UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-KSB
(Mark
One)
|
þ
|
ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
fiscal year ended
December 31,
2007
|
o
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period from ______________ to________________
Commission
file number
0001265449
|
Integrated
Pharmaceuticals, Inc.
|
|
(Name of small
business issuer in its charter)
|
|
ID
|
|
04-3413196
|
|
(State or other
jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
310
Authority Drive
Fitchburg,
MA 01420
(Address
of principal executive offices) (Zip Code)
(978)
696-0020
(Issuer
’
s telephone
number, including area code)
Securities
registered under Section 12(g) of the Act:
|
Title
of class
|
Name
of Exchange on Which Registered
|
|
Common
Stock, par value $.01 per share
|
None
|
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes
þ
No
o
Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
o
Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act. Yes
o
No
þ
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
o
No
þ
State
issuer’s revenues for its most recent fiscal
year.
$
35,400
As of
April 7, 2008, the aggregate market value of the issuer’s common equity held by
non-affiliates was approximately $5,977,423.
As of
March 28, 2008, the Issuer had 42,589,799 shares of common stock
outstanding.
INTEGRATED
PHARMACEUTICALS, INC.
FORM
10-KSB
TABLE
OF CONTENTS
|
|
|
PAGE
|
|
PART
I.
|
|
|
|
|
|
|
|
ITEM
1
|
BUSINESS
|
1
|
|
|
FORWARD-LOOKING
STATEMENTS
|
4
|
|
|
RISK
FACTORS
|
4
|
|
|
|
|
|
ITEM
2
|
PROPERTIES
|
9
|
|
|
|
|
|
ITEM
3
|
LEGAL
PROCEEDINGS
|
10
|
|
|
|
|
|
ITEM
4
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PART
II.
|
|
|
|
|
|
|
|
ITEM
5
|
MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER
PURCHASES OF EQUITY SECURITIES
|
10
|
|
|
|
|
|
ITEM
6
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS
|
12
|
|
|
|
|
|
ITEM
7
|
FINANCIAL
STATEMENTS
|
13
|
|
|
|
|
|
ITEM
8
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
13
|
|
|
|
|
|
ITEM
8A
|
CONTROLS
AND PROCEDURES
|
13
|
|
|
|
|
|
ITEM
8B
|
OTHER
INFORMATION
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PART
III.
|
|
|
|
|
|
|
|
ITEM
9
|
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
|
15
|
|
|
|
|
|
ITEM
10
|
EXECUTIVE
COMPENSATION
|
16
|
|
|
|
|
|
ITEM
11
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
19
|
|
|
|
|
|
ITEM
12
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
20
|
|
|
|
|
|
ITEM
13
|
EXHIBIT
INDEX
|
22
|
|
|
|
|
|
ITEM
14
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
23
|
|
|
|
|
|
|
|
|
|
INDEX
TO FINANCIAL STATEMENTS
|
23
|
|
|
|
|
|
|
|
|
|
SIGNATURES
|
24
|
|
|
|
|
|
|
|
|
|
EXHIBITS
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
STATEMENTS
|
|
PART
I
Item
1. Description Of Business
Business
Development
We are a
biotechnology company dedicated to the production of specialty chemicals and
nutraceuticals for sale to distributors and retailers. We focus on
compounds and nutraceuticals that have proven therapeutic or nutritional value
in humans, plants and/or animals. In January 2003, we changed our business model
from that of performing contract research and development to the production of
compounds using our patented processes so that we could retain for our own use
the intellectual property we develop and commercialize our proprietary
technologies with production facilities that we hoped to develop. During 2003
and 2004, we directed our efforts towards the establishment of a production
facility and raising capital to finance that facility and its operations. During
2005, we completed construction of our production facility and focused on sales
and new product development. In 2005, we also developed a proprietary process to
deliver calcium in foods or beverages without altering the taste or
the flavor of the food or beverage. We have filed U.S. patent applications to
protect our process. To the best of our knowledge, no one else has the ability
to add calcium in a manner that does not affect the taste or flavor of the food
or beverage. In 2006, we supplemented our patent portfolio and focused on the
sale and marketing of our powdered calcium supplement and the development of a
plan to make and sell mineral water made with our proprietary
processes.
Our
current product line
We have
developed a patent-pending calcium supplement that can be sold in packets like
those used for artificial sweeteners. Each packet allows consumers to add 120
milligrams of soluble calcium per package into their soft drinks, coffee, tea,
soup, dehydrated sauces and beverages. To the best of our knowledge, this is a
unique product because of its lack of adverse taste or odor. We have signed an
agreement with Naples Marketing Systems LLC (“Naples”) for the distribution of
this product. Naples is selling the packets under the brand name “CAL-SAP™”, and
currently supplies the product to a chain of about 59 grocery stores in New
England, and is in discussions with other substantial distribution channels. The
product is also available at Naples’ website www.calsap.com. Our license
agreement with Naples does not have any minimum sales requirement, license fees,
or royalties. It does, however, require Naples to purchase its ingredients from
us, to the extent that we can make them. We are also developing a product
consisting of a mixture of our calcium supplement and commercially available
artificial sweeteners, which we hope to bring to market in 2009.
Our
product pipeline
We expect
to launch a fortified bottled water product in the second quarter of 2008. We
expect our water to have at least 250 mg of calcium and 35 mg of magnesium per
liter, and yet to be odorless and tasteless. We plan to price this mineral water
as a high end product due to its purity. To our knowledge, no other company has
successfully added more than 180 mg of calcium per liter to water without
introducing adverse taste and odor. In 2005, close to $1.8 billion worth of
fortified beverages and almost $10 billion of packaged water bottles were sold
in the United States, and the worldwide market for bottled water was $46
billion.
We have
also developed a process to manufacture a dairy product. Although we have filed
an application to patent this technology, we have not yet made serious efforts
to commercialize this product due to the effort required to successfully develop
and distribute our fortified bottled water. We hope to bring a dairy product to
market in 2009.
Competition
We will
be a small producer in industries where substantial resources are generally
devoted to sales and marketing and development. Competition is intense in both
the bottled water and the nutritional supplement industry, and we have several
competitors in each industry that have far greater resources than us. Among
our
principal competitors in the bottled water market are the Nestle Waters North
America, The Coca-Cola Company, large regional brands owned by private groups,
and local competitors in the markets that we serve. In the calcium supplement
market, our competitors include GNC, Twinlab, Now, Source Naturals, Water Oz,
and many others.
Source
and Availability of Raw Materials; Principal Suppliers
The
primary raw materials of our calcium supplement products are glucose (sometimes
called dextrose) which is derived from corn; and lactic acid, which is derived
from glucose. Glucose is a commodity product that is widely available from such
companies as Corn Products International. Lactic acid is widely available. Our
principal suppliers have been Boremco, Inc. and Ashland Chemicals Inc. both
distributors. While this materials is readily available, its price is often
related to the prices of energy and corn, and thus may be volatile. We intend to
obtain the water for our bottled mineral water product from municipal
sources.
Proprietary
Rights and Licensing
We rely
heavily on patents and trade secrets to protect our production techniques.
Currently, we are the exclusive licensee of two issued patents, U.S. patent nos.
6,416,981 and 6,828,130 relating to the production of gluconate derivatives; and
a divisional patent application that broadens the protection with respect to
gluconate derivatives. The issued patents are a key component of our business
plan. Three of our directors, through their partnership, NEC Partnership, have
entered into a license with us granting us exclusive rights to these patents and
non-exclusive rights to related trade secret information. Under the terms of the
license, we are required to pay a 3% royalty to NEC Partners for sales of
products made with the process covered by the patent, or $25,000 per quarter,
whichever is greater. The quarterly minimum does not apply in any year in which
the Company’s sales are less than $5 million or to years in which the Company’s
earnings before depreciation, interest and taxes (EBITDA) on sales of licensed
products are less than 12.5%. We are also the owners of eight US
patent applications related to other aspects of our gluconate derivative
technology, including applications relating to our calcium supplement and our
dairy product.
We
anticipate substantial ongoing patent filing activity relating to our existing
technology.
We seek
to limit disclosure of our intellectual property by requiring employees,
consultants and any third party with access to ours proprietary information to
execute confidentiality agreements and by restricting access to the proprietary
part of the applications.
Regulatory
Background
The
processing, formulation, manufacturing, packaging, labeling, advertising, and
distribution of our products are subject to federal laws and regulation by one
or more federal agencies, including the Food and Drug Administration, or FDA,
the Federal Trade Commission, or FTC, the Consumer Product Safety Commission,
the United States Department of Agriculture, and the Environmental Protection
Agency. These activities are also regulated by various state, local, and
international laws and agencies of the states and localities in which our
products are sold. Government regulations may prevent or delay the introduction,
or require the reformulation, of our products, which could result in lost
revenues and increased costs to us.
For
instance, the FDA regulates, among other things, the composition, safety,
labeling, and marketing of dietary supplements (including vitamins, minerals,
herbs, and other dietary ingredients for human use). The FDA may not accept the
evidence of safety for any new dietary ingredient that we may wish to market,
may determine that a particular dietary supplement or ingredient presents an
unacceptable health risk, or may determine that a particular claim or statement
of nutritional value that we use to support the marketing of a dietary
supplement is an impermissible drug claim or an unauthorized version of a
“health claim.”
In
addition, the Federal Food and Drug Administration (FDA), regulates bottled
water as a
“
food.
”
Accordingly, our
bottled water must meet FDA requirements of safety for human consumption, of
processing
and distribution under sanitary conditions and of production in accordance with
the FDA “good manufacturing practices.” To assure the safety of bottled water,
the FDA has established quality standards that address the substances that may
be present in water which may be harmful to human health as well as substances
that affect the smell, color and taste of water. These quality standards also
require public notification whenever the microbiological, physical, chemical or
radiological quality of bottled water falls below standard.
The
labels affixed to bottles and other packaging of the water are subject to FDA
restrictions on health and nutritional claims for foods under the Fair Packaging
and Labeling Act. In addition, all drinking water must meet Environmental
Protection Agency standards established under the Safe Drinking Water Act for
mineral and chemical concentration and drinking water quality and treatment that
are enforced by the FDA. We are subject to the food labeling regulations
required by the Nutritional Labeling and Education Act of 1990. We believe we
will operate in compliance with these regulations.
As a
producer of bottled water, we will be subject to periodic, unannounced
inspections by the FDA. Upon inspection, we must be in compliance with all
aspects of the quality standards and good manufacturing practices for bottled
water, the Fair Packaging and Labeling Act, and all other applicable regulations
that are incorporated in the FDA quality standards.
We also
must meet state regulations in a variety of areas. These regulations set
standards for approved water sources and the information that must be provided.
To date, we have not received or applied for approval for our drinking water in
any jurisdiction. Our product labels are subject to state regulation
(in addition to the federal requirements) in each state where the water products
are sold. These regulations set standards for the information that must be
provided and the basis on which any therapeutic claims for water may be
made.
The laws
that regulate our activities and properties are subject to change. As a result,
there can be no assurance that additional or more stringent requirements will
not be imposed on the our operations in the future. Although we believe that our
water supply, products and bottling facilities will be in compliance with all
applicable governmental regulations, failure to comply with such laws and
regulations could have a material adverse effect on our business.
Other
than our fortified mineral water, our current product portfolio consists of
already proven clinically active compounds that do not require further
regulatory approval. Nevertheless, these products must comply with United States
Pharmacopoeia (USP) standards as well as our customers’ quality standards. Tests
on samples produced so far indicate that these products meet USP
standards.
We intend
to produce our products in compliance with the FDA’s Current Good Manufacturing
Practice (cGMP) standards, where appropriate. Our officers have collectively
over sixty years of experience with cGMP standards and are confident that their
production processes will meet or exceed these requirements.
Research
and Development Expenditures
We
spent $211,186 and $210,703 on research and development in 2007 and 2006,
respectively. All of these amounts were spent on the
development of our carbohydrate production technology. Our expenses associated
with developing our calcium supplement, bottled water and dairy products are all
classified for this purpose as carbohydrate production technology.
Environmental
Compliance
We do not
use or generate hazardous materials in our production. Our wastewater is
expected to meet standards permitting use of the Fitchburg wastewater treatment
facility without any supplemental treatment. The total cost of wastewater
disposal will be quite modest. We believe that our production processes are less
costly, in environmental terms, than the production processes currently used by
our competitors.
Employees
As of
December 31, 2007, we had four full-time and two part-time employees.
Of these, two are senior management, one of whom also performs
research and development work.
None of our employees
are represented by a labor union, and we consider relations with our employees
to be good.
FORWARD-LOOKING
STATEMENTS
This
Annual Report and other documents we file with the Securities and Exchange
Commission (“SEC”) contain forward-looking statements that are based on current
expectations, estimates, forecasts and projections about us, our future
performance, our business, our beliefs and our management’s
assumptions. All statements other than statements of historical facts
are forward-looking statements, including any statements of the plans and
objectives of management for future operations, projections of revenue earnings
or other financial items, any statements regarding future economic conditions or
performance, and any statement of assumptions underlying any of the
foregoing. Some of these forward-looking statements may be identified
by the use of words in the statements such as “anticipate,” “estimate,” “could,”
“would,” “expect,” “project,” “intend,” “plan,” “believe,” “seek,” “should,”
“may,” “assume,” “continue,” variations of such words and similar
expressions. These statements are not guarantees of future
performance and involve certain risks, uncertainties, and assumptions that are
difficult to predict. We caution you that our performance and results
could differ materially from what is expressed, implied, or forecast by our
forward-looking statements due to general financial, economic, regulatory and
political conditions affecting the economy and markets, as well as
more specific risks and uncertainties affecting the Company. The
Company operates in a rapidly changing environment that involves a number of
risks, some of which are beyond the Company’s control. Future
operating results and the Company’s stock price may be affected by a number of
factors. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in the section entitled “ITEM
1. BUSINESS,” and all subsections therein, including, without limitation, the
subsection entitled, “RISK FACTORS,” and the section entitled “MARKET FOR
REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS,” all contained in
this Annual Report on Form 10-KSB. Given these risks and
uncertainties, any or all of these forward-looking statements may prove to be
incorrect. Therefore, you should not rely on any such forward-looking
statements. Furthermore, we do not intend (and we are not obligated)
to update publicly any forward-looking statements. You are advised,
however, to consult any further disclosures we make on related subjects in our
reports to the Securities and Exchange Commission.
RISK
FACTORS
An investment in our common stock
involves a high degree of risk. You should carefully consider the risks
described below and the other information contained in this prospectus before
deciding to invest in our common stock. You should only purchase our securities
if you can afford to suffer the loss of your entire
investment.
RISKS
RELATED TO OUR BUSINESS
Our
business, operations and financial condition are subject to various risks. Some
of these risks are described below and you should take these risks into account
in making a decision to invest in our common stock. This section does not
describe all risks associated with us, our industry or our business, and it is
intended only as a summary of the material risk factors. If any of the following
risks actually occur, we
may not
be able to conduct our business as currently planned and our financial condition
and operating results could be seriously harmed. In that case, the market price
of our common stock could decline, and you could lose all or part of your
investment in our common stock.
Our
Independent Auditor’s Report contains a going concern qualification which means
there is substantial doubt about our ability to continue as a going
concern
Our independent registered public
accounting firm has concluded that our
recurring losses from operations since
inception, our limited cash, and our capital deficiency raise substantial doubt
about our ability to continue as a going concern. Our cash
requirements (primarily working capital requirements and cash for product
development activities) have been satisfied through the issuance of securities
in a number of private placements. At December 31, 2007, we had cash and
cash equivalents on hand of $66,503. We need to raise additional
equity to adequately fund our strategies and to satisfy our ongoing working
capital requirements. If we are unable to obtain such financing in a timely
manner, we could be forced to curtail or cease operations. Even if we are able
to pursue these strategies, there can be no assurances that we will ever attain
profitability. The financial statements included herein do not include any
adjustments that might result from the outcome of this
uncertainty.
