Mosaic Nutraceuticals (MCNJ) 10QSB 2006 Q3 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

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

For the quarterly period ended:  September 30, 2006

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ___________ to ___________

Commission file number:   000-51434

MOSAIC NUTRACEUTICALS CORP.

(Exact name of small business issuer as specified in its charter)

Nevada	88-0462298
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

1502 San Antone, Lewisville, Texas  75077

(Address of principal executive offices)

(214) 866-0045

(Issuer’s telephone number)

4100 Spring Valley Road, Suite 200, Dallas, Texas  75244

(Former name, former address, and former fiscal year, if changed since last report)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS 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 No o

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 55,209,029 shares of Common Stock, par value $.001 per share, issued and outstanding on September 30, 2006.

Transitional Small Business Disclosure Format (Check one): Yes o No þ

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

PART II OTHER INFORMATION

SIGNATURES

2

PART I

FINANCIAL INFORMATION

Item 1.Financial Statements

MOSAIC NUTRACEUTICALS, CORP.

(A Development Stage Enterprise)

FINANCIAL REPORTS

(UNAUDITED)

SEPTEMBER 30, 2006

DECEMBER 31, 2005

3

MOSAIC NUTRACEUTICALS, CORP.

(A Development Stage Enterprise)

Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FINANCIAL STATEMENTS
Balance Sheets	F-2
Statements of Operations	F-3
Statements of Stockholders’ Equity	F-4
Statements of Cash Flows	F-5
Notes to Financial Statements	F- 6 - F -9

4

Report of Independent Registered Public Accounting Firm

To the Board of Directors

Mosaic Nutraceuticals, Corp.

Dallas, Texas

We have reviewed the accompanying statement of financial position of Mosaic Nutraceuticals, Corp. (the “Company”) as of September 30, 2006, and the related statements of operations shareholders’ equity and cash flows for the three-month and nine-month periods ended September 30, 2006 and 2005. These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Kyle L. Tingle, CPA, LLC

November 14, 2006

Las Vegas, Nevada

F - 1

MOSAIC NUTRACEUTICALS, CORP.

(A Development Stage Enterprise)

BALANCE SHEETS

See Report of Independent Registered Accounting Firm

	September 30,			December 31,
	2006			2005
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash	$	2,880		$	143
Accounts receivable		--			1,003
Other receivable		101,963			101,964
Inventory		113,759			91,257
Prepaid expenses		105,000			160,485
Total current assets	$	320,881		$	354,852
OTHER ASSETS
Deposits	$	--		$	2,889
Fixed assets, net		10,243			34,628
Intangible assets, net		16,000			20,500
Total assets	$	349,845		$	412,869
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	216,675		$	116,383
Accrued officer compensation and taxes		145,327			--
Officer payable		8,500			--
Customer Deposit		4,000			4,000
Notes payable		19,876			19,876
Total current liabilities	$	394,378		$	140,259
STOCKHOLDERS’ EQUITY
Preferred stock: $0.001 par value; authorized
5,000,000 shares; no shares issued and outstanding
Common stock: $0.001 par value;
authorized 100,000,000 shares; issued and
outstanding: 55,209,029 September 30, 2006,
54,653,242 and December 31, 2005:	$	55,209		$	54,653
Additional paid in capital		2,215,372			2,047,928
Accumulated deficit during development stage		(2,315,114	)		(1,829,971	)
Total stockholders’ equity (deficit)	$	(44,533	)	$	272,610
Total liabilities and
stockholders’ equity (deficit)	$	349,845		$	412,869

See Accompanying Notes to Financial Statements.

F - 2

MOSAIC NUTRACEUTICALS, CORP.

(FKA MOSAIC NUTRICEUTICALS, CORP.)

