10QSB 1 v030096_10qsb.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. FORM 10-QSB [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, For the Quarter Ended September 30, 2005 [_] Transitional Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File No. 000-28459 ADVANCED PLANT PHARMACEUTICALS, INC. (Exact name of Registrant as specified in its charter) Delaware 59-2762023 ------------------- ------------------- (State of other jurisdiction (I.R.S. Employer Identification Number) of incorporation or organization) 43 West 33rd Street, New York, New York 10001 --------------------------------------------- Address of principal executive offices Registrant's telephone number, including area code: 212-695-3334 Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] As of November 18, 2005, there were issued and outstanding 786,382,298, shares of Common Stock, $.0007 par value per share. Transitional Small Business Disclosure Format Yes [_] No [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes [_] No [X] ADVANCED PLANT PHARMACEUTICALS, INC. INDEX ----- PAGE PART I. FINANCIAL INFORMATION NUMBER --------------------- ---------- Item 1. Condensed financial statements (unaudited) Condensed Balance sheet as of September 30, 2005 3 Condensed Statements of operations for the three and nine months ended September 30, 2005 and 2004 4 Condensed Statements of cash flows for the nine months ended September 30, 2005 and 2004 5 Notes to the condensed financial statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Controls and Procedures 11 PART II. OTHER INFORMATION 12 ---------------- SIGNATURES 13 2 PART I ITEM 1. CONDENSED FINANCIAL STATEMENTS ADVANCED PLANT PHARMACEUTICALS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

September 30, December 31, 2005 2004 ------------- ------------ Unaudited ASSETS CURRENT ASSETS Cash $ 560 $ 1,045 Accounts receivable 306 Inventory 1,014 Prepaid expenses 5,000 ------------- ------------ Total Current Assets 6,574 1,351 OFFICE EQUIPMENT, net of accumulated depreciation of $2,662 and $1,824, respectively 1,691 2,529 OTHER ASSETS Goodwill 10,406 10,406 Intangible assets, net of impairment losses 24,599 Due from related company 6,250 Other assets 7,144 7,144 ------------- ------------ 50,090 17,550 ------------- ------------ Total Assets $ 56,664 $ 21,430 ============= ============ LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT LIABILITIES Bank overdraft $ 8,146 $ 5,111 Accounts payable 126,893 167,108 Accrued expenses 251,285 568,983 Accrued expenses - stockholders 1,133,603 901,246 Due to distributor 103,500 Due to stockholder - asset acquisition 1,315,000 1,315,000 Loans payable - stockholders 321,555 228,796 Deposits 96,625 ------------- ------------ Total Current Liabilities 3,253,107 3,289,744 STOCKHOLDERS' DEFICIENCY Preferred stock, authorized 10,000,000 shares; $0.0007 par value; 5,000,000 and 2,500,000 shares issued and outstanding at September 30, 2005 and December 31, 2004, respectively 3,500 1,750 Common stock, authorized 880,000,000 shares; $0.0007 par value; 797,157,996 and 748,157,996 shares issued and outstanding at September 30, 2005 and December 31, 2004, respectively 558,711 523,711 Additional paid-in capital 14,681,548 14,540,226 Accumulated deficit (18,440,202) (18,334,001) ------------- ------------ Total Stockholders' Deficiency (3,196,443) (3,268,314) ------------- ------------ Total Liabilities and Stockholders' Deficiency $ 56,664 $ 21,430 ============= ============

See accompanying notes to financial statements. 3 ADVANCED PLANT PHARMACEUTICALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

For the Three Months Ended For the Nine Months Ended September 30, September 30, ------------------------------ ------------------------------ 2005 2004 2005 2004 ------------- ------------- ------------- ------------- Restated Restated REVENUE - SALES $ 1,458 $ 3,557 $ 7,387 $ 52,532 COSTS AND EXPENSES Cost of goods sold 122 719 1,948 30,978 Selling, general and administrative expenses 351,398 326,760 897,129 1,020,499 Stock based compensation 51,907 52,220 Stock issued for marketing services 1,872 187,000 121,572 983,367 Stock issued for consulting services 3,343 6,250 9,193 1,336,950 Depreciation 279 249 838 314 ------------- ------------- ------------- ------------- Total Costs and Expenses 408,921 520,978 1,082,900 3,372,108 ------------- ------------- ------------- ------------- NET OPERATING LOSS (407,463) (517,421) (1,075,513) (3,319,576) OTHER EXPENSE Interest expense (2,042) (2,072) ------------- ------------- ------------- ------------- Total Other Expense (2,042) (2,072) ------------- ------------- ------------- ------------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (409,505) (517,421) (1,077,585) (3,319,576) EXTRAORDINARY ITEM Forgiveness of debt (net of income taxes) 638,291 638,291 ------------- ------------- ------------- ------------- NET INCOME (LOSS) $ (228,786) $ (517,421) $ (439,294) $ (3,319,576) ============= ============= ============= ============= NET LOSS PER SHARE OF COMMON STOCK $ (.00) $ (.00) $ (.00) $ (.01) ============= ============= ============= ============= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 798,114,518 634,951,712 790,978,509 597,039,441 ============= ============= ============= =============