We
have had losses since our inception and expect losses to continue in the future.
We may never become profitable.
We had
net losses of $3,855,218 for the year ended December 31, 2005; $2,125,737 for
the the year ended December 31, 2006, and $1,825,194 for the year ended December
31, 2007. Our future operations may not be profitable if we are unable to
develop our business. Revenues and profits, if any, will depend upon various
factors, including whether we will be able to receive funding to develop and
market new products or find additional businesses to operate and/or acquire. We
may not achieve our business objectives and the failure to achieve such goals
would have an adverse impact on our business. We are currently in the early
stages of our new business strategy and plan to increase marketing and
development efforts. There is no assurance that our new strategy will be
successful or that we will ever achieve profitability.
We may be required to obtain
additional financing, which there is no assurance of obtaining on a favorable
basis or at all.
As of
December 31, 2007, our cash position was $66,503. While we are
effectuating our new business strategy, we expect to operate on a negative cash
flow basis. There is no assurance that our current funds, including any funds
that are available to us from prospective investors or under the Investment
Agreement with Dutchess, will be sufficient to fund operations over an extended
period of time. If we were to require additional funds, there can be no
assurance that any funds will be available or available on favorable terms. Any
additional financing will also likely cause substantial dilution.
We are dependent on our Chief
Executive Officer and other key executive officers and executives for future
success.
Our
future success depends to a significant degree on the skills, experience and
efforts of our Chief Executive Officer, our Vice President of Research and
Development, and other key executives. The loss of the services of any of these
individuals could harm our business. None of our key executives have employment
agreements with us. In addition, we have not obtained life insurance on any key
executive officers. If any key executive officers left us or were
seriously injured and became unable to work, our business could be
harmed.
We rely on third parties for the
bottling of our water product, and the distribution of all our products and to
provide us with the ingredients for our products. The loss of any of these
relationships could cause our revenue, earnings or reputation to
suffer.
We are
planning to launch a bottled water product in 2008, but have no independent
distribution capacity. We have established a relationship with
a distributor who has access to 600 stores. A loss of that
relationship would be harmful to our prospects. While we have some
bottling capacity, we have decided to outsource that function for reasons of
cost. We will be relying upon sales representatives and their
relationships with retailers. We currently sell our powdered calcium
product through a single distributor. If we are unable to maintain these
relationships, and to obtain sufficient additional distribution relationships on
favorable terms, we may be unable to market our products
successfully.
We rely
on third parties to supply ingredients that we require to develop our products.
We are not assured of an adequate supply or pricing on a long-term basis. If we
are unable to obtain sufficient quantity, quality and variety of materials in a
timely and low cost manner from our manufacturers, we will be unable to produce
our products in a timely manner, which may cause us to lose revenue and market
share or incur higher costs.
We
depend upon maintaining the integrity of our water resources and manufacturing
process. If our water sources, bottling processes, or manufacturing processes
were contaminated for any reason, our business would be seriously
harmed.
Our
ability to attract customers in the bottled water market will depend upon our
ability to maintain the integrity of our water resources and our ability to
guard against defects in, or tampering with, the manufacturing processes of our
third-party bottlers. The loss of integrity in our water resources or
manufacturing process could lead to product recalls and/or customer illnesses
that could significantly reduce our ability to develop this line of business and
subject us to potential liability.
The markets for bottled water and
nutritional supplements are subject to rapid market change, introduction of
competing products, and changing industry standards
.
Competition
is intense in both the bottled water and the nutritional supplement industry,
and we must compete successfully in the areas of price, taste, quality, brand
recognition, distribution capabilities, and reputation. We have a significant
number of competitors, many of which have far greater resources than us. Among
our principal competitors in the bottled water market are the Nestle Waters
North America, The Coca-Cola Company, large regional brands owned by private
groups, and local competitors. In the calcium supplement market, our competitors
include GNC, Twinlab, Now, Source Naturals, Water Oz, and many others. Price
reductions and the introduction of new products by our competitors can adversely
affect our revenues, gross margins, and profits.
The
bottled water and nutritional supplement industries are regulated at both the
state and federal level. If we are unable to comply with applicable regulations
and standards in any jurisdiction, we might not be able to sell our products in
that jurisdiction, and our business could be seriously harmed.
The
processing, formulation, manufacturing, packaging, labeling, advertising, and
distribution of our products are subject to federal laws and regulation by one
or more federal agencies, including the Food and Drug Administration or FDA),
the Federal Trade Commission (or FTC), the Consumer Product Safety Commission,
the United States Department of Agriculture, and the Environmental Protection
Agency. These activities are also regulated by various state, local, and
international laws and agencies of the states and localities in which our
products are sold. Government regulations may prevent or delay the introduction,
or require the reformulation, of our products, which could result in lost
revenues and increased costs to us.
For
instance, the FDA regulates, among other things, the composition, safety,
labeling, and marketing of dietary supplements (including vitamins, minerals,
herbs, and other dietary ingredients for human use). The FDA may determine that
a particular dietary supplement or ingredient presents an unacceptable health
risk, or may determine that a particular claim or statement of nutritional value
that we use to support the marketing of a dietary supplement is an impermissible
drug claim or an unauthorized version of a “health claim.”
Additional
or more stringent regulations of dietary supplements have been considered from
time to time. These developments could require reformulation of some products to
meet new standards, recalls or discontinuance of some products not able to be
reformulated, additional record-keeping requirements, increased documentation of
the properties of some products, additional or different labeling, additional
scientific substantiation, adverse event reporting, or other new requirements.
Any of these developments could increase our costs significantly.
In
addition, agencies of the state and federal governments (including the Federal
Food and Drug Administration) regulate bottled water sold for human
consumption. Our bottled water must meet FDA requirements of safety,
labeling, processing and distribution under sanitary conditions and production
in accordance with FDA “good manufacturing practices.” Our water must
meet Environmental Protection Agency standards established under the Safe
Drinking Water Act for mineral and chemical concentration and drinking water
quality and treatment, which are enforced by the FDA. State
regulations set standards for water sources. We expect that the
Massachusetts Department of Public Health will inspect our facility and require
an independent laboratory analysis of our water before we are authorized to sell
our water in Massachusetts. Each state and some local governments
(including New York City) have separate licensing requirements that we must
satisfy in order to sell our water in their jurisdictions. We
have not yet received approval for our drinking water in any jurisdiction and
can give no assurance that we will receive such approvals in the
future.
Our water business will be seasonal,
which may cause fluctuations in our stock price
.
Although
our overall business has not historically been seasonal, we expect that the
period from June to September will represent the peak period for sales and
revenues of our mineral water product due to increased consumption of beverages
during the summer months. We expect that warmer weather in our geographic
markets will tend to increase sales, and cooler weather will tend to decrease
sales. To the extent that our quarterly results are affected by these patterns,
our stock price may fluctuate to reflect them.
The sale of ingested products
involves product liability and other risks.
We face
an inherent risk of exposure to product liability claims if the use of our
products results in illness or injury. The successful assertion or settlement of
a claim or a significant number of claims could harm us by adding costs to the
business and by diverting the attention of senior management from the operation
of the business. We may also be subject to claims that our products contain
contaminants, are improperly labeled, include inadequate instructions for use or
inadequate warnings covering food borne illnesses, allergies or possible side
effects or interactions with other substances. While we have product liability
insurance for the sale of bulk products, we have not yet obtained product
liability insurance for consumer sales. Product liability litigation,
even if not meritorious, is very expensive and could also entail adverse
publicity for us, thereby harming our ability to gain market share for our
products and reducing revenue and operating results.
We may not successfully manage our
growth.
We have a
limited operating history as a manufacturer of nutritional supplements, and have
no prior experience as a manufacturer of bottled water. Our success will depend
upon the expansion of our operations and the effective management of our growth,
which will place a significant strain on our management and administrative,
operational, and financial resources. To manage this growth, should there be
growth, we must expand our facilities, augment our operational, financial and
management systems, and hire and train additional qualified personnel. If we are
unable to manage our growth effectively, our business will be
harmed.
RISKS
ASSOCIATED WITH INVESTING IN OUR COMMON STOCK
Because our shares are deemed “penny
stocks,” you may have difficulty selling them in the secondary trading market.
The SEC
has adopted regulations which generally define a “penny stock” to be any equity
security that has a market price (as therein defined) of less than $5.00 per
share that is not registered or approved for registration on a national
securities exchange. Because our common stock comes within the definition of
penny stock, these regulations require that a broker-dealer, prior to any
transaction involving our common stock, deliver a risk disclosure schedule
explaining the penny stock market and the risks associated with it. The
broker-dealer must also provide the customer with bid and offer quotations for
the penny stock, disclose any compensation of the broker-dealer and any
salesperson in the transaction, and provide monthly account statements
indicating the market value of each penny stock held in the customer’s account.
In addition, the penny stock rules require that, prior to a transaction in a
penny stock, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser’s written agreement to the transaction. These disclosure requirements
may have the effect of reducing the trading activity in the secondary market for
our common stock. As a result, the market liquidity for our common stock may be
severely and adversely affected. We can provide no assurance that trading in our
common stock will not be subject to these or other regulations in the future,
which would negatively affect the market for our common stock.
Our compliance with the
Sarbanes-Oxley Act of 2002 and SEC rules concerning internal controls may be
time-consuming, difficult and costly.
We are a
voluntary reporting public reporting company in the U.S. and, accordingly,
subject to the information and reporting requirements of the Securities Exchange
Act of 1934 and other federal securities laws, and the compliance obligations of
the Sarbanes-Oxley Act of 2002. The costs of preparing and filing annual and
quarterly reports and other information with the SEC will cause our expenses to
be higher than they would be if we were a privately-held company.
It may be
time consuming, difficult and costly for us to develop and implement the
internal controls and reporting procedures required by the Sarbanes-Oxley Act of
2002. We expect to hire additional financial reporting, internal controls and
other finance staff in order to develop and implement appropriate internal
controls and reporting procedures. If we are unable to comply with
Sarbanes-Oxley’s internal controls requirements, we may not be able to obtain
the independent accountant certifications that Sarbanes-Oxley Act requires
publicly-traded companies to obtain.
Our
securities have been thinly traded on the Over-The-Counter Bulletin Board, which
may not provide liquidity for our investors.
Our
securities are quoted on the Over-the-Counter Bulletin Board. The
Over-the-Counter Bulletin Board is an inter-dealer, over-the-counter market that
provides significantly less liquidity than the NASDAQ Stock Market or national
or regional exchanges. Securities traded on the Over-the-Counter Bulletin Board
are usually thinly traded, highly volatile, have fewer market makers and are not
followed by analysts. The Securities and Exchange Commission’s order handling
rules, which apply to NASDAQ-listed securities, do not apply to securities
quoted on the Over-the-Counter Bulletin Board. Quotes for stocks included on the
Over-the-Counter Bulletin Board are not listed in newspapers. Therefore, prices
for securities traded solely on the Over-the-Counter Bulletin Board may be
difficult to obtain and holders of our securities may be unable to resell their
securities at or near their original acquisition price, or at any
price.
We do not intend to
pay dividends in the foreseeable future, and you may therefore never see a
return on your investment
.
We do not
anticipate the payment of cash dividends on our Common Stock in the foreseeable
future. We anticipate that any profits from our operations will be devoted to
our future operations. Any decision to pay dividends will depend upon our
profitability at the time, cash available and other factors. Therefore, you may
never see a return on your investment. Investors who anticipate a need for
immediate income from their investment should not purchase the securities
offered in this prospectus.
RISKS
RELATED TO OUR INVESTMENT AGREEMENT WITH DUTCHESS
Existing
stockholders may experience significant dilution from the sale of securities
pursuant to our Investment Agreement with Dutchess.
The sale
of shares pursuant to our Investment Agreement with Dutchess will have a
dilutive impact on our stockholders. As a result, our net income per share, if
any, could decrease in future periods, and the market price of our common stock
could decline. In addition, the lower our stock price is at the time we exercise
our put option, the more shares we will have to issue to Dutchess to satisfy our
“put” for a specific dollar amount of shares. If our stock price
decreases, then our existing stockholders would experience greater
dilution.
Dutchess
will pay less than the then-prevailing market price of our common stock, which
may cause our stock price to decline.
The
common stock to be issued under our agreement with Dutchess will be purchased at
a 6% discount to the lowest closing bid price for the five days immediately
following our notice to Dutchess of our election to exercise our put right.
These discounted sales could cause the price of our Common Stock to decline, and
you may not be able to sell our stock for as much as you paid for
it.
We may not be able
to access sufficient funds under the Investment Agreement with Dutchess when
needed
.
We will
depend on external financing to fund our planned expansion. We hope to meet
these financing needs in large part through our agreement with Dutchess.
However, due to the terms of the Investment Agreement, this financing may not be
available in sufficient amounts, or at all, when needed. As a result, we may not
be able to grow our business as planned.
Item
2. Description of Property.
We own no
real estate. We lease a 38,000 square foot production building in Fitchburg,
Massachusetts which we use for our operations. The building is located on an
11-acre parcel of land.
The lease
term for the Fitchburg facility commenced in September 2003 and continues
through September 2008. Base rent for the facility for the current year of the
lease (which continues through September 2008) is $12,315 per month. Our base
rent is payable 50% in stock (using a $1.00 per share valuation) and 50% in
cash. We are also responsible for paying, as “additional rent,”
the cost of utility services, building maintenance, insurance, real estate taxes
and the like. We are obligated to purchase the Fitchburg property (including the
land) by September 2008. The lease does not specify the consequences of a
failure to purchase the property by September 2008. We have been advised that we
would be liable to the landlord for the excess, if any, of the price at which
would then be obligated to purchase the property (approximately $1.75 million)
over its then-current value. The building is in good condition. Our lease
obligations are personally guaranteed by Chinmay Chatterjee, Nilu Chatterjee and
Edward Furtado.
The
Fitchburg facility includes laboratories and offices for secretarial and other
support services. The laboratories meet BL I/II standards as per CDC/NIH
guidelines for recombinant microbial and plant research activities. The facility
includes several dedicated HVAC units for air supplies. The laboratories are all
equipped with large autoclave, Biosafety Cabinets, temperature controlled
multiple incubators, bioreactors, microscopes, UV/Visible spectrophotometer,
centrifuges, -80
o
C
Freezers, chromatography equipment and other analytical instruments required for
advanced biotechnology research and biopharmaceutical production
operations.
Investment
Policies
We
currently invest our surplus funds in bank instruments and accounts. We do not
invest in real estate or mortgages.
Item
3. Legal Proceedings
We are
not a party to any pending legal proceedings, nor is our property the subject of
any pending legal proceeding.
Item
4. Submission of Matters to a Vote of Security
Holders.
No matter
was submitted during the fourth quarter of the fiscal year covered by this
report to a vote of security holders, through the solicitation of proxies or
otherwise.
PART
II
Item
5. Market for Common Equity and Related Stockholder
Matters.