(A Development Stage Enterprise)

STATEMENTS OF OPERATIONS

See Report of Independent Registered Accounting Firm

													Aug 8, 1990
	Three months ended						Nine months ended						(inception) to
	September30,			September 30,			September 30,			September 30,			September 30,
	2006			2005			2006			2005			2006
	(unaudited)						(unaudited)						(unaudited)
Revenues	$	--		$	5,290		$	6,448		$	5,992		$	16,495
Cost of revenue		--			1,608			3,048			1,729			5,979
Gross profit	$	--		$	2,682		$	3,400		$	4,263		$	10,516
General, selling and
administrative expenses
Operating expenses	$	113,553		$	764,523		$	474,036		$	1.023.461		$	2,239,248
Depreciation and amortization		2,213			3,061			8,392			6.956			21,937
Operating loss		(115,766	)	$	(763,902	)	$	(479,028	)	$	(1,026,154	)	$	(2,250,669	)
Nonoperating income (expense)
Interest expense	$	(398	)	$	(400	)	$	(1,222	)	$	(1,208	)	$	(3,475	)
Loss on sale of assets		(4,893	)		--			(4,893	)		--			(4,893	)
Net loss	$	(121,057	)	$	(764,302	)	$	(485,143	)	$	(213,060	)	$	(2,259,037	)
Net loss per share, basic
and diluted	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.02	)
Weighted Average number
of shares of common stock
outstanding		55,209,029			53,299,935			55,141,895			52,301,417

See Accompanying Notes to Financial Statements.

F - 3

MOSAIC NUTRACEUTICALS, CORP.

(A Development Stage Enterprise)

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

See Report of Independent Registered Accounting Firm

										Accumulated
					Additional			Common		(Deficit) During
	Common Stock				Paid-In			Stock		Development
	Shares		Amount		Capital			Subscribed		Stage			Total
Issuance of Common Stock,
August 8, 1990		562,500	$	563	$	1,937		$	0	$	0		$	2,500
Balance, December 31, 1990		562,500	$	563	$	1,937		$	0	$	0		$	2,500
Balance, December 31, 1991		562,500	$	563	$	1,937				$	0		$	2,500
Net loss, December 31, 1992											(2,500	)		(2,500	)
Balance, December 31, 1992		562,500	$	563	$	1,937		$	0	$	(2,500	)	$	0
Balance, December 31, 1993		562,500	$	563	$	1,937		$	0	$	(2,500	)	$	0
Balance, December 31, 1994		562,500	$	563	$	1,937		$	0	$	(2,500	)	$	0
July 20, 1995, changed from no
par value to $.001
July 21, 1995, forward stock 900:1
Balance, December 31, 1995		562,500	$	563	$	1,937		$	0	$	(2,500	)	$	0
February 1, 1996, reverse split 1:100
Issuance of Common Stock for
Services February 22, 1996		16,500,000		16,500		(1,937	)				(13,563			1,000
Net loss, December 31, 1996											(1,000	)		(1,000	)
Balance, December 31, 1996		17,062,500	$	17,063	$	0		$	0	$	(17,063	)	$	0
Balance, December 31, 1997		17,062,500	$	17,063	$	0		$	0	$	(17,063	)	$	0
Balance, December 31, 1998		17,062,500	$	17,063	$	0		$	0	$	(17,063	)	$	0
Balance, December 31, 1999		17,062,500	$	17,063	$	0		$	0	$	(17,063	)	$	0
Contributed Capital											1,025			1,025
Net loss, December 31, 2000											(1,025	)		(1,025	)
Balance, December 31, 2000		17,062,500	$	17,063	$	1,025		$	0	$	(17,063	)	$	0
Issuance of common stock; April 19,
2001, at $0.001708 per share		6,250,000		6,250							(5,823	)		427
Issuance of common stock; June 21,
2001, at $0.001708 per share		8,750,000		8,750							(8,152	)		598
Net loss, December 31, 2001											(1,025	)		(1,025	)
Balance, December 31, 2001		32,062,500	$	32,063	$	0		$	0	$	(32,063	)	$	0
Balance, December 31, 2002		32,062,500	$	32,063	$	0		$	0	$	(32,063	)	$	0
Balance, December 31, 2003		32,062,500	$	32,063	$	0		$	0	$	(32,063	)	$	0
May 24, 2004, forward stock
split 25:1
Recapitalization of common stock
stock in connection with merger
ePublishedBooks.com		5,949,300		5,949		24,205					(29,563	)		591
Issuance of 11,000,000 shares pursuant
to merger agreement		11,000,000		11,000										11,000
Issuance of 1,000,000 to board member
upon joining board of directors		1,000,000		1,000										1,000
Issuance of warrants for services						432,387								432,387
Contribution of capital						268								268
Issuance of 233,000 shares for debt		233,000		233		30,067								30,300
Stock subscribed									20,000					20,000
Net loss, December 31, 2004											(481,080	)		(481,080	)
Balance, December 31, 2004		50,244,800	$	50,245	$	486,927		$	20,000	$	(542,706	)	$	14,466

