UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q
(Mark
One)
|
þ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended
June 30,
2008
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period from ______________ to________________
Commission
file number
000-50960
Integrated
Pharmaceuticals, Inc.
(Exact
name of registrant in its charter)
|
|
|
|
|
Idaho
|
|
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
(Registrant
’
s
telephone number, including area code)
(Former
name, former address and former fiscal year, if changes since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
þ
Yes
o
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of “large accelerated filer,” “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act. (Check one):
|
Large accelerated
filer
o
|
Accelerated filer
o
|
|
Non-accelerated
filer
o
|
Smaller reporting
company
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
APPLICABLE
ONLY TO CORPORATE ISSUERS
As of
November 11, 2008, the Issuer had 47,048,217
shares of $.01 par value
common stock outstanding.
INTEGRATED
PHARMACEUTICALS, INC.
FORM
10-Q
TABLE
OF CONTENTS
|
PART
I. – FINANCIAL INFORMATION
|
|
|
|
|
|
|
|
|
ITEM
1
|
Financial
Statements
|
|
|
|
|
|
|
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|
|
Balance
Sheets As Of June 30, 2008 And December 31, 2007
|
|
3
|
|
|
|
|
|
|
|
Statements
Of Operations For The Three Month and Six Month Periods Ended
June 30, 2008 and June 30, 2007, and for the period commencing February 1,
2003 (the commencement of the development stage) and ended June 30,
2008
|
|
4
|
|
|
|
|
|
|
|
Statements Of
Cash Flows For The Six Month Periods Ended June 30, 2008 and
June 30, 2007 and for the period commencing February 1, 2003 (the
commencement of the development stage) and ended June 30,
2008
|
|
5
|
|
|
|
|
|
|
|
Statement
of Stockholders’ Equity for the Sixth Month Period Ended June 30,
2008
|
|
6
|
|
|
|
|
|
|
|
Notes
to Financial Statements – June 30, 2008
|
|
7 -
14
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|
|
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|
ITEM
2
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
|
15
|
|
|
|
|
|
|
ITEM
3
|
Quantitative
and Qualitative Disclosures About Market Risk
|
|
16
|
|
|
|
|
|
|
ITEM
4
|
Controls
and Procedures
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
PART
II. – OTHER INFORMATION
|
|
|
|
|
|
|
|
|
ITEM
1A
|
Risk
Factors
|
|
16
|
|
|
|
|
|
|
ITEM
2
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
|
17
|
|
|
|
|
|
|
ITEM
6
|
Exhibits
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SIGNATURES
|
|
|
18
|
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
|
|
|
June
30,
|
|
|
|
|
|
|
|
2008
|
|
|
December
31,
|
|
|
|
|
(unaudited)
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
Cash
|
|
$
|
180,853
|
|
|
$
|
66,503
|
|
|
Accounts
receivable
|
|
|
—
|
|
|
|
27,687
|
|
|
Inventory
|
|
|
108,384
|
|
|
|
107,922
|
|
|
Prepaid
expenses
|
|
|
68,313
|
|
|
|
43,699
|
|
|
Total
Current Assets
|
|
|
357,550
|
|
|
|
245,811
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT
|
|
|
2,764,875
|
|
|
|
2,764,875
|
|
|
Less:
accumulated depreciation
|
|
|
2,279,070
|
|
|
|
2,010,138
|
|
|
Net
property and equipment
|
|
|
485,805
|
|
|
|
754,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
|
|
|
Investment
|
|
|
1,680
|
|
|
|
2,390
|
|
|
Deposits
|
|
|
—
|
|
|
|
|
|
|
Patents,
net of amortization
|
|
|
97,092
|
|
|
|
102,123
|
|
|
Total
Other Assets
|
|
|
98,772
|
|
|
|
104,513
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
942,127
|
|
|
$
|
1,105,061
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
273,664
|
|
|
$
|
155,659
|
|
|
Accrued
expenses
|
|
|
83,833
|
|
|
|
113,482
|
|
|
Related
party short-term debt
|
|
|
|
|
|
|
—
|
|
|
Capital
leases payable - current portion
|
|
|
—
|
|
|
|
—
|
|
|
Total
Current Liabilities
|
|
|
357,497
|
|
|
|
269,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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;
47,048,217 and 42,551,795 shares
issued
and outstanding, respectively
|
|
|
470,482
|
|
|
|
425,518
|
|
|
Additional
paid-in capital
|
|
|
17,883,050
|
|
|
|
17,349,650
|
|
|
Other
comprehensive income (loss)
|
|
|
(340
|
)
|
|
|
370
|
|
|
Accumulated
deficit prior to development stage
|
|
|
(494,624
|
)
|
|
|
(494,624
|
)
|
|
Accumulated
deficit during development stage
|
|
|
(17,273,938
|
)
|
|
|
(16,444,994
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
Stockholders’ Equity
|
|
|
584,630
|
|
|
|
835,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND
STOCKHOLDERS’
EQUITY
|
|
$
|
942,127
|
|
|
$
|
1,105,061
|
|
The accompanying notes are an integral part of
these financial statements.