The
Company’s common stock is traded on the basis of inter-dealer quotations that
are reported on the OTC Bulletin Board. The prices shown reflect
inter-dealer bid prices, without retail mark-up, mark-down or
commission. The range of high and low bid information for our common
stock for each quarter during of the last two years, are as
follows:
|
|
|
|
Lo
|
|
Hi
|
|
2006
|
Q1
|
|
$
0.24
|
|
$
0.50
|
|
|
Q2
|
|
$
0.20
|
|
$
0.30
|
|
|
Q3
|
|
$
0.10
|
|
$
0.27
|
|
|
Q4
|
|
$
0.06
|
|
$
0.45
|
|
|
|
|
|
|
|
|
2007
|
Q1
|
|
$
0.16
|
|
$
0.23
|
|
|
Q2
|
|
$
0.13
|
|
$
0.16
|
|
|
Q3
|
|
$
0.13
|
|
$
0.26
|
|
|
Q4
|
|
$
0.06
|
|
$
0.22
|
As of
March 28, 2008, there were approximately 491 holders of the Company’s common
stock.
The
Company has not declared any dividends on its common stock during the past two
years. The Company is not subject to any restrictions on its ability
to declare dividends.
Sales
Of Unregistered Securities.
In May
2005, the Company commenced a private placement offering of its common stock to
accredited investors. During this round of investment, the Company sold
1,044,166 units for $0.75 per unit, with each unit consisting of one share of
common stock and a warrant to purchase 40% of an additional share of common
stock, raising $783,125. The exercise price of the warrants is $1.50, and they
expire on December 31, 2007.
In
November 2005, the Company sold 954,001 units for $0.25 per unit, with each unit
consisting of one share of common stock and a warrant to purchase 80% of an
additional share of common stock, raising $238,500. The exercise price of the
warrants is $0.90, and they expire on June 30, 2008.
Also in
November 2005 individuals that had invested during the first round of the
private placement offering, received additional warrants. If they did not
participate in the November 2005 private placement, they received a warrant for
20% of the number of shares originally purchased; and if they did participate in
the November 2005 private placement, they received a warrant for 40% of the
number of shares originally purchased. The exercise price of these warrants was
$1.50, and they expire on December 31, 2007.
In
January 2006, as a continuation of the November 2005 financing round, the
Company raised an additional $100,000 from investors. The Company sold 400,000
units for $0.25 per unit, with each unit consisting of one share of common stock
and a warrant to purchase 80% of an additional share of common stock. The
exercise price of the warrants is $0.90, and they expire on June 30, 2008. This
financing was a continuation of the financing that occurred in the fourth
quarter of 2005.
In the
second quarter of 2006, the Company completed a private placement offering of
its common stock to accredited investors. During this first round of
investment, the Company sold 3,425,000 units for $0.20 per unit with each unit
consisting of one share of common stock and 40% of a warrant to purchase an
additional share of common stock, raising $685,000. The exercise
price of the warrants is $0.45 per share, and they expire on June 30,
2008.
In
December 2006, during the second round of investment, the Company sold
17,096,002 units for $0.06 per unit, with each unit consisting of one share of
common stock and 50% of a warrant to purchase an additional share of common
stock, raising $1,020,265. The exercise price of the warrants is
$0.35, and they expire on June 30, 2008.
In March
2007, we issued 267,192 shares of our common stock to our outside directors as
compensation for services rendered in 2006.
In April,
2007, we issued 35,000 shares of common stock for a total price per share of
$5,411 to Dutchess Private Equities Fund pursuant to our investment agreement
with that fund.
In
September 2007, the Company engaged in another private placement to accredited
investors. In this financing round, the Company sold 1,525,000 shares
of common stock and warrants to purchase an additional 533,750 shares of common
stock for a total purchase price of $305,000. The exercise price of
the warrants is $0.45, and they expire on September 30, 2009. An
additional $265,000 was raised from some of the same investors in January 2008
on the same terms. The stock certificates for the 1,325,000 shares
subscribed for at that time have not yet been issued, so these shares are not
included in the number of shares issued for the purpose of computing the
percentage ownership in the Company owned by the officers and directors of the
Company.
In 2004,
we granted incentive stock options to Chinmay Chatterjee (200,000 shares),
Edward Furtado (70,000 shares) and Nilu Chatterjee (193,000 shares). Each of
these options has a five-year vesting schedule. The option granted to Chinmay
Chatterjee had a term of five years, and the other two options had a term of ten
years. (All options granted to Dr. C. Chatterjee expired unexercised
in 2008, six months after he resigned as CEO of the Company.) The options issued
to Edward Furtado and Nilu Chatterjee had an exercise price of $1.00; and the
option issued to Dr. Chinmay Chatterjee had an exercise price of
$1.10.
We lease
our Fitchburg facility on terms that call for the payment of base rent in the
form of common stock. The company has issued 92,207 and 108,678 shares to its
landlord in 2007 and 2006, respectively, in satisfaction $92,207 and $108,678 in
rent obligations, respectively. During the years ended December 31,
2005, and
December 31, 2004, we issued 154,957 and 13,337 shares of common
stock to the landlord pursuant to the lease, in satisfaction of $161,686 and
$13,337 of rents payable in this form, respectively. Because of a difference
between the agreed upon value of shares specified in our lease ($1.00 per share)
and the market value of the shares at the time that the rent obligation was
payable (which fluctuated between a low of $0.11 per share and a high of $2.36
per share), the issuance of these shares resulted in charges to our earnings
that differed from these figures. We believe that the landlord is an accredited
investor within the meaning of SEC regulation D, and have issued shares to the
landlord in reliance upon the exemption provided by section 4(2) of the
Securities Act.
In
addition, the Company has issued approximately 780,000 shares of its common
stock to a number of service providers in the years 2005-2007, including 394,588
to its law firm in partial payment for legal services, 350,017 shares to David
Smith as director’s fees, 32,191 shares to Sally Johnson-Chin for services as a
director and a consultant, and 3,519 shares to Kenneth Wlosek for services as a
director. We believe these issuances to be covered by SEC rule 701
and/or section 4(2) of the Securities Act.
Item
6. Management’s Discussion and Analysis or Plan of
Operation.
The
following discussion and analysis should be read in conjunction with the
accompanying financial statements and the notes to those financial statements
included elsewhere in this Form 10-SB. The following discussion includes
forward-looking statements that reflect our plans, estimates and beliefs and
involve risks and uncertainties. Our actual results could differ materially from
those discussed in these forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
below and elsewhere in this Form 10-SB.
We had no
operating revenue during 2004; and our operating revenue for the years 2005,
2006 and 2007 was $77,341, $60,658, and $35,400 respectively.
The
calendar year of 2007 was devoted to developing a new bottled water product
called HEALTHYCAL+. In late 2007 we hired new CEO/president.
Plan
of Operation
In 2008,
we will seek to begin selling in stores HEALTHYCAL+™, our new bottled water
beverage that contains 100% absorbable calcium and magnesium plus electrolytes,
in the Northeast and the Mid West portion of the United States. A
large bottling company, a bottle shape and size and a label have been selected.
Several orders have been secured, and a distributor with 600 stores has agreed
to carry our product. We will seek to expand distribution regionally
in 2008 and nationally in 2009. We will explore in 2008 and seek to introduce in
2009 a children’s line of HEALTHYCAL+ water with and without flavoring. We will
continue to sell of our calcium powder to CAL-SAP™ and seek to sell it to
various other food and beverage businesses for addition to their
product(s). In 2009 we will seek to introduce a patented lactose free
milk based yogurt product.
Financial
Condition and Operations
In 2007
we raised approximately $330,500 in a private placement of our common
stock. Our cash position at December 31, 2007 was $66,503. We
anticipate that we will need to raise additional funds in 2008 in order to
advertise, market, manufacture and distribute our bottled water and our calcium
supplement products in 2008 and 2009. Our short-term liquidity
will be affected by our ability to raise capital. Our long-term liquidity will
be affected by our ability to generate sales, which is subject to uncertainties.
In addition, we are obligated to purchase our Fitchburg facility by September
2008. At that time, the purchase price will be approximately $1.75
million. We have not yet arranged for financing for this
purchase.
Our
capital needs for 2008 will depend upon the amount and mix of purchase orders
that we receive (assuming that we receive such orders at all). Assuming
that we generate some sales revenues by the third quarter of 2008, we should be
able to pay for the cost of filling the orders out of our working capital.
There are no significant elements of income or loss that do not arise from our
operations. At the moment, there do not appear to be seasonal aspects to
our business.
Off-Balance Sheet
Arrangements
. We have no off-balance sheet
arrangements.
Item
7. Financial Statements.
The
reports of the independent certified public accountants and financial statements
and notes listed in the accompanying index are part of this report. See “Index
to Financial Statements” below.
Item
8. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure.
None.
Item
8A. Controls and Procedures.
EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES
In
connection with the preparation of this annual report on Form 10-KSB, an
evaluation was carried out by Integrated Pharmaceuticals Inc.’s management, with
the participation of the Chief Executive Officer and the Chief Financial
Officer, of the effectiveness of Integrated Pharmaceuticals Inc.’s disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (“Exchange Act”)) as of December 31,
2007. Disclosure controls and procedures are designed to ensure that
information required to be disclosed in reports filed or submitted under the
Exchange Act is recorded, processed, summarized, and reported within the time
periods specified in the SEC rules and forms and that such information is
accumulated and communicated to management, including the Chief Executive
Officer and the Chief Financial Officer, to allow timely decisions regarding
required disclosures.
Based on
that evaluation, Integrated Pharmaceuticals Inc.’s management concluded, as of
the end of the period covered by this report, that Integrated Pharmaceuticals
Inc.’s disclosure controls and procedures were effective in recording,
processing, summarizing, and reporting information required to be disclosed,
within the time periods specified in the Securities and Exchange Commission’s
rules and forms.
MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management
of Integrated Pharmaceuticals Inc. is responsible for establishing and
maintaining adequate internal control over financial
reporting. Integrated Pharmaceuticals Inc.’s internal control over
financial reporting is a process, under the supervision of the Chief Executive
Officer and the Chief Financial Officer, designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of the Company’s financial statements for external purposes in accordance with
United States generally accepted accounting principles
(GAAP). Internal control over financial reporting includes those
policies and procedures that:
|
·
|
Pertain
to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the Company’s
assets;
|
|
·
|
Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of the financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures are
being made only in accordance with authorizations of management and the
Board of Directors; and
|
|
·
|
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the Company’s assets that
could have a material effect on the financial
statements.
|
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk
that
controls may become inadequate because of changes in conditions or that the
degree of compliance with the policies or procedures may
deteriorate.
Integrated
Pharmaceuticals, Inc. management conducted an assessment of the effectiveness of
the Company’s internal control over financial reporting as of December 31, 2007,
based on criteria established in
Internal Control – Integrated
Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”). As a result of this assessment, management
identified a material weakness in internal control over financial
reporting.
A
material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial reporting such that there is a reasonable possibility
that a material misstatement of the company’s annual or interim financial
statements will not be prevented or detected on a timely basis.
The
material weakness identified is disclosed below.
Significant Turnover in Accounting
Function and Lack of Appropriate Oversight.
Due to significant
turnover in the accounting function, and the lack of appropriate financial
reporting expertise in key management positions, the Company was not able to
ensure that the objectives of reliable financial reporting were met throughout
2007. This led to identification by the auditors of required material
adjustments to information presented in the Company’s financial statements and
related disclosures.
As a
result of the material weakness identified above, management of Integrated
Pharmaceuticals, Inc. has concluded that, as of December 31, 2007, internal
control over financial reporting was not effective.
This
annual report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting. We were not required to have, nor have we, engaged our
independent registered public accounting firm to perform an audit of internal
control over financial reporting pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management’s report in
this annual report.
We intend
to remedy the material weakness identified above by retaining during 2008 either
a professional services organization or an individual to improve the quality and
consistency of our internal financial reporting controls.
CHANGES
IN INTERNAL CONTROL OVER FINANCIAL REPORTING
As of the
end of the period covered by this report, there have been no changes in internal
control over financial reporting (as defined in Rule 13a-15(f) of the Exchange
Act) during the quarter ended December 31, 2007, that materially affected, or
are reasonably likely to materially affect, Integrated Pharmaceuticals Inc.
internal control over financial reporting.
Item
8B. Other Information.
None.
PART
III
Item
9. Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the Exchange Act.
Our
directors and executive officers, their present positions, and their ages are as
follows:
|
Name
|
|
Age
|
|
Office
with IntePharm
|
|
Peter
Featherston
|
|
50
|
|
President
and Director
|
|
Nilu
P. Chatterjee, Ph.D.
|
|
49
|
|
Vice-President
of Research and Development and Director
|
|
Edward
D. Furtado
|
|
53
|
|
Vice-President
of Operations, Secretary and Director
|
|
David
H. Smith II
|
|
68
|
|
Director
and Chief Financial Officer
|
|
Sally
Johnson Chin
|
|
59
|
|
Director
|
|
Kenneth
Wlosek
|
|
47
|
|
Director
|
The
President and the Vice-President of Research and Development work
full-time for the Company.
Mr.
Furtado is on leave of absence.
The
following biographies describe the business experience of IntePharm’s directors,
officers and key employees.
Peter
Featherston from 1982 to 2005, was co-founder, co-owner and chief operating and
marketing officer of RISMEDIA, a privately held, national real estate media
company based in Norwalk, Connecticut. In 2006 and 2007, Mr.
Featherston acted as a business consultant/broker and created works of art with
notable Americans. Mr. Featherston is not a director of any other
public company, and he is not related to any other officer or director of the
Company.
Nilu P.
Chatterjee, Ph.D. is the Vice-President of Research and Development and Director
of IntePharm. She has been a director of IntePharm since 2000, when it acquired
APTI. She held the same positions at APTI since its inception in
1998. Prior to founding APTI in 1998, Dr Chatterjee was employed from
1989-1998 by OmniGene Bioproducts, Inc., OmniGene, Inc., and Biotechnica
International, Inc., in Cambridge, MA as a Biochemical Engineer. In that
position she was responsible for research project management and the development
of process technology for the production of enzymes, proteins vitamins and other
fine specialty chemicals using recombinant DNA. Dr. N. Chatterjee received her
Ph.D. from Worcester Polytechnic Institute, Worcester, MA in Biochemical
Engineering. Dr. N. Chatterjee has also received Master’s Degree in Chemical
Engineering from Northeastern University, Boston. She also received her Master’s
and Bachelor’s degree in Biochemical Engineering from Jadavpur University in
India and a Bachelor’s degree in Chemistry from University of Calcutta, India.
Dr. N. Chatterjee is a member of the American Society for Microbiology, the
American Institute of Chemical Engineers and other professional
organizations. She has numerous publications on her research works in
scholarly journals and is a co-inventor of issued patents.
Edward D.
Furtado is the Vice-President of Operations and a Director of IntePharm, a
position he has held since 2000, when it acquired APTI. He held the
same positions at APTI since the inception in 1998. He has been a
director of IntePharm since 2000, when it acquired APTI. From 1995 to
1998, he was Senior Mechanical Engineer with Shooshanian Process Engineering
& Construction, Inc., Stoneham MA. Mr. Furtado graduated from Northeastern
University with a degree in Mechanical Engineering. Mr. Furtado is a member of
the American Society of Heating, Refrigeration and Air Conditioning Engineers,
the American Society of Plumbing Engineers and the Construction Specifications
Institute and is a co-inventor of issued patents.
David H.
