Integrated Pharmaceuticals 10QSB Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-QSB

(Mark One)

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

For the quarterly period ended June 30, 2005

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 ____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
2006 Common Stock Purchase Warrants	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 7, 2005, the Issuer had 16,853,965 shares of common stock outstanding.

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

INTEGRATED PHARMACEUTICALS, INC.

FORM 10-QSB

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
ITEM 1 Financial Statements	2
ITEM 2 Management's Discussion and Analysis	11
ITEM 3 Controls and Procedures	12
PART II. - OTHER INFORMATION
ITEM 1 Legal Proceedings	12
ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds	12
ITEM 3 Default Upon Senior Securities	12
ITEM 4 Submission of Matters to a Vote of Security Holders	12
ITEM 5 Other Information	12
ITEM 6 Exhibits and Reports on Form 8-K	13

 SIGNATURES

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

Integrate Pharmaceuticals Inc.

Financial Statements

For The Quarter Ended June 30, 2005

(Unaudited)

CONTENTS

PAGE

3 Balance Sheets As At June 30, 2005 And December 31, 2004

4 Statements Of Operations And Income For The Six Months Ended June 30, 2005 and 2004

5  Statements Of Stockholders' Equity For The Periods Ended June 30, 2005 And December 31, 2004

6 Statements Of Cash Flows For The Six Months Ended June 30, 2005 and 2004

7-11Notes To Financial Statements - June 30, 2005

INTEGRATED PHARMACEUTICALS, INC.

(A Development Stage Company)

BALANCE SHEETS

		June 30,
		2005			December 31,
		(unaudited)			2004
ASSETS
CURRENT ASSETS
Cash	$	262,702		$	1,461,708
Accounts receivable		9,000			-
Inventory		128,241			83,558
Prepaid expenses		15,162			42,543
Total Current Assets		415,105			1,587,809
PROPERTY AND EQUIPMENT, net		2,003,768			2,075,001
OTHER ASSETS
Investments		1,220			2,000
Deposits		763			763
Total Other Assets		1,983			2,763
TOTAL ASSETS	$	2,420,856		$	3,665,573
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	216,204		$	269,030
Accrued expenses		140,811			114,709
Capital leases payable - current portion		1,879			4,646
Total Current Liabilities		358,894			388,385
Total Liabilities		358,894			388,385
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; 16,833,239 and 16,443,500 shares
issued and outstanding, respectively		168,333			164,435
Additional paid-in capital		6,055,848			5,609,581
Other comprehensive income (loss)		(800	)		(20	)
Stock options and warrants		7,221,687			6,613,509
Accumulated deficit prior to development stage		(494,624	)		(494,624	)
Accumulated deficit during development stage		(10,888,482	)		(8,615,693	)
Total Stockholders' Equity		2,061,962			3,277,188
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,420,856		$	3,665,573

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

3

INTEGRATED PHARMACEUTICALS, INC.

(A Development Stage Company)