See Accompanying Notes to Financial Statements.

F - 4

MOSAIC NUTRACEUTICALS, CORP.

(A Development Stage Enterprise)

STATEMENTS OF STOCKHOLDERS’ EQUITY

										Accumulated
					Additional		Common			(Deficit) During
	Common Stock				Paid-In		Stock			Development
	Shares		Amount		Capital		Subscribed			Stage			Total
Balance, December 31, 2004		50,244,800	$	50,245	$	486,927	$	20,000		$	(542,706	)	$	14,466
Issue subscribed stock		33,334		33		19,967		(20,000	)					--
Stock subscribed		333,334		333		49,667								50,000
Stock subscribed in settlement of
accounts payable		119,520		120		17,809								17,929
Stock issued for services		1,852,557		1,853		1,005,647								1,007,500
Stock issued, net of acquisition fees		2,069,697		2,069		467,911								469,980
Net loss, December 31, 2005											(1,287,265	)		(1,287,265	)
Balance, December 31, 2005		54,653,242	$	54,653	$	2,047,928	$	--		$	(1,829,971	)	$	272,610
Stock issued		120,001		120		17,880								18,000
Stock issued for services		435,786		436		149,564								150,000
Net loss, September 30, 2006											(485,143	)		(485,143	)
Balance, September 30, 2006		55,209,029	$	55,209	$	2,215,372	$	--		$	(2,315,114	)	$	(44,533	)

See Accompanying Notes to Financial Statements.

F - 5

MOSAIC NUTRACEUTICALS, CORP.

(A Development Stage Enterprise)

STATEMENTS OF CASH FLOWS

See Report of Independent Registered Accounting Firm

							Aug. 8, 1990
	Nine Months Ended						(inception) to
	September 30,						September 30,
	2006			2005			2006
	(unaudited)						(unaudited)
Cash Flows From Operating Activities
Net loss	$	(485,143	)	$	(1,027,362	)	$	(2,259,037	)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization		8,392			6,956			21,937
Loss on Disposition of assets		4,893			--			4,893
Stock based expenses		150,000			700,000			1,432,387
Stock based compensation		52,500			--			65,500
Interest expense paid by stock		--			--			300
Changes in assets and liabilities
Decrease in accounts receivables		1,003			--			--
(Increase) in other receivables		--			--			(101,963	)
(Increase) in inventory		(22,502	)		(143,947	)		(113,759	)
(Increase) decrease in prepaid expenses		2,985			(128,417	)		--
(Increase) decrease in deposits		2,889			(2,889	)		--
Increase in customer deposits		--			--			4,000
Increase in accounts payable and accrued liabilities		245,620			88,795			379,931
Net cash used in operating activities	$	(39,363	)	$	(506,864	)	$	(565,811	)
Cash Flows From Investing Activities
Purchase of fixed assets	$	--		$	(38,674	)	$	(38,674	)
Purchase of intangible asset		--			--			(30,000	)
Proceeds from sale of assets		15,600			--			15,600
Acquisitions, net of cash acquired		--			--			591
Net cash used in investing activities	$	15,600		$	(38,674	)		(52,483	)
Cash Flows From Financing Activities
Issuance of common stock	$	18,000		$	550,000		$	561,505
Proceeds from notes payable		--			--			49,876
Loan from officer		8,500			--			8,500
Contribution of capital		--			--			1,293
Net cash provided by financing activities	$	26,500		$	550,000		$	621,174
Net increase in cash	$	2,737		$	4,462		$	2,880
Cash, beginning of period	$	143		$	2,519		$	--
Cash, end of period	$	2,880		$	6,981		$	2,880
Supplemental Information and Non-monetary Transactions:
Interest paid	$	6		$	742		$	763
Taxes paid	$	--		$	--		$	--
Stock issued in settlement of accounts payable, 119,520 shares	$	--		$	17,929		$	17,929
Stock issued for advertising services, 1,000,000 shares at $0.50	$	150,000		$	700,000		$	1,000,000
Warrants issued for distribution services	$	--		$	--		$	432,387
Stock issued for debt 233,000 shares at $0.13	$	--		$	--		$	30,300
Stock issued for directors fees 450,000 shares	$	--		$	157,500		$	157,500