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
CONDENSED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February
1, 2003
|
|
|
|
|
Three Months
Ended
|
|
|
Six
Months Ended
|
|
|
(inception
of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
development
stage)
|
|
|
|
|
June
30, 2008
|
|
|
June
30, 2007
|
|
|
June
30, 2008
|
|
|
June
30, 2007
|
|
|
to
June 30, 2008
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
—
|
|
|
$
|
8,400
|
|
|
$
|
—
|
|
|
$
|
8,400
|
|
|
$
|
173,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF GOODS SOLD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Materials
and supplies
|
|
|
—
|
|
|
|
7,680
|
|
|
|
—
|
|
|
|
7,680
|
|
|
|
112,614
|
|
|
Total
Cost of Goods Sold
|
|
|
—
|
|
|
|
7,680
|
|
|
|
—
|
|
|
|
7,680
|
|
|
|
112,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
—
|
|
|
|
720
|
|
|
|
—
|
|
|
|
720
|
|
|
|
60,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GENERAL
AND ADMINISTRATIVE EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
66,376
|
|
|
|
65,844
|
|
|
|
132,082
|
|
|
|
131,688
|
|
|
|
1,158,967
|
|
|
Research
and development
|
|
|
36,290
|
|
|
|
39,563
|
|
|
|
84,699
|
|
|
|
94,151
|
|
|
|
1,235,046
|
|
|
Marketing
|
|
|
885
|
|
|
|
4,696
|
|
|
|
2,910
|
|
|
|
5,051
|
|
|
|
766,027
|
|
|
Legal
and professional fees
|
|
|
53,255
|
|
|
|
93,788
|
|
|
|
60,605
|
|
|
|
173,363
|
|
|
|
1,496,753
|
|
|
Consulting
|
|
|
26,193
|
|
|
|
—
|
|
|
|
42,224
|
|
|
|
59,359
|
|
|
|
3,222,334
|
|
|
Idle
facility expense
|
|
|
136,045
|
|
|
|
128,738
|
|
|
|
255,416
|
|
|
|
269,046
|
|
|
|
2,837,285
|
|
|
Occupancy
|
|
|
23,854
|
|
|
|
22,468
|
|
|
|
76,269
|
|
|
|
47,981
|
|
|
|
1,310,498
|
|
|
Labor
and benefits
|
|
|
22,222
|
|
|
|
75,726
|
|
|
|
54,053
|
|
|
|
98,301
|
|
|
|
1,100,783
|
|
|
Share-based
compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
2,850
|
|
|
|
2,850
|
|
|
|
1,552,499
|
|
|
Office
supplies and expenses
|
|
|
8,933
|
|
|
|
6,182
|
|
|
|
12,992
|
|
|
|
13,394
|
|
|
|
223,849
|
|
|
Travel
|
|
|
3,165
|
|
|
|
4,013
|
|
|
|
4,480
|
|
|
|
4,784
|
|
|
|
192,574
|
|
|
Other
general and administrative expenses
|
|
|
61,049
|
|
|
|
23,961
|
|
|
|
98,103
|
|
|
|
57,919
|
|
|
|
803,819
|
|
|
Total
General and Administrative Expenses
|
|
|
438,267
|
|
|
|
464,979
|
|
|
|
826,683
|
|
|
|
957,887
|
|
|
|
15,900,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
LOSS
|
|
|
(438,267
|
)
|
|
|
(464,259
|
)
|
|
|
(826,683
|
)
|
|
|
(957,167
|
)
|
|
|
(15,839,649
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
2
|
|
|
|
2
|
|
|
|
4
|
|
|
|
3
|
|
|
|
10,068
|
|
|
Interest
expense
|
|
|
(829
|
)
|
|
|
(1,148
|
)
|
|
|
(2,265
|
)
|
|
|
(3,050
|
)
|
|
|
(1,443,239
|
)
|
|
Other
income (expense)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,118
|
)
|
|
Total
Other Expenses
|
|
|
(827
|
)
|
|
|
(1,146
|
)
|
|
|
(2,261
|
)
|
|
|
(3,047
|
)
|
|
|
(1,434,289
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE TAXES
|
|
|
(439,094
|
)
|
|
|
(465,405
|
)
|
|
|
(828,944
|
)
|
|
|
(960,214
|
)
|
|
|
(17,273,938
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
TAXES
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
|
(439,094
|
)
|
|
|
(465,405
|
)
|
|
|
(828,944
|
)
|
|
|
(960,214
|
)
|
|
|
(17,273,938
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gain (loss) in market value of
investments
|
|
|
(80
|
)
|
|
|
—
|
|
|
|
(710
|
)
|
|
|
—
|
|
|
|
2,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
LOSS
|
|
$
|
(439,174
|
)
|
|
$
|
(465,405
|
)
|
|
$
|
(829,654
|
)
|
|
$
|
(960,214
|
)
|
|
$
|
(17,271,878
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) PER COMMON SHARE,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHARES
OUTSTANDING, BASIC AND DILUTED
|
|
|
44,467,862
|
|
|
|
40,235,238
|
|
|
|
43,304,173
|
|
|
|
40,150,868
|
|
|
|
|
|
The accompanying notes are an integral part of
these financial statements.
