejudice . On September 30, 2003, as a result of the court's dismissal, AstreZeneca served each of the Second Wave Defendants, including IMPAX, with an amended complaint . In October 2003, IMPAX filed an answer to the amended complaint in which we asserted a new counterclaim with antitrust allegations . The counterclaim will be severed, and proceedings relating to it will be stayed until after trial of the patent infringement case .

In December 2003, the trial court entered a new scheduling order governing pre-trial proceedings relating to the second Wave Defendants, including IMPAX . The schedule for completion of the litigation in the Second wave, including AstraZeneca's litigation against IMPAX, now provides that all fact discovery (with certain exceptions) is complete . AstraZeneca's expert reports on issues as to which it bears the burden of proof, including issues of alleged infringement, were served on February 17, 2004 . IMPAX's responsive expert reports were served on July 12, 2004 . Astra's reply reports were served in early September 2004, prior to the launch of IMPAX's commercial product .

The December 2003 scheduling order was amended most recently in August 2004 . Pursuant to the terms of the amended scheduling order, expert depositions have commenced and are scheduled to conclude in January 2005 . The amended scheduling order also allows for the filing of summary judgment motions beginning in March 2005 . The parties may also request leave of the Court to file summary judgment motions earlier than the March 2005 date . The amended scheduling order states that no further extensions of time shall be granted to the parties .

IMPAX may file motions for summary judgment at the appropriate juncture in this case . It is likely that one or more additional parties to this matter may also file motions for summary judgment . If the case is not resolved through such motions, the court will schedule a date for trial . At this time, we believe it is likely that, given the proceedings in the First Wave cases, the case against IMPAX will be transferred back to New York for a consolidated trial before the same judge who decided the First Wave cases . IMPAX currently believes, however, that any trial that might be scheduled in the case will commence in 2005 .

As noted in Item 2 (Major Operational Highlights), in conjunction with its strategic partner, Teva, IMPAX recently has initiated a commercial launch of certain omeprazole products which were the subject of its ANDA application and which are at issue in this litigation . If IMPAX is not ultimately successful in establishing invalidity or non-infringement, the court may award monetary damages associated with the commercial sale of IMPAX's omeprazole products . Pursuant to the Strategic Alliance Agreement with Teva, however, Teva in responsible for indemnifying the Company with respect to any such monetary damages, provided certain conditions are met .

In September 2004, in accordance with the terms of the Strategic Alliance Agreement between IMPAX and Teva Pharmaceuticals, Teva exercised its option to designate counsel to handle the omeprasole litigation, and IMPAX's counsel in the matter were replaced . New counsel entered their appearances in th e litigation on behalf of IMPAX in July 2004 . In October 2004, Astra filed pleadings with the Court setting forth causes of action against Teva, and amending its claims against IMPAX to clearly state claims alleging willful infringement of the patents in suit, and seeking monetary damages for alleged infringement . It is expected that the Court will grant Aatra's request to add Teva as a party and to amend its claims against IMPAX . Under the Strategic Alliance Agreement, Teva has the obligation to indemnify IMPAX for certain losses, and to pay a large share of the attorneys fees that will be incurred after Teva's exercise of its option under the Strategic Alliance Agreement . It is uncertain whether, if at all, the addition of revs and the amendment of Astra's claims against IMPAX will delay the ultimate resolution of Astra's claims against IMPAX . IMPAX intends to vigorously defend the action brought by AstraZeneca, and it expects that counsel selected by rave will vigorously represent the interests of both IMPAX and Teva in the litigation .

28 AVENTIS PHARMACEUTICALS INC . . ET AL . V . IMPAX : THE FEXOFENADINE CASES

On March 25, 2002 , Aventis Pharmaceuticals Inc ., Merrell Pharmaceuticals Inc ., and Carderm Capital L . P . (collectively referred to as Aventis ) sued IMPAX in the U .S . District Court for the District of New Jersey (Civil Action No . 02 - CV-1322) alleging that IMPAX's proposed fexofenadine and pseudoephedrine hydrochloride tablets , containing 60 mg of fexofenadine and 120 mg of pseudoephedrine hydrochloride, infringe U .S . Patent Nos . 6,039 , 974 ; 6,037,353 ; 5,738,872 ; 6,167,791 ; 5,855,912 ; and 6 , 113,942 . On November 7, 2002, Aventis filed an amended complaint , which added an allegation that IMPAX's Fexofenadine and Pseudoephedrine Hydrochloride 60 mg/120 mg Extended Release Tablet product infringes U .S . Patent go . 6,399 , 632 . Aventia seeks an injunction preventing IMPAX from marketing its Fexofenadine and Pseudoephedrine Hydrochloride 60 mg/120 mg Extended Release Tablet product until the patents - in-suit have expired , and an award of damages for any commercial manufacture , use, or sale of IMPAX ' ■ Pexofenadine and Pseudoephedrine Hydrochloride 60 mg / 120 mg Extended Release Tablet product , together with costs and attorneys' fees .

Fact discovery in this action in scheduled to close in January 2005 . IMPAX believes that it has defenses to the claims made by Aventis based on noninfringement and invalidity . A tentative trial date has been scheduled for October 2005 .

Aventis has also filed a suit against Barr Laboratories , Inc ., Mylan Pharmaceuticals , Inc ., Dr . Reddy ' s Pharmaceuticals and Teva Pharmaceuticals USA, Inc . in New Jersey asserting the same patent infringement against these defendants' proposed Fexofenadine and Pseudoephedrine or Fexofenadine products . The IMPAX case has been consolidated for trial with the Barr , Mylan , Dr . Reddy and Teva cases .

On March 25, 2004 , Aventis and AMR filed a complaint and first amended complaint against IMPAX and Ranbaxy, alleging infringement of two additional patents relating to the process for making the active pharmaceutical ingredient, fexofenadine hydrochloride . Theme patents , United States Patent Nos . 5,581,011 and 5 , 750,703, are owned by AMR and exclusively licensed to Aventis .

On July 23, 2003 , IMPAX filed Summa ry Judgment motions for non-infringement of U .S . Patent Nos . 6,039 , 974, 6 , 113,942 , and 5,855,912 ; and for non - infringement and invalidity of U .S . Patent No . 5,738 , 872 . Oral argument for the Summary Judgment motion regarding the '912 , ' 942, and ' 974 patents was heard on November 3, 2003 . Oral argument for the Summa ry Judgment Motion regarding the '872 patent was heard on December 8, 2003 . On June 29, 2004 , the court granted the Company's Motions for Summa ry Judgment of Non- infringement of the ' 912 and ' 942 patents and denied the Company ' s Motion for Summary Judgment of Non - infringement of the '974 patent . At the same time , the court ordered that a ruling on the Company's motion for summary Judgment for the Non -infringement and invalidity of the '872 patent is reserved pending a Markman hearing held on September 9, 2004 to assist the court in construing the patent ' s product-by - process claims . On October 4, 2004 , Judge Greenaway construed the claims of the fifth patent in favor of IMPAX and the other defendants . Aventi ■ is seeking reconsideration of that ruling by the court . IMPAX will be able to assert both non - infringement and invalidity of the remaining patents ( if necessa ry) at trial .

PURDUE PHARMA L .P . ET AL . V IMPAX : THE OXYCODONE CASES ------

On April 11 , 2002 , Purdue Pharma and related companies filed a complaint in the U .S . District Court for the Southe rn District of New York alleging that IMPAX's submission of ANDA No . 76 - 318 for 80 mg oxycodone tablets infringes three patents owned by Purdue . The Purdue patents are U . S . Patent Noe . 5,508,042, 5,549 , 912 and 5,656,295 ; all directed to controlled release opioid formulations . On September 19, 2002 , Purdue filed a second Infringement Complaint regarding IMPAX ' ■ 40 mg oxycodone generic product . On October 9, 2002, Purdue filed a third Infringement Complaint regarding IMPAX ' s 10 mg and 20 mg oxycodone generic products . IMPAX filed its answer and counterclaims in each case on October 3, 2003 . On November 25, 2003 , Purdue submitted their reply to our counterclaims . Purdue is seeking, among other things, a court order preventing IMPAX from manufacturing, using or selling any drug product that infringes the subject Purdue patents .

