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 September 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 November 14, 2005, the Issuer had 17,710,786 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	2
ITEM 1 Financial Statements	2
ITEM 2 Management's Discussion and Analysis	10
ITEM 3 Controls and Procedures	11
PART II. - OTHER INFORMATION	11
ITEM 1 Legal Proceedings	11
ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds	11
ITEM 3 Default Upon Senior Securities	11
ITEM 4 Submission of Matters to a Vote of Security Holders	11
ITEM 5 Other Information	12
ITEM 6 Exhibits and Reports on Form 8-K	12
SIGNATURES	13

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 September 30, 2005

(Unaudited)

CONTENTS

PAGE
3	Balance Sheets As At September 30, 2005 And December 31, 2004
4	Statements Of Operations And Income For The Nine Months Ended September 30, 2005 and 2004
5	Statements Of Cash Flows For The Nine Months Ended September 30, 2005 and 2004
6-10	Notes To Financial Statements - September 30, 2005

2

INTEGRATED PHARMACEUTICALS, INC.

(A Development Stage Company)

BALANCE SHEETS

	September 30,
	2005			December 31,
	(unaudited)			2004
ASSETS
CURRENT ASSETS
Cash	$	119,764		$	1,461,708
Accounts receivable		17,500			-
Inventory		141,676			83,558
Prepaid expenses		34,112			42,543
Total Current Assets		313,052			1,587,809
PROPERTY AND EQUIPMENT, net		1,878,054			2,075,001
OTHER ASSETS
Investments		1,000			2,000
Deposits		763			763
Total Other Assets		1,763			2,763
TOTAL ASSETS	$	2,192,869		$	3,665,573
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	179,999		$	269,030
Accrued expenses		109,683			114,709
Capital leases payable		662			4,646
Total Current Liabilities		290,344			388,385
Total Liabilities		290,344			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; 17,637,655 and 16,443,500 shares
issued and outstanding, respectively		176,376			164,435
Additional paid-in capital		6,517,551			5,609,581
Other comprehensive income (loss)		(1,020	)		(20	)
Stock options and warrants		7,667,164			6,613,509
Accumulated deficit prior to development stage		(494,624	)		(494,624	)
Accumulated deficit during development stage		(11,962,922	)		(8,615,693	)
Total Stockholders' Equity		1,902,525			3,277,188
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	2,192,869		$	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

													Period from
													February 1, 2003
													(inception of
	Three Months Ended						Nine Months Ended						development stage)
	September 30, 2005			September 30, 2004			September 30, 2005			September 30, 2004			to September 30, 2005
	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
REVENUES	$	17,560		$	-		$	52,210		$	-		$	52,210
COST OF GOODS SOLD
Materials and supplies		19,000			-			24,694			-			24,694
Total Cost of Goods Sold		19,000			-			24,694			-			24,694
GROSS PROFIT		(1,440	)		-			27,516			-			27,516
GENERAL AND ADMINISTRATIVE EXPENSES
Depreciation and amortization		63,689			83,428			189,186			145,465			453,902
Research and development		66,204			115,162			233,346			352,015			706,099
Marketing		58,804			66,123			209,957			271,919			569,614
Legal and professional fees		70,894			128,275			257,333			327,061			980,810
Consulting		198,038			499,696			552,431			2,017,251			3,029,830
Idle facility expense		242,045			-			858,669			-			1,266,559
Occupancy		44,660			149,046			223,228			449,323			990,661
Labor and benefits		81,403			80,098			231,909			260,416			735,900
Services paid by stock options		180,085			202,850			454,155			467,360			1,125,220
Office supplies and expenses		8,191			20,279			30,657			92,257			155,006
Travel		1,134			13,001			25,002			35,112			168,237
Other general and administrative expenses		44,311			66,852			109,538			157,239			397,627
Total General and Administrative Expenses		1,059,458			1,424,810			3,375,411			4,575,418			10,579,465
OPERATING LOSS		(1,060,898	)		(1,424,810	)		(3,347,895	)		(4,575,418	)		(10,551,949	)
OTHER INCOME (EXPENSES)
Interest income		127			2,686			1,255			7,029			10,167
Interest expense		(179	)		(16,295	)		(589	)		(1,048,235	)		(1,415,580	)
Miscellaneous income (expense)		-			-			-			(5,481	)		(5,560	)
Total Other Income and Expenses		(52	)		(13,609	)		666			(1,046,687	)		(1,410,973	)
LOSS BEFORE TAXES		(1,060,950	)		(1,438,419	)		(3,347,229	)		(5,622,105	)		(11,962,922	)
INCOME TAXES		-			-			-			-			-
NET LOSS		(1,060,950	)		(1,438,419	)		(3,347,229	)		(5,622,105	)		(11,962,922	)
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gain (loss) in market value of
investments		(220	)		-			(1,000	)		80			(1,020	)
COMPREHENSIVE LOSS	$	(1,061,170	)	$	(1,438,419	)	$	(3,348,229	)	$	(5,622,025	)	$	(11,963,942	)
NET LOSS PER COMMON SHARE,
BASIC AND DILUTED	$	(0.06	)	$	(0.09	)	$	(0.20	)	$	(0.40	)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING, BASIC AND DILUTED		17,438,891			16,231,487			16,849,830			14,155,239

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

4

INTEGRATED PHARMACEUTICALS, INC.      