Smith II has been a director of the Company since February
2004. Since 1996, he has been a founder and managing director of the
following venture capital funds: Interim Advantage Fund, LLC (founded in 1996),
Contra V.C., LLC (founded in 1998), Tailwind V.C., LLC (founded in 2000) and
Fivex, LLC (founded in 2004). He has had significant business experience in the
clinical laboratory industry. He was a co-founder, Vice President and Director
of Canberra Industries, a large publicly-traded manufacturer of analytical
instruments, and also of Canberra Clinical Laboratories, which was sold in 1986
to MetPath, Inc., a subsidiary of Corning, Inc. Mr. Smith received a B.A. degree
in Political Science from Hampden-Sydney College. Until
September 2006, he served as a director of Pro-Pharmaceuticals, Inc., a
reporting company under the Exchange Act; and during 2005 was a director of
Sention, Inc.
Sally
Johnson-Chin, a director of the Company, is an independent
consultant. She was Vice President of Finance and Administration of
Oechsle International Advisors, LLC, a Boston based financial services
management company, from 1999 until May 2006. Ms. Johnson-Chin
received an MBA from Babson College, earned her CPA in Massachusetts in 1980,
and has been an auditor for Ernst & Young, LLP.
Ken
Wlosek has been a director of the Company since May 2006. He serves as a Senior
Vice President of Ridgewood Energy, where he has been employed since 1989. Mr.
Wlosek has been a certified financial planner since 1986, and received his NASD
Series 7 license in 1985 and Series 24 license in 1989.
None of
the directors of IntePharm currently serves as a director of any other SEC
reporting company.
Family
Relationships.
There are no family relationships among our
officers and directors.
Involvement in Certain Legal
Proceedings.
No director or executive officer of IntePharm
has, during the past five years, (i) been involved as a general partner or
executive officer of any business that has been the subject of a bankruptcy
petition, (ii) been convicted of a crime (other than traffic violations and
other minor offenses; (3) been subject to any order, judgment or decree
enjoining, barring, suspending or otherwise limiting his or her involvement in
any type of business, securities or banking activities; or (4) been found by a
court, the SEC or the CFTC to have violated a securities or commodities
law.
Audit Committee Financial
Expert.
The Board of Directors of serves as the Company’s
Audit Committee. The Board has concluded that Sally Johnson-Chin
qualifies as a financial expert, but would not qualify as “independent” under
the AMEX or NASDAQ rules of audit committee composition because she is receiving
compensation for consulting services being rendered to IntePharm.
Nominating
Committee.
The full Board of Directors serves as the
nominating committee. During 2007, there were no changes made to the
procedures by which security holders may recommend nominees to the Company’s
board.
Section
16(a) Beneficial Ownership Reporting Compliance
Kenneth
Wlosek was appointed to the Board of Directors on May 30, 2006. He
did not file a Form 3, reporting the shares of common stock of the Company that
he held at the time, until January 22, 2007. This is the only late
filing of Mr. Wlosek known to the Company. This late filing did not
pertain to a transaction, but to Mr. Wlosek’s election to the
Board. Peter Featherston was appointed President and was appointed to
the Board of Directors on November 1, 2007. He did not file a
Form 3 to report the shares of common stock of the Company that he held
until April 11, 2008. This is the only late filing of Mr. Featherston
known to the Company. This late filing did not pertain to a
transaction, but to Mr. Featherston’s election to the Board and appointment as
an officer of the Company. Other than these late filings, the Company
is not aware of any officers, director or holder of more than 10% of the
Company’s common stock who has failed to file on a timely basis, all reports
required by section 16(a) of the Exchange Act during the most recent fiscal
year. The Company is not aware of any transactions that should have
been disclosed on Form 4 but were not disclosed.
Code
of Ethics
The
Company has adopted a Financial Code of Ethics applicable to the Company’s CEO,
CFO principal accounting officer or controller, and persons performing similar
functions, including its Treasurer. A copy of the Financial Code of
Ethics was previously filed as Exhibit 14 to its 2005 Form 10KSB.
Item
10. Executive Compensation.
Compensation
of Principal Executive Officer
During
calendar years 2006 and 2007, Chinmay Chatterjee served as our President and CEO
until his resignation on July 19, 2007. David Smith served as interim
CEO without pay until the appointment of
Peter
Featherston as president and CEO on November 1, 2007. No executive
officer received total compensation in excess of $100,000 during those
years. Mr. Chatterjee’s compensation during those years consisted of
a salary, bonus, incentive option awards, and certain non-cash benefits such as
health and dental insurance. Mr. Featherston’s compensation consisted
of salary, heath insurance and a travel reimbursement allowance.
The
following table provides a summary of the compensation paid to Messrs.
Chatterjee and Featherston for the years ended December 31, 2007 and
2006.
SUMMARY
COMPENSATION TABLE
|
Name
and Principal Position
|
Year
|
Salary
|
Bonus
|
Option
Awards
1
|
All
Other Compensation
|
Total
|
|
Chinmay
Chatterjee, President and CEO
|
2007
|
$53,308
|
$
0
|
$
0
|
Note
1
|
$53,308
|
|
2006
|
$41,461
|
$
0
|
$ 12,500
|
Note
1
|
$53,961
|
|
Peter
Featherston, President and CEO
|
2007
|
$14,537
|
$
0
|
$
0
|
Note
1
|
$14,537
|
|
|
1
Value of option awards are computed in accordance with FAS 123R
using the assumptions set forth in note 6 to the December 31, 2007
financial statements included in this Form
10-KSB.
|
Note
1: Executives of the Company receive health and dental insurance
benefits and certain travel reimbursement. No executive of the
Company received benefits other than salary having a value in excess of $10,000
in 2006 or 2007.
Mr.
Featherston does not currently have a written employment agreement Mr.
Featherston’s compensation as CEO is based upon a $90,000 annual salary plus a
bonus of $20,000 if the Company achieves certain sales objectives. He
will be issued a warrant, exercisable at $0.20 per share, for 500,000 shares of
the Company’s common stock. The warrant will vest as the Company
achieves certain sales objectives. Mr. Featherston is included in the
Company’s health insurance program. Mr Featherston may receive salary increases
and additional stock purchase warrants from time to time.
On
December 16, 2002, the Board of Directors adopted IntePharm’s 2002 Stock Plan,
which provides for the granting to officers and key employees options to acquire
stock in IntePharm. The plan was approved by our stockholders at a special
meeting held on December 12, 2003. On August 28, 2004, the Board increased the
size of the plan from 1.2 million shares to 1.6 million shares. This action was
ratified by the Company’s shareholders at their annual meeting held on November
3, 2004. The full Board of Directors currently serves as the Stock Option
Committee for the purpose of administering the plan. No stock options were
granted to the Company’s executive officers during 2007. The company has no
other plan for the issuance of equity awards to employees or officers, but does
intend to issue a stock purchase warrant to Mr. Featherston in connection with
his agreement to join the Company. That warrant will cover 500,000
shares of common stock, and will contain performance vesting tied to sales. The
term and exercise price of the warrant have not yet been
determined.
As of
December 31, 2007, Mr. Featherston held no stock options, and Mr. Chatterjee
held the following options issued :
|
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|
Date
of Grant
|
Number
of Shares Underlying Unexercised Options
|
Option
Exercise Price
|
Option
Expiration Date
|
|
|
Exercisable
|
Unexercisable
|
|
|
|
March
19, 2004
|
200,000
|
0
|
$1.10
|
March
19, 2009
|
|
July
1, 2006
|
83,333
|
0
|
$0.30
|
July
1, 2011
|
|
July
1, 2006
|
0
|
250,000
|
$0.30
|
July
1, 2011
|
Mr.
Chatterjee did not receive any stock awards from the Company in
2007. The options that Mr. Chatterjee held on December 31, 2007 later
expired unexercised.
See note
6 of the footnotes to the financial statements for disclosure concerning the
effect of these option issuances on our financial statements.
Compensation
of Directors
During
2007, the Company’s directors received the following compensation:
|
Name
(a)
|
Fees
Earned or Paid in Cash
(b)
|
Stock
Awards
(c)
|
Option
Awards
(d)
|
Non-Equity
Incentive Plan Compensation
(e)
|
Nonqualified
Deferred Compensation Earnings
(f)
|
All
Other Compensation
(g)
|
Total
(h)
|
|
Peter
Featherston
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
|
Chinmay
Chatterjee
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
|
Nilu
Chatterjee
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
|
Edward
Furtado
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
|
Sally
Johnson-Chin
|
$0
|
$7,000
|
$0
|
$0
|
$0
|
$0
|
$7,000
|
|
David
Smith
|
$0
|
$50,000
|
$0
|
$0
|
$0
|
$0
|
$50,000
|
|
Ken
Wlosek
|
$0
|
$1,500
|
$0
|
$0
|
$0
|
$0
|
$1,500
|
All of
the compensation paid in 2007 was for services rendered in 2006. In
2007, four directors were employees of the Company, and received no separate
compensation for serving as directors.
David
Smith, Sally Johnson-Chin and Ken Wlosek are the directors who are not employees
of the Company. The Company compensates Mr. Smith at the annual rate
of $25,000, provided that he attends 90% of the Board’s meeting. In
May 2006, we issued 104,167 shares of common stock to Mr. Smith as compensation
for his services rendered as a director in 2005, based upon a 2005 year-end
market price of our common stock of $0.24 per share. The total value
of the shares so issued was $25,000. For his additional time devoted to our
activities in 2006, we decided to issue to Mr Smith additional shares having a
market value of $25,000 for his service as a board member. One-half
of this additional compensation was paid in shares issued at $0.27 per shares
(the average closing price during the month of December), and the other half was
paid in shares issued at $0.18 per share, the closing price on December 29,
2006. The total number of shares so issued to Mr. Smith was
231,482. We have accrued $25,000 as an amount owed to Mr. Smith for
his services in 2007. We intend to satisfy this obligation by issuing
416,66,8 shares of common stock to Mr. Smith (using the price per share of $0.06
that was the closing price of our common stock on December 31,
2007).
During
2007, Ms. Johnson-Chin accrued directors fees at the rate of $500 per meeting
that she attends payable in common stock valued at the end of the month during
which the services were rendered. As a
result,
the Company has accrued an obligation of $1,500 to Ms. Johnson-Chin in 2007 for
her services as a director. We intend to issue Ms.
Johnson-Chin 8,514 shares of common stock to her in order to satisfy
this obligation. Ms. Johnson-Chin also performed financial
consulting services for us in 2007 for which we have agreed to pay her $1,000
per month, payable in stock valued at the end of each month. We have
accrued an obligation of $12,000 to Ms. Johnson-Chin that we intend
to satisfy by issuing 71,959 shares of common stock to her in
2008. On July 1, 2007, the final 30,000 shares of her December
22, 2003 warrant for 150,000 shares vested.
Mr.
Wlosek, who joined the board on May 30, 2006, is compensated at the rate of $500
per meeting that he attends, payable in common stock valued at the end of the
month during which the meeting in question occurred. As a result, the
Company has accrued an obligation of $1,500 to Ms. Johnson-Chin in 2007 for her
services as a director. We intend to issue Mr. Wlosek 5,573 shares of
common stock to him in order to satisfy this obligation.
Employment
Contracts
The
Company currently has no employment contracts with its executive
officers. Peter Featherston is paid a salary at an annual rate of
$90,000. Until September 2005, Chinmay Chatterjee, our CEO, was paid
at an annual rate of $90,000; and Nilu Chatterjee and Edward Furtado were paid
at an annual rate of $80,000. Starting in October 2005, the salaries
of Mr. Chatterjee, Mr. Furtado and Mrs. Chatterjee were reduced to $36,000
annually. Until August 2005, these executives received car
allowances of $2,000 per month (for Chinmay Chatterjee and Nilu Chatterjee) and
$1,000 per month (for Edward Furtado). Starting in September 2005,
these car allowances were eliminated.
Item
11. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
The
following table sets forth certain information with respect to the beneficial
ownership of our equity securities as of March 28, 2008 by:
|
•
|
each security holder known by us to be the beneficial owner of more than
5% of our outstanding securities;
|
|
•
|
each of our executive officers; and
|
|
•
|
all directors and executive officers as a
group.
|
Except as
otherwise indicated, to our knowledge, all persons listed below have sole voting
power and investment power and record and beneficial ownership of their shares,
except to the extent that authority is shared by spouses under applicable
law.
The
information contained in this table reflects “beneficial ownership” as defined
in Rule 13d-3 of the Securities Exchange Act of 1934 (the “Exchange Act”). In
computing the number of shares beneficially owned by a person and the percentage
ownership of that person, shares of common stock subject to options and warrants
held by that person (and/or pursuant to proxies held by that person) that were
exercisable on March 28, 2008 or would become exercisable within 60 days
following that date are considered outstanding. However, such shares are not
considered outstanding for the purpose of computing the percentage ownership of
any other person. Percentage of ownership is based on 42,589,799 shares of
common stock outstanding as of March 28, 2008. As of March 28, 2008, there were
495 holders of record of our common stock (including holders of our options and
warrants).
|
Name
of Beneficial Owner
|
Amount
and Nature of Beneficial Ownership
|
Percent
of Class
|
|
Peter
Featherston
|
162,500
1
|
0.4%
|
|
David
H. Smith II
|
8,051,517
2
|
18.9%
|
|
Nilu
P. Chatterjee
|
1,366,333
3
|
3.0%
|
|
Edward
Furtado
|
1,273,333
4
|
2.8%
|
|
Sally
Johnson-Chin
|
875,190
5
|
2.1%
|
|
Ken
Wlosek
|
103,519
6
|
0.4%
|
|
All
directors and Officers as a group
|
11,715,726
|
27.5%
|
1
Includes
54,167 shares subject to stock purchase warrants that can be exercised within 60
days.
2
Includes
(a) 1,208,333 shares subject to stock purchase warrants owned directly that can
be exercised within 60 days; (b) 1,656,667 shares owned by entities controlled
by Mr. Smith; and (c) 483,333 shares subject to stock purchase warrants owned by
entities controlled by Mr. Smith that can be exercised within 60
days. An additional 255,000 shares are owned by Mr. Smith’s family
members or trusts established for their benefit, and an additional 50,000 shares
are subject to stock purchase warrants owned by those trusts and family
members. Mr. Smith disclaims beneficial ownership of the shares and
warrants identified in the last sentence. Does not include
shares to be issued as compensation for services as a director in
2007.
3
Includes
193,000 shares subject to stock options exercisable within 60
days. Excludes 3,360,000 shares owned by her husband, Chinmay
Chatterjee. Ms. Chatterjee disclaims beneficial ownership of those
shares.
4
Includes
70,000 shares subject to stock options exercisable within 60 days.
5
Includes
275,000 shares subject to stock warrants that can be exercised within 60 days.
Does not include shares to be issued as compensation for services as a director
in 2007.
6
Includes
50,000 shares subject to stock warrants that can be exercised within 60
days. Does not include shares to be issued as compensation for
services as a director in 2007.
Changes
in Control
There are
no arrangements known to the Registrant the operation of which may at a
subsequent time result in the change of control of the Registrant.
Item
12. Certain Relationships and Related Transactions.
In August
2001, Chinmay Chatterjee, Nilu Chatterjee and Edward Furtado (the “
NEC Partners
”) formed NEC
Partnership (“
NEC
”), and
entered into a license agreement with us for patent applications that they had
filed prior to becoming affiliated with us. The patent applications,
which relate to a process for making gluconate derivatives, have since matured
into two issued patent, US patent nos. 6,416,981 and 6,828,130; and a divisional
patent application that seeks to broaden the protection with respect to
gluconate derivatives.
