WWW.EXFILE.COM, INC. -- INTEGRATED PHARMACEUTICALS, INC -- FORM 10-QSB

10QSB 1 form10-qsb_15310.htm INTEGRATED PHARMACEUTICALS, INC. WWW.EXFILE.COM, INC. -- INTEGRATED PHARMACEUTICALS, INC -- FORM 10-QSB

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-QSB

(Mark One)

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

RANSITION REPORT UNDER 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 small business issuer 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
	(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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes o Noo

APPLICABLE ONLY TO CORPORATE ISSUERS

As of July 23, 2007 the Issuer had 40,975,328 shares of common stock outstanding.

Transitional Small Business Disclosure Format (Check one): Yeso Noþ

INTEGRATED PHARMACEUTICALS, INC.

FORM 10-QSB

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		PAGE

ITEM 1	Financial Statements	2

ITEM 2	Plan of Operation; Management’s Discussion and Analysis	11

ITEM 3	Controls and Procedures	12




PART II. – OTHER INFORMATION

ITEM 1	Legal Proceedings	13

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	13

ITEM 3	Default Upon Senior Securities	13

ITEM 4	Submission of Matters to a Vote of Security Holders	13

ITEM 5	Other Information	13

ITEM 6	Exhibits and Reports on Form 8-K	14

SIGNATURES		15

NOTE REGARDING FORWARD-LOOKING STATEMENTS

Except for statements of historical fact, certain information described in this document contains “forward-looking statements” that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “anticipate,”“believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will” and “would” or similar words. You should read the statements that contain these words carefully because these statements discuss our future expectations, contain projections of our future results of operations or of our financial position or state other “forward-looking” information. Integrated Pharmaceuticals, Inc. believes that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control. The factors listed below in the section captioned “Risk Factors,” within the section “Description of Business” as well as any cautionary language in this Form, provide examples of risks, uncertainties and events that may cause our actual results and achievements expressed or implied to differ materially from the expectations we described in our forward-looking statements. Integrated Pharmaceuticals, Inc. believes that before you invest in our common stock, you should be aware that the occurrence of the events described in these risk factors and elsewhere in this Form could have a material adverse effect on our business, results of operations and financial position.

PART I

ITEM 1. Financial Statements

Integrated Pharmaceuticals Inc.

Financial Statements

For The Quarter Ended June 30, 2007

(Unaudited)

CONTENTS

PAGE

Balance Sheets As At June 30, 2007 And December 31, 2006

Statements Of Operations And Income For The Three Months Ended June 30, 2007 and June 30, 2006

Statements Of Cash Flows For The Three Months Ended June 30, 2007 and June 30, 2006

7- 31

Notes To Financial Statements – June 30, 2007

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INTEGRATED PHARMACEUTICALS, INC.

(A Development Stage Company)

BALANCE SHEETS

	June 30,			Audited
	2007			December 31,
	(unaudited)			2006

ASSETS
CURRENT ASSETS
Cash	$	267,674		$	872,182
Accounts receivable		686			686
Inventory		113,126			118,068
Prepaid expenses		27,779			47,128
Total Current Assets		409,265			1,038,064

PROPERTY AND EQUIPMENT, net		1,025,416			1,279,401

OTHER ASSETS
Investments		3,810			3,590
Deposits		—			—
Patents, net of amortization		106,683			107,800
Total Other Assets		110,493			111,390

TOTAL ASSETS	$	1,545,174		$	2,428,855

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	194,217		$	218,754
Accrued expenses		150,811			162,039
Related party short-term debt					24,061
Capital leases payable - current portion		—			—
Total Current Liabilities		345,028			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; 40,685,800 and 40,024,316 shares
issued and outstanding, respectively		406,858			400,243
Additional paid-in capital		16,857,948			16,728,424
Other comprehensive income (loss)		1,790			1,570
Accumulated deficit prior to development stage		(494,624	)		(494,624	)
Accumulated deficit during development stage		(15,571,826	)		(14,611,612	)

Total Stockholders’ Equity		1,200,146			2,024,001

TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY	$	1,545,174		$	2,428,855

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

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INTEGRATED PHARMACEUTICALS, INC.