Purdue previously sued Boehringer Ingelheim/ Roxane , Endo and Teva on the same patents . One or more of these defendant s may resolve the invalidity issues surrounding the Purdue patents prior to when IMPAX ' s case goes to trial . The Boehringer Ingelheim/ Rexane suit is stayed . The Endo action was tried in June 2003 and post trial brief s have been filed . In January 2004 , the judge in the Endo action ruled that the three patents in suit , the same patents that Purdue has asserted against IMPAX , are unenforceable because they were inequitably procured and enjoined their enforcement . Purdue has appealed that ruling to the Court of Appeals for the Federal Circuit, and oral argument is scheduled for November 3, 2004 .

29 INPAX V . AVENTIB PHARMACEUTICALS, INC ., TUB RILUBOLB CAS E

In June 2002 , IMPAX filed suit against Aventis Pharmaceuticals , Inc . in the U .S . District Court in Wilmington, Delaware, seeking a declaration that the filing of an AMDA to engage in a commercial manufacture and/or sale of Rilusole 50 eg Tablets for treatme nt of patients with amyotrophic lateral scleroses ( ALS) does not infringe claim of Mantis' U .S . Patent No . 5,527,614 ('814 patent) and a declaration that this patent is invalid .

In response to IMPAX's complaint , Mantis filed counterclaims for direct infringement and inducement of infringement of the '814 patent . In December 2002 , the district court granted Aventis ' Motion for Preliminary Injunction and enjoined IMPAX from infringing , Contributory infringing , or inducing any other person to infringe Claim 1, 4 or 5 of the ' 814 patent by selling, offering for sale, distributing , marketing or exporting from the United States any pharmaceutical product or compound containing rilusole or salt thereof for the treatment of ALS .

The trial was completed on October 30, 2003 , and post -trial briefing was completed in December 2003 . On January 30, 2004 , the court denied IMPAX ' ■ Notion for Summary Judgment on inequitable conduct and, on Fe bruary 5 , 2004 , the court denied IMPAX ' e Notion for Summary Judgment on non - infringement of certain claims . In September 2004, the court ruled the '914 patent is valid , enforceable and infringed by IMPA% ' s proposed generic riluzole product . The Company is considering its options regarding a possible appeal .

If IMPAX is not ultimately successful in proving invalidity or unenforceability, there is a substantial likelihood that the court will enter a permanent injunction enjoining IMPAE from marketing Rilurole SO mg Tablets for the treatment of AL8 in the United States until the expiration of the ' 614 patent (June 16 , 2013 ) . If IMPAX is ultimately successful in proving either defense, the preliminary injunction would be set aside and IMPAX would be permitted to market its Rilusole 50 wg Tablet product for the treatment of AL8 in the United States .

ABBOTT LABORATORIES V . IMPAX : THE PBMD►IBRATS TABLET CASE S

In January 2003 , Abbott Laboratories and Fournier Industrie at Sent* and a related company filed suit against IMPAX in the U .S . District Court in Wilmington, Delaware claiming that IMPAX's submission of an ANDA for Fenofibrate Tablets, 160 mg, constitutes infringement of two U . S . patents owned by Fournier and exclusively licensed to Abbott , relating to Abbott ' s Tricor tablet product .

In March 2003 , Abbott and Fournier filed a second action against IMPAX in the same court making the same claims against IMPAA ' s 54 mg Fenofibrate Tablets . These cases were consolidated in April 2003 .

In September 2003 , Abbott and Fournier filed a third action against IMPAX in the U .B . District Court in Wilmington , Delaware, claiming that IMPAX ' s submiss ion of its ANDA for 54 mg and 160 mg re nofibrate Tablets constitutes infringement of a third patent recently issued to Fournier and exclusively licensed to Abbott . This action was also consolidated with the two previously consolidated actions in December 2003 . In Janua ry 2004 , Abbott and Fournier filed a fourth action relating to IMPAX ' s 54 mg and 160 mg Penotibrate Tablets b ased upon a claim of infringement of a fourth patent . The assert ed patents are U .B . Patent Nos . 6,6S2 , sa1 . 6,569,552 , 6,277,405 and 6,074,670 . All four cases were consolidated in March 2004 . Pact and expert discovery in the consolidated cases closes in November 2004 and the trial is currently set for June 2005 . IMPAX has responded to all four complaints by a ss erting that its propose d generic Fenofibrete Tablet products do not infringe the patents- in-suit and by as serting that the patents - in-suit are invalid .

All four actions seek an injunction preventing IMPAX from marketing its Penofibrate Tablet products until the expiration of the patents ( January 9 . 2016) and an award of damages for any commercial manufacture, use, or sale of IMPAX' a Penofibrate Tablet product , together with costs and attorney fees .

SOLVAY PHARMACEUTICALS V . IMPAX : THE CRBOM CASE ......

On April 11 , 2003 , Solvay Pharmaceuticals , Inc ., manufacturer of the Creon(R) line pancreatic enzyme products , brought suit against IMPAX in the U .B . District Court for the District of Minnesota claiming that IMPAX has engaged in false advertising , unfair competition , and unfair trade practices under federal and Minnesota law in connection with the Company' s marketing and .ale of it s Lipram products . The suit seeks actual and consequential damages , including treble damages, attorneys ' fees, injunctive relief and declarato ry judgments that would prohibit the substitution of Lipram for prescriptions of Croon . On June 6, 2003, IMPAX filed a Motion for Dismis sa l of Plaintiff 's Complaint , which sought to dismiss each count of Solvay's complaint . On Janua ry 9, 2004 , the U .B . District Court I ssued a ruling on IMPAX ' s Motion for Dismissal , dismissing two of the count s set forth in the Complaint , including the count which sought a declaratory judgment that Lipram may not lawfully be substituted for prescriptions of Croon . On January 26, 2004 , IMPAX filed its Answe r to the Complaint and Counterclaim alleging that Solvay wrongfully interfered with IMPAX ' s business relationships . On February 17, 2004 , Solvay filed its Reply to IMPAX ' s Counterclaim . On February 24, 2004 , the Rule 16 scheduling Conference was held and, on Februa ry 25 , 2004 , the Court issued a Scheduling Order setting the deadline for discovery on January 14, 2005 , and a tentative trial date for July 1, 2005 . On September 9, 2004 , the Court i ssued an Amended Scheduling Order pursuant to a stipulation filed by the parti es, moving the deadline for discove ry to March 14 , 2005 . Fact discovery is currently ongo ing in this case . IMPAX believes it has defenses to Solvay ' s allegations and intends to pursue thew defense s vigorously . ALZA CORPORATION V . IMPAXi THE OXYEUTYNIN CAS E on September 4, 2003, Alma Corporation (•Alsa•) filed a lawsuit against IMPAX in the U.B . District Court for the Northern District of California alleging patent infringement of one patent, U .B . Patent No . 6,124 .355, related to IMPAE's filing of an ANDA for a generic version of Ditropen EL (Oxybutynin Chloride) Tablets, S mg, 10 mg, and IS so . Alma seeks an injunction, a declaration of infringement, attorney's fees and costs . On October 24, 2003, IMPAX filed its Answer to the Complaint, which included defenses to the infringement claim, and counterclaimed for patent non-infringement and invalidity . Discovery is on-going and trial is currently set for November 3005 .

On October 24 . 2003, IMPAX filed a lawsuit against Alma in the U .B . District Court for the Northern District of California seeking a declaratory judgment that four Alta patents relating to IMPAE'e filing of an ANDA for a generic version of Ditropan XL(R) (Oxybutynin Chloride) Tablets, 5 mg . 10 eg, and 1S egg are invalid and/or not infringed by the commercial manufacture, use, offer for sale, sale, or importation of the IMPAX product . On November 17, 2003, Also moved to dismiss the Company's complaint for lack of subject matter jurisdiction based on Alra's argument that there is no case or controversy between the parties with respect to these four patents . On April 19, 2004, the Court denied Alma's notion . On May 16, 2004, the Court ordered the entry of a stipulation of dismissal based on a covenant not to sue issued by Alas to the Company with respect to four Alta patents in the case .