See Accompanying Notes to Financial Statements.

F - 6

MOSAIC NUTRACEUTICALS, CORP.

(FKA MOSAIC NUTRICEUTICALS, CORP.)

(A Development Stage Enterprise)

NOTES TO FINANCIAL STATEMENTS

Note 1.Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with Securities and Exchange Commission requirements for interim financial statements. Therefore, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The financial statements should be read in conjunction with the Form 10-KSB for the year ended December 31, 2005 of Mosaic Nutraceuticals, Corp. (the “Company”).

The interim financial statements present the balance sheet, statements of operations and cash flows of the Company. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

The interim financial information is unaudited. In the opinion of management, all adjustments necessary to present fairly the financial position as of September 30, 2006 and the results of operations and cash flows presented herein have been included in the financial statements. Interim results are not necessarily indicative of results of operations for the full year.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Note 2.Going Concern

The Company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. Currently, the Company does not have significant operations, nor does it have sufficient operations to cover its operating costs and raises substantial doubt about its ability to continue as a going concern. The Company will be dependent upon the raising of additional capital through placement of our common stock or a significant increase in revenues in order to continue with its business plan. There can be no assurance that the Company will be successful in raising the capital it requires through the sale of our common stock or increase sales in order to continue as a going concern. Until the Company has sufficient operations, the stockholders, officers, and directors have committed to advancing the operating costs of the Company.

Note 3.Recent Accounting Pronouncements

In February 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments—an Amendment of FASB Statements No. 133 and 140” (“SFAS No. 155”). SFAS No. 155 allows financial instruments that contain an embedded derivative and that otherwise would require bifurcation to be accounted for as a whole on a fair value basis, at the holders’ election. SFAS No. 155 also clarifies and amends certain other provisions of SFAS No. 133 and SFAS No. 140. This statement is effective for all financial instruments acquired or issued in fiscal years beginning after September 15, 2006. We do not expect that the adoption of SFAS No. 155 will have a material impact on our financial condition or results of operations.

F - 7

MOSAIC NUTRACEUTICALS, CORP.

(FKA MOSAIC NUTRICEUTICALS, CORP.)

(A Development Stage Enterprise)

NOTES TO FINANCIAL STATEMENTS

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets—an Amendment of FASB Statement No. 140” (“SFAS No. 156”). SFAS No. 156 provides guidance on the accounting for servicing assets and liabilities when an entity undertakes an obligation to service a financial asset by entering into a servicing contract. This statement is effective for all transactions in fiscal years beginning after September 15, 2006. We do not expect that the adoption of SFAS No. 156 will have a material impact on our financial condition or results of operations.

In July 2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the recognition threshold and measurement of a tax position taken on a tax return. FIN 48 is effective for fiscal years beginning after December 15, 2006. FIN 48 also requires expanded disclosure with respect to the uncertainty in income taxes. We are currently evaluating the requirements of FIN 48 and the impact this interpretation may have on our financial statements.