(A Development Stage Company)

STATEMENTS OF OPERATIONS

													Period from
													February 1, 2003
	Three Months Ended						Six Months Ended						(inception of
													development stage)
	June 30, 2007			June 30, 2006			June 30, 2007			June 30, 2006			to June 30, 2007
	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)

REVENUES	$	8,400			14,400			8,400		$	60,658		$	146,399

COST OF GOODS SOLD
Materials and supplies		7,680			13,112			7,680			56,101			108,759
Total Cost of Goods Sold		7,680			13,112			7,680			56,101			108,759

GROSS PROFIT		720			1,288			720			4,557			37,640

GENERAL AND ADMINISTRATIVE EXPENSES
Depreciation and amortization		65,844			64,286			131,688			130,786			916,858
Research and development		39,563			43,523			94,151			86,533			1,053,948
Marketing		4,696			6,777			5,051			8,849			634,685
Legal and professional fees		93,788			45,669			173,363			91,891			1,411,616
Consulting		—			14,719			59,359			74,078			3,193,448
Idle facility expense		128,738			131,469			269,046			285,264			2,284,408
Occupancy		22,468			36,274			47,981			69,210			1,178,377
Labor and benefits		75,726			21,843			98,301			47,668			950,269
Services paid by stock options		—			79,875			2,850			180,648			1,494,423
Office supplies and expenses		6,182			5,037			13,394			9,918			199,510
Travel		4,013			2,819			4,784			3,621			185,161
Other general and administrative expenses		23,961			25,453			57,919			76,075			683,098
Total General and Administrative Expenses		464,979			477,744			957,887			1,064,541			14,185,801

OPERATING INCOME (LOSS)		(464,259	)		(476,456	)		(957,167	)		(1,059,984	)		(14,148,161	)

OTHER INCOME (EXPENSES)
Interest income		2			3			3			76			10,282
Interest expense		(1,148	)		(1,469	)		(3,050	)		(3,037	)		(1,428,387	)
Other income (expense)		—			—			—			—			(5,560	)
Total Other Income and Expenses		(1,146	)		(1,466	)		(3,047	)		(2,961	)		(1,423,665	)

LOSS BEFORE TAXES		(465,405	)		(477,922	)		(960,214	)		(1,062,945	)		(15,571,826	)

INCOME TAXES		—			—			—			—			—

NET LOSS		(465,405	)		(477,922	)		(960,214	)		(1,062,945	)		(15,571,826	)

OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gain (loss) in market value of
investments					900						2,450			1,570

COMPREHENSIVE LOSS	$	(465,405	)		(477,022	)		(960,214	)	$	(1,060,495	)	$	(15,570,256	)

NET INCOME (LOSS) PER COMMON SHARE,
BASIC AND DILUTED	(0.01		)		(0.02	)		(0.02	)	$	(0.05	)

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING, BASIC AND DILUTED		40,235,238			20,231,949			40,150,868			20,231,949

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

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INTEGRATED PHARMACEUTICALS, INC.