SHIRE LABORATORIES INC . V INPAEi THE GENERIC ADDERALL CASE

On December 29, 2003, Shire Laboratories, Inc ., a subsidiary of Shire Pharmaceuticals Group, PLC, filed a lawsuit against IMPAX in the U .S . District Court for the District of Delaware alleging patent infringement on U .B . Patent Hot . 6,322,619 and 6,605,300 related to filing of an ANDA to market a generic version of Adderall XR(R) 30 6g capsules . I14PAX filed its answer on January 20, 2004, denying infringement and contesting the validity of both patents . All discovery is expected to be completed by March 2005 . A tentative court date has been scheduled for October 11, 2005 .

OTHER LITIGATION

STATE OF CALIFORNIA V . IMPAX

On August 7, 2003 . IMPAX received an Accusation from the Department of Justice, Bureau of Narcotic Enforcement, State of California (•SNE•), alleging that IMPAX failed to maintain adequate controls to safeguard precursors from theft or loss regarding our pseudoephedrine product in January 2003 . IMPAX contested the allegations in the Accusation and entered into discussions with the State of California, Department of Justice, to bring resolution to this matter . IMPAE has implemented a number of remedial measures aimed at improving the security and accountability of precursor substances used by IMPAX and regulated by the California Department of Justice, Bureau of Narcotic Enforcement . In March 2004, following a theft of pssudoephedrine from IMPAE's facilities, the MR filed an Amended Accusation, again alleging that IMPAX failed to maintain adequate controls to safeguard precursors from theft or loss regarding our pseudoopbedrine product . In Ray 2004, a Notice of Hearing was received from SHE, which set the hearing of this matter, should one be necessary, for October is and October It, 2004 . on October 11, 2004 IMPAX entered into a Stipulation with the California Bureau of Narcotic Enforcement ("ENE") regarding IMPAE's California Precursor Business Permit 1201, applicable to the IMPAX facility located at 31153 San Antonio Street . Hayward, California . Pursuant to the Stipulation . Permit #201 is provisionally suspended, with such suspension stayed, for a period of two (2) years, in which IMPAX must comply with the terms and conditions of the Stipulation . The Stipulation provides, "Upon successful completion of the terms of the Stipulation for the period of time in which it is in effect, IMPAE's permit will be fully restored without having been suspended . "

The Stipulation resolves both the original Accusation and the Amended Accusation .

IMPAX DERIVATIVE LAWSUITS

On September 24 . 2004 . Iepax Laboratories, Inc . received a Complaint filed by a shareholder of the Corporation in the Superior Court for Alameda County, California, purporting to state a derivative claim on behalf of the Company, as a nominal defendant . The Complaint, brought by Catherine Burke, derivatively on behalf of nominal defendant Iepax Laboratories, Inc ., Case No . 8004176541, asserts claims against Robert L . Burr, David S . Doll, Barry Edwards . Charles Haiso, Larry Hsu . Michael Markbrelter, and Cornel C. Spiegler, each of whom is an officer or director, or both, of the Company . The Complaint alleges claims against these individuals under California Corporations Code as . 25402, and under California's common law relating to the fiduciary duties of corporate officers and directors, arising from the sale of common stock of the Company by the named individuals in June 2004 . A second, virtually identical complaint, brought by Crayton D . Leavitt, as trustee of the Leavitt Family Trust, derivatively on behalf of nominal defendant Impax Laboratories, Inc ., Case No . R004176931, received by the Company on September 28, 2004, was filed in the some forum by another shareholder of the Corporation against the same individuals . The complaints seek treble damages, imposition of a constructive trust on the individual defendants, attorneys fees and costs, and other relief as the court determines .

The Board has appointed a special litigation committee of disinterested directors to investigate the merits of the allegations in the complaints and to engage special counsel to assist in such investigation . Each of the named individuals has informed the Company that he denies the allegations made in these complaints, and that he will vigorously defend the claims asserted against him . The Company responded to each of the complaints on October 20, 2004, by filing a motion to dismiss (called a demurrer in California State courts) and a motion to stay the actions for 120 days to allow the special litigation committee to complete its investigation . After these motions were filed, the plaintiffs offered to stipulate to a stay of 120 days, and such a stipulation was filed with the Court on October 29, 2004 . As part of the stipulation, the Company withdrew its motion to dismiss . An order for a 120 day stay was also submitted, but it has not yet been signed by the judge .

There are no allegations in the two complaints against the Company . The special litigation committee will determine whether the Company itself should pursue the claims alleged or move to dismiss them .

The Company is aware that two law firms issued press releases on Friday, November 12, 2004, indicating that they filed class action lawsuits against the Company in the United States District Court for the Northern District of California . According to the press releases, the complaints allege that the Company and certain of its officers and directors violated the Securities Exchange Act of 1934 by causing the Company's shares to trade at artificially inflated levels through the issuance of false and misleading financial statements . The complaints appear to focus, in part, on the Company's announcement on November 3, 2004 that it would restate its earnings for the first and second quarters of 2004 as a result of a strategic partner's unforeseen revision of revenues from sales of one of the company's drugs during such quarters . The Company has not yet been served with copies of the complaints . Other than the legal proceedings described above, we are not aware of any other material pending or threatened legal actions, private or governmental, against us . However, as we file additional applications with the FDA that contain Paragraph IV certifications and develop new products, it is likely we will become involved in additional litigation related to those filings or products .

INSURANCE

As part of our patent litigation strategy , we had obtained two policies covering up to $7 million of patent infringement liability insurance from American International Specialty Line Company (" AISLIC "), an affiliate of AIG International . This litigation insurance covered us against the costs associated with patent infringement claims made against us relating to seven of the ANDA5 we filed under Paragraph IV of the Hatch-Waxman Amendments . Both policies had reached their limits of liability and the Company has collected all monies from AIG, as of September 30, 2004 IMPAX does not have any receivables from AIG . While Teva has agreed to pay 45% to 501 of the attorneys ' fees and costs (in excess of the $7 million covered by our insurance policies for six products) related to the twelve products covered by our strategic alliance agreement with them , we will be responsible for the remaining expenses and costs for these products , and all of the cost a associated with patent litigation for our other products and our future products .

We do not believe that this type of litigation insurance will be available to us on acceptable terms for our other current or future ANDAe . In those cases, our policy is to record such expenses as incurred . Product liability claims by customers constitute a risk to all pharmaceutical manufacturers . We currently carry $ 80 million of product liability insurance for our own manufactured products . This insurance may not be adequate to cover any product liability claims to which we may become subject .

32 ITEM 6 . EXHIBIT S

(a) Exhibit s

10 .67 - Exclusive License, Supply and Distribution Agreement Between Leiner Health Products, LLC and Impax Laboratories, Inc . dated June 11, 2004 . (This agreement has been redacted pursuant to a confidential treatment request filed with the SEC on the date hereof . )

10 .68 - Exclusive License, Supply and Distribution Agreement Between Leiner Health Products, LLC and Impax Laboratories, Inc . dated July 1, 2004 . (This agreement has been redacted pursuant to a confidential treatment request tiled with the SEC on the date hereof . )

10 .69 - Letter Agreement dated October 8, 2003 between the Company and Teva Pharmaceuticals Curacao N .V . (This agreement has been redacted pursuant to a confidential treatment request filed with the SEC on the date hereof .) "

31 .1 - Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 .

31 .2 - Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ,

32 .1 - Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 .

33 SIGNATURE S

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 .

IMPAX LABORATORIES, INC .

Byt /a/ BARRY R . EDWARDS November 15, 2004 ------'------.------•------Chief Executive Office r (Principal Executive Officer )

By : /e/ CORNEL C . SPIEGLER November 15, 2004 ------'------^------^------"'------Chief Financial Officer (Principal Financial and Accounting Officer )

34 EXHIBIT G FORM 4 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington , D.C. 20549 OMB Number 3235-0287 D Check this box Expires: Janua ry if no longer STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP OF 31, 2005 subject to Estimated Section 16 . SECURITIES average Form 4 or Form burden hours 5 obligations Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, Section ry continue . 17(a) of the Public Utility Holding Company Act of 1935 or Section 30(h) of the instruction Investment Company Act of 1940 1(b).