Under the
terms of the license, we paid no license fee, but we are required to pay a 3%
royalty to NEC Partners for sales of products made with the process covered by
the patent, or $25,000 per quarter, whichever is greater. Pursuant to
a letter agreement dated October 13, 2005, NEC Partners has waived any
right to
royalties until the company reaches annual sales of $5 million and with respect
to sales in any year in which it the company’s earnings before interest and
taxes (EBITDA) is less than 12.5%. The 3% royalty and the
$25,000 minimum quarterly payment are reduced by one-half if we continue to
employ all three of the NEC Partners on a full-time basis. Smaller
reductions apply if we employ some but not all of the NEC
Partners. NEC Partnership has waived any rights to royalties earned
prior to September 30, 2005. Under the license agreement, we agreed
to indemnify the NEC Partners from any product liability claim that might arise
in connection with the sale of products covered by the patent; and the NEC
Partners have agreed to indemnify us if the technology that NEC has licensed to
us infringes any patent that had been issued on or prior to the date of the
license agreement.
In
December 2003, we entered into a consulting agreement with Sally Johnson-Chin,
who in November 2004 was elected to the Board of Directors. Under
that consulting agreement, Ms. Johnson-Chin agreed to provide up to 10 hours per
week of strategic and financial planning services to the Company through July
2007. In exchange for these services, the Company agreed to Ms.
Johnson-Chin $2,000 per month through December 2005, and granted her a warrant
to purchase 150,000 shares of the Company’s common stock. The warrant is subject
to a vesting schedule that continued through July 1, 2007. In
March 2007, Ms. Johnson-Chin was issued 32,191 shares of common stock in
satisfaction of fees of $7,000 that she had earned. Ms. Johnson-Chin currently
receives no additional compensation for her service on the Board of
Directors.
In March
2004, we granted incentive stock options to Chinmay Chatterjee (200,000 shares),
Edward Furtado (70,000 shares) and Nilu Chatterjee (193,000
shares). Each of these options has a five-year vesting
schedule. The option granted to Chinmay Chatterjee has a term of five
years, and the other two options have a term of ten years. The
options issued to Edward Furtado and Nilu Chatterjee had an exercise price of
$1.00; and the option issued to Chinmay Chatterjee had an exercise price of
$1.10. At the time of the option grants, the Company had just
completed the first round of its 2004 private placement, in which common stock
was sold at an average price per share of $0.97. Thus, the exercise
price of the options granted to Mr. Furtado and Ms. Chatterjee was greater than
the then-current fair market value of the common stock; and the exercise price
of the option granted to Mr. Chatterjee was more than 10% greater than the
then-current fair market value of the common stock.
David
Smith has served on our board of directors since March 2004. He
receives annual compensation for his services as a director in the form of
common stock having a value or $25,000, provided that he attends 90% of the
board’s meetings during each 12-month period during which he serves as a
director. Pursuant to this arrangement, in March 2005, we issued
14,368 shares of stock valued at $1.74 to Mr. Smith as a fee for his first full
year of service as a director. In May 2006, we issued Mr. Smith 104,167 shares
of common stock valued at $0.24 per share. The value of these shares
was $25,000 in each case. In March 2007, Mr. Smith was issued
231,482 shares of common stock in satisfaction of fees of $50,000 that he had
earned.
In
November 2005, Chinmay Chatterjee, our CEO, lent the Company
$55,0000. This loan bears interest at the rate of
9.99%. By December 31,2007, this loan had been repaid in
full.
There
have been no other transactions or series of transactions, actual or proposed,
during the last two years to which we are a party in which any Director, nominee
for election as a Director, executive officer or beneficial owner of five
percent or more of our Common Stock, or any member of the immediate family of
the foregoing, had or is to have a direct or indirect material interest
exceeding $60,000.
Item
13. Exhibits.
INDEX
TO AND DESCRIPTION OF EXHIBITS
The
following documents are filed as exhibits to this Form 10-KSB:
|
Number
|
Description
of Exhibit
|
|
3.1
|
Amended
and Restated Articles of Incorporation of Integrated Pharmaceuticals, Inc.
(1)
|
|
|
|
|
3.2
|
Amended
and Restated Bylaws of Integrated Pharmaceuticals, Inc.
(2)
|
|
|
|
|
4.1
|
Specimen
Certificate for Integrated Pharmaceuticals, Inc. Common Stock, par value
$.01 per share (2)
|
|
|
|
|
4.2
|
Form
of Common Stock Purchase Warrant (2)
|
|
|
|
|
10.1
|
Amended
and Restated Patent License Agreement with NEC Partners
(2)
|
|
|
|
|
10.2
|
Lease
Agreement with Chantilas Properties, LLC and Advanced Process
Technologies, Inc. (2)
|
|
|
|
|
10.3
|
Assignment
and Assumption of Lease(2)
|
|
|
|
|
10.4
|
Consulting
and Warrant Agreements with James Czirr (2)
|
|
|
|
|
10.5
|
2002
Stock Plan (2)
|
|
|
|
|
10.6
|
Registration
Rights Agreement(2)
|
|
|
|
|
10.7
|
Letter
dated May 5, 2005 amending the Patent License Agreement with NEC Partners
(3)
|
|
|
|
|
10.8
|
Letter
dated October 13, 2005 amending the Patent License Agreement with NEC
Partners (4)
|
|
|
|
|
10.9
|
Investment
Agreement between the Company and Dutchess Private Equities Fund, LP dated
December 22, 2006 (5)
|
|
|
|
|
10.10
|
Registration
Rights Agreement between the Company and Dutchess Private Equities Fund,
LP dated December 22, 2006 (5)
|
|
|
|
|
10.11
|
Placement
Agent Agreement among the Company, US Euro Securities Inc. and Dutchess
Private Equities Fund, LP dated December 22, 2006 (5)
|
|
|
|
|
14
|
Financial
Code of Ethics (6)
|
|
|
|
|
21
|
Subsidiaries
of Integrated Pharmaceuticals (6)
|
(1) Previously
filed and incorporated by reference to Amendment No. 1 to the Company’s Form
10-SB Registration Statement filed with the Securities and Exchange Commission
on December 3, 2004.
(2) Previously
filed and incorporated by reference to the Company’s Form 10-SB Registration
Statement filed with the Securities and Exchange Commission on September 27,
2004.
(3) Previously
filed and incorporated by reference to Amendment No. 3 to the Company’s Form
10-SB Registration Statement filed with the Securities and Exchange Commission
on May 12, 2005.
(4) Previously
filed and incorporated by reference to the Company’s Form 10-QSB filed with the
Securities Exchange Commission on November 14, 2005.
(5) Previously
filed and incorporated by reference to the Company’s Registration Statement on
Form SB-2 with the Securities Exchange Commission on January 26,
2007.
(6) Previously
filed and incorporated by reference to the Company’s Form 10-KSB filed with the
Securities Exchange Commission on September 29, 2005.
Item
14. Principal Accountant Fees and Services.
Audit
Fees
During
the years 2006 and 2007, the Company’s principal accounting firm was Williams
& Webster, PS, of Spokane, Washington. During those years,
Williams & Webster PS billed the Company $60,599 and $52,763,
respectively, for the audit of the Company’s annual financial statements or
services that are normally provided by the accountant in connection with
statutory and regulatory services for those years.
Audit-Related
Fees
During
the years 2005 and 2006, Williams & Webster did not perform assurance and
related services for the Company that were related to the performance of the
audit or review of the Company’s financial statements and are not described in
the previous paragraph, and did not bill the Company for any such
services. Before we engaged Williams & Webster PS to render
services to the Company for or relating to its 2007 fiscal year, the engagement
was approved by the Company’s Audit Committee.
Tax
Fees
During
the years 2006 and 2007, Williams & Webster did not perform tax compliance
or tax planning services for the Company, and did not provide tax advice, nor
did Williams & Webster bill the Company for such services.
INDEX
TO FINANCIAL STATEMENTS.
The
financial statements filed as part of this Form 10-KSB are indexed below and are
included at pages F-1 through F-19, which appear at the end of this Form
10-KSB.
|
Statement
|
Page
|
|
Audited
Financial Statements for the 12-month periods ended December 31, 2006 and
2005
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|
Balance
Sheets
|
F-2
|
|
Statements
of Operations
|
F-3
|
|
Statements
of Stockholders’ Equity
|
F-4
|
|
Statements
of Cash Flows
|
F-9
|
|
Notes
to the Financial Statements
|
F-10
|
Integrated
Pharmaceuticals, Inc.
Fitchburg,
MA
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
We have
audited the accompanying balance sheet of Integrated Pharmaceuticals, Inc. as of
December 31, 2007 and 2006, and the related statements of operations,
stockholders’ equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement
. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements.
An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Integrated Pharmaceuticals, Inc. as
of December 31, 2007 and 2006 and the results of its operations, stockholders
equity and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has limited cash. In addition, the Company’s significant
operating losses raise substantial doubt about its ability to continue as a
going concern. Management’s plans regarding those matters also are described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Williams & Webster,
P.S.
Williams
& Webster, P.S.
Certified
Public Accountants
Spokane,
Washington
April 10,
2008
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
|
|
|
December
31,
|
|
|
December
31,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
Cash
|
|
$
|
66,503
|
|
|
$
|
872,182
|
|
|
Accounts
receivable
|
|
|
27,687
|
|
|
|
686
|
|
|
Inventory
|
|
|
107,922
|
|
|
|
118,068
|
|
|
Prepaid
expenses
|
|
|
43,699
|
|
|
|
47,128
|
|
|
Total
Current Assets
|
|
|
245,811
|
|
|
|
1,038,064
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, net
|
|
|
754,737
|
|
|
|
1,279,401
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
2,390
|
|
|
|
3,590
|
|
|
Patents,
net of amortization
|
|
|
102,123
|
|
|
|
107,800
|
|
|
Total
Other Assets
|
|
|
104,513
|
|
|
|
111,390
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
1,105,061
|
|
|
$
|
2,428,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
155,659
|
|
|
$
|
218,754
|
|
|
Accrued
expenses
|
|
|
113,482
|
|
|
|
162,039
|
|
|
Related
party short-term debt
|
|
|
|
|
|
|
24,061
|
|
|
Total
Current Liabilities
|
|
|
269,141
|
|
|
|
404,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.10 par value, 20,000 shares
authorized;
no shares issued
|
|
|
—
|
|
|
|
—
|
|
|
Common
stock, $0.01 par value, 75,000,000 shares
authorized;
42,551,795 and 40,024,316 shares
issued
and outstanding, respectively
|
|
|
425,051
|
|
|
|
400,243
|
|
|
Additional
paid-in capital
|
|
|
17,283,196
|
|
|
|
16,728,424
|
|
|
Other
comprehensive income (loss)
|
|
|
370
|
|
|
|
1,570
|
|
|
Accumulated
deficit prior to development stage
|
|
|
(494,624
|
)
|
|
|
(494,624
|
)
|
|
Accumulated
deficit during development stage
|
|
|
(16,444,994
|
)
|
|
|
(14,611,612
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
Stockholders’ Equity
|
|
|
835,920
|
|
|
|
2,024,001
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY
|
|
$
|
1,105,061
|
|
|
$
|
2,428,855
|
|
The
accompanying notes are an integral part of these financial
statements.
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
|
|
|
|
|
|
|
|
|
Period
from
|
|
|
|
|
|
|
|
|
|
|
February
1, 2003
|
|
|
|
|
|
|
|
|
|
|
(inception
of
|
|
|
|
|
|
|
|
|
|
|
development
stage)
|
|
|
|
|
Year
Ended
|
|
|
Year
Ended
|
|
|
to
Dec 31, 2007
|
|
|
|
|
December
31, 2007
|
|
|
December
31, 2006
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
35,400
|
|
|
|
60,658
|
|
|
$
|
173,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF GOODS SOLD
|
|
|
12,405
|
|
|
|
56,101
|
|
|
|
113,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
22,995
|
|
|
|
4,557
|
|
|
|
59,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GENERAL
AND ADMINISTRATIVE EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
260,620
|
|
|
|
261,404
|
|
|
|
1,045,790
|
|
|
Research
and development
|
|
|
211,186
|
|
|
|
210,703
|
|
|
|
1,170,983
|
|
|
Marketing
|
|
|
16,837
|
|
|
|
58,297
|
|
|
|
646,471
|
|
|
Legal
and professional fees
|
|
|
219,270
|
|
|
|
259,475
|
|
|
|
1,438,900
|
|
|
Consulting
|
|
|
143,716
|
|
|
|
100,090
|
|
|
|
3,277,805
|
|
|
Idle
facility expense
|
|
|
566,506
|
|
|
|
586,180
|
|
|
|
2,581,868
|
|
|
Occupancy
|
|
|
99,180
|
|
|
|
104,279
|
|
|
|
1,229,576
|
|
|
Labor
and benefits
|
|
|
84,354
|
|
|
|
97,946
|
|
|
|
936,322
|
|
|
Services
paid by stock options
|
|
|
58,076
|
|
|
|
236,144
|
|
|
|
1,549,649
|
|
|
Office
supplies and expenses
|
|
|
16,999
|
|
|
|
22,768
|
|
|
|
203,115
|
|
|
Travel
|
|
|
7,716
|
|
|
|
9,574
|
|
|
|
188,093
|
|
|
Other
general and administrative expenses
|
|
|
163,729
|
|
|
|
189,677
|
|
|
|
750,255
|
|
|
Total
General and Administrative Expenses
|
|
|
1,848,189
|
|
|
|
2,136,537
|
|
|
|
15,018,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME (LOSS)
|
|
|
(1,825,194
|
)
|
|
|
(2,131,980
|
)
|
|
|
(14,958,912
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
8
|
|
|
|
81
|
|
|
|
10,287
|
|
|
Interest
expense
|
|
|
(8,196
|
)
|
|
|
(8,802
|
)
|
|
|
(1,433,533
|
)
|
|
Other
income (expense)
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,560
|
)
|
|
Total
Other Income and Expenses
|
|
|
(8,188
|
)
|
|
|
(8,721
|
)
|
|
|
(1,428,806
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE TAXES
|
|
|
(1,833,382
|
)
|
|
|
(2,140,701
|
)
|
|
|
(16,387,718
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
TAXES
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
|
(1,833,382
|
)
|
|
|
(2,140,701
|
)
|
|
|
(16,387,718
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gain (loss) in market value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investments
|
|
|
1,200
|
|
|
|
2,610
|
|
|
|
2,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
LOSS
|
|
$
|
(1,832,182
|
)
|
|
|
(2,138,091
|
)
|
|
$
|
(16,384,948
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) PER COMMON SHARE,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED
|
|
$
|
(0.04
|
)
|
|
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHARES
OUTSTANDING, BASIC AND DILUTED
|
|
|
40,989,154
|
|
|
|
22,960,705
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
|
INTEGRATED PHARMACEUTICALS,
INC.