In September 2006, the SEC Staff issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements” (“SAB No. 108”). SAB No. 108 requires the use of two alternative approaches in quantitatively evaluating materiality of misstatements. If the misstatement as quantified under either approach is material to the current year financial statements, the misstatement must be corrected. If the effect of correcting the prior year misstatements, if any, in the current year income statement is material, the prior year financial statements should be corrected. In the year of adoption (fiscal years ending after November 15, 2006 or calendar year 2006 for us), the misstatements may be corrected as an accounting change by adjusting opening retained earnings rather than being included in the current year income statement. We are currently evaluating the requirements of SAB No. 108 and the impact it may have on our consolidated financial statements.

Note 4.Notes Payable

Notes payable consist of the following:		September 30, 2006		December 31, 2005
Notes payable, at 8% interest, due November 19, 2005	$	10,000	$	10,000
Notes payable, at 8% interest, due September 7, 2005		9,876		9,876
Short term notes payable	$	19,876	$	19,876

Notes are past due. Note holder has not demanded payment as of report date. Accrued interest on notes payable is $2,389 and $1,196 as of September 30, 2006 and December 31, 2005, respectively.

Note 5.Stockholders’ Equity

Common stock

The Company issued 435,786 shares for the final three installments of the marketing agreement with the Global Media Fund. 

F - 8

MOSAIC NUTRACEUTICALS, CORP.

(FKA MOSAIC NUTRICEUTICALS, CORP.)

(A Development Stage Enterprise)

NOTES TO FINANCIAL STATEMENTS

The Company issued 120,001 shares for $18,000 in cash to two shareholders.

Note 3.Commitments and Contingencies

Lease commitments

The Company is engaged in a non-cancelable operating lease for a sales office. Under the term of the lease agreement, the Company is obligated to make minimum monthly payments of $2,889 with an expiration date through May 2010. The lease also required a lease deposit of $2,889. In July 2006, the Company terminated the lease for the office space. The lease deposit was forfeited and the landlord provided a release from the remaining terms of the lease. No additional future lease obligations are required of the Company.

For the three months ended September 30, 2006 and 2005, the Company had rent expense of $0 and $8,667, respectively, and for the nine months ended September 30, 2006 and 2005, the Company had rent expense of $17,334 and $11,556, respectively.

Litigation

On January 6, 2006, the Company commenced a civil action against the previous manufacturer of its products. The Company prepaid $132,000 in April 2005 for the production of inventory. Shipments of $42,981 were received, with approximately $13,000 not meeting specified tolerances. The Company recorded a receivable of $101,963 for the recovery of the prepaid funds for undelivered product and the damaged product. The lawsuit is at an early stage and there have been no settlement discussions to date. Management believes it will receive full recovery of the receivable and no allowance has been recorded.

Note 4.   Related party transactions

An officer and director of the company loaned $8,500 to the Company for operating expenses. There are no definite repayment terms or accruing interest on the advance. There are no definite repayment terms or accruing interest on the advance. Also, due to cash flow constraints, the salaries for officers have been accrued, not paid. As of September 30, 2006, the Company accrued $135,000 in salary and $10,327 in associated payroll taxes.

F - 9

Item 2.Management’s Discussion and Analysis or Plan of Operation

FORWARD-LOOKING STATEMENT WARNING

This Form 10-QSB contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we desire to take advantage of the “safe harbor” provisions in the Securities Act and the Exchange Act. Accordingly, we are including this statement so that we are covered by the protection available under the safe harbor provisions with respect to all of the forward-looking statements in this Form 10-QSB. The forward-looking statements in this Form 10-QSB reflect our current views with respect to possible future events and financial performance. You should consider any statements made in this Form 10-QSB that are not statements of historical fact to be forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “plan,” “seek,” or “believe.” We believe that the expectations reflected in such forward-looking statements are accurate as of the date of this Form 10-QSB. However, we cannot assure you that such expectations will occur. Our actual future performance could differ materially from such statements. Factors that could cause or contribute to such differences include, but are not limited to, economic and regulatory changes, inability to achieve significant revenues and/or financial resources, our history of losses, and significant increase in competition. You should not unduly rely on these forward-looking statements. We undertake no obligation to publicly revise forward-looking statements herein to reflect events or circumstances that may arise after the date of this Form 10-QSB.