(Print or Type Responses)

1 . Name and Address of Repor ting Person - 2. Issuer Name and Ticker or Trading Symbol 5. Relationship of Repor ti ng Person(s) to Issuer SPIEGLER CORNEL C IMPAX LABORATORIES INC IPXL (Check all applicable ) (Last) (First) (Middle) 3. Date of Earliest Transaction (Month /Day/Year) 061004 Director t(ownehe r C/O IMPAX LABORATORIES, 07~ -3r Officer (give title - Otther (specify below ) w~i INC., 3735 CASTOR AVENUE bi° Chief Financial Officer (Strod) 4. If Amendment, Date Original Filed 6. Individual or Joint/Group Filing (Choc k (M y/C) Applicable Line) 06/08/2004 X_ Form filed by One Reporting Pawn PHILADELPHIA PA 19124 Fonn filed by More than One Reporting Person (city) (State) (zip )

Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owne d

I.Tkk of Seauity 2. Tlwaaiao Doe 2A. owned 3. Tr.ragiaa Code 4 . Securities Acquired (A) or Dihpowd of S. Amount of Sewuitia 6.Owea .hip Form : 7. Nature oftedbw (Intr. 3) (MomWDWYe.) nxoawion Date, if (Iva. t) (D) aexfkWly owned Direct (D) or Indirect (1) aeaelkW Ownmki p MY (low. 3,1 oed S) Following Rrponed (Into. 4) (Intr. 4 ) (MoslWDe /Yer) Tti.aeoa(s) G4 V Aleoms (A)or(D) Price (1our.3ied4)

Exercise of stock 06107/2004 06/0712004 P 36,000 A $3 .125 46,750 D option

Exercise of stock 06107/2004 06/07/2004 P 8,000 A .1875 54,750 D option $2

Exercise of stock 06/07/2004 06/07/2004 P 12,000 A $3.3125 66,750 D

Sale of common stock 06/07!2004 06/07/2004 S 15,000 D $21 .9 51,750 D

Sale of common stock 06/07/2004 06107/2004 S 21,000 D $21 .8 30,750 D

Sale of common stock 06/07/2004 06(07/2004 S 5.000 D $21 .8 25,750 D Sale of common stock 06/07/2004 06/07/2004 S 15,000 D $21.77 10,750 D

Table II - Derivative Securities Acquired, Disposed of, or Beneficially Owned (e g , puts, calls, warrants, options, convertible securities )

IS. . .. { 1 . IYY{Mh." 1C , to 1.T..."Dw &to.r/ 41C Il .A..f"" tDo.! rtntrh Or 7.1Dti Aw~~1{U.rrl,lylsi~ . t M.{ CM .tr{ II.M fry .rrW VA"D Y00) ire"Gr.r I-.U 20M10A+i./w PM 69WNMO I-Ir.l 6M.Nw D,A.ot o...* he"

od.ew IM.rOr~'~f Nr.).ar l) Ir l) ~ .,erd, o,rl.w o.rr►. o+r frM,: (n_ SI F"nti M.M . wfi-o) Ar~1 .N~~d &~W ab Y NI I01 Or rrirY Wir1~D,r "do ~~ lf~+lu4 M.~1 M1+. h

option to buy $3.23 06A112000 A 60,000 0101/2001"1 0N01/2010 C 60 .000 55 .25 60,000 D common stock Stock

option to buy Commen $5 .623 12/19/2000 A 15000 12/19/2001_1 12/19/2010 S 15 .000 $5 .625 IS,000 D commom dock

Optice to buy Comm= $6.72 03108/2002 A 30,000 00(111=32 03/08/2012 30,000 $6.72 30.000 D common dock Stock I I

option to buy CAMUMO 53 .06 03/10/1003 0YOY2003.. A 25,000 03/I02001.. 03/13/1013 25,000 $3.04 25,000 D wrenn stack

Option to buy common $23.05 01/142006 0H20/2004 A 25,000 0411vnosT W14/2014 25,000 $23.03 25 .000 D common Mock Reporting Owners

Relationships Reportin g Owner Name / Address Director 10% Owner Officer Other SPIEGLER CORNEL C C/O IMPAX LABORATORIES, INC . 3735 CASTOR AVENUE Chief Financial Officer PHILADELPHIA PA 1912 4 Explanation of Responses :

(1) Vest as follows : 10% after I year from date of grant, 3074 after 2 years, 60% after 3 years and l00% after 4 years fro in date of grant. (2) Option vests over 4 years from the date of grant in 25% equal annual installments . (3) This is the day that the Company informed the recipient of the award .

Signatures Comel Spiele r Signature of Reporting Perron Due Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly. • If the form is filed by more than one reporting person, see Instruction 4(bXv). •" Intentional misstatements or omissions of facts constitute Federal Criminal Violations. See 18 U .S.C. 1001 and 15 U .S .C. 7811(a). Note : File three copies of this Form, one of which must be manually signed. If space is insufficient , see Instruction 6 for procedure. Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB number. Defendant Total Shares Before Sale Shares Sold Percent Sol d

Barry Edwards 961,901' 120,000' 12.48%

Comel Spiegler 201,7501 56,000 27.76%

David Doll 202,279, 30,000 14.83%

Charles Hsiao 4,573,465, 600,000 13.12% from 13D fi led June 15, 200 4

Larry Hsu" 5,175,688 600,000 11 .59% from 13D fi led June 15, 200 4

David Edwards* 7,500 0 0.00%

Total # of shares sol d: 1,406,000

Total Shares controlled by Ds 11,122,583

% ot stock an d options controlled by Ds that were sold 12 .64%

i I

__ • the complaint states that David Edwards sold 97,248 shares of IMPAX . However, a review of the record s indicates that it was an indirect sale by WD Partnership, LP and WD Offshore Fund Ltd. There were no direct sales of shares by Mr. Edwards. Further, according to SEC filings, Mr . Edwards only directly holds 7500 options in IMPAX.

•• his shares are owned jointly with Ann Hsu, so his total shares owned number includes shares held by both he and Ann EXHIBIT H ------OMB APPROVAL OMB Number : 3235-0145 Expires ; December 31, 2005 Estimated average burden hours per response ...... 15 ------

UNITED STATES SECURITIES AND EXCHANGE COMMISSIO N WASHINGTON, D .C . 2054 9

SCHEDULE 13 D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO . ONE) *

IMPAX LABORATORIES, INC . ------(Name of Issuer)

COMMON STOCK, $ .01 PAR VALUE ------(Title of Class of Securities )

45256B101 ------(CUSIP Number )

BARRY R . EDWARDS CHIEF EXECUTIVE OFFICER IMPAX LABORATORIES, INC . 30831 HUNTWOOD AVENUE HAYWARD, CALIFORNIA 9454 4 (510) 476-2000 ------(Name, Address and Telephone Number of Perso n Authorized to Receive Notices and Communications )

JUNE 15, 200 4 (Date of Event which Requires Filing of this Statement )

If the filing person has previously filed a statement on Schedule 13O to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of ss .ss .240 .13d-1(e), 240 .13d-l(f) or 240 .13d-1(g), check the following box . I_ I

NOTE : Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits . See ss .240 .13d-7 for other parties to whom copies are to be sent .

* The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page .

The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes) .

PERSONS WHO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY VALI D OMB CONTROL NUMBER . ------CUSIP NO . 452568101 SCHEDULE 13D Page 2 of 7 ------1 NAME OF REPORTING PERSON . I .R .S . IDENTIFICATION NO . OP ABOVE PERSON (Entities Only ) Charles (Chiin Hsiung ) Hsiao, Ph .D .

------2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) I__I (b) ------3 SEC USE ONLY

------4 SOURCE OF FUNDS (See Instructions) SC

------5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) I_ 1 ------6 CITIZENSHIP OR PLACE OF ORGANIZATION

U .S .A . ------7 SOLE VOTING POWER

3,973, 465 shares* ( See Item 5 )

------NUMBER OF 8 SHARED VOTING POWE R SHARES BENEFICIALLY 0 shares (See Item 5) OWNED BY EACH REPORTING ------PERSON 9 SOLE DISPOSITIVE POWER WITH 3,973,465 shares* (See Item 5 )

------10 SHARED DISPOSITIVE POWE R

0 shares (See Item 5 )

------11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

3,973, 465 shares* (See Item 5 ) ------12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARE S ( See Instructions) I_I

------13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11 )

6 .8%* (See Item 5 ) ------14 TYPE OF REPORTING PERSON ( See Instructions )

IN ------•Includes options to purchase 438,810 shares of common stock which are immediately exercisable . Does not include 2,601,924 shares of common stock held in the Chiin Hsiao Children Irrevocable Trust, as to which shares Dr . Hsiso does not have voting or dispositive power . Page 3 of 7

This Amendment No . One to Schedule 13D ("Amendment No . One") amends and supplements the information set forth in the Schedule 13D filed with the Securities and Exchange Commission on December 27, 1999 (the "Original Schedule 13D") and constitutes Amendment No . One to the Original Schedule 13D . Capitalized terms used herein and not otherwise defined herein have the respective meanings ascribed to such terms in the Original Schedule 13D .