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
CONDENSED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
Period
from
|
|
|
|
|
Six
Month
|
|
|
Six
Month
|
|
|
February
1, 2003
|
|
|
|
|
Period
Ended
|
|
|
Period
Ended
|
|
|
(inception
of
|
|
|
|
|
June
30, 2008
|
|
|
June
30, 2007
|
|
|
development
stage)
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
to
June 30, 2008
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(828,944
|
)
|
|
$
|
(960,214
|
)
|
|
$
|
(17,273,938
|
)
|
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
used
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
276,048
|
|
|
|
270,981
|
|
|
|
2,162,371
|
|
|
Loss
on disposition of assets
|
|
|
—
|
|
|
|
—
|
|
|
|
7,024
|
|
|
Provision
for bad debt
|
|
|
27,687
|
|
|
|
—
|
|
|
|
27,687
|
|
|
Stock
and warrants issued as incentive for notes payables
|
|
|
—
|
|
|
|
—
|
|
|
|
496,389
|
|
|
Stock
issued for interest expense
|
|
|
—
|
|
|
|
—
|
|
|
|
149,878
|
|
|
Stock
issued for rent expense
|
|
|
3,952
|
|
|
|
12,912
|
|
|
|
619,531
|
|
|
Stock
issued for services
|
|
|
51,562
|
|
|
|
30,864
|
|
|
|
1,390,230
|
|
|
Stock
issued for assets and securities
|
|
|
—
|
|
|
|
—
|
|
|
|
43,739
|
|
|
Share-based
compensation and warrants vested
|
|
|
2,850
|
|
|
|
62,209
|
|
|
|
3,968,408
|
|
|
Recognition
of noncash deferred financing expense
|
|
|
—
|
|
|
|
—
|
|
|
|
578,699
|
|
|
Options
and warrants issued for services and financing
|
|
|
—
|
|
|
|
—
|
|
|
|
253,753
|
|
|
Other
adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,850
|
)
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
—
|
|
|
|
—
|
|
|
|
(11,603
|
)
|
|
Inventory
|
|
|
(462
|
)
|
|
|
4,942
|
|
|
|
(108,384
|
)
|
|
Prepaid
expenses
|
|
|
(24,614
|
)
|
|
|
19,349
|
|
|
|
72,389
|
|
|
Other
assets
|
|
|
—
|
|
|
|
—
|
|
|
|
13,247
|
|
|
Accounts
payable
|
|
|
118,005
|
|
|
|
(24,537
|
)
|
|
|
175,117
|
|
|
Accrued
expenses
|
|
|
(29,649
|
)
|
|
|
(11,228
|
)
|
|
|
(137,279
|
)
|
|
Net
cash used by operating activities
|
|
|
(403,565
|
)
|
|
|
(594,722
|
)
|
|
|
(7,574,592
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
—
|
|
|
|
(16,997
|
)
|
|
|
(2,761,533
|
)
|
|
Patent
costs
|
|
|
(2,085
|
)
|
|
|
1,117
|
|
|
|
(118,830
|
)
|
|
Leasehold
concessions received
|
|
|
—
|
|
|
|
—
|
|
|
|
185,000
|
|
|
Net
cash used by investing activities
|
|
|
(2,085
|
)
|
|
|
(15,880
|
)
|
|
|
(2,695,363
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of common stock units
|
|
|
520,000
|
|
|
|
30,154
|
|
|
|
9,288,140
|
|
|
Payments
on capital leases
|
|
|
—
|
|
|
|
—
|
|
|
|
(9,563
|
)
|
|
Payments
of related party loans
|
|
|
—
|
|
|
|
(24,061
|
)
|
|
|
(56,701
|
)
|
|
Proceeds
from exercise of options
|
|
|
—
|
|
|
|
—
|
|
|
|
1,080
|
|
|
Proceeds
from convertible debt
|
|
|
—
|
|
|
|
—
|
|
|
|
939,900
|
|
|
Net
cash provided by financing activities
|
|
|
520,000
|
|
|
|
6,093
|
|
|
|
10,162,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
|
114,350
|
|
|
|
(604,509
|
)
|
|
|
(107,099
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
beginning of period
|
|
|
66,503
|
|
|
|
872,182
|
|
|
|
287,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
end of period
|
|
$
|
180,853
|
|
|
$
|
267,673
|
|
|
$
|
180,853
|
|
|
SUPPLEMENTAL
CASH FLOW DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
|
Income
taxes paid
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Interest
paid
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
33,196
|
|
|
NON-CASH
INVESTING AND FINANCING:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options and warrants vested
|
|
$
|
2,850
|
|
|
$
|
—
|
|
|
$
|
3,739,965
|
|
|