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

							Period from
							February 1, 2003
							(inception of
	Period Ended			Period Ended			development stage)
	June 30, 2007			June 30, 2006			to June 30, 2007
	(unaudited)			(unaudited)			(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(960,214	)	$	(1,062,945	)	$	(15,571,826	)
Adjustments to reconcile net income (loss) to net cash
flows provided (used) by operating activities:
Depreciation and amortization		270,981			266,240			1,614,646
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		12,912			17,033			611,676
Stock and options issued for services		30,864			11,954			1,206,903
Stock issued for assets and securities		—			—			43,739
Stock options and warrants vested		62,209			254,726			3,853,100
Recognition of noncash deferred financing expense		—			—			578,699
Options and warrants issued for services and financing		—			—			253,753
Noncash recovery of other income		—			—			(1,850	)
Changes in assets and liabilities:
Receivables		—			(18,912	)		15,398
Inventory		4,942			15,439			(113,126	)
Prepaid expenses		19,349			24,182			119,781
Other assets		—			763			6,370
Accounts payable		(24,537	)		(18,859	)		95,670
Accrued expenses		(11,228	)		6,313			(32,172	)
Net cash used by operating activities		(594,722	)		(504,066	)		(6,665,948	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets		(16,997	)		(4,167	)		(2,760,536	)
Patent costs		1,117			(39,784	)		(121,305	)
Leasehold concessions received		—			—			185,000
Net cash used by investing activities		(15,880	)		(43,951	)		(2,696,841	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock units		30,154			785,000			8,467,794
Payments on capital leases		—			(195	)		(9,563	)
Proceeds from related party loans		(24,061	)		(12,434	)		(56,701	)
Proceeds from exercise of options		—			—			1,080
Proceeds from convertible debt		—			—			939,900
Net cash provided by financing activities		6,093			772,371			9,342,510

Net increase in cash		(604,509	)		224,354			(20,279	)

Cash, beginning of period		872,182			182,582			287,952

Cash, end of period	$	267,673		$	406,936		$	267,673



SUPPLEMENTAL CASH FLOW DISCLOSURES:
Income taxes paid	$	—		$	—		$	—
Interest paid	$	—		$	—		$	33,802

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
Noncash recovery of other income	$	—		$	—		$	1,850

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

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INTEGRATED PHARMACEUTICALS, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS

June 30, 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.

The company has raised additional capital through private placements in 2006 to continue its operations. Management plans to use the majority of the proceeds from the financing to implement its business plan. As a result of the proceeds received management has determined that it can continue as a going concern for at least the next twelve months.

At June 30, 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.

The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10QSB and Regulation S-B as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2006. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented. Operating results for the three-month period ended June 30, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.

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INTEGRATED PHARMACEUTICALS, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS

June 30, 2007

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.

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. All instruments are accounted for on an historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at June 30, 2007.

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, 2007, the Company’s raw material, work in process, and finished goods inventories totaled $63,952, $12,887, and $36,287 respectively.

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 June 30, 2007 and December 31, 2006:

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INTEGRATED PHARMACEUTICALS, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS

June 30, 2007

	2007			2006
Equipment	$	1,817,252		$	1,800,255
Furniture and fixtures		120,114			120,114
Leasehold improvements		826,511			826,511
		2,763,877			2,746,880
Less: Accumulated depreciation		(1,738,461	)		(1,467,479	)
Total	$	1,025,416		$	1,279,401

Depreciation and amortization expense for the periods ended June 30, 2007 and December 31, 2006 were $270,981 (of which $145,414 is included in “idle facility expense”), and $535,411 (of which $282,963 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 – 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 September 30, 2006, 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 2007, the Company sold 408,333 units for $0.06 per unit, raising $24,500. Each units consists of one share of common stock and 50% of a warrant to purchase an additional share of common stock. The exercise price of the warrants is $0.35 and they expire on 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 71,736 shares, valued at approximately $12,912 were issued during the six-month period ended June 30, 2007 for payment of rent. Additionally, the Company issued 146,367 shares of common stock at an average price of $.0.21 per share in exchange for services.

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INTEGRATED PHARMACEUTICALS, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS

June 30, 2007

NOTE 5 – COMMON STOCK OPTIONS AND WARRANTS

2002 Stock Plan

During the six months ended June 30, 2007, the Company recorded an expense of approximately $2,850 for vested options.

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)	1,025,000	$0.62	575,000

Total	1,025,000		575,000

(1) Second Amended and Restated 2002 Stock Plan

Following is a summary of the status of the options outstanding during the periods ended December 31, 2006 and June 30, 2007.