1 . SECURITY AND ISSUER .

No amendments or supplements .

2 . IDENTITY AND BACKGROUND .

The following information amends and supplements Item 2 of the Original Schedule 13D :

The Original Schedule 13D was filed pursuant to a Joint Filing Agreement (attached as Exhibit 1 to the Original Schedule 13D and incorporated herein by reference) by and among Dr . Hsiao, Shu Shen Hsiao Trust and Richard Hsiao Trust . Effective as of June 9, 2004, Dr . Hsiao resigned as trustee of both the Shu Shen Hsiao Trust and Richard Hsiao Trust, and the Joint Filing Agreement was terminated .

The information required by this Item for Dr . Haiao is as follows : Dr . Hsiao's business address is 30831 Huntwood Avenue, Hayward, CA 94544 . Dr . Hsiao is a citizen of the United States . Dr . Hsiao's principal occupation is Chairman, Impax Laboratories, Inc . (30831 Huntwood Ave . Hayward, CA 94544) .

During the last five years prior to the date of this filing, Dr . Hsiao has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction ending in a judgment, decree or final order enjoining future violations or prohibiting or mandating activities subject to, federal or state securities laws or finding a violation with respect to such laws .

3 . SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION .

The following information amends and restates Item 3 of the Original Schedule 13D in its entirety :

Global and Impax entered into an Agreement and Plan of Merger , dated as of July 26, 1999 (" Merger Agreement "), pursuant to which Impax would merge into Global, with Global being the surviving corporation . The Merger of Impax into Global was consummated on December 14, 1999 .

The Issuer's corporate existence was not affected by the Merger, but its certificate of incorporation was amended to increase the number of shares of Common Stock that Issuer is authorized to issue and to change the name of the combined company to Impax Laboratories, Inc .

Effective with the Merger , the following shares and all rights with respect to those shares were converted into capital stock of the Issuer as described below :

(a) Each outstanding share of Impax common stock, Series A preferred stock and Series B preferred stock was converted into 3 .3358 shares of the Issuer's Common Stock, Page 4 of 7

(b) Each outstanding share of Impax Series C preferred stock was converted into 5 .849 shares of the Issuer's Common Stock ;

(c) Every 20 outstanding shares of Impax Series D preferred stock was converted into one share of the Issuer's Series 1-B preferred stock ;

(d) Each outstanding share of Global Series C preferred stock was converted into 50 shares of the Issuer's Common Stock ; and

(e) Each outstanding share of Global Series D preferred stock was converted into one share of Issuer's Series 1-A preferred stock .

Dr . Hsiao was the record and beneficial owner of 1,818 shares of common stock of Impax, 1,000,000 shares of Series A Preferred Stock of Impax, a warrant to purchase 200,000 shares of common stock of Impax and an option to purchase 100,000 shares of common stock of Impax . Consequently, as a result of the Merger, Dr . Hsiao was the record and beneficial owner of 3,341,864 shares of Common Stock of the Issuer, options to purchase 333,580 shares of Common Stock of the Issuer and warrants to purchase 667,160 shares of Common Stock of the Issuer .

On December 22, 2000, Dr . Hsiao was granted options to purchase 60,800 shares of Common Stock of the Issuer, on March 8, 2002, Dr . Hsiao was granted options to purchase 100,000 shares of Common Stock of the Issuer and on March 10, 2003, Dr . Hsiao was granted options to purchase 75,000 shares of Common Stock of the Issuer . Of these options (including the options to purchase 333,580 shares of Common Stock of the Issuer described in the paragraph above), options to purchase 438,810 shares of Common Stock of the Issuer may be exercised within 60 days .

On November 25, 2003, Dr . Hsiao exercised his warrants and purchased 667,160 shares of Common Stock of the Issuer at an exercise price of $0 .75 per share . Dr . Hsiao has also acquired approximately 125,631 shares of the Common Stock of the Issuer since the date of the original Schedule 13D through various transactions including acquisitions under the Issuer's Employee Stock Purchase Plan .

On June 3, 2004, Dr . Hsiao, donated 300,000 shares of the Common Stock to the Pamela and Charles Hsiao Charitable Remainder Unitrust (the "Hsiao Unitrust") . Dr . Hsiao and his wife, Pamela Hsiao, are the co-trustees of the Hsiao Unitrust and have the authority to vote or dispose of all shares held by the Hsiao Unitrust . On June 7, 2004, the Hsiao Unitrust sold (a) 25,000 shares of the Common Stock of the Issuer at a price of $21 .8463 per share and (b) 275,000 shares of the Common Stock of the Issuer at a price of $21 .0767 per share . As a result of such sale, the Hsiao Unitrust currently holds no shares of Common Stock of the Issuer . On June 7, 2004, Dr . Hsiao sold (a) 25,000 shares of the Common Stock of the Issuer at a price of $21 .8463 per share and (b) 275,000 shares of the Common Stock of the Issuer at a price of $21 .0767 per share .

4 . PURPOSE OF TRANSACTION .

The following information amends and restates Item 4 of the Original Schedule 13D in its entirety : The shares of Common Stock of Issuer deemed to be beneficially owned by Dr . Hsiao were acquired for, and are being held for, investment purposes . Dr. Hsiao may dispose of or acquire securities Page 5 of 7 of the Issuer, including Common Stock, depending upon the position of the market, the Issuer and other factors . Except as set forth above, Dr . Hsiao has no plans or proposals which relate to or would result in :

(a) any other acquisition by any person of additional securities of the Issuer, or the disposition of securities of the Issuer ;

(b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries ;

(c) a sale or transfer of a material amount of assets of the Issuer or any of its subsidiaries ;

(d) any change in the present board of directors or management of the Issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board ;

(e) any material change in the present capitalization or dividend policy of the Issuer ;

(f) any other material change in the Issuer's business or corporate structure ;

(g) changes in the Issuer's charter, bylaws or instruments corresponding thereto or other actions that may impede the acquisition of control of the Issuer by any person ;

(h) causing a class of securities of the Issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association ;

(i) a class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g) (4) of the Exchange Act ; or

(j) any action similar to any of those enumerated above .

Dr . Hsiao retains the right to change his investment intent, to propose one or more possible transactions to the Issuer's board, to acquire additional shares of Issuer ' s preferred stock or common stock from time to time or to sell or otherwise dispose of all or part of the Common Stock beneficially owned by him in any manner permitted by law . In the event of a material change in the present plans or intentions of Dr . Hsiao , Dr . Hsiao will amend this Schedule 13D to reflect such change , to the extent required by law .

5 . INTEREST IN SECURITIES OF THE ISSUER . The following information amends and supplements Item 5 of the original Schedule 13D :

Dr . Hsiao owns 3,973 ,465 shares of Common Stock of Issuer , including options to purchase 438 , 810 shares of common stock which may be exercised within 60 days . Accordingly , Dr . Hsiao may be deemed to beneficially own 6 . 8% of the outstanding shares of Common Stock of Issuer , which percentage is calculated based upon 58,028 , 543 shares of Common Stock reported outstanding by the Issuer as of April 30, 2004 . The percentage is calculated by dividing 3,973 , 465 shares beneficially owned by 58,467,353 ( which is the sum of 58,028,543 and 438,810) .

(a) The information required by this paragraph is reflected on Lines 7-10 of Dr . Hsiao ' s cover page, incorporated herein by reference . Page 6 of 7

(b) Except as disclosed in Item 3, Dr . Hsiao has not effected any transactions in the Common Stock during the last 60 days .

(c) No other person is known to have the right to receive or the power to direct the receipt of dividends from, or any proceeds from the sale of, the shares of Common Stock beneficially owned by Dr . Hsiao . (d) Not Applicable .

6 . CONTRACTS, ARRANGEMENTS , UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER .