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
|
|
|
Stock
issued for prepaid and deferred rent and rent expense
|
|
$
|
3,952
|
|
|
$
|
—
|
|
|
$
|
602,716
|
|
|
Stock
and warrants issued for services
|
|
$
|
51,562
|
|
|
$
|
—
|
|
|
$
|
1,127,651
|
|
|
Warrants
and options issued for deferred services and financing
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
520,102
|
|
|
Accounts
payable paid by contributed capital
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
27,767
|
|
|
Noncash
recovery of other income
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,850
|
|
The accompanying notes are an integral part of
these financial statements.
INTEGRATED
PHARMACEUTICALS, INC.
(A
Development Stage Company)
CONDENSED
STATEMENT OF STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Deficit
Prior to
|
|
|
Deficit
During
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
|
|
|
Paid-in
Capital
|
|
|
Stock
Options
and
Warrants
|
|
|
Development
Stage
|
|
|
Development
Stage
|
|
|
Comprehensive
Income(Loss)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2007
|
|
|
42,551,795
|
|
|
$
|
425,518
|
|
|
$
|
17,349,650
|
|
|
$
|
8,421,864
|
|
|
$
|
8,504,429
|
|
|
$
|
(494,624
|
)
|
|
$
|
(16,444,994
|
)
|
|
$
|
370
|
|
|
$
|
835,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued at an average of $.15 per
share in exchange for legal
services
|
|
|
81,780
|
|
|
|
818
|
|
|
|
11,244
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued at an average price of
$.11 per share in exchange for
rent expense
|
|
|
36,942
|
|
|
|
369
|
|
|
|
3,583
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued to directors for services
|
|
|
502,700
|
|
|
|
5,027
|
|
|
|
34,473
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
39,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
2,850
|
|
|
|
—
|
|
|
|
58,076
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
2,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock and warrants issued in
connection with private
placement
|
|
|
3,875,000
|
|
|
|
38,750
|
|
|
|
481,250
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
520,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment
for employee options vested
but not
exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
Unrealized
loss on market value of
investment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(710
|
)
|
|
|
(710
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Adjustments
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
(923
|
)
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
Net
loss for the Period ended
June 30, 2008
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(828,944
|
)
|
|
|
—
|
|
|
|
(828,944
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
June 30, 2008
|
|
|
47,048,217
|
|
|
$
|
470,482
|
|
|
$
|
17,883,050
|
|
|
$
|
8,420,941
|
|
|
$
|
8,562,505
|
|
|
$
|
(494,624
|
)
|
|
$
|
(17,273,938
|
)
|
|
$
|
(340
|
)
|
|
$
|
584,630
|
|
The
accompanying notes are an integral part of these financial
statements.
INTEGRATED
PHARMACEUTICALS, INC. (A Development Stage Company)
CONDENSED
NOTES TO FINANCIAL STATEMENTS
June
30, 2008
NOTE
1 – BUSINESS ORGANIZATION AND BASIS OF PRESENTATION
Operations
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, APT 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, APT acquired new
non-qualifying shareholders and automatically converted from an “S” corporation
to a regular “C” corporation. On November 28, 2000, the APT changed
its name to Integrated Pharmaceuticals, Inc. As a result of this
transaction, Integrated Pharmaceuticals, Inc. changed its state of domicile to
Idaho, and operates as an Idaho corporation.