Plan of Operation

During the next twelve months the Company plans to produce and sell chew supplements and OTC drug products and other non-chew supplements produced by third party manufacturers for the Company. Additionally, the Company intends to make arrangements with at least one supplement chew manufacturer to produce the VitalHealth soft chew products, and if necessary due to demand, will attempt to make similar arrangements with a secondary manufacturer as a backup.Currently, the Company has an inventory of chew products that it is selling through the Company website. All chew products are available except Premium Calcium and Multi-vitamin chews.

The Company has experienced difficulties with former manufacturers regarding production of its soft chew product line. The Company intends to remedy such problems by making arrangements with a new third party manufacturer that has successfully completed samples of the most difficult chew formulations. Though production costs have been discussed and agreed to in principal, no substantive agreements have been reached with any new third party manufacturer. The Company believes it will not be able to finalize an agreement with any new potential third party manufacturer until such time as it has obtained financing to build its inventory. In the event that arrangements are made with a new third party manufacturer, the Company must still complete development ofthe balance of the products, review packaging and produce samples in final form prior to pursuing retail contracts for its products.

The Company obtained a media credit for one million dollars ($1,000,000) in prepaid advertising and used the advertising to generate interest and traffic to the Mosaic website. The print ads started in August 2005 and radio ads started in July 2005. The ads obtained through the media credit ran in at least 25 newspapers each month for six months. The final advertisements ran in May 2006 and the prepaid advertising credit has now been exhausted. Management does not anticipate running any additional advertisements until the Company has retained a manufacturer and resolved all issues relating to production of chew products.

The Company has taken measures to reduce the amount needed to sustain operations. Such efforts include sale of some of our office furniture, and negotiations with the landlord to potentially move to smaller more affordable office space. As such, we anticipate that the Company will require approximately $64,500 to sustain operations through June 2007. The foregoing estimate takes into consideration estimated costs relating to anticipated rent, phone services, payroll, legal services, accounting services, insurance, marketing and other miscellaneous expenses. The foregoing amount does not take into consideration amounts necessary to build product inventory for sale. The Company intends to use any available funding in excess of the $64,500 needed to sustain operations to build its product inventory.

5

Though Mosaic has sold products via its website, internet traffic to the Mosaic website has not generated and is not currently expected to generate the revenue necessary to sustain the operations of the Company through June 2007.

The Company is also pursuing purchase orders from retailers and export accounts to generate revenue necessary to sustain operations. However, such efforts were hindered by the Company’s need to find a new third party manufacturer capable of filling such orders. Once we obtain financing to build our inventory we believe we will be able to conclude negotiations with a new manufacturer for production of our chew product line and we expect to be able to fill new purchase orders as they are received.

Though the Company believes it will eventually be able to generate purchase orders and internet sales sufficient to sustain operations, it will be forced to pursue loans, capital infusions from private sale of common stock, deferment of compensation to certain officers, or some combination thereof until such time. There can be no assurance that the Company will be successful in obtaining loans, equity financing upon favorable terms or deferments of compensation. The Company also anticipates potentially funding additional advertising with Global Media Fund through exchange of its restricted common stock for additional media credit once it concludes negotiations with a new chew product manufacturer.

The Company intends to raise money through private placement sale of its restricted common stock during the next twelve months. This will be done to sustain operations until the Company begins to generate sufficient revenue from internet sales and purchase orders from retailers and export accounts. The Company intends to attempt to raise $500,000 to $2,000,000.

No significant changes in the number of employees of the Company are currently planned.