No amendments or supplements .

7 . MATERIAL TO BE FILED AS EXHIBITS .

No amendments or supplements . Page 7 of 7

SIGNATURE S

After reasonable inquiry and to the best of the undersigned's knowledge and belief, the undersigned certifies that the information set forth in this Amendment One to Schedule 13D is true, complete and correct .

Date : June 15, 2004 /s/ Charles (Chiin Hsiung ) Hsiao, Ph .D . ------Charles (Chiin Hsiung) Hsiao, Ph .D . EXHIBIT I ------0MB APPROVAL OMB Number : 3235-0145 Expires : December 31, 2005 Estimated average burden hours per response ...... 15 ------

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D .C . 2054 9

SCHEDULE 13 D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO . ONE) *

IMPAX LABORATORIES, INC . ------(Name of Issuer )

COMMON STOCK, $ .0l PAR VALUE ------(Title of Class of Securities )

45256B101

(CUSIP Number )

BARRY R . EDWARDS CHIEF EXECUTIVE OFFICER IMPAX LABORATORIES, INC . 30831 HUNTWOOD AVENUE HAYWARD, CALIFORNIA 9454 4 (510) 476-2000 ------(Name , Address and Telephone Number of Person Authorized to Receive Notices and Communications )

JUNE 15, 200 4 (Date of Event which Requires Filing of this Statement )

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and in filing this schedule because of ss .ss .240 .13d-l(e), 240 .13d-l(f) or 240 .13d-l(g), check the following box . 1_ 1

NOTE : Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits . See ss .240 .13d-7 for other parties to whom copies are to be sent .

* The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alte r disclosures provided in a prior cover page .

The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act') or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes) .

PERSONS WHO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY VALID OMB CONTROL NUMBER . CUSIP NO . 45256B101 SCHEDULE 13D Page 2 of S ------1 NAME OF REPORTING PERSON . I .R .S . IDENTIFICATION NO . OF ABOVE PERSON (Entities Only)

Larry (Chung-Chiang ) Hsu, Ph .D .

------2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROU P (See instructions) (a) I__I (b )

------3 SEC USE ONLY

------4 SOURCE OF FUNDS (See Instructions) S C ...... S CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) I_ 1

------6 CITIZENSHIP OR PLACE OF ORGANIZATIO N

U .S .A ...... ------7 SOLE VOTING POWER

442,330 shares* (See Item 5 ) ------NUMBER OF S SHARED VOTING POWE R SHARES BENEFICIALLY 2,040,012 shares (See Item 5) OWNED BY EACH REPORTING ------PERSON 9 SOLE DISPOSITIVE POWER WITH 442,330 shares- (See Item 5 )

------10 SHARED DISPOSITIVE POWER

2,040,012 shares (See Item 5 )

------11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

2,482,342 shares ** (See Item 5 )

------^ . . . ------12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARE S (See Instructions) I_ I

------13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN RON (11 )

4 .3N• (See Item 5 ) ...... 14 TYPE OF REPORTING PERSON (See Instruction )

IN ------*Includes (a) options to purchase 432,330 shares of common stock which are immediately exercisable and (b) 10,000 shares held in Larry Hsu's

•I•Includesl ) options t o purchase 432,330 ■ haras of common stock which are immediately(a exercisable and (b) 10,000 shares held in Larry Hsu's 401(k) Plan . Does not include 1,254 , 320 shares of common stock held in the Hsu Children Irrevocable Trust, as to which shares Larry Hsu does not have voting or diapositive power . CUSIP NO . 45256B101 SCHEDULE 13D Page 3 of 8 ------1 NAME OF REPORTING PERSON . I .A .S . IDENTIFICATION NO . OF ABOVE PERSON (Entities Only )

Ann (Fung- Hwa) Hsu

------2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP ( See Instructions ) ( a) I=~ (b )

------3 SEC USE ONLY

------4 SOURCE OF FUNDS (See Instructions) SC

------5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e )

------6 CITIZENSHIP OR PLACE OF ORGANIZATION

U .S .A .

------7 SOLE VOTING POWER

53,334 shares* (See Item 5 )

------NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 2,040,012 shares (See Item 5 ) OWNED BY EACH REPORTING ------PERSON 9 SOLE DISPOSITIVE POWE R WITH 53,334 shares* (See Item 5 )

------10 SHARED DISPOSITIVE POWER

2,040,012 shares (See Item 5 )

------11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSO N

2,093,346 shares** ( See Item 5 )

------12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARE S (See Instructions) I_I

------13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11 )

3 .6%** (See Item 5 )

------14 TYPE OF REPORTING PERSON ( See Instructions )

IN ------•Includes options to purchase 53,334 shares of common stock which may be exercised within 60 days . **Includes options to purchase 53,334 shares of common stock which may be exercised within 60 days . Does not include 1,254 , 320 shares of common stock held in the Hsu Children Irrevocable Trust, as to which shares Ann Hsu does not have voting or dispositive power . Page 4 of 8

This Amendment No . One to Schedule 13D ("Amendment No . One") amends and supplements the information set forth in the Schedule 13D filed with the Securities and Exchange Commission on December 27, 1999 (the "Original Schedule 13D") and constitutes Amendment No . One to the Original Schedule 13D . Capitalized terms used herein and not otherwise defined herein have the respective meanings ascribed to such terms in the Original Schedule 13D .

1 . SECURITY AND ISSUER .

No amendments or supplements .

2 . IDENTITY AND BACKGROUND .

The following information amends and supplements Item 2 of the original Schedule 13D :

This Amendment One is being filed pursuant to a Joint Filing Agreement (attached as Exhibit 1 to this Amendment No . One) by and between Hsu and his spouse, Ann (Fung-Hwa) Hsu ("Ann") (individually, a "Reporting Person" and, collectively, the "Reporting Persons") .

The information required by this Item for each of the Reporting Persons is set forth in Appendix 1 hereto .

During the last five years prior to the date of this filing, none of the Reporting Persons has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction ending in a judgment, decree or final order enjoining future violations or prohibiting or mandating activities subject to, federal or state securities laws or finding a violation with respect to such laws .

3 . SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION .

The following information amends and restates Item 3 of the Original Schedule 13D in its entirety :

Global and Impax entered into an Agreement and Plan of Merger, dated as of July 26, 1999 ("Merger Agreement"), pursuant to which Impax would merge into Global, with Global being the surviving corporation . The merger of Impax into Global was consummated on December 14, 1999 .

The Issuer's corporate existence was not affected by the Merger, but its certificate of incorporation was amended to increase the number of shares of Common Stock Issuer is authorized to issue and to change the name of the combined company to Impax Laboratories, Inc . Effective with the Merger, the following shares and all rights with respect to those shares were converted into capital stock of the Issuer as described below :

(a) Each outstanding share of Impax common stock, Series A preferred stock and Series B preferred stock was converted into 3 .3358 shares of Issuer Common Stock ;

(b) Each outstanding share of Impax Series C preferred stock was converted into 5 .849 shares of the Issuer's Common Stock ; Page 5 of 8

(c) Every 20 outstanding shares of Global Series D preferred stock was converted into one share of the Issuer's Series 1-B preferred stock ;

(d) Each outstanding share of Global Series C preferred stock was converted into 50 shares of the Issuer's Common Stock ; and

(e) Each outstanding share of Global Series D preferred stock was converted into one share of Issuer's Series 1-A preferred stock .

Hsu was the record and beneficial owner of 381,818 shares of common stock of Impax, 200,000 shares of Series A preferred stock of Impax, a warrant to purchase 200,000 shares of common stock of Impax and an option to purchase 100,000 shares of common stock of Impax .

Consequently, as a result of the Merger , Hsu was the record and beneficial owner of 1, 940,828 shares of Common Stock of the Issuer , options to purchase 333,580 shares of Common Stock of the Issuer and warrants to purchase 667,160 shares of Common Stock of the Issuer .

On December 22, 2000, Hsu was granted options to purchase 50,000 shares of Common Stock of the Issuer, on March 8, 2002, Hsu was granted options to purchase 100,000 shares of Common Stock of the Issuer and on March 10, 2003, Hsu was granted options to purchase 75,000 shares of Common Stock of the Issuer . Of these options (including the options to purchase 333,580 shares of Common Stock of the Issuer described in the paragraph above), options to purchase 432,330 shares of Common Stock of the Issuer may be exercised within 60 days .