See accompanying notes to financial statements. 4 ADVANCED PLANT PHARMACEUTICALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the Nine Months Ended September 30, ------------------------ 2005 2004 --------- ----------- Restated CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(439,294) $(3,319,576) Stock issued for services 183,165 2,320,317 Depreciation expense 838 195 Forgiveness of debt income (638,291) Changes in assets and liabilities: Decrease (increase) in accounts receivable 306 (1,008) (Increase) decrease in inventory (1,014) 56,060 Increase in prepaid expenses (5,000) (1,520) Increase in other assets 172,000 Increase (decrease) in accounts payable 18,216 (45,551) Increase in accrued expenses 175,162 364,260 Increase in accrued expenses - stockholders 242,357 146,060 --------- ----------- Net cash used in operating activities (463,555) (308,763) CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for office equipment (3,353) Cash paid for intangible assets (5,579) Due from related parties (6,250) 11,738 --------- ----------- Net cash (used in) provided by investing activities (11,829) 8,385 CASH FLOWS FROM FINANCING ACTIVITIES Increase in bank overdraft 3,035 7,071 Cash acquired in acquisition of subsidiary 100 Loans payable - stockholders' - net 83,759 (31,093) Proceeds from due to related company 4,037 Increase in deposits 96,625 10,000 Proceeds from issuance of common stock 291,480 45,244 --------- ----------- Net cash provided by financing activities 474,899 35,359 --------- ----------- Net increase (decrease) in cash (485) (265,019) CASH AT BEGINNING OF PERIOD 1,045 265,858 --------- ----------- CASH AT END OF PERIOD $ 560 $ 839 ========= ===========

See accompanying notes to financial statements. 5 ADVANCED PLANT PHARMACEUTICALS, INC AND SUBSIDIARIES. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)

For the Nine Months Ended September 30, ----------------------- 2005 2004 --------- ----------- Restated SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION NON-CASH INVESTING AND FINANCING ACTIVITIES Issuance of common stock for services $ 183,165 $ 2,320,317 Issuance of preferred stock in payment of loans payable to stockholders 10,000 Issuance of preferred stock in payment of accrued expenses to stockholders 10,000 Issuance of common stock in payment of accrued expenses 16,500 Purchase of intangible assets for loan payable to stockholder 19,000 Issuance of common stock in payment of loan payable to stockholder 500,000 Assets acquired and liabilities assumed in acquisition of subsidiary: Cash acquired 100 Goodwill 9,041 Accrued expenses (8,251) Loans payable - stockholders (890)