Subsequent
to June 30, 2008, due to the problems that the Company has encountered in trying
to execute its business plan, the Board voted to suspend all activity related to
bringing its water product to market, to layoff all employees and to focus
instead on reducing or eliminating its liabilities and converting the Company to
an inactive shell. It is expected that the Company will continue in
existence as an inactive shell company. The Company’s Chief Executive
Officer is presently negotiating with all of its vendors to settle the Company’s
outstanding liabilities at below carrying value. The ultimate outcome
of these negotiations is uncertain at this time.
As such,
the accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and the settlement of liabilities and commitments in the normal course of
business. As shown in the accompanying financial statements, the
Company has earned minimal revenues and has incurred a net loss from inception
of development stage (February 1, 2003) through June 30, 2008 totaling
approximately $17.3M. These conditions raise substantial doubt about
the Company’s ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty, and the assets and liabilities of the Company are presented at
carrying value in the accompanying financial statements and do not purport to
represent realizable or settlement values.
INTEGRATED
PHARMACEUTICALS, INC. (A Development Stage Company)
CONDENSED
NOTES TO FINANCIAL STATEMENTS
June
30, 2008
Basis
of Presentation
At June
30, 2008, 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.
The
interim condensed financial statements of Integrated Pharmaceuticals, Inc.
presented herein, without audit, have been prepared pursuant to the rules of the
Securities and Exchange Commission for quarterly reports on Form 10-Q and do not
include all the information and note disclosures required by accounting
principles generally accepted in the United States of America. These
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended December 31, 2007, included in
the Company’s 2007 Annual Report on Form 10-KSB as filed with the Securities and
Exchange Commission.
The
condensed balance sheet as of June 30, 2008, the condensed statements of
operations for the three- and six-month periods ended June 30, 2008, and 2007,
and the condensed statements of cash flows for the six months ended June 30,
2008, and 2007, are unaudited but, in the opinion of management, include all
adjustments (consisting of normal, recurring adjustments) necessary for fair
presentation of results for these interim periods.
The
preparation of financial statement in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilites at the date of
the financial statements and the reported amounts of revenues and expenses
during the reported period.
The
results of operations for the six-month period ended June 30, 2008, are not
necessarily indicative of the results to be expected for the entire fiscal year
ending December 31, 2008.
NOTE
2 – LIMITED 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 the United
States of America, and have been consistently applied in the preparation of the
financial statements.
Use of
Estimates
The
process of preparing financial 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
.
INTEGRATED
PHARMACEUTICALS, INC. (A Development Stage Company)
CONDENSED
NOTES TO FINANCIAL STATEMENTS
June
30, 2008
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 of clinically active pharmaceutical
compounds, including active small molecules and recombinant DNA technology
derived products.
Fair Value of Financial
Instruments
Our
financial instruments as defined by Statement of Financial Accounting Standard
No. 157, “Fair Value Measurements,”(SFAS No. 157), include cash, accounts
receivable, accounts payable and accrued expenses. All instruments
are accounted for on a historical cost basis, which, due to the short maturity
of these financial instruments, approximates fair value at June 30, 2008 and
December 31, 2007.
On
January 1, 2008 the Company adopted SFAS No. 157, which defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value
measurements.
SFAS No.
157 establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurements) and the lowest priority to
unobservable inputs (Level 3 measurements). The three levels of the
fair value hierarchy under SFAS No. 157 are described below:
|
|
Level
1-
|
Unadjusted
quoted prices in active markets that are accessible at the measurement
date for identical unrestricted assets or
liabilities.
|
|
|
Level
2-
|
Quoted
prices in markets that are not active, or inputs that are observable,
either directly or indirectly, for substaintially the full term of the
asset or liability.
|
|
|
Level
3-
|
Prices
or valuation techniques that require inputs that are both significant to
fair value measurement and unobservable (supported by little or no market
activity).
|
The
Company’s cash instruments and investments are classified within Level 1 of the
fair value hierarchy because they are valued using quoted market
prices. The cash instruments and investments that are valued based on
quoted market prices in active markets are primarily money market accounts and
publically traded securities.
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 June 30, 2008, the Company’s raw material, work in
process, and finished goods inventories totaled $63,500, $11,994, and $32,890
respectively and at December 31, 2007, were $63,674, $12,026, and
$32,222, respectively.
Basic and Diluted Earnings
Per Share
Basic
earnings per share is computed by dividing net income (loss) by the weighted
average number of shares outstanding. For purposes of calculating
diluted earnings per share, the weighted average number of shares outstanding is
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 June 30, 2008 and 2007 as inclusion of the common stock equivalents
would be antidilutive. The Company has a total of
50,094,976 shares at June 30, 2008 that would be issued if all
options and warrants were exercised.