STATEMENTS OF OPERATIONS

								February 1, 2003				Period from
								(inception of				February 1, 2003
		Six Months Ended			Six Months Ended			Period from development stage) to		Period from February 1, 2003 (inception of		(inception of development stage) to
		June 30, 2005			June 30, 2004			June 30, 2005		development stage) to		March 31, 2005
		(unaudited)			(unaudited)			(unaudited)		December 31, 2004		(unaudited)
REVENUES	$	34,650		$	-		$	34,650		-		34,650.00
COST OF GOODS SOLD
Materials and supplies		5,694			-			5,694		-		5,694.00
Total Cost of Goods Sold		5,694			-			5,694		-		5,694.00
GROSS PROFIT		28,956			-			28,956		-		28,956.00
GENERAL AND ADMINISTRATIVE EXPENSES
Depreciation and amortization		125,497			62,037			390,213		264,716.00		326,746.00
Research and development		167,142			18,355			639,895		472,753.00		558,076.00
Marketing		151,153			205,768			510,810		359,657.00		431,704.00
Legal and professional fees		186,439			198,813			909,916		723,477.00		801,568.00
Consulting		354,393			1,643,555			2,831,792		2,477,399.00		2,678,928.00
Idle facility expense		616,623			-			1,024,513		407,890.00		737,017.00
Occupancy		178,568			142,384			946,001		767,433.00		870,623.00
Labor and benefits		150,507			272,788			654,498		503,991.00		573,510.00
Services paid by stock options		260,580			264,512			931,645		671,065.00		805,090.00
Office supplies and expenses		22,466			71,586			146,815		124,349.00		135,577.00
Travel		23,868			22,112			167,103		143,235.00		156,161.00
Other general and administrative expenses		65,227			141,137			353,316		288,089.00		314,584.00
Total General and Administrative Expenses		2,302,463			3,043,047			9,506,517		7,204,054.00		8,389,584.00
OPERATING LOSS		(2,273,507	)		(3,043,047	)		(9,477,561	)	(7,204,054.00	)	(8,360,628.00	)
OTHER INCOME (EXPENSES)
Interest income		1,128			4,342			10,040		8,912.00		9,728.00
Interest expense		(410	)		(1,031,906	)		(1,415,401	)	(1,414,991.00	)	(1,415,236.00	)
Miscellaneous income (expense)		-			(5,516	)		(5,560	)	(5,560.00	)	(5,560.00	)
Total Other Income and Expenses		718			(1,033,080	)		(1,410,921	)	(1,411,639.00	)	(1,411,068.00	)
LOSS BEFORE TAXES		(2,272,789	)		(4,076,127	)		(10,888,482	)	(8,615,693.00	)	(9,771,696.00	)
INCOME TAXES		-			-			-		-		-
NET LOSS		(2,272,789	)		(4,076,127	)		(10,888,482	)	(8,615,693.00	)	(9,771,696.00	)
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gain (loss) in market value of
investments		(780	)		80			(800	)	(20.00	)	60.00
COMPREHENSIVE LOSS	$	(2,273,569	)	$	(4,076,047	)	$	(10,889,282	)	(8,615,713.00	)	(9,771,636.00	)
NET INCOME (LOSS) PER COMMON SHARE,
BASIC AND DILUTED	$	(0.14	)	$	(0.31	)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING, BASIC AND DILUTED		16,555,317			13,117,115

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

4

INTEGRATED PHARMACEUTICALS, INC.

STATEMENT OF STOCKHOLDERS' EQUITY

(A Development Stage Company)

	Common Stock													Accumulated			Accumulated
					Additional			Discount on			Stock Options			Deficit Prior to			Deficit During			Accumulated Other
	Number  of Shares		Amount		Paid-in Capital			Common Stock			and Warrants			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	$	612,183		$	-		$	520,660		$	(494,624	)	$	(1,123,977	)	$	(100	)	$	(402,274	)
Balance, December 31, 2003	8,358,459	$	83,584	$	612,183		$	-		$	520,660		$	(494,624	)	$	(1,123,977	)	$	(100	)	$	(402,274	)
Stock and warrants issued as incentive
for notes payable	194,950		1,950		165,708			-			222,243			-			-			-			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	84,701		847		221,662			-			-			-			-			-			222,509
share in exchange for legal services.
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		1,967,135			-			3,568,905			-			-			-			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		1,572,246			-			26,483			-			-			-			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	$	5,609,581		$	-		$	6,613,509		$	(494,624	)	$	(8,615,693	)	$	(20	)	$	3,277,188
Balance, December 31, 2004	16,443,500	$	164,435	$	5,609,581		$	-		$	6,613,509		$	(494,624	)	$	(8,615,693	)	$	(20	)	$	3,277,188
Stock issued at an average of $1.77 per	21,751		218		38,297			-			-			-			-			-			38,515
share in exchange for legal services.
Stock issued at an average price of	67,620		676		118,674			-			-			-			-			-			119,350
$1.77 per share in exchange
for rent expense
Stock issued at an average of $1.74 per	14,368		144		24,856			-			-			-			-			-			25,000
share in exchange for consulting/BOD
services.
Value of warrants vested during the period	-		-		-			-			333,818			-			-			-			333,818
Value of options vested during the period	-		-		-			-			260,580			-			-			-			260,580
Unrealized loss on market value of
investment	-		-		-			-			-			-			-			(780	)		(780	)
Exercise of Options by Consultant at	6,000		60		2,040			-			(1,020	)		-			-			-			1,080
$.18 per share.
Stock and Warrants issued for Private	280,000		2,800		262,400			-			14,800			-			-			-			280,000
Placement
Net loss for the period ended
June 30, 2005 (unaudited)	-		-		-			-			-			-			(2,272,789	)		-			(2,272,789	)
Balance, June 30, 2005 (unaudited)	16,833,239	$	168,333	$	6,055,848		$	-		$	7,221,687		$	(494,624	)	$	(10,888,482	)	$	(800	)	$	2,061,962