|
|
|
|
|
|
|
|
|
|
|
(A Development Stage
Company)
|
|
|
|
|
|
|
|
|
|
|
STATEMENT OF STOCKHOLDERS’
EQUITY
(DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
Accumulated
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
Deficit
Prior to
|
|
Deficit
During
|
|
Other
|
|
|
|
|
|
|
|
|
Amount
|
|
Paid-in
Capital
|
|
Discount
on
Common
Stock
|
|
Development
Stage
|
|
Development
Stage
|
|
Comprehensive
Loss
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2002
|
|
|
7,646,250
|
|
$
|
76,463
|
|
$
|
173,059
|
|
$
|
(240,000
|
)
|
$
|
(417,775
|
)
|
$
|
|
|
$
|
|
|
$
|
(408,253
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued at an average price of $1.01 per share as an incentive for notes
payable
|
|
|
516,250
|
|
|
5,162
|
|
|
514,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
519,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued at an average price of $0.50 per share in exchange for services and
asset purchases
|
|
|
160,719
|
|
|
1,607
|
|
|
77,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued at an average price of $1.00 per share in exchange for rent
expense
|
|
|
35,240
|
|
|
352
|
|
|
59,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of options vested during the period
|
|
|
—
|
|
|
|
|
|
12,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued as incentive for notes payable
|
|
|
|
|
|
|
|
|
328,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
328,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued for services
|
|
|
|
|
|
|
|
|
180,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
180,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment
of accounts payable by shareholder
|
|
|
|
|
|
|
|
|
27,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Close
discount on common stock to additional paid-in
capital
|
|
|
|
|
|
|
|
|
(240,000
|
)
|
|
240,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
loss on market value of investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(100
|
)
|
|
(100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(76,849
|
)
|
|
(1,123,977
|
)
|
|
|
|
|
(1,200,826
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2003
|
|
|
8,358,459
|
|
$
|
83,584
|
|
$
|
1,132,843
|
|
$
|
|
|
$
|
(494,624
|
)
|
$
|
(1,123,977
|
)
|
$
|
(100
|
)
|
$
|
(402,274
|
)
|
The
accompanying notes are an integral part of these financial
statements.
|
INTEGRATED PHARMACEUTICALS,
INC.
|
|
|
|
|
|
|
|
|
|
(A Development Stage
Company)
|
|
|
|
|
|
|
|
|
|
STATEMENT OF STOCKHOLDERS’
EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
Accumulated
|
|
Accumulated
|
|
|
|
|
|
|
Common
Stock
|
|
Additional
|
|
|
|
Deficit
During
|
|
Other
|
|
|
|
|
|
|
Number
|
|
|
|
Paid-in
|
|
Development
|
|
Development
|
|
Comprehensive
|
|
|
|
|
|
|
of
Shares
|
|
Amount
|
|
Capital
|
|
Stage
|
|
Stage
|
|
Loss
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2003
|
|
|
8,358,459
|
|
$
|
83,584
|
|
$
|
1,132,843
|
|
$
|
(494,624
|
)
|
$
|
(1,123,977
|
)
|
$
|
(100
|
)
|
$
|
(402,274
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
and warrants issued as incentive for notes payable
|
|
|
194,950
|
|
|
1,950
|
|
|
387,951
|
|
|
|
|
|
|
|
|
|
|
|
389,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of warrants vested during the period
|
|
|
|
|
|
|
|
|
1,616,673
|
|
|
|
|
|
|
|
|
|
|
|
1,616,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of options vested during the period
|
|
|
|
|
|
|
|
|
658,545
|
|
|
|
|
|
|
|
|
|
|
|
658,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued at an average of $2.63 per share in exchange for legal
services.
|
|
|
84,701
|
|
|
847
|
|
|
221,662
|
|
|
|
|
|
|
|
|
|
|
|
222,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued at an average of $2.14 per share in exchange for
services.
|
|
|
292,083
|
|
|
2,921
|
|
|
622,391
|
|
|
|
|
|
|
|
|
|
|
|
625,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued at an average price of $2.78 per share in exchange for rent
expense
|
|
|
132,610
|
|
|
1,326
|
|
|
367,967
|
|
|
|
|
|
|
|
|
|
|
|
369,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued for purchase of assets at $1.88 per share
|
|
|
9,974
|
|
|
100
|
|
|
18,639
|
|
|
|
|
|
|
|
|
|
|
|
18,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
and warrants issued for cash at an average price of $0.95 per unit, less
expenses of $126,000
|
|
|
5,896,000
|
|
|
58,960
|
|
|
5,536,040
|
|
|
|
|
|
|
|
|
|
|
|
5,595,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
and warrants issued for convertible debt plus interest at prices
ranging from $0.75 to $1.25 per unit
|
|
|
1,434,723
|
|
|
14,347
|
|
|
1,598,729
|
|
|
|
|
|
|
|
|
|
|
|
1,613,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued for securities at $1.00 per share
|
|
|
25,000
|
|
|
250
|
|
|
24,750
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued for cash at $2.47 per share
|
|
|
15,000
|
|
|
150
|
|
|
36,900
|
|
|
|
|
|
|
|
|
|
|
|
37,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gain on market value of investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,491,716
|
)
|
|
|
|
|
(7,491,716
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2004
|
|
|
16,443,500
|
|
$
|
164,435
|
|
$
|
12,223,090
|
|
$
|
(494,624
|
)
|
$
|
(8,615,693
|
)
|
$
|
(20
|
)
|
$
|
3,277,188
|
|
The
accompanying notes are an integral part of these financial
statements.
|
INTEGRATED PHARMACEUTICALS,
INC.
|
|
|
|
|
|
|
|
|
|
|
|
(A Development Stage
Company)
|
|
|
|
|
|
|
|
|
|
|
|
STATEMENT OF STOCKHOLDERS’
EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
Accumulated
|
|
Accumulated
|
|
|
|
|
|
|
Common
Stock
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Number
|
|
|
|
Paid-in
|
|
Development
|
|
Development
|
|
Comprehensive
|
|
|
|
|
|
|
of
Shares
|
|
Amount
|
|
Capital
|
|
Stage
|
|
Stage
|
|
Loss
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2004
|
|
|
16,443,500
|
|
$
|
164,435
|
|
$
|
12,223,090
|
|
$
|
(494,624
|
)
|
$
|
(8,615,693
|
)
|
$
|
(20
|
)
|
$
|
3,277,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued at an average of $1.19 per
share
in exchange for legal services.
|
|
|
46,337
|
|
|
463
|
|
|
54,862
|
|
|
|
|
|
|
|
|
|
|
|
55,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued at an average price of $1.26 per share in exchange for rent
expense
|
|
|
129,254
|
|
|
1,293
|
|
|
161,627
|
|
|
|
|
|
|
|
|
|
|
|
162,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issues at an average of $1.74 per share in exchange for consulting/BOD
services.
|
|
|
14,368
|
|
|
144
|
|
|
24,856
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of warrants vested during the period
|
|
|
|
|
|
|
|
|
530,325
|
|
|
|
|
|
|
|
|
|
|
|
530,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of options vested during the period
|
|
|
|
|
|
|
|
|
584,364
|
|
|
|
|
|
|
|
|
|
|
|
584,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of Options by Consultant at $.18 per share.
|
|
|
6,000
|
|
|
60
|
|
|
1,020
|
|
|
|
|
|
|
|
|
|
|
|
1,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
and Warrants issued for Private Placement, net of finder’s
fees.
|
|
|
1,998,167
|
|
|
19,981
|
|
|
980,344
|
|
|
|
|
|
|
|
|
|
|
|
1,000,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment
to actual for shares of common stock.
|
|
|
(5,000
|
)
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gain on market value of investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,020
|
)
|
|
(1,020
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,855,218
|
)
|
|
|
|
|
(3,855,218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2005
|
|
|
18,632,626
|
|
$
|
186,326
|
|
$
|
14,560,488
|
|
$
|
(494,624
|
)
|
$
|
(12,470,911
|
)
|
$
|
(1,040
|
)
|
$
|
1,780,239
|
|
The
accompanying notes are an integral part of these financial
statements.
|
INTEGRATED PHARMACEUTICALS,
INC.
|
|
|
|
|
|
|
|
|
(A Development Stage
Company)
|
|
|
|
|
|
|
|
|
STATEMENT OF STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
Accumulated
|
|
Accumulated
|
|
|
|
|
|
|
Common
Stock
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Number
|
|
|
|
Paid-in
|
|
Development
|
|
Development
|
|
Comprehensive
|
|
|
|
|
|
|
of
Shares
|
|
Amount
|
|
Capital
|
|
Stage
|
|
Stage
|
|
Loss
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2005
|
|
|
18,632,626
|
|
$
|
186,326
|
|
$
|
14,560,488
|
|
$
|
(494,624
|
)
|
$
|
(12,470,911
|
)
|
$
|
(1,040
|
)
|
$
|
1,780,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued at an average of $0.22 per share in exchange for legal
services
|
|
|
137,725
|
|
|
1,377
|
|
|
29,541
|
|
|
|
|
|
|
|
|
|
|
|
30,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued at an average price of $0.24 per share in exchange for rent
expense
|
|
|
128,796
|
|
|
1,288
|
|
|
30,023
|
|
|
|
|
|
|
|
|
|
|
|
31,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of warrants vested during the period
|
|
|
|
|
|
|
|
|
140,715
|
|
|
|
|
|
|
|
|
|
|
|
140,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of options vested during the period
|
|
|
|
|
|
|
|
|
236,144
|
|
|
|
|
|
|
|
|
|
|
|
236,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued for accrued expenses
|
|
|
204,167
|
|
|
2,042
|
|
|
97,958
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
and warrants issued for private placement
|
|
|
20,921,002
|
|
|
209,210
|
|
|
1,596,055
|
|
|
|
|
|
|
|
|
|
|
|
1,805,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
issued to employee for services
|
|
|
|
|
|
|
|
|
37,500
|
|
|
|
|
|
|
|
|
|
|
|
37,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gain on market value of investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,610
|
|
|
2,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the Period ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,140,701
|
)
|
|
|
|
|
(2,140,701
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2006
|
|
|
40,024,316
|
|
$
|
400,243
|
|
$
|
16,728,424
|
|
$
|
(494,624
|
)
|
$
|
(14,611,612
|
)
|
$
|
1,570
|
|
$
|
2,024,001
|
|
The
accompanying notes are an integral part of these financial
statements.
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
STATEMENT
OF STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
Number
|
|
|
|
|
|
Paid-in
|
|
|
Development
|
|
|
Development
|
|
|
Comprehensive
|
|
|
|
|
|
|
|
of
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
Stage
|
|
|
Loss
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2006
|
|
|
40,024,316
|
|
|
$
|
400,243
|
|
|
$
|
16,728,424
|
|
|
$
|
(494,624
|
)
|
|
$
|
(14,611,612
|
)
|
|
$
|
1,570
|
|
|
$
|
2,024,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued at an average of $.21 per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
share
in exchange for legal services
|
|
|
201,747
|
|
|
|
2,017
|
|
|
|
38,877
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
41,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued at an average price of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$.18
per share in exchange
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
rent expense
|
|
|
90,207
|
|
|
|
903
|
|
|
|
15,912
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued to directors for services
|
|
|
267,192
|
|
|
|
2,672
|
|
|
|
55,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of warrants vested during the period
|
|
|
|
|
|
|
|
|
|
|
140,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
140,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of options vested during the period
|
|
|
|
|
|
|
|
|
|
|
58,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
and warrants issued for private
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
placement
|
|
|
1,968,333
|
|
|
|
19,863
|
|
|
|
310,817
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
330,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment
for employee options vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
but
not exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gain on market value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,200
|
)
|
|
|
(1,200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Adjustments
|
|
|
|
|
|
|
923
|
|
|
|
(923
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the Period ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2007
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,833,382
|
)
|
|
|
—
|
|
|
|
(1,833,382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2007
|
|
|
42,551,795
|
|
|
$
|
425,518
|
|
|
$
|
17,349,650
|
|
|
$
|
(494,624
|
)
|
|
$
|
(16,387,718
|
)
|
|
$
|
370
|
|
|
$
|
835,920
|
|
The
accompanying notes are an integral part of these financial
statements.
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
|
|
|
|
|
|
|
|
|
Period
from
|
|
|
|
|
|
|
|
|
|
|
February
1, 2003
|
|
|
|
|
|
|
|
|
|
|
(inception
of
|
|
|
|
|
Year
Ended
|
|
|
Year
Ended
|
|
|
development
stage)
|
|
|
|
|
December
31, 2007
|
|
|
December
31, 2006
|
|
|
to
December 31, 2007
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(1,833,382
|
)
|
|
$
|
(2,140,701
|
)
|
|
$
|
(16,420,869
|
)
|
|
Adjustments
to reconcile net income (loss) to net cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
flows
provided (used) by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
542,639
|
|
|
|
543,611
|
|
|
|
1,886,323
|
|
|
Loss
on disposition of assets
|
|
|
—
|
|
|
|
—
|
|
|
|
7,024
|
|
|
Stock
and warrants issued as incentive for notes payables
|
|
|
—
|
|
|
|
—
|
|
|
|
496,389
|
|
|
Stock
issued for interest expense
|
|
|
—
|
|
|
|
—
|
|
|
|
149,878
|
|
|
Stock
issued for rent expense
|
|
|
16,815
|
|
|
|
31,311
|
|
|
|
615,579
|
|
|
Stock
issued for services
|
|
|
100,394
|
|
|
|
168,418
|
|
|
|
1,276,433
|
|
|
Stock
issued for assets and securities
|
|
|
—
|
|
|
|
—
|
|
|
|
43,739
|
|
|
Stock
options and warrants vested
|
|
|
198,792
|
|
|
|
376,859
|
|
|
|
3,965,558
|
|
|
Recognition
of noncash deferred financing expense
|
|
|
—
|
|
|
|
—
|
|
|
|
578,699
|
|
|
Options
and warrants issued for services and financing
|
|
|
—
|
|
|
|
—
|
|
|
|
253,753
|
|
|
Noncash
recovery of other income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(27,001
|
)
|
|
|
19,487
|
|
|
|
(11,603
|
)
|
|
Inventory
|
|
|
10,146
|
|
|
|
5,076
|
|
|
|
(107,922
|
)
|
|
Prepaid
expenses
|
|
|
(3,429
|
)
|
|
|
11,092
|
|
|
|
97,003
|
|
|
Other
assets
|
|
|
6,877
|
|
|
|
763
|
|
|
|
13,247
|
|
|
Accounts
payable
|
|
|
(63,095
|
)
|
|
|
39,092
|
|
|
|
57,112
|
|
|
Accrued
expenses
|
|
|
(48,557
|
)
|
|
|
(14,079
|
)
|
|
|
(69,501
|
)
|
|
Net
cash used by operating activities
|
|
|
(1,099,801
|
)
|
|
|
(959,071
|
)
|
|
|
(7,171,027
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of fixed assets
|
|
|
(17,994
|
)
|
|
|
(69,441
|
)
|
|
|
(2,761,533
|
)
|
|
Patent
costs
|
|
|
5,677
|
|
|
|
(58,204
|
)
|
|
|
(116,745
|
)
|
|
Leasehold
concessions received
|
|
|
—
|
|
|
|
—
|
|
|
|
185,000
|
|
|
Net
cash used by investing activities
|
|
|
(12,317
|
)
|
|
|
(127,645
|
)
|
|
|
(2,693,278
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of common stock units
|
|
|
330,500
|
|
|
|
1,805,265
|
|
|
|
8,768,140
|
|
|
Payments
on capital leases
|
|
|
—
|
|
|
|
(195
|
)
|
|
|
(9,563
|
)
|
|
Proceeds
from related party loans
|
|
|
(24,061
|
)
|
|
|
(28,754
|
)
|
|
|
(56,701
|
)
|
|
Proceeds
from exercise of options
|
|
|
—
|
|
|
|
—
|
|
|
|
1,080
|
|
|
Proceeds
from convertible debt
|
|
|
—
|
|
|
|
—
|
|
|
|
939,900
|
|
|
Net
cash provided by financing activities
|
|
|
306,439
|
|
|
|
1,776,316
|
|
|
|
9,642,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
|
(805,679
|
)
|
|
|
689,600
|
|
|
|
(221,449
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
beginning of period
|
|
|
872,182
|
|
|
|
182,582
|
|
|
|
287,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
end of period
|
|
$
|
66,503
|
|
|
$
|
872,182
|
|
|
$
|
66,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes paid
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Interest
paid
|
|
$
|
8,196
|
|
|
$
|
8,802
|
|
|
$
|
33,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH
INVESTING AND FINANCING:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
and warrants issued for convertible debt
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,613,076
|
|
|
Stock
issued for assets and securities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
43,739
|
|
|
Stock
issued as deferred incentive for notes payables
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
519,587
|
|
|
Warrants
and options issued for deferred services and financing
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
520,102
|
|
|
Accounts
payable paid by contributed capital
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
27,767
|
|
|
Non-cash
recovery of other income
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,850
|
|
The
accompanying notes are an integral part of these financial
statements.