Off Balance Sheet Arrangements

The Company has no off balance sheet arrangements.

Item 3.Controls and Procedures

Pursuant to paragraph (b) of Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 (the “Exchange Act”) and on August 3, 2006, our President and Chief Executive Officer, Charles Townsend (the “CEO”) acting as both our principal executive and financial officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) or Rule 15d-15(e) and concluded that, as of September 30, 2006, and based on the evaluation of these controls and procedures as required by paragraph (b) of Rule 13a-15 or Rule 15d-15, there were no significant deficiencies in these procedures. The CEO determined that our disclosure controls and procedures are effective.

There have been no material changes during the second quarter of 2006 in our internal controls over financial reporting or in any other factor that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II

OTHER INFORMATION

Item 1.Legal Proceedings

During the third quarter of 2006, we did not become a party to any new material legal proceedings, nor are we aware of any new legal proceedings being contemplated against us by any governmental authority. Furthermore, we are not aware of any other legal proceeding in which any of our officers, directors, affiliates or security holders is a party adverse to us or in which any of them have a material interest adverse to us.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.Defaults Upon Senior Securities

None.

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

None.

Item 5.Other Information

None.

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Item 6.Exhibits and Reports on Form 8-K

Exhibit No.	Description of Document
2	Plan of Merger and Agreement and Plan of Reorganization of Westchester Group, Inc., a Nevada corporation into ePublishedbooks.com, a Nevada corporation, as the surviving corporation*
3.1	Articles of Incorporation of ePublishedbooks.com filed March 14, 2000*
3.2	Articles of Merger (pursuant to Nevada Revised Statutes Chapter 92A) filed May 24, 2004*
3.3	Continuation of Articles of Merger (Pursuant to NRS Chapter 92A) By and Between Westchester Group, Inc. into ePublishedbooks.com and Amendment to the Articles of Incorporation of ePublishedbooks.com filed May 24, 2004*
3.4	Certificate of Amendment to Articles of Incorporation For Nevada Profit Corporations filed February 15, 2005*
3.5	By-laws of ePublishedbooks.com dated as of March 14, 2000*
3.6	Amended and Restated Bylaws of Mosaic Nutraceuticals Corp. effective as of September 23, 2005**
10.1	Memorandum of Understanding (“MOU”) with Global Media Fund, LLC (“GMF”), April 8, 2005*
10.2	Media Due Bill in the amount of One Million Dollars ($1,000,000) dated April 8, 2005*
10.3	International Distributor Agreement with AHB Trading Limited, S.A. dated September 13, 2004*
10.4	Munning Trading Co. exclusive marketing rights letter agreement dated October 6, 2004*
10.5	International Marketing Agreement with C & H Marketing, Inc. dated July 12, 2004*
10.6	Service Agreement with BJC Marketing dated June 23, 2005*
10.7	Office Lease Agreement between PHL-OPCO, LP, as Landlord and Mosaic Nutraceuticals Corp., as Tenant*
10.8	Correspondence dated February 21, 2005 to Munning Trading Co. regarding product pricing***
31.1	Certification of Principal Executive Officer****
31.2	Certification of Principal Financial Officer****
32	Certification pursuant to 18 U.S.C. Section 1350****
*	Incorporated by reference to the corresponding exhibits filed with Mosaic’s Form 10-SB filed on July 13, 2005
**	Incorporated herein by reference to the Company’s Form 8-K filed on November 3, 2005
***	Incorporated by reference to the corresponding exhibits filed with Mosaic’s Form 10-SB Amendment No. 2 filed on December 29, 2005
****	Filed herewith

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DATE:  November 14, 2006                                                     MOSAIC NUTRACEUTICALS CORP.
                                                                                                                      (Registrant)

BY:/s/  Charles Townsend                                                               
             CHARLES TOWNSEND
             PRESIDENT, CHIEF EXECUTIVE OFFICER, AND
             PRINCIPAL FINANCIAL OFFICER

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