	Number of Shares	Weighted Average Exercise Price
Outstanding at January 1, 2006	1,160,000	$ 0.60
Granted	250,000	.27
Exercised	—	—
Forfeited	(135,000)	(0.50)
Outstanding at December 31, 2006	1,275,000	0.55
Granted	—	—
Exercised	—	—
Rescinded	—	—
Options outstanding at June 30, 2007	1,275,000	$ 0.55

Options exercisable at June 30, 2007	877,4000	$ 0.67
Weighted average fair value of options granted in 2007		—

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INTEGRATED PHARMACEUTICALS, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS

June 30, 2007

Warrants

At June 30, 2007 and December 31, 2006, there were outstanding warrants to purchase 12,565,885 and 12,306,968 shares respectively, of the Company’s common stock, at prices ranging from $0.35 to $2.50 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, 2007, approximately $ 169,674 was at risk.

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 June 30, 2007, applicable royalties were waived by the patent holder.

NOTE 8 –SUBSEQUENT EVENTS

Subsequent to June 30, 2007 Dr. Chinmay Chatterjee resigned as a director of the Company for personal reasons. Prior to his resignation, Dr. Chatterjee had served as chairman of the board of directors and as a member of the Company’s audit committee. Dr. Chatterjee also resigned as the Company’s chief executive officer and president. In his capacity as president of the Company, Dr. Chatterjee had also served as the Company’s principal financial officer. David Smith has agreed to serve as interim Chief Executive Officer, President and Chief Financial Officer. Currently, Mr. Smith is not being compensated for these services.

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Item 2 Management’s Discussion and Analysis

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-QSB. 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-QSB.

We generated almost no operating revenue during the calendar year of 2003, which was a year of transition from a contract research organization to a development stage production company. We had no operating revenue during the 2^nd quarter 2007 compared to $14,400 of revenue for the 2^nd quarter 2006.

Plan of Operation.

We are now a development stage company. As described in further detail below, we had no substantial operating revenue in 2005 or 2006. However, during 2005, we completed construction of our production facility and focused on 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. 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. In 2007, we have further focused our efforts to concentrate on our proposed mineral water product.

On July 18, 2007, Chinmay Chatterjee submitted his immediate resignation as our CEO and President and as a member of the Board of Directors . Mr. David H. Smith, a Board member since 2004 and a major shareholder immediately became acting CEO, President, CFO and Chairman of the Board.

Since 1996, Mr. Smith 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, sold to Williams Company in 2003), Tailwind V.C., LLC (founded in 2000, sold to Williams Company in 2003) and Fivex, LLC (founded in 2004). He has had significant business experience in the clinical laboratory industry. He was a co-founder and vice president of Canberra Industries (later known as Packard Biosciences), a large publicly-traded manufacturer of analytical instruments that was sold to Perkin-Elmer in 2001.Mr. Smith was founder, CEO and president 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. He is also a director of Dynamic Therapeutics, Inc. and Spincor LLC. Mr. Smith has no employment agreement with the Company, and is receiving no additional compensation for his new roles.

Mr. Smith is actively interviewing several well qualified candidates to succeed him as our CEO and President, and expects to offer the position to the best candidate by August 31, 2007. The candidates all have extensive sales and marketing expertise. We needs these skills now as we are about to launch our new and unique bottled water product, Healthy Cal +™ This product will have 135 milligrams of calcium and 35 milligrams of magnesium in a half liter of water. Both important minerals as made by the Company are 100% soluble and 100% absorbable.

We took possession of our new bottling and labeling machines at our 39,000 sq.ft. facility approximately a month ago. Both machines are functioning properly. We have new bottles on our premises and expects new labels to arrive before the end of August 2007. Shortly thereafter, we will have a finished bottle water product to show prospective buyers.

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We are interviewing several experienced sales representative to sell our healthy bottled water. We expect to hire 3 or 4 representative to introduce and sell our products by mid-September, 2007. Supporting sales literature is expected to be available at the beginning of September 2007.