(A Development Stage Company)      

STATEMENTS OF CASH FLOWS

							Period from
							February 1, 2003
	Nine Months			Nine Months			(inception of
	Ended			Ended			development stage)
	September 30, 2005			September 30, 2004			to September 30, 2005
	(unaudited)			(unaudited)			(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(3,347,229	)	$	(5,622,105	)	$	(11,962,922	)
Adjustments to reconcile net income (loss) to net cash
flows provided (used) by operating activities:
Depreciation		396,043			145,465			660,719
Loss on disposition of assets		-			5,481			7,024
Stock and warrants issued as incentive for notes payables		-			389,900			496,389
Stock issued for interest expense		-			-			149,878
Stock issued for rent expense		149,666			266,955			578,325
Stock issued for services		69,934			-			997,280
Stock issued for assets and securities		-			-			43,739
Recognition of noncash deferred financing expense		-			578,699			578,699
Options and warrants issued for services and financing		969,761			2,566,616			3,498,732
Noncash recovery of other income		-			-			(1,850	)
Changes in assets and liabilities:
Receivables		(17,500	)		(630	)		(1,416	)
Inventory		(58,118	)		(194,451	)		(141,676	)
Prepaid expenses		8,431			80,585			113,447
Other assets		-			-			5,607
Deferred Compensation		-			9,000
Accounts payable		(89,031	)		(37,614	)		81,452
Accrued expenses		(5,026	)		(92,780	)		(73,300	)
Net cash used by operating activities		(1,923,069	)		(1,904,879	)		(4,969,873	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets		(199,096	)		(1,785,950	)		(2,673,868	)
Leasehold concessions received		-			-			185,000
Net cash used by investing activities		(199,096	)		(1,785,950	)		(2,488,868	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock units		783,125			5,632,050			6,415,175
Payments on capital leases		(3,984	)		(3,833	)		(8,901	)
Payments on related party loans		-			(41,123	)		(56,701	)
Proceds from exercise of options		1,080			-			1,080
Proceeds from convertible debt		-			389,900			939,900
Net cash provided by financing activities		780,221			5,976,994			7,290,553
Net increase in cash		(1,341,944	)		2,286,165			(168,188	)
Cash, beginning of period		1,461,708			253,940			287,952
Cash, end of period	$	119,764		$	2,540,105		$	119,764
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Income taxes paid	$	-		$	-		$	-
Interest paid	$	-		$	-		$	25,000
NON-CASH INVESTING AND FINANCING:
Stock and warrants issued for convertible debt	$	-		$	1,447,798		$	1,613,076
Stock issued for assets and securities	$	-		$	-		$	43,739
Stock issued as deferred incentive for notes payables	$	-		$	389,900		$	496,389
Stock issued for prepaid rent and rent expense	$	149,666		$	266,955		$	578,325
Stock and warrants issued for services	$	69,934		$	-		$	997,280
Warrants and options issued for services and financing	$	969,761		$	2,566,616		$	3,498,732
Accounts payable paid by contributed capital	$	-		$	-		$	27,767
Noncash recovery of other income	$	-		$	-		$	1,850

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

5

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 September 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 nine-month period ended September 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.

6

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.

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 September 30, 2005, the Company’s raw material, work in process, and finished goods inventories totaled $56,527, $10,688, and $74,462, respectively.

Reclassification

Certain amounts from prior periods have been reclassified to conform to the current period presentation. This reclassification has resulted in no changes to the Company’s accumulated deficit or net losses presented.

Recent Accounting Pronouncements

In November 2004, the Financial Accounting Standards Board 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 nine-month period ended September 30, 2005, the Company has recorded $858,669 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 September 30, 2005 and December 31, 2004:

	2005			2004
Equipment	$	1,730,584		$	1,609,268
Furniture and fixtures		120,114			106,809
Leasehold improvements		826,511			762,036
		2,677,209			2,478,113
Less: Accumulated depreciation		(799,155	)		(403,112	)
Total	$	1,878,054		$	2,075,001

Depreciation and amortization expense for the periods ended September 30, 2005 and December 31, 2004 were $396,043 (of which $206,856 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.