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

5

INTEGRATED PHARMACEUTICALS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
							Period from			Period from
							February 1, 2003			February 1, 2003
							(inception of			(Inception of
	Period Ended			Period Ended			development stage)			Development Stage)
	June 30, 2005			June 30, 2004			to June 30, 2005			to December 31,			Year Ended
	(unaudited)			(unaudited)			(unaudited)			2004				December 31, 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(2,272,789	)	$	(4,076,127	)	$	(10,888,482	)	$	(8,615,693	)		(7,491,716	)
Adjustments to reconcile net income (loss) to net cash
flows provided (used) by operating activities:
Depreciation		262,400			62,037			527,076			264,676			243,054
Loss on disposition of assets		-			5,482			7,024			7,024			7,024
Stock and warrants issued as incentive for notes payables		-			389,900			496,389			496,389			389,901
Stock issued for interest expense		-			-			149,878			149,878			149,878
Stock issued for rent expense		119,350			65,058			548,009			428,659			369,293
Stock issued for services		63,515			-			990,861			927,346			847,821
Stock issued for assets and securities		-			-			43,739			43,739			43,739
Stock options and warrants vested		594,398			264,512			2,869,616			2,275,218			2,275,218
Recognition of noncash deferred financing expense		-			578,699			578,699			578,699			578,699
Options and warrants issued for services and financing		-			1,558,673			253,753			253,753			26,483
Noncash recovery of other income		-			-			(1,850	)		(1,850	)		-
Changes in assets and liabilities:		-			-			-
Receivables		(9,000	)		-			7,084			16,084			-
Inventory		(44,683	)		(82,295	)		(128,241	)		(83,558	)		(83,558	)
Prepaid expenses		27,381			117,243			132,397			105,016			94,083
Other assets		-			-			5,607			5,607			5,607
Accounts payable		(52,826	)		(32,381	)		117,657			170,483			78,429
Accrued expenses		26,102			(75,058	)		(42,172	)		(68,274	)		(29,050	)
Net cash used by operating activities		(1,286,152	)		(1,224,257	)		(4,332,956	)		(3,046,804	)		(2,495,095	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets		(191,167	)		(1,129,070	)		(2,665,939	)		(2,474,772	)		(2,273,047	)
Leasehold concessions received		-			-			185,000			185,000			-
Net cash used by investing activities		(191,167	)		(1,129,070	)		(2,480,939	)		(2,289,772	)		(2,273,047	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock units		280,000			5,595,000			5,912,050			5,632,050			5,632,050
Payments on capital leases		(2,767	)		(2,407	)		(7,684	)		(4,917	)		(4,917	)
Payments on related party loans		-			(41,123	)		(56,701	)		(56,701	)		(41,123	)
Proceds from exercise of options		1,080			-			1,080			-
Proceeds from convertible debt		-			389,900			939,900			939,900			389,900
Applicable beneficial conversion allocated to warrants		-			-			-
Net cash provided by financing activities		278,313			5,941,370			6,788,645			6,510,332			5,975,910
Net increase in cash		(1,199,006	)		3,588,043			(25,250	)		1,173,756			1,207,768
Cash, beginning of period		1,461,708			253,940			287,952			287,952			253,940
Cash, end of period	$	262,702		$	3,841,983		$	262,702		$	1,461,708			1,461,708
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Income taxes paid	$	-		$	-		$	-		$	-			-
Interest paid	$	-		$	-		$	25,000		$	25,000			-
NON-CASH INVESTING AND FINANCING:
Stock options and warrants vested	$	594,398		$	264,512		$	2,869,616		$	2,275,218			2,275,218
Stock and warrants issued for convertible debt	$	-		$	1,447,798		$	1,613,076		$	1,613,076			1,613,076
Stock issued for assets and securities	$	-		$	-		$	43,739		$	43,739			43,739
Stock issued as deferred incentive for notes payables	$	-		$	389,900		$	519,587		$	519,587			-
Stock issued for rent expense	$	119,350		$	65,058		$	548,009		$	428,659			369,293
Stock and warrants issued for services	$	63,515		$	-		$	990,861		$	927,346			847,821
Warrants and options issued for deferred services and financing	$	-		$	1,558,673		$	520,102		$	520,102			-
Accounts payable paid by contributed capital	$	-		$	-		$	27,767		$	27,767			-
Noncash recovery of other income	$	-		$	-		$	1,850		$	1,850			-

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

6

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.