NOTE
3 - RECENT ACCOUNTING PRONOUNCEMENTS
In
February 2007, the FASB issued Statement No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (SFAS No. 159). SFAS No. 159 permits
entities to choose to measure many financial instruments and certain other items
at fair value that are not currently required to be measured at fair value.
Subsequent unrealized gains and losses on items for which the fair value option
has been elected will be reported in earnings. The provisions of SFAS No. 159
are effective for financial statements issued for fiscal years beginning after
November 15, 2007. The Company has not adopted the fair value option of SFAS No.
159 on any financial instruments thus far in 2008.
In
December 2007, the FASB issued SFAS No. 141R, “Business Combinations,” which
changes the accounting for business acquisitions. SFAS No. 141R requires the
acquiring entity in a business combination to recognize all (and only) the
assets acquired and liabilities assumed in the transaction and establishes the
acquisition –date fair value of consideration paid in a business combination
(including contingent consideration); excludes transaction costs from
acquisition accounting; and changes accounting practices for acquired
contingencies, acquisition-related restructuring costs, in-process research and
development, indemnification assets and tax benefits. SFAS No. 141R
is effective for business combinations and adjustments to an acquired entity’s
deferred tax asset and liability balances occurring after December 31,
2008. The Company is evaluating the future impacts and disclosures of
this standard.
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements –an amendment of ARB No. 51.” This
statement is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008. SFAS No. 160 requires
the recognition of a noncontrolling interest (minority interest) as equity in
the consolidated financial statements and separate from the parent’s
equity. The amount of net income attributable to the noncontrolling
interest will be included in consolidated net income on the face of the income
statement. SFAS No. 160 amends the consolidation procedures of
certain ARB No. 51 provision for consistency with the requirements of SFAS No.
141(R). This statement requires changes in the parent’s ownership
interest of consolidated subsidiaries to be accounted for as equity
transactions. This statement also includes expanded disclosure
requirements regarding the interests of the parent and its noncontrolling
interest. The Company is currently evaluating the future impacts and
disclosures of this standard.
INTEGRATED
PHARMACEUTICALS, INC. (A Development Stage Company)
CONDENSED
NOTES TO FINANCIAL STATEMENTS
June
30, 2008
In
March 2008, the FASB issued SFAS No. 161, “Disclosures about
Derivative Instruments and Hedging Activities — an amendment of FASB Statement
No. 133” (“SFAS No. 161”). SFAS No. 161 changes the disclosure
requirements for derivative instruments and hedging activities. Entities are
required to provide enhanced disclosures about: (i) how and why an entity
uses derivative instruments; (ii) how derivative instruments and related
hedged items are accounted for under SFAS No. 133 and its related
interpretations; and (iii) how derivative instruments and related hedged
items affect an entity’s financial position, financial performance, and cash
flows. SFAS No. 161 is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008, with early
adoption encouraged. SFAS No. 161 encourages, but does not require,
comparative disclosures for earlier periods at initial adoption. The Company is
currently assessing the impact of adopting SFAS No. 161.
NOTE
4 – 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 June
30, 2008, 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
January 2008, the Company sold 1,325,000 units for $0.20 per unit, raising
$265,000. Each unit consists of one share of common stock and 35% of
a warrant to purchase an additional share of common stock. The
exercise price of the warrants is $0.45 and they expire on September 30, 2009.
The Company issued a total of 463,750 warrants. In May 2008, the
Company sold 2,550,000 units for $.10 per unit, raising
$255,000. Each unit consists of one share of common stock and
warrants calculated as follows; sixty-five percent of the investment dollar
amount was allocated towards warrants at an exercise price of $0.35 per share to
purchase an additional share of common stock resulting in the Company issuing a
total of 473,571 warrants. The warrants expire on December 31,
2009.
Those
investors who invested $25,000 or more in this private placement and who also
invested in the September 2007 Private Placement were granted a nine month
extension of the warrants’ expiration date. The warrants’ value, determined
using the Black-Scholes option pricing model, were deemed immaterial and
therefore not accounted for separately.
INTEGRATED
PHARMACEUTICALS, INC. (A Development Stage Company)
CONDENSED
NOTES TO FINANCIAL STATEMENTS
June
30, 2008
The
Company has a lease for its facility in Fitchburg, Massachusetts whereby the
base rent is paid with one share of common stock for each $1.00 of
rent. A total of 36,942 shares, valued at approximately $3,952 were
issued during the six-month period ended June 30, 2008 for payment of
rent. Additionally, the Company issued 594,600 shares of common stock
at an average price of $0.12 per share in exchange for services valued at
approximately $51,562.