We expect to first sell our bottled water in New England, primarily through stores emphasizing health and organic products as well as high end stores, health clubs and spas. Distributors will be called on to distribute the product.

Prior to shipping product, we must meet state and federal requirements for approval. The company is addressing those issues currently.

Over the next nine months we hope to keep our water bottling plant running smoothly in our Fitchburg facility and continue to sell our proprietary products for calcium supplements.

Financial Condition and Operations

Financial Condition.

We raised approximately $1,050,260 in a private placement of our common stock in December 2006. Our cash position at June 30, 2007 was $267,764. We have reduced our operating loss from $476,465 in the second quarter of 2006 to $465,405 for the second quarter of 2007. We anticipate that we will require additional funds by October 2007 in order to start the production of our water product, advertise, market, meet our operating costs and distribute our bottled water products in 2007 and 2008. In the first quarter of 2007, we filed a registration statement on SEC form SB-2, as we agreed to do in our financing agreement with Dutchess Private Equities Fund, Ltd. (“Dutchess”). Other than our arrangement with Dutchess, we have no commitments from financial sources for this additional capital.

Other than as described above, we know of no long-term or short-term trends or events that have or are reasonably likely to have a material impact on or short-term or long-term liquidity. 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.

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.

Material Commitments for Capital Expenditures. We have no such commitments outstanding.

Trends and Seasonality. We are not aware of any trends that are likely to have a material impact on our liquidity, or on our net sales or revenues or income from continuing operations. We are not aware of any seasonality in our business.

Off-Balance Sheet Arrangements. We have no off-balance sheet arrangements.

Item 3. Controls and Procedures

David Smith, President, CEO and Chief Financial Officer, has evaluated the Company’s disclosure controls and procedures in effect as of June 30, 2007 and concluded that they were effective. He concluded that the controls and procedures provided the officers, on a timely basis, with all information necessary for them to determine that the Company has disclosed all material information required to be included in the Company’s periodic reports filed with the Securities and Exchange Commission. Based upon this evaluation, there were not any significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

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PART II. – OTHER INFORMATION

Item 1. Legal Proceedings.

The Company is not a party to any pending legal proceedings, nor is its property the subject of any pending legal proceeding.

ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds

During the three-month period ended June 30, 2007, we sold 35,000 shares of our common stock to Dutchess for $5,411 in an unregistered sales of equity securities We have used those funds for our general corporate purposes. During the same period, we issued 17,934 shares of our common stock to our landlord in partial payment of our rent.

In January 2006, we raised $100,000 from accredited investors based a price $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.

Later in 2006, we sold 3,425,000 units for $.20 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 $685,000. The exercise price of the warrants is $0.45, and they expire on 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 93,972 shares, valued at approximately $22,605, were issued during the nine-month period ended September 30, 2006 for payment of rent. Additionally, the Company issued 72,095 shares of common stock at an average price of $.26 per share during that period in exchange for services.

We raised approximately $1,050,260 in a private placement of our common stock in December 2006. This placement was made to accredited investors who purchased units from the Company, at $0.06 per unit, consisting of one share of common stock and a warrant to purchase one-half share at $0.35. These warrants will expire on June 30, 2008.

After June 30, 2007, we issued 149,681 shares of our common stock to a law firm in partial payment of our legal fees, and an additional 17,934 shares to our landlord in partial payment of our rent.

ITEM 3 Default Upon Senior Securities

The Company has no senior securities outstanding.

Item 4. Submission of Matters to a Vote of Security Holders.

No matter was submitted during the first quarter of the fiscal year covered by this report to a vote of security holders, through the solicitation of proxies or otherwise.

Item 5. Other Information.

None.

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ITEM 6 Exhibits and Reports on Form 8-K

The following documents are filed as exhibits to this Form 10-QSB:

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.

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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.

s/s David Smith________________________________________________

By: David Smith

Its: CEO

Date: August 14, 2007

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