For the year ended December 31, 2002, the Company’s auditors expressed a going concern qualification in the Company’s audited financial statements. This qualification was removed with the December 31, 2003 financial statements. 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. Management plans to use the majority of the proceeds from the financing to implement its business plan. As a result of the proceeds received from stock issuances and the conversion of debt to common stock, as well as the private placement which commenced in May 2005, management has determined that it can continue as a going concern for at least the next twelve months.

At June 30, 2005, 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, 2004. 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 six-month period ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.

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.

7

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 production of clinically active pharmaceutical compounds, including active small molecules and recombinant DNA technology derived products.

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, 2005, the Company’s raw material, work in process, and finished goods inventories totaled $69,818, $1,695, and $56,728, respectively.

Recent Accounting Pronouncements

In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 151, “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 costs of conversion be based on the normal capacity of the production facilities. This statement is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company had previously adopted this statement for the year ended December 31, 2004. For the period ended June 30, 2005, the Company has recorded $616,623 as idle facility expense.

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, 2005 and December 31, 2004:

	2005			2004
Equipment	$	1,722,655		$	1,609,268
Furniture and fixtures		120,114			106,809
Leasehold improvements		826,511			762,036
		2,669,280			2,478,113
Less: Accumulated depreciation		(665,512	)		(403,112	)
Total	$	2,003,768		$	2,075,001

Depreciation and amortization expense for the periods ended June 30, 2005 and December 31, 2004 were $262,400, of which $136,903 is included in “idle facility expense”, and $243,053, 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.

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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, 2005, 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.

During the six months ended June 30, 2005, the Company sold 280,000 units for $1 per unit, with each unit consisting of one share of common stock and .20 of a warrant to purchase an additional share of common stock, raising $280,000. 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 $14,800, based upon the Black-Scholes calculation. Additionally, the Company issued 36,119 shares of common stock at an average price of $1.76 per share in exchange for services and issued 6,000 shares of stock for the exercise of options by a consultant.

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 67,620 shares, valued at approximately $119,350, were issued during the six-month period ended June 30, 2005 for payment of rent.

NOTE 5 - COMMON STOCK OPTIONS AND WARRANTS

Second Amended and Restated 2002 Stock Option Plan

During the six months ended June 30, 2005, the Company recorded an expense of approximately $260,580 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)	1,258,000	$ 0.95	342,000
Total	1,258,000		342,000

(1) Second Amended and Restated 2002 Stock Plan

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Following is a summary of the status of the options outstanding during the periods ended December 31, 2004 and June 30, 2005.

	Number of Shares			Weighted Average Exercise Price
Outstanding at December 31, 2003		690,000		$	0.25
Granted		668,000			1.61
Exercised		-			-
Rescinded		(75,000	)		-
Outstanding at December 31, 2004		1,283,000			0.96
Granted		-			-
Exercised		(6,000	)		(0.18	)
Rescinded		(19,000	)		1.60
Options outstanding at June 30, 2005		1,258,000		$	0.95
Options exercisable at June 30, 2005		540,000		$	0.66
Weighted average fair value of options granted in 2005					-

Warrants

At June 30, 2005 and December 31, 2004, there were outstanding warrants to purchase 4,656,700 and 4,600,700 shares respectively, of the Company’s common stock, at prices ranging from $1.00 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 June 30, 2005, approximately $162,401 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, 2004 and June 30, 2005, applicable royalties were waived by the patent holder.

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. The Company has the option to purchase this property in September 2006 and is obligated to do so by September 2008. If the Company has not purchased the property by September 2006, then the rent becomes payable 50% in cash and 50% in stock. Under certain conditions, the Company may accelerate its option to purchase the property to September 2005. The purchase price of the property will be approximately $1.1 million plus 10% compounded for each 12-month period from September 2003 through the date of purchase.

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Total rental expense, including common area charges, for the period ending June 30, 2005 was approximately $119,349 of which $79,566 is included in idle facility costs and $371,856 for the year ended December 31, 2004.