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
NOTE
1 – BUSINESS ORGANIZATION AND BASIS OF PRESENTATION
Integrated
Pharmaceuticals, Inc., (hereinafter, “the Company”) is the successor to Advanced
Process Technologies, Inc. (hereinafter, “APT”) a corporation formed on March
23, 1998 under the laws of the Commonwealth of Massachusetts. In
February 2003, the Company began a new development stage whereby it began the
development of technologies for the production of clinically active
pharmaceutical compounds, including active small molecules and recombinant DNA
technology derived products. The Company was involved in contract
research for pharmaceutical companies, through January 2003, when it changed its
primary focus to the development of its own technology and manufacturing
capacity.
On
September 5, 2000, the Company agreed to an exchange of its stock in an
acquisition with Bitterroot Mining Company (hereinafter
“Bitterroot”). This transaction was accounted for as an acquisition
and recapitalization of an operating enterprise by a non-operating public
company. The legal entity is that of Bitterroot, while the accounting
entity is the operating company, which had been APT. At that time,
the Company acquired new non-qualifying shareholders and automatically converted
from an “S” corporation to a regular “C” corporation. On November 28,
2000, the Company changed its name to Integrated Pharmaceuticals,
Inc. As a result of this transaction, Integrated Pharmaceuticals,
Inc. changed it state of domicile to Idaho, and operates as an Idaho
corporation.
In 2004,
the Company obtained significant additional capital through a private placement
of its stock and the issuance of convertible debt. Additionally, the
majority of this convertible debt was converted to common stock during
2004. The company has raised additional capital through private
placements in 2006, 2007 and 2008 to continue its
operation. Management plans to use the majority of the proceeds from
the 2008 financing to implement its business plan. The Company will
need to raise additional equity in 2008 in order to continue as a going concern,
and is actively pursuing that strategy.
At
December 31, 2007, the Company was considered a development stage enterprise as
it is devoting substantially all of its efforts to establishing a new business
and substantial planned principal operations had not yet commenced.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This
summary of significant accounting policies of the Company is presented to assist
in understanding the Company’s financial statements. The financial
statements and notes are representations of the Company’s management, which is
responsible for their integrity and objectivity. These accounting
policies conform to accounting principles generally accepted in
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
the
United States of America, and have been consistently applied in the preparation
of the financial statements.
Going Concern
The
accompanying consolidated financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate the
continuation of the Company as a going concern. The Company reported net losses
during both 2007 and 2006. These factors, among others, indicate that the
Company may be unable to continue as a going concern for a reasonable period of
time unless break-even can be attained within a reasonable time. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
To
continue developing the Company's business plan, which is now in the initial
production stages and is being deployed with customers, management plans to
raise additional equity before the end of 2008.
Unless
breakeven is achieved and new equity is raised there is substantial doubt about
the Company's ability to continue as a going concern. The recoverability of the
recorded assets and satisfaction of the liabilities reflected in the
accompanying balance sheets is dependent upon our continued operation, which is
in turn dependent upon our ability to raise additional equity to meet its cash
flow requirements on a continuing basis and to succeed in its future operations.
There can be no assurance that management will be successful in implementing its
plans. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Basis of
Accounting
The
Company’s financial statements are prepared using the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United Sates of America. The Company has a December 31 year-end.
Advertising and
Marketing
Advertising
and Marketing Costs are charged to operations in the year incurred. The
Company’s advertising and marketing expenses for the year ended December 31,
2007 and 2006 were $16,837 and $58,297, respectively.
Accounts
Receivable
The
Company carries its accounts receivable at cost less an allowance for doubtful
accounts. On a periodic basis, the Company evaluates its accounts receivable and
establishes an allowance for doubtful accounts, based on a history of past
write-offs and collections and current credit conditions. At December 31, 2007,
the Company determined that an allowance for doubtful accounts was not
necessary. The Company’s policy is not to accrue interest on trade
receivables
Basic and Diluted Earnings
Per Share
The
Company has adopted Statement of Financial Accounting Statement No. 128,
“Earnings Per Share”. Basic earnings per share is computed by dividing net
income (loss) by the weighted average number of basic shares outstanding
increased by the number of shares that would be outstanding assuming conversion
of the exercisable stock options and warrants, and convertible debt. Diluted net
loss per share is the same as basic net loss per share at December 31, 2007 and
2006 as inclusion of the common stock equivalents would be anti-dilutive. The
Company has a total of 56,960,000 and 13,739,367 shares at December 31, 2007 and
2006 respectively, that would be issued if all options and warrants were
exercised.
Cash and Cash
Equivalents
The
Company considers all highly liquid investments with a maturity of three months
or less at the date of acquisition to be cash equivalents
Cost of
Sales
Cost of
sales consists of the purchase price of materials and supplies, labor and
benefits, and other overhead costs associated with production.
Compensated
Absences
Employees
of the Company are entitled to paid vacation, paid sick days and personal days
off depending on job classification, length of service and other factors. No
liability has been recorded in the accompanying financial statements as the
amounts are immaterial.
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
Derivative
Instruments
The
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 133, “Accounting for Derivative Instruments and Hedging
Activities” (hereinafter “SFAS No. 133), as amended by SFAS No. 137, “Accounting
for Derivative Instruments and Hedging Activities – Deferral of the Effective
Date of FASB Statement No. 133”, SFAS No. 138, “Accounting for Certain
Derivative Instruments and Certain Hedging Activities”, and SFAS No. 149,
“Amendment of Statement 133 on Derivative Instruments and Hedging Activities”,
which is effective for the Company as of January 1, 2001. These statements
establish accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. They require that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value.
If
certain conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging derivative with the recognition of (i) the changes in the fair
value of the hedged asset or liability that are attributable to the hedged risk
or (ii) the earnings effect of the hedged forecast transaction. For a derivative
not designated as a hedging instrument, the gain or loss is recognized in income
in the period of change.
Historically,
the Company has not entered into derivatives contracts to hedge existing risks
or for speculative purposes. At December 31, 2007 and 2006, the Company has not
engaged in any transactions the would be considered derivative instruments or
hedging activities.
Use of
Estimates
The
process of preparing fiancial statements in conformity with accounting
principles generally accepted in the United States of America requires the use
of estimates and assumptions regarding certain types of assets, liabilities,
revenues, and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the financial
statements. Accordingly, upon settlement, actual results may differ
from estimated amounts.
Development Stage
Activities
The
Company began a new development stage February 1, 2003, when it discontinued
outside contract research as its primary focus. It is now primarily
engaged in the development and production of clinically active pharmaceutical
compounds, including active small molecules and recombinant DNA technology
derived products.
Fair Value of Financial
Instruments
The
Company’s financial instruments as defined by Statement of Financial Accounting
Standards No. 107, “Disclosures about Fair Value of Financial Instruments,”
include cash, receivables, and payable. The Company’s financial
instruments as defined by Statement of Financial Accounting Standards No. 107,
“Disclosures about Fair Value of Financial Instruments,” include cash,
receivables, prepaid expenses (principally prepaid insurance expensed over the
term of the policy), payables and accrued expenses and short-term
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
borrowings.
All instruments are accounted for on an historical cost basis, which, due to the
short maturity of these financial instruments, approximates fair value at
December 31, 2007 and 2006.
Marketable
Securities
The
Company accounts for marketable securities in accordance with the provisions of
Statement of Financial Accounting Standards No. 115, “Accounting for Certain
Investments in Debt and Equity Securities” (“SFAS No. 115”). Under SFAS
No. 115, debt securities and equity securities that have readily determinable
fair values are to be classified in three categories:
Held
to Maturity – the positive intent and ability to hold to maturity. Amounts
are reported at amortized cost, adjusted for
amortization of premiums and accretion of discounts.
Trading
Securities – bought principally for purpose of selling them in the near
term. Amounts are reported at fair value, with unrealized gains and losses
included in earnings.
Available
for Sale – not classified in one of the above categories. Amounts are
reported at fair value, with unrealized gains and losses excluded from earnings
and reported separately as a component of stockholders’ equity.
Idle Facility
Costs
In
November 2004, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard No. 107, “Inventory Costs- an amendment of ARB
No. 43, Chapter 4.” This statement amends the guidance in ARB No. 43, Chapter 4,
“Inventory Pricing” , to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material (spoilage).
Paragraph 5 of ARB 43, Chapter 4, previously stated that “…under some
circumstances, items such as idle facility expense, excessive spoilage, double
freight, and rehandling costs may be so abnormal as to require treatment as
current period charges….” This statement requires that those items be recognized
as current-period charges regardless of whether they meet the criterion of “so
abnormal”. In addition, this statement requires that allocation of fixed
production overheads to the cost of conversion be based on the normal capacity
of the production facilities. This statement is effective for inventory costs
incurred in fiscal years beginning after June 15, 2005. The Company had
previously adopted this statement for the year ended December 31, 2004. For the
years ended December 31, 2007 and 2006, the Company has recorded $ 566,505 and $
586,180 respectively, as idle facility expense.
Inventory
The
Company maintains an inventory of raw materials, work in process, and finished
goods. Inventories are stated at the lower of cost or
market. Cost has been determined by using the first-in first-out
method. As of December 31, 2007, the Company’s raw material, work in
process, and finished goods inventories totaled $63,674, $12,026, and $32,222,
respectively, and at December 31, 2006 were $62,548, $11,553 and $43,967,
respectively.
Long-Lived
Assets
In
October 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets” (hereinafter “SFAS No. 144”). This standard
establishes a single accounting model for
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
long-lived
assets to be disposed of by sale, including discontinued operations. SFAS No.
144 requires that these long-lived assets be measured at the lower of carrying
amount or fair value less cost to sell, whether reported in continuing
operations or discontinued operations. The Company does not believe any
adjustments are needed to the carrying value of its assets at this
time.
Property and
Equipment
Property
and Equipment are recorded at cost and depreciated using the straight-line
method over the estimated useful lives of five to ten years. See Note
3.
Patents
Patents
are stated at cost. In the years 2007 and 2006 the Company has filed one
provisional application and three non-provisional applications. Amortization is
provided using the straight-line method over the estimated useful lives of ten
years. Amortization expense for the years ended December 31, 2007 and 2006 was
$5,677 and $8,200, respectively.
Accounting for Stock Options
and Warrants Granted to Employees and Nonemployees
Statement
of Financial Accounting Standards No. 123(R), “Accounting for Stock-Based
Compensation”, defines a fair value-based method of accounting for stock options
and other equity instruments. The Company has adopted this method, which
measures compensation costs based on the fair value of the award and recognizes
that cost over the service period. See Note 6.
Provision for
Taxes
Income
taxes are provided based upon the liability method of accounting pursuant to
Statement of Financial Accounting Standards No. 109, “Accounting for Income
Taxes” (hereinafter “SFAS No. 109”). Under this approach, deferred income taxes
are recorded to reflect the tax consequences in future years of differences
between the tax basis of assets and liabilities and their financial reporting
amounts at each year end. A valuation allowance is recorded against deferred tax
assets if management does not believe the Company has met the “more likely than
not” standard imposed by SFAS No. 109 to allow recognition of such an asset. See
Note 4.
Revenue
Recognition
Revenues
and costs of revenues for services are recognized when the contract services are
furnished or delivered. As the Company begins production and shipment of its
products, revenue is recognized when there is credible evidence that an
arrangement exists with the purchaser. The price is fixed and determinable, and
collectability of the charges is reasonably assured. Products are shipped FOB
and title passes upon shipment.
Research and
Development
Research
and development expenses for non-contract related projects are charged to
operations as incurred. Prior to the beginning of the development stage, while
the Company was performing contract research, certain expenses incurred for
specific research and development contracts were
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
borne by
the customers. These expenses, including materials and supplies, labor and
benefits and depreciation of equipment used in the research, were all included
in cost of good sold.
Recent Accounting
Pronouncements
In March
2008, the Financial Accounting Standards Board (FASB) issued FASB Statement No.
161, Disclosures about Derivative Instruments and Hedging Activities. The new
standard is intended to improve financial reporting about derivative instruments
and hedging activities by requiring enhanced disclosures to enable investors to
better understand their effects on an entity’s financial position, financial
performance, and cash flows. It is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged. The company is currently evaluating the impact of
adopting SFAS. No. 161 on its financial statements.
In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
160 (“SFAS 160”), Non-controlling interests in Consolidated Financial
Statements, which establishes accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS 160 is effective for financial statements issued for fiscal
years beginning on or after December 15, 2008, and interim periods within those
fiscal years.
In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141R (“SFAS 141R”), Business Combinations, which establishes principles and
requirements for how the acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any
non-controlling interest in the acquiree, goodwill acquired in the business
combination, or a gain from a bargain purchase. SFAS 141R is effective for
financial statements issued for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008
Effective
November 1, 2007, the Company adopted the Financial Accounting Standards Board
(“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes-an
interpretation of FSAB Statement No. 109” (“FIN 48”). FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in an enterprise’s
financial statements in accordance with FASB Statement No. 109, “Accounting for
Income Taxes”. FIN 48 prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. Additionally, FIN 48
provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. The adoption of FIN 48
did not have a material impact on the Company’s financial position, results of
operation or liquidity.
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities”, which permits entities to choose to
measure many financial assets and financial liabilities at fair value.
Unrealized gains on items for which the fair value option has been elected are
to be reported in earnings. SFAS 159 will become effective as of the beginning
of the first fiscal year that begins after November 15, 2007. Management has not
determined yet the effect that adoption of SFAS 159 may have on our results of
operations or financial position.
In
September, 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 157, “Fair Value Measurements” (hereinafter
“SFAS No. 157”). This statement defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles (GAAP), and
expands disclosure about fair value measurements. This statement applies under
other accounting pronouncements that require or permit fair value measurements.
This statement does not require any new fair value measurements, but for some
entities, the application of this statement may change current practice. The
adoption of this statement had no immediate material effect on the Company’s
financial condition or results of operations.
In
September, 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements
No. 87,88,106, and 132(R)” (hereinafter :SFAS No. 158”). This statement requires
an employer to recognize the overfunded or underfunded statues of a defined
benefit postretirement plan (other than a
multiemployer
plan) as an asset or liability in its statement of financial position and to
recognize changes in that funded status in the year in which the changes occur
through comprehensive income of a business entity or changes in unrestricted net
assets of a not for profit organization. This statement also requires an
employer to measure the funded status of a plan as of the date of its year end
statement of financial position, with limited exceptions. The adoption of this
statement had no immediate material effect on the Company’s financial condition
or results of operations.
In
September, 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 157, “Fair Value Measurements” (hereinafter
“SFAS No. 157”). This statement defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles (GAAP), and
expands disclosure about fair value measurements. This statement applies under
other accounting pronouncements that require or permit fair value measurements.
This statement does not require any new fair value measurements, but for some
entities, the application of this statement may change current practice. The
adoption of this statement had no immediate material effect on the Company’s
financial condition or results of operations.