On November 26, 2003, Hsu exercised his warrants and purchased 667,160 shares of Common Stock of the Issuer at an exercise price of $0 .75 per share .

Hsu has also acquired approximately 42,024 shares of the Common Stock of the Issuer since the date of the Original Schedule 13D through various transactions including acquisitions under the Issuer's Employee Stock Purchase Plan .

On December 19, 2003, Hsu re -registered his shares of Common Stock of the Issuer in joint name with Ann .

On June 7, 2004, Hsu and Ann sold (a) 50,000 shares of the Common Stock of the Issuer at a price of $21 .8463 per share and (b) 550,000 shares of the Common Stock of the Issuer at a price of $21 .0767 per share . As a result of these transactions, Hsu and Ann ceased to be the beneficial owner of more than five percent of the Common Stock of Issuer .

4 . PURPOSE OF TRANSACTION .

The following information amends and restates Item 4 of the Original Schedule 13D in its entirety :

The shares of Common Stock of Issuer deemed to be beneficially owned by the Reporting Persons were acquired for, and are being held for, investment purposes . Hsu and Ann may dispose of or acquire securities of the Issuer, including Common Stock, depending upon the position of the market, the Issuer and other factors . Except as set forth above, none of the Reporting Persons nor, to the best of their knowledge, any person listed in Appendix 1, has any plans or proposals which relate to or would result in : Page 6 of 8

(a) any other acquisition by any person of additional securities of the Issuer, or the disposition of securities of the Issuer ;

(b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries ;

(c) a sale or transfer of a material amount of assets of the Issuer or any of its subsidiaries ;

(d) any change in the present board of directors or management of the Issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board ;

(e) any material change in the present capitalization or dividend policy of the Issuer ;

(f) any other material change in the Issuer's business or corporate structure ;

(g) changes in the Issuer's charter, bylaws or instruments corresponding thereto or other actions that may impede the acquisition of control of the Issuer by any person ;

(h) causing a class of securities of the Issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association ;

(i) a class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act ; or

(j) any action similar to any of those enumerated above .

The Reporting Persons retain the right to change their investment intent, to propose one or more possible transactions to the Issuer's board, to acquire additional shares of Issuer's preferred stock or common stock from time to time or to sell or otherwise dispose of all or part of the Common Stock beneficially owned by them in any manner permitted by law . In the event of a material change in the present plans or intentions of the Reporting Persons, the Reporting Persons will amend this Schedule 13D to reflect such change, to the extent required by law .

5 . INTEREST IN SECURITIES OF THE ISSUER .

The following information amends and supplements Item 5 of the Original Schedule 13D :

(a) Hsu owns 2,482,342 shares of Common Stock of Issuer, including (a) 2,040,012 shares of Common Stock of the Issuer which he holds in joint name with Ann, (b) options to purchase 432,330 shares of common stock which may b e exercised within 60 days and (c) 10,000 shares held in his 401(k) Plan . Accordingly, Hsu may be deemed to beneficially own 4 .3% of the outstanding shares of Common Stock of Issuer, which percentage is calculated based upon 58,028,543 shares of Common Stock reported outstanding by the Issuer as of April 30, 2004 . The percentage is calculated by dividing 2,482,342 shares beneficially owned by 58,460,873 (which is the sum of 58,028,543 and 432,330) .

Ann owns 2,093,346 shares of Common Stock of the Issuer, including (a) 2,040,012 shares of Common Stock of the Issuer which he holds in joint name with Hsu and (b) options to purchase 53,334 shares of common stock which may be exercised within 60 days . Accordingly, Ann may be deemed to Page 7 of 8 beneficially own 3 .6% of the outstanding shares of Common Stock of Issuer, which percentage is calculated based upon 58,028,543 shares of Common Stock reported outstanding by the Issuer as of April 30, 2004 . The percentage is calculated by dividing 2,093,346 shares beneficially owned by 58,081,877 (which is the sum of 58,028,543 and 53,334) .

(b) The information required by this paragraph is reflected on Lines 7-10 of each Reporting Person's cover page, incorporated herein by reference . The information required by Item 2 of this Schedule for each person with whom the power to vote or direct a vote or to dispose or direct the disposition is shared is set forth in Appendix 1 hereto .

(c) Except as disclosed in Item 3, none of the Reporting Persons has effected any transactions in the Common Stock during the last 60 days .

(d) No other person is known to have the right to receive or the power to direct the receipt of dividends from, or any proceeds from the sale of, the shares of Common Stock beneficially owned by any of the Reporting Persons .

(e) Hsu and Ann ceased to be the beneficial owner of more than five percent of the Common Stock of Issuer on June 7, 2004 .

6 . CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER .

No amendments or supplements .

7 . MATERIAL TO BE FILED AS EXHIBITS .

The following information amends and supplements Item 7 of the Original Schedule 13D :

Exhibit 1 - Joint Filing Agreemen t

Appendix 1 - Information required by Item 2 for each of the Reporting Persons . Page 8 of 8

SIGNATURE S

After reasonable inquiry and to the best of each of the undersigned's knowledge and belief , each of the undersigned certifies that the information set forth in this Amendment One to Schedule 13D is true , complete and correct .

Date : June 15, 2004 /s/ Larry (Chung-Chiang) Hsu, Ph .D . ------Larry (Chung-Chiang) Hsu, Ph .D .

/s/ Ann (Fung-Hwa) Hsu ------Ann (Fung-Hwa) Hsu Exhibit 1

Joint Filing Agreement ------

As required by Rule 13d-l(k)(1) of Regulation 13D of the General Rules and Regulations of the Securities and Exchange Act of 1934, as amended, each Reporting Person on whose behalf this Statement is filed agrees that this Statement is, and any subsequent amendments hereto will be filed on behalf of each of them . Each Reporting Person understands that they are responsible for the timely filing of this Statement and any amendments thereto and for the completeness and accuracy of the information concerning such Reporting Person contained herein ; each Reporting Person understands that they are not responsible for the completeness or accuracy of the information concerning the other Reporting Persons making this filing unless such Reporting Person knows or has reason to believe that such information is inaccurate . This Statement may be executed in more than one counterpart .

Dated : June 15, 2004

/s/ Larry (Chung-Chiang) Hsu, Ph .D . ------Larry (Chung-Chiang) Hsu, Ph .D .

/s/ Ann (Fung-Hwa) Hsu ------Ann (Fung-Hwa) Hsu Appendix 1

Information required by Item 2 for each of the Reporting Persons

Place of Present Principal Reporting Person Business Address Organization/Citizenship Occupation ------

Larry (Chung - Chiang) 30831 Huntwood Ave United States President, Impax Hsu, Ph .D . Hayward, CA 9454 4 Laboratories, Inc . (30831 Huntwood Ave . Hayward, CA 94544)

Ann (Dung-Hwal Hsu 30831 Huntwood Ave United States Consultant, Impax Hayward, CA 94544 Laboratories, Inc . (30831 Huntwood Ave . Hayward, CA 94544) EXHIBIT J FORM 4 UNITED STATES SECURITIES AND EXCHANGE COMMISSION OMB Washington , D.C. 20549 OMB Number, 3235-0287 0 Check this bo x Expire s : January if no longer STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP OF 31, 2005 subject to Estimated Section 16. SECURITIES average Form 4 or For m burden hour s 5 obligations Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, Section may continue. 17(a) of the Public Utility Holding Company Act of 1935 or Section 30(h) of the See Instruction Investment Company Act of 194 0 I(b).