NOTE
5 – COMMON STOCK OPTIONS AND WARRANTS
The
Company measures compensation costs for stock options and other equity
instruments issued to employees based on the fair value of the award and
recognizes that cost over the service period of the employee.
2002 Stock
Plan
During
the six months ended June 30, 2008 and June 30, 2007, the Company recorded an
expense of approximately $2,850 in each period for vested options. At
June 30, 2008, common shares of 1,061,112 were available for future issuance
under equity compensation plans.
Following
is a summary of the status of the options outstanding during the period ended
June 30, 2008.
|
|
|
Number
of Shares
|
|
|
Exercise
Price Weighted Average
|
|
|
Weighted
Average Remaining Life
|
|
|
Outstanding
at December 31, 2007
|
|
|
875,000
|
|
|
$
|
0.62
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
Forfeited/Expired
|
|
|
(336,112
|
)
|
|
|
0.62
|
|
|
|
|
|
Outstanding
at June 30, 2008
|
|
|
538,888
|
|
|
$
|
0.62
|
|
|
|
4.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercisable at June 30, 2008
|
|
|
534,088
|
|
|
$
|
0.62
|
|
|
|
3.11
|
|
|
Options
vested and expected to vest at June 30, 2008
|
|
|
538,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
option exercise price range is $0.17 - $1.00. There was no intrinsic
value of the options at June 30, 2008.
INTEGRATED
PHARMACEUTICALS, INC. (A Development Stage Company)
CONDENSED
NOTES TO FINANCIAL STATEMENTS
June
30, 2008
Future
share-based compensation expense the Company will record as the equity
securities granted through June 30, 2008 vest totals $10,408 and will be
recognized over a weighted average recognition period of .625
years.
Warrants
At June
30, 2008 and December 31, 2007, there were outstanding warrants to purchase
2,507,871 and 12,883,451 shares, respectively, of the Company’s common stock, at
prices ranging from $0.35 to $1.50 per share. The warrants vest at
various rates ranging up to 5 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
June 30, 2008, approximately $ 84,000 was uninsured.
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. Through the period ended
June 30, 2008, the patent holder has relieved the Company of any obligation it
has under this agreement.
Purchase
Obligation
Effective
September, 2003, the Company entered into a facility lease agreement that
expired September 30. 2008. Upon expiration of the lease, the Company
was obligated to purchase the facility for the purchase price of $1,750,000. The
Company is currently negotiating with the landlord to terminate its obligation
to purchase the facility.
INTEGRATED
PHARMACEUTICALS, INC. (A Development Stage Company)
CONDENSED
NOTES TO FINANCIAL STATEMENTS
June
30, 2008
NOTE
8 – CORRECTION OF DECEMBER 31, 2007 FORM 10-KSB
In the
course of preparing the Company’s Form 10Q for the six months ended June 30,
2008, management noted certain mathematical, transposition, and formatting
errors in the presentation of its Form 10-KSB for the year ended December 31,
2007. Certain accounts have been corrected in the accompanying comparative
financial statements for 2007 for these errors.
|
Balance
sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
As originally filed
|
|
|
Change
|
|
|
As corrected
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
$
|
425,051
|
|
|
$
|
467
|
|
|
$
|
425,518
|
|
|
Additional
paid-in capital
|
|
|
17,283,196
|
|
|
|
66,454
|
|
|
|
17,349,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
deficit prior to development stage
|
|
$
|
(16,387,718
|
)
|
|
$
|
(57,276
|
)
|
|
$
|
(16,444,994
|
)
|
|
ITEM
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
Forward-looking
Statements:
This
Quarterly 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. All of
the forward-looking statements are qualified in their entirety by reference to
the risk factors and other disclaimers described in the Company’s filings with
the Securities and Exchange Commission, in particular its most recent 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.
Overview:
We
generated no operating revenue during the second quarter of 2008 as we continued
our transition from development stage production company to a consumer-product
company utilizing our technology to launch a new bottled water product called
HEALTHYCAL+™ and position the Company to sell minerals powders in the
marketplace.
Initial
bottling of HEALTHYCAL+ was delayed by the bottlers in 2008. As test bottling
progressed, we discovered an adverse taste and microbial reaction to our
minerals, apparently from the application of ozone, by the bottler to the water
product. More rounds of bottling were conducted to address this problem. In
August, we conducted a final bottling test and sent water for 50 State FDA and
State compliance analysis. Unfortunately, adverse reactions continued. As such,
the label that was being designed for sale of the bottled water was
put on hold and 50 State analysis canceled. Management met with the research and
development team to discuss options. It was determined that the best course of
action at this time was to terminate the staff and close the
facility.