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
NOTE
3 – PROPERTY AND EQUIPMENT
Property
and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets ranging from
5 to 10 years. The following is a summary of property, equipment and
accumulated depreciation at December 31, 2007 and December 31,
2006:
|
|
|
2007
|
|
|
2006
|
|
|
Equipment
|
|
$
|
1,818,250
|
|
|
$
|
1,800,255
|
|
|
Furniture
and fixtures
|
|
|
120,114
|
|
|
|
120,114
|
|
|
Leasehold
improvements
|
|
|
826,511
|
|
|
|
826,511
|
|
|
|
|
|
2,764,875
|
|
|
|
2,746,880
|
|
|
Less: Accumulated
depreciation
|
|
|
(2,010,137
|
)
|
|
|
(1,467,479
|
)
|
|
Total
|
|
$
|
754,738
|
|
|
$
|
1,279,401
|
|
Depreciation
and amortization expense for the periods ended December 31, 2007 and December
31, 2006 were $542,658 (of which $294,280 is included in “idle facility
expense”), and $535,411 (of which $282,207 is included in “idle facility
expense”), respectively. The Company evaluates the recoverability of
property and equipment when events and circumstances indicate that such assets
might be impaired. The Company determines impairment by comparing the
undiscounted future cash flows estimated to be generated by these assets to
their respective carrying amounts. Maintenance and repairs are
expensed as incurred. Replacements and betterments are
capitalized. The cost and related reserves of assets sold or retired
are removed from the accounts, and any resulting gain or loss is reflected in
results of operations.
NOTE
4– INCOME TAXES
We may
from time to time be assessed interest or penalties by major jurisdictions. In
the event we receive an assessment for interest and/or penalties, it will be
classified in the financial statements as tax expense.
At
December 31, 2007 and 2006 there are no unrecognized tax benefits and no accrued
interest or penalties, and the Company does not expect the unrecognized benefits
to change significantly over the next twelve months. We file income tax returns
in the U.S. federal and state jurisdictions. The statute of limitations remains
open for these jurisdictions for tax years 2003 and forward. The Company has not
taken a position that, if challenged, would have a material effect on the
financial statements for the twelve months ended December 31, 2007, or during
the prior three years applicable under FIN 48. As a result of the adoption of
FIN 48, we did not recognize any adjustment to the beginning balance of
accumulated deficit on the accompanying balance sheet.
The
following is a reconciliation of income tax computed at statutory rates to the
provision for taxes:
|
|
|
December
31, 2007
|
|
|
December
31, 2006
|
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Federal
tax (benefit)
|
|
$
|
(4,859,900
|
)
|
|
|
(34.0
|
)%
|
|
$
|
(4,280,400
|
)
|
|
|
(34.0
|
)%
|
|
State
tax (benefit)
|
|
|
(1,274,000
|
)
|
|
|
(9.5
|
)%
|
|
|
(1,099,400
|
)
|
|
|
(9.5
|
)%
|
|
Expenses
not deductible for income tax purposes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
10,300
|
|
|
|
0.1
|
%
|
|
|
325,300
|
|
|
|
2.6
|
%
|
|
Deferred
tax asset
|
|
|
6,123,600
|
|
|
|
42.9
|
%
|
|
|
5,054,500
|
|
|
|
42.7
|
%
|
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes.
Significant
components of the cumulative deferred tax assets at December 31, 2007 and 2006
are as follows:
|
|
|
2007
|
|
|
2006
|
|
|
Net
operating losses (cumulative)
|
|
$
|
14,293,900
|
|
|
$
|
12,589,300
|
|
|
Tax
depreciation in excess of book
|
|
|
587,600
|
|
|
|
852,600
|
|
|
Net
operating loss carry-forwards
|
|
$
|
13,706,300
|
|
|
$
|
11,736,700
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax asset
|
|
$
|
4,859,900
|
|
|
$
|
4,280,000
|
|
|
Deferred
tax valuation allowance
|
|
$
|
(4,859,900
|
)
|
|
$
|
(4,280,000
|
)
|
At
December 31, 2007 and 2006, the Company has federal net operating loss
carryforwards of approximately $14,293,900 and $12,589,300 respectively, which
expire in the years 2015 through 2022, and state net operating loss
carryforwards of approximately $13,410,700 at December 31, 2007, which expire in
the years 2008 through 2012. The change in the allowance account from December
31, 2006 to December 31, 2007 was $579,900.
NOTE
5 – CAPITAL STOCK
Preferred
Stock
In
November 2004, the Company amended the authorized capital stock section of its
articles of incorporation. The Company is authorized to issue 20,000
shares of non-assessable $0.10 par value preferred stock. As of
December 31, 2007, the Company has not issued any preferred stock.
Common
Stock
In
November 2004, the Company amended the authorized capital stock section of its
articles of incorporation. The Company is authorized to issue
75,000,000 shares of non-assessable $0.01 par value common
stock. Each share of stock is entitled to one vote at the annual
shareholders’ meeting.
In May
2005, the Company commenced a private placement offering of its common stock to
accredited investors. During the first round of investment, the
Company sold 1,044,166 units for $0.75 per unit, with each unit consisting of
one share of common stock and 40% of a warrant to purchase an additional share
of common stock, raising $783,125. The exercise price of the warrants
is $1.50, and they expire on December 31, 2007. The value of the
warrants attached to the stock issued was $110,454, based upon the Black-Scholes
option model.
In
November 2005, during the second round of investment, the Company sold 954,001
units for $0.25 per unit, with each unit consisting of one share of common stock
and 80% of a warrant to
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
purchase
an additional share of common stock, raising $238,500. The exercise
price of the warrants is $0.90, and they expire on June 30, 2008. The
value of the warrants attached to the stock issued was $25,540, based upon the
Black-Scholes calculation.
In
November 2005 individuals that had invested during the first round of the
private placement offering, received additional warrants. They
received 20% of the number of shares originally purchased. The
exercise price of these warrants was $1.50, and they expire on December 31,
2007.
In
November 2005 individuals that invested during both rounds of the private
placement offering received additional warrants. They received 40% of
the number of shares purchased during the first round. The exercise
price of these warrants was $1.50, and they expire on December 31,
2007.
In
January 2006 the Company raised an additional $100,000 from investors based on
the terms of the second round of financing. The company sold 400,000
units for $0.25 per unit, with each unit consisting of one share of common stock
and 80% of a warrant to purchase an additional share of common
stock. The exercise price of the warrants is $0.90, and they expire
on June 30, 2008. The Black-Scholes Option was used to determine the value of
the warrants. The value was determined to be immaterial and therefore not
accounted for separately.
In March
2006 a third round of investing was started. During the period ended
June 30, 2006, the Company sold 3,425,000 units for $.20 per unit, with each
unit consisting of one share of common stock and 40% of a warrant to purchase an
additional share of common stock, raising $685,000. The exercise
price of the warrants is $0.45, and they expire on June 30, 2008. The
Black-Scholes Option was used to determine the value of the warrants. The value
was determined to be immaterial and therefore not accounted for
separately.
In March 2007, the Company issued
267,192 shares of its common stock to its outside directors as compensation for
services rendered in 2006. The Company issued 35,000 shares of common stock to
Dutchess Private Equities Fund Ltd. in April 2007 for a sale price of
$5,411.
In
September 2007 a round of private placement issuing 1,525,000 shares of common
stock at $.20 per share raised $305,000. The placement included 533,750 warrants
at $.45 per share expiring September 30, 2009. The Black-Scholes Option was used
to determine the value of the warrants. The value was determined to be
immaterial and therefore not accounted for separately.
The
Company has a lease for its facility in Fitchburg, Massachusetts whereby the
base rent was paid with one share of common stock for each $1.00 of rent until
April, 2007 when half the rent was paid in cash and half in stock. In October,
2007 the rent increased by three percent, half paid in cash and half in stock. A
total of 90,207 shares, valued at approximately $16,580, were issued during the
twelve month period ended December 31, 2007 for payment of rent and a total of
128,769 shares of stock valued at $31,311, were issued during the year ended
December 31,
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
2006.
Additionally, the Company issued 154,957 shares of common stock at an average
price of $.17 per share in exchange for services during the year ended December
31, 2007 and a total of 137,725 shares of common stock at an average price of
$.22 per share was issued for services during the year ended December 31,
2006.
NOTE
6 – COMMON STOCK OPTIONS AND WARRANTS
2002 Stock
Plan
During
the twelve months ended December 31, 2007, the Company recorded an expense of
approximately $ 58,076 for vested options. 400,000 options valued at
approximately $76,000 expired.
The
following is a summary of the Company’s equity compensation plans:
|
Plan
|
|
Number
of securities to be issued upon exercise of outstanding
options
|
|
|
Weighted-average
exercise price of outstanding options
|
|
|
Number
of securities remaining available for future issuance under equity
compensation plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plan approved by security holders (1)
|
|
|
875,000
|
|
|
$
|
0.62
|
|
|
|
840,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
875,000
|
|
|
|
|
|
|
|
840,000
|
|
(1)
Second Amended and Restated 2002 Stock Plan
During
the year ended December 31, 2006, the Company granted stock options to purchase
a total of 250,000 shares of common stock to its employees. The options are
exercisable at $0.27 per share, and vested on the grant date. The average fair
value of the options of $0.15 each was estimated using the Black Scholes Option
model. The following assumptions were made to value the stock options: risk free
interest rate of 4%; expected life of 5 years; and expected volatility of 62%
with no dividends expected to be paid.
Following
is a summary of the status of the options outstanding during the periods ended
December 31, 2007 and December 31, 2006.
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
|
|
|
Number
of Shares
|
|
|
Weighted
Average Exercise Price
|
|
|
Outstanding
at December 31, 2005
|
|
|
1,160,0000
|
|
|
$
|
0.60
|
|
|
Granted
|
|
|
250,0000
|
|
|
|
.27
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
Rescinded
|
|
|
(135,000
|
)
|
|
|
.50
|
|
|
Outstanding
at December 31, 2006
|
|
|
1,275,000
|
|
|
|
.55
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
Rescinded
|
|
|
(400,000
|
))
|
|
|
.19
|
|
|
Options
outstanding at December 31, 2007
|
|
|
875,000
|
|
|
$
|
0.62
|
|
|
Options
exercisable at December 31, 2007
|
|
|
862,400
|
|
|
$
|
0.67
|
|
Summarized
information about stock options outstanding and exercisable at December 31, 2007
is as follows:
|
|
Outstanding
Options
|
|
|
|
Exercise
Price Range
|
Number
of Shares
|
Weighted
Average Remaining Life
|
Weighted
Average Exercise Price
|
|
$.17
- $1.10
|
875,000
|
2.76
yrs.
|
$.62
|
|
|
Exercisable
Options
|
|
|
|
Exercise
Price Range
|
Number
of Shares
|
Weighted
Average Remaining Life
|
Weighted
Average Exercise Price
|
|
$.18
- $3.05
|
842,600
|
2.84
yrs.
|
$.67
|
|
|
|
|
|
Warrants
At
December 31, 2007and December 31, 2006, there were outstanding warrants to
purchase 12,883,451 and 16,818,695 shares respectively, of the Company’s common
stock, at prices ranging from $.45 to $2.50 per share. The warrants
vest at various rates ranging up to 4 years and expire at various dates through
2014.
NOTE
6 – CONCENTRATIONS
Credit Risk for Cash Held at
Banks
The
Company maintains its cash accounts primarily at a Massachusetts
bank. These funds are insured to a maximum of $100,000. At
December 31, 2007 and at December 31, 2006, none of these funds are considered
at risk.
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2007
NOTE
7 – COMMITMENTS AND CONTINGENCIES
Patent License
Agreement
During
2001, the Company entered into a license agreement, with a related party, for
the rights to a patent application. The Company may further develop,
make, use, sub-lease, promote, distribute, sell and market the patent product or
process. The Company is responsible for the expenses of prosecuting
the patent application, which matured into an issued patent in
2002. In addition, a royalty of 3% of net sales, less discounts, is
obligated to be paid on a quarterly basis for the license, with minimum annual
royalties of $100,000, before discounts. During the periods ended
December 31, 2006 and December 31, 2007, applicable royalties were waived by the
patent holder.
On
October 13, 2005, the license agreement was amended. The related
party agreed to waive any royalties until the Company reaches annual sales of
$5,000,000. In addition, the related party agreed to waive any
royalties if the products produced by the licensed technology don’t make a
profit of more than 12.5% before payment of income taxes (EBITA). No
royalties were paid or accrued during the period ended December 31,
2007.
Building Lease in
Fitchburg
In
September 2003, the Company signed a five-year lease agreement for a commercial
real estate property in Fitchburg, Massachusetts. The base rent,
which for the first year was $10,843 per month, will be paid with one share of
common stock for each $1.00 of rent through April, 2007, when 50% of the rent
became payable in stock and 50% in cash. The lease provides for the Company to
purchase this property in September 2006 and is obligated to do so by September
2008. Total rental expense, including common area charges, for the periods
ending December 31, 2007 and December 31, 2006 was approximately $ 71,166(of
which $51,908 is included in “idle facility expense”) and $45,311 (of which
$30,358 is included in “idle facility expense”).
NOTE
8– CAPITAL LEASES
During
the year ended December 31, 2002, the Company entered into a capital lease
contract for equipment valued at $7,278. The contract is for three years with
monthly payments of $280, plus taxes. This equipment is included in property and
equipment of the Company, and is being depreciated over five years. This lease
was paid off during the year ended December 31, 2006.
NOTE
9– SUBSEQUENT EVENTS
The
September 2007 private placement resulted in an additional 1,325,000 shares
being sold during the first quarter of 2008, raising $265,000. The shares were
purchased at $.20 per share and included 463,750 warrants exercisable through
September 30, 2009 at $.45 per share.
During
the first quarter of 2007, 283,333 options expired at an average price of $.85
per share.
NOTE
10 - RELATED PARTY TRANSACTIONS
Loans
Payable
On
November 7, 2005, the company received a loan from an officer. The loan accrued
interest at 9.99% per annum. During 2006, the Company made monthly payments of
$3,000 including interest. At December 31, 2006, the balance of this loan was
$24,601. This loan was paid in full during 2007. Interest expense for
the years ended December 31, 2007 and 2006 amounted to $1,815 and $1,247,
respectively.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized, in the capacities and on the dates indicated.
|
|
INTEGRATED
PHARMACEUTICALS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
Date: April
11, 2008
|
By:
|
/s/ Peter
Featherston
|
|
|
|
|
Peter
Featherston,
|
|
|
|
|
Chief
Executive Officer, President and
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Nilu
P. Chatterjee
|
|
|
|
|
Nilu
P. Chatterjee,
|
|
|
|
|
Vice
President, Treasurer and Director
|
|
|
|
|
|
|
|
|
|
|
|
|
Date: April
14, 2008
|
By:
|
/s/
Edward Furtado
|
|
|
|
|
Edward
Furtado,
|
|
|
|
|
Vice
President and Director
|
|
|
|
|
|
|
|
|
|
|
|
|
Date: April
__, 2008
|
By:
|
/s/
|
|
|
|
|
Sally
Johnson-Chin,
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ David
H. Smith II
|
|
|
|
|
David
H. Smith II,
|
|
|
|
|
Director
and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Ken
Wlosek
|
|
|
|
|
Ken
Wlosek,
|
|
|
|
|
Director
|
|
Integrated Pharmaceuticals (CE) (USOTC:INTP)
Historical Stock Chart
Von Mai 2024 bis Jun 2024
Integrated Pharmaceuticals (CE) (USOTC:INTP)
Historical Stock Chart
Von Jun 2023 bis Jun 2024