Mass Development Revenue Bond

In September 2003, the Company received a two year extension of preliminary approval for a $5.03 million revenue bond financing from MassDevelopment to finance an expansion of its operation to a new facility in Fitchburg, Massachusetts.

NOTE 8 -SUBSEQUENT EVENTS

Private Placement Offering

In May 2005, the Company commenced a private placement offering of its common stock to accredited investors. Subsequent to June 30, 2005 the Company has received $448,250 under this private placement. Under the terms of the offering, units sold after June 30, 2005 were offered to investors at the price of $0.75 per unit. A unit consists of one share of common stock and a warrant to purchase an additional .40 of a share of common stock. The warrants are exercisable at $1.50 per share and expire on December 31, 2007. The Company is also required to file a registration statement under the Securities Act of 1933 providing for the resale of the shares within 180 days of completion of the offering. The Company has not paid fees to any brokerage firms or investment bankers in relation to this private placement.

Shipments

Subsequent to June 30, 2005 the Company has made shipment of products to two customers. These shipments have created $5,020 in revenue. In addition, customers have provided purchase orders representing an additional $205,200 in orders.

Item 2 Management’s Discussion and Analysis

In January 2003, Integrated Pharmaceuticals, Inc. (“IntePharm,”“we” or the “Company”) changed its focus from contract research and development for pharmaceutical companies to the development of our own technology and production capacity. We changed our business model in this manner 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. As of June 30, 2005, we had begun commercial production and created inventories so that we could fill orders quickly, but we had few customers and had not yet generated meaningful cash flow from operations.

During the year 2003 we financed our development through the sale of $750,000 of convertible notes. This was sufficient to fund our development and other costs incurred in that year and increase our cash position from about $9,000 at the beginning of the year to about $250,000 at the end of the year. We had approximately $45,000 of revenue in 2003, which represented payment for work done primarily in 2002.

During 2004, we raised approximately $5.7 million through the sale of common stock in a private placement. In addition, convertible notes that we had issued in prior years were converted to common stock. As a result, we were able to commence and substantially complete construction of our production facility in Fitchburg, Massachusetts, and end the year with $1.46 million in cash.

During the first quarter of 2005, we were testing our production facilities, performing QA procedures, and attempting to secure orders for our products. Orders for $34,650 of products were received, and our cash position at the end of the quarter was $440,000. Because of the Company’s declining cash position and slower-than-expected sales, we began to explore the possibility of a new round of equity financing. We identified a target range of $3 million - $5.4 million in additional capital that we would seek to raise in order to finance our continuing operations and research and development efforts.

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During the second quarter of 2005, we received almost no sales orders. We were, however, able to raise $280,000 through the sale of common stock and warrants. At June 30, 2005, our cash position was $262,702, and our monthly expenditures were about $180,000. As a result, we were focused on raising additional capital and determining how to cut our costs.

Because we have not yet secured significant purchase orders for our products, we are unsure about our ability to do so in the future. In that regard, we are uncertain as to whether there are competitors, particularly Asian competitors with whom we are unfamiliar, who may be able to sell the products that we make at lower prices than are economic for us to match.

The Company has no sources of liquidity other than sales revenue and proceeds from securities offerings. As of June 30, 2005, the Company had no commitments for capital expenditures.

Item 3. Controls and Procedures

Chinmay Chatterjee, President, and CEO and Chief Financial Officer, has evaluated the Company’s disclosure controls and procedures and concluded that they are 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 the officer’s 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.

PART II. - OTHER INFORMATION

Item 1. Legal Proceedings.

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

ITEM 2Unregistered Sales of Equity Securities and Use of Proceeds

The Company raised $280,000 through the sale of stock and warrants in a private placement during the three month period ended June 30, 2005. It also paid base rent on its building in Fitchburg, Massachusetts in the form of common stock; and it paid a portion of its legal fees in the form of common stock.

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 fourth 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	First Amended and Restated Supply Agreement with Frag-Chem Corporation (3)
10.8	Letter dated May 5, 2005 amending the Patent License Agreement with NEC Partners (3)
31	Certification of the Chief Financial Officer of the Company as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of the Chief Executive Officer and Chief Financial Officer of the Company pursuant to 18 U.S.C. section 1250 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002

(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.

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 Chinmay Chatterjee________________________________________________

By: Chinmay Chatterjee

Its: Chief Executive Officer and

Chief Financial Officer

Date: September 23, 2005

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