7

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, 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.

In May 2005, the Company commenced a private placement offering of its common stock to accredited investors. During the nine months ended September 30, 2005, the Company sold 1,044,166 units for $0.75 per unit, with each unit consisting of one share of common stock and 40% of a warrant to purchase an additional share of common stock, raising $783,125. The exercise price of the warrants is $1.50, and they expire on December 31, 2007. The value of the warrants attached to the stock issued was $113,218, based upon the Black-Scholes calculation. Additionally, the Company issued 42,559 shares of common stock at an average price of $1.64 per share in exchange for services.

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 101,430 shares, valued at approximately $149,666, were issued during the nine-month period ended September 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 September 30, 2005, the Company recorded an expense of approximately $454,155 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)		1,185,000	$	0.65		415,000
Total		1,185,000				415,000

(1) Second Amended and Restated 2002 Stock Plan

8

Following is a summary of the status of the options outstanding during the periods ended December 31, 2004 and September 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		2,000			0.65
Exercised		(6,000	)		(0.18	)
Rescinded		(94,000	)		2.62
Options outstanding at September 30, 2005		1,185,000		$	0.65
Options exercisable at September 30, 2005		617,000		$	0.74
Weighted average fair value of options granted in 2005				$	0.36

Warrants

At September 30, 2005 and December 31, 2004, there were outstanding warrants to purchase 5,018,366 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 September 30, 2005, approximately $119,705 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 September 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, may 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.

9

Total rental expense, including common area charges, for the period ending September 30, 2005 was approximately $149,666, of which $99,777 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 Mass Development to finance an expansion of its operation to a new facility in Fitchburg, Massachusetts.

NOTE 8 -SUBSEQUENT EVENTS

Shipments

Subsequent to September 30, 2005, the Company shipped approximately $14,000 of products to customers. In addition, customers have provided purchase orders representing an additional $250,200 in orders.

Amendment to the Patent License Agreement

Subsequent to September 30, 2005, there were changes made to the license agreement between the Company and a related party. The related party has agreed to waive any royalties until the Company reaches annual sales of $5,000,000. In addition, the related party will waive any royalties if the products produced by the licensed technology don’t make a profit of more than 12.5% before payment of income taxes (EBITA).

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 September 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.

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 cash expenditures were about $180,000.

During the third quarter of 2005, we recognized revenue of $17,560 from the sale of our products, resulting in a gross loss of $1,440. Our total loss for the three months ended September 30, 2005 was $1,060,950. At September 30, 2005, our cash position was $119,764. As a result, we focused on raising additional capital and we cut our monthly cash expenditures from $180,000 to about $80,000. During the three-month period ended September 30, 2005, we raised $783,125 through the sale of common stock and warrants in our 2005 private placement, at a price per share of $0.75.

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During the quarter ended September 30, 2005 we strove to create new food products for which our carbohydrate compounds could serve as a primary ingredient. For example, we developed new technologies for delivering calcium in hot an cold beverages, and filed patent applications related to these technologies. We also worked closely with a start-up company that seeks to create a market for our calcium product on such matters as packaging and labeling of this new consumer product.

Because we have not yet secured significant purchase orders for our bulk 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 bulk 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 September 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 $783,0125 through the sale of stock and warrants in a private placement during the three month period ended September 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 third quarter of the fiscal year covered by this report to a vote of security holders, through the solicitation of proxies or otherwise.

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Item 5. Other Information.

None.

ITEM 6 Exhibits and Reports on Form 8-K

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

Number	Description of Exhibit
3.1	Amended and Restated Articles of Incorporation of Integrated Pharmaceuticals, Inc. (1)
3.2	Amended and Restated Bylaws of Integrated Pharmaceuticals, Inc. (2)
4.1	Specimen Certificate for Integrated Pharmaceuticals, Inc. Common Stock, par value $.01 per share (2)
4.2	Form of Common Stock Purchase Warrant (2)
10.1	Amended and Restated Patent License Agreement with NEC Partners (2)
10.2	Lease Agreement with Chantilas Properties, LLC and Advanced Process Technologies, Inc. (2)
10.3	Assignment and Assumption of Lease(2)
10.4	Consulting and Warrant Agreements with James Czirr (2)
10.5	2002 Stock Plan (2)
10.6	Registration Rights Agreement(2)
10.7	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)
10.9	Letter dated October 13, 2005 amending the Patent License Agreement with NEC Partners
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 Office rand 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.

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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/ Chinmay Chatterjee 

By: Chinmay Chatterjee

Its: CEO

Date: November 14, 2005

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