(Print or Type Responses)

1. Name and Address of Reporting Person - 2. Issuer Name and Ticker or Trading Symbol 5. Relationship of Reporting Person(s) to Issue r EDWARDS DAVID J IMPAX LABORATORIES INC IPXL (Check all applicable) (Last) (First ) (Middle) 3. Date of Earliest Transaction (Month/Day/Year) 05/12/2004 _X_ Director - 10%10% Owner C/O WINDREST DISCOVERY Officer (give title Other (specify below) INVESTMENTS, LLC, 122 EAST 42ND &F OW-) STREET, 47TH FLOOR (S treet) 4. If Amendment, Date Original Filed 6. Individual or Joint/Group Filing (Check (Month/Dayn'ear) Applicable Line ) _X_ Form filed by One Reporting Pe rson NEW YORK, NY 10168 Form filed by More than One Repo rting Person (City) (St ate) (Zip)

Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owne d

I .Tik orseaetry 2. T,s tIoe Data 2A . Deomd 3. Tneactim Code 4. Sawitla Aagdlad (A) or Disposed of i M,ea t of Soaoities 6.Owwiiip Falco 7. Notate of todirso (last r. 3) (MamhMoy/ Yor) Execution Date, if (katr. ti) (D) Bendkidly owned Direct (n) or kdinq (1) aonJkial Owemhip any (low. 3.4 sad 5) Fdkwiea Repeated (Intr. 4) (low. 4) (Moswo"/Yor) Tnnoetiws) Code V Amomt (A) or (D) Fria poop. 3 ad 4)

By WD Pamership LP Sale ofcommon stock 05/12/2004 05/12/2004 P 26,700 D $21 .842 70,548 1 and WD Offshore Fund Ltd .!-') By WD Partnership LP Sale of common stock 05/13/2004 05/13/2004 P 70,548 D $21 .98 0 1 and WD Offshore Fund Ltd-" )

Table II - Derivative Securities Acquired, Disposed of, or Beneficially Owned (e.g., puts, calls, warrants, options, conve rtible securities)

I . IYY .ID"-t 1.(W- " 3. 71 1k W1 I&D-oo. ♦ T ..&.C. f. 1406.0IG"I." •6~Wrlbr Y,YW D~ 1 .Tbb .W _ u-bri,Yr .. I,Iw .f •. Nw~A NO atp II .Naw d - .1 . E . .O- IM.V9.,xwl ras.il~or It ( q a .lSe A~idW . I . .~IGdM~I ! ."w" oM." D.A.dw r. .( IWw" pa.3) nl. .r olwr .rtp a _.1 .W4) 3a.y I..W. o"n"1. . err ai l o.wuw 1 ►r+9.rA'w nr .3.4 d n 1_. el a-6-* Iris! I ..dq o..W 11Iwa1D)w (Iae)

L wnd ryw p 0.6 V IN (D) Da boo" IwI")a Dr Tie A . otlt is " . =7*11

Reporting Owners

Relationshf s Report ing Owner Name /Address Director 10% Owner Officer Othe r EDWARDS DAVID J C/O WINDREST DISCOVERY INVESTMENTS, LLC X 122 EAST 42ND STREET, 47TH FLOOR NEW YORK NY 10168 Explanation of Responses :

Sale of common stock by WD Partnership LP and WD Offshore Fund Ltd ; the funds are managed by Windcrest Discovery Investments I.I.C. (1) Mr. Edwards has an investment in the funds as a general partner, receives a "carried interest" in the profits of the funds , and is a managing member of Windcrest Discovery Investments I .I.C. Signatures Edwards J. David 05/14/2004 SiSUMM of Reporting Person Date Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly. If the form is filed by more than one reporting person , see Instruction 4(bXv) . •• Intentional misstatements or omissions of facts constitute Federal Criminal Violations . See 18 U.S .C. 1001 and 15 U .S.C. 78ff(a) . Note: File three copi es of this Form, one of which must be manually signed. If space is insufficient, see Instruction 6 for procedure . Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a cu rrently valid OMB number. EXHIBIT K FORM 4 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D .C. 20549 OMB Number. 3235-0287 Q Check this box Expires: January if no longer STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP OF 31 2005 Estimate d subjectSection 16 . to SECURITIES average Form 4 or Form burden hours 5 obligations Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, Section may continue. 17(a) of the Public Utility Holding Company Act of 1935 or Section 30(h) of the See Instruction Investment Company Act of 1940 l(b). (Printor Type Responses)

1. Name and Address of Reporting Person - 2. Issuer Name and Ticker or Trading Symbol 5. Relationship of Reporting Person(s) to Issuer DOLL DAVID S IMPAX LABORATORIES INC IPXL (Check all applicable) (LW) (First) (Middle) 3. Date of Earliest Transaction (Month /Day/Year) Di C/O IMPAX LABORATORIES, ~07~ -X' officer (give title - other (qty below) INC., 3735 CASTOR AVENUE SOS Senior VP - Sales & Marketing (street) 4. If Amendment, Date Original Filed 6. Individual or Joint/Group Filing (Check (Moa@JDay/ Year) Applicable Line) 06/08/2004 _X_ Form fi led by One Rep orting Pers on PHILADELPHIA, PA 19124 -Form filed by More than One Reporting Peo n (City) (State) (zip)

Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owne d

I .Titk of fecttlty 2. Tneuctioe Die 2A. Doomed 3. Ttwadiao Code 4. Sanctions Acgritad (A) or Dispos ed of S. Amount of feauitia 6Owownbip Force 7. Nava of led(n a (Intr. 3) (MmtWDsy/Yw) Ea esdc. Dw, If (lose. 8) (D) aaoafcidly Owned Diroot (D) or teditst (1) BonsOclol ownershi p W' (lose. 3,4 and 5) Following Reported (Intr. 4) (I .e. 4 ) ( dmm3ayly ) TnswiaQs) Cad. V Aa.M (A)or(D) hits (lose. 3 sod 4) Exercise of stock 06/07/2004 06/07/2004 P 30,000 A $6.8125 32,279 D option Sale of common stock 06/07/2004 06/07/2004 S 16,000 D $21 .9 16,279 D Sale of common stock 06/07/2004 06/07/2004 S 14,000 D $21 .8 2,279 D

Table II - Derivative Securities Acquired, Disposed of, or Beneficially Owned (e.g., puts, calls, warrants, op tions, convertible securities)

t ile .(MwM 7 I.Tr .itfu 7&t1-1 4.71WnCi 1 .11r6os( .haft • 6W I 4 Nr B,".13M 7. 11YrA~ aU ft0+r7edYr L Med atlrdwd I'. t1 .Nos. r .wy .n,.a. 04.~.0 &-"Dou a...a U .A .prw 04u~.O O. .. trp trt.r .. o.l.+.. or► t.c . n n... 3l nr.e 4 .ot+-tltq rely r.r. f w" O.Nrr OA.rI.. N.Mryn.r) Or.1,tt-n (r+. 7) b D.1w14. aw~iy o-W 0-4 ) hp ..ift Dtle ID1 . UAW M A. .. .I . w~l.. •,••+ o+ w tw rr.r a .r-o. 716 ht .) Ir. ate .a option to buy cornmm $6.8123 0I/IW 01 A 45 ,000 01/19/2002._1 01/19/2011 75,000 $6.1125 75,000 D cormunco stock Stock

Opbom to buy f11 .11 0924 S001 A 4000 09/24/2002. 09/24/201I C 40.000 $11.11 40,000 D comaswe stock Stock

Option to buy Cornwall 56.77 03/082002 A 30,000 03mooz 03/25/2012 30.000 56.72 30.000 D

Option b buy Ill 1`1 common 33.04 03/IOROD3 ObOYl003.. A 30,000 03/102004_ 03/10/2013 k 30.000 53.04 30.000 D

Option to buy comm $23.05 04/14/2004 04/20 20041 A 25,000 04/14200521 04/142014 25,000 523.05 25,000 D common mock

Reporting Owners

Relationships Reporting Owner Name / Address Director 10% Owner Officer Other DOLL DAVID S Senior VP - Sales & Marketing C/O IMPAX LABORATORIES, INC . 3735 CASTOR AVENUE I PHILADELPHIA, PA 19124 I I I I I Explanation of Responses :

(1) Vest as follows : 10% after 1 year, 30% after 2 years, 60% after 3 years and l00% after 4 year. from date of grant. (2) Option vests over 4 years from the date of grant in 25% equal annual installments. (3) This is the day that the company informed the recipient of the award.

Signatures David Doll 06/17/2004 _Sipudue Of Report ing Person DW Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly. " If the form is filed by more than one repor ti ng person,see Instruction 4(bxv). •• Intentional misstatements or omissions of facts constitute Federal Criminal Violations . See 18 U.S.C. 1001 and 15 U.S.C. 78ft(a). Note : File three copies of this Form, one of which must be manually signed. If mace is insufficient, see Instruction 6 for procedure. Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB number.