General
and Administrative Expenses.
General
and Administrative expenses (G&A) decreased 6% to $438,267 for
the three-month period ended June 30, 2008 from $464,979 in the same period of
2007. G&A expenses decreased 14% to $826,683 for the six-month
period ended June 30, 2008 from $957,887 in the same period of
2007. For the three- and six-month periods of 2008, there was a
decrease in legal expenses and labor and benefits partially offset by an
increase in consulting and temporary help.
Liquidity
and Capital Resources.
In the
first and second quarter of 2008 we raised approximately $265,000 and $255,000,
respectively, in private placement of our common stock. We fell short
of our anticipated $750,000 and we will need to raise additional funds in order
to advertise, market, manufacture and distribute our bottled water and our
calcium supplement products in the future.
Our
liquidity and the Company’s viability will be affected by our ability to raise
additional capital.
Facility
and equipment and software upgrades are required to maintain the certifications
necessary to produce our mineral powders especially as they relate to human
consumption in food and beverage products. The costs of those upgrades are not
known.
Subsequent
to June 30, 2008, due to the problems that we have encountered in trying to
execute our business plan, the Board voted to suspend all activity related to
bringing or water product to market, to layoff all employees and to focus
instead on reducing or eliminating our liabilities and converting the Company to
an inactive shell. It is expected that the Company will continue
existence as an inactive shell company. The Company’s Chief Executive
Officer is presently negotiating with all of our vendors to settle the Company’s
outstanding liabilities at below carrying value. The ultimate outcome
of these negotiations is uncertain at this time.
Material Commitments for Capital
Expenditures.
We have no such commitments outstanding other than the
obligation to purchase our Fitchburg facility for $1.75
million. We are currently negotiating with the landlord to
terminate the obligation to purchase this facility.
Off-Balance Sheet
Arrangements
. We have no off-balance sheet
arrangements.
|
ITEM 3.
|
Quantitative and Qualitative
Disclosures About Market
Risk
|
Not
required for smaller reporting companies
|
ITEM
4.
|
Controls
and Procedures
|
Disclosure
Controls And Procedures
As of the
end of the period covered by this report, the Company’s Chief Executive Officer
and Chief Financial Officer performed an evaluation of the effectiveness of the
Company’s disclosure controls and procedures (as defined in SEC Rule 13a-15 or
15d-15). Based upon that evaluation, they concluded that the disclosure controls
and procedures were effective.
There has
been no change in the Company’s internal control over financial reporting during
the most recent fiscal quarter that has materially affected, or is reasonable
likely to materially affect, the Company’s internal control over financial
reporting.
PART
II. – OTHER INFORMATION
Information
regarding risk factors appears in Part 1 – Item 2 of this Form 10Q in
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” under “Forward-Looking Statements” and in or Annual Report on Form
10-KSB for the fiscal year ended December 31, 2007, in Part II – Item 1A under
“Risk Factors” and in Part I – Item 2T under “Management’s Discussion and
Analysis of Financial Condition and Results of Operations.” There has
been no material change from the risk factors previously disclosed in our Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2007.
|
ITEM
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
In April
and May 2008, we raised $255,000 in a private placement of 2,550,000 units
consisting of common stock and warrants. Each unit sold for
$0.10 per unit included one share of stock and a warrant to purchase 0.65 shares
of our common stock. The warrants expire on December 31, 2009 and are
exercisable at $0.35 per share. Those investors who invested $25,000
or more in this private placement and who also invested in the September 2007
Private Placement were granted a nine month extension of the warrants purchased
in the September 2007 private placement, extending the expiration date of those
warrants from September 30, 2009 to June 30, 2010.
The
following documents are filed as exhibits to this Form 10-Q:
|
Number
|
Description
of Exhibit
|
|
|
|
|
31.1
|
Rule
13a-14(a) or Rule 15d-14(a) Certification of the Chief Executive
Officer
|
|
|
|
|
31.2
|
Rule
13a-14(a) or Rule 15d-14(a) Certification of the Chief Financial
Officer
|
|
|
|
|
32
|
Certification
pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
Integrated Pharmaceuticals, Inc.
|
|
|
|
|
|
|
|
Date:
November 11, 2008
|
By:
|
/s/ Peter
Featherston
|
|
|
|
|
Peter
Featherston
|
|
|
|
|
CEO
|
|
|
|
|
|
|
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