See accompanying notes to financial statements. 6 ADVANCED PLANT PHARMACEUTICALS, INC AND SUBSIDIARIES. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2005 NOTE A - CONDENSED FINANCIAL STATEMENTS In the opinion of the Company, the accompanying unaudited condensed financial statements include all adjustments (consisting only of normal recurring accruals) which are necessary for a fair presentation of the results for the periods presented. Certain information and footnote disclosure, normally included in the financial statements prepared in accordance with generally accepted accounting principles, have been condensed and omitted. The results of operations for the nine months ended September 30, 2005 are not indicative of the results of operations for the year ended December 31, 2005. The condensed financial statements should be read in conjunction with the Company's financial statements included in its annual Form 10 KSB for the year ended December 31, 2004. NOTE B - STOCK WARRANTS At September 30, 2005, the Company had outstanding warrants to purchase 7,000,000 shares of the Company's common stock at a price of $.03 per share. The warrants are exercisable and expire at various dates through 2007. NOTE C - COMMITMENTS AND CONTINGENCIES The Company has employment agreements with three employees, and a consulting contract with a key consultant, who are also stockholders of the Company. At September 30, 2005, the Company has a total liability for accrued salaries and consulting expense to stockholders of $809,800. There could be certain payroll tax liabilities owed to the IRS on some of the payments for services to certain consultants that were paid in prior years, pursuant to these employment agreements. NOTE D - RELATED PARTIES STOCK AND ASSET TRANSACTIONS On January 18, 2005, the Company issued 30,000,000 shares of its common stock under an S-8 filing with the Securities and Exchange Commission to consultants at $0.00355 per share. The aggregate remuneration of $106,500 has been treated as stock issued for marketing services and expensed in the current year. In connection with a private placement, on January 24, 2005 the Company issued 10,000,000 shares of its common stock at $0.002 per share realizing $20,000. On February 1, 2005, the Company issued 2,500,000 shares of its preferred stock at $0.008 per share as payment of $20,000 against loans payable - stockholders and accrued expenses - stockholders. On March 5, 2005, Amazing Nutritionals, Inc. ("Amazing") a subsidiary of the Company, entered into an Agreement of Sale with Nature's Backyard, Inc., whereby Amazing agreed to buy all intellectual property, permits, patents (granted, pending, or applied for), trademarks, processes, formulation, exact ingredients, precise way of manufacturing, and related items of the "Slim Cookie", a product for weight loss and lowering cholesterol. The purchase price is as follows: (a) Payment of $1,000 and the issuance of 200,000 shares of common stock on signing the agreement, (b) 300,000 shares of common stock upon signing and filing of a provisional patent application by the Company, (c) 100,000 shares of common stock upon the issuance of a patent by the U.S. Patent and Trademark Office, (d) payment of $4,000 not more than 60 days from the execution of the Agreement, and (e) payment of $15,000 within 270 days of the execution of the Agreement. The Company has not made the required payment and is in default of the agreement. On April 26, 2005, the Company issued 4,000,000 shares of its common stock under an S-8 filing with the Securities and Exchange Commission to consultants at $0.00345 per share. The aggregate remuneration of $13,800 has been treated as stock issued for marketing services and expensed in the current year. 7 ADVANCED PLANT PHARMACEUTICALS, INC AND SUBSIDIARIES. NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2005 NOTE D - RELATED PARTIES STOCK AND ASSET TRANSACTIONS (CONTINUED) On April 26, 2005, the Company issued 5,000,000 shares of its common stock under an S-8 filing with the Securities and Exchange Commission at $0.00345 per share as payment for accounts payable in the amount of $16,500. On July 5, 2005, the Company issued 1,000,000 shares of its common stock at $0.001872 for services. The aggregate remuneration of $1,872 has been treated as stock issued for marketing services and expensed in the current year. NOTE E - FORGIVENESS OF DEBT The Company obtained releases from numerous companies and individuals indicating that they were not owed any amounts from the Company. During the three and nine month periods ended September 30, 2005, the Company recognized Forgiveness of Debt income in the amount of $638,291 from writing off these liabilities. NOTE F - GOING CONCERN As reflected in the accompanying financial statements, the Company has current liabilities in excess of current assets of $3,246,533, resulting in negative working capital. Management is presently seeking to raise permanent equity capital in the capital markets to eliminate negative working capital and provide working capital. Failure to raise equity capital or secure some other form of long-term debt arrangement will cause the Company to further increase its negative working capital deficit. However, there are no assurances that the Company will succeed in obtaining equity financing or some form of long-term debt instrument. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS BACKGROUND Advanced Plant Pharmaceuticals, Inc. (the "Company") was incorporated in the State of Delaware in 1986, under the name Ventra Management, Inc. On July 20, 1994, we amended our Certificate of Incorporation to change our name to Advanced Plant Pharmaceuticals, Inc. DESCRIPTION OF BUSINESS The Company continues to focus on the research and development of plant based dietary supplements. In July 1999, the Company acquired exclusive rights and interests to a thirteen-step process, which utilizes virtually all of the nutrients found in plants to manufacture natural herbal dietary supplements. The purchase price for the thirteen step process was 12,000,000 shares of common stock of the Company. The shares were issued on February 13, 2001. Further, the Company is required to issue an additional 6,000,000 shares of common stock when marketing of the product commences. The Company intends to use this process to manufacture products that it hopes to distribute worldwide through various sales distribution contracts. On February 28, 2000, the Company entered into an Asset Purchase Agreement with Dr. Bielory to purchase his various allergy and nasal formulations. This agreement was approved by the Board of Directors on September 6, 2000. Dr. Bielory was granted a five year option to purchase an aggregate of 18,000,000 shares of the Company's common stock at an exercise price of $180.00. Dr. Bielroy exercised an option for 12,000,000 shares in the first quarter of 2001. Sinusol, being the formulation purchased from Dr. Bielory, is a generalized base solution for the development of an extensive line of specialty products related to allergy and sinus conditions. The ingredients include a mixture of gently pH-balanced essential mineral oils that combat the various symptoms related to allergies and sinus disorders, including congestions, irritated nasal mucosa and bacterial and fungal infections. Specialized advanced formulations are being reviewed for patent submission. In addition to Sinusol, the Company is also currently marketing its Lo-Chol product. Lo-Chol's formula is derived from the "whole plant" parts of six selected plants that work in concert to help tip your lipid balance (good and bad cholesterol) towards a more normal level. These six plants are synergistically combined using a proprietary "whole plant technology" (a special pharmaceutical-grade process) that delivers virtually all the natural phyto-chemicals and active ingredients in the plants. Unlike almost all other herbal supplements on the market, Lo-Chol does not contain any extracts. Instead, it utilizes the entire part of a specific plant that is processed and standardized to deliver optimum potency and nutritional benefits. RECENT DEVELOPMENTS In January 2004, the Company acquired a 44% interest in Amazing Nutritionals, Inc., a development stage company, whereby APPI sold Amazing all of the rights, title, patents, trademarks, processes and related items of LHM123 which is a natural composition for the treatment of senile dementias in consideration for 3,300,000 shares of Amazing's common stock. In December 2004, the Company acquired a 99% interest in Mazal Plant Pharmaceuticals, Inc. ("Mazal"), a development stage company, whereby APPI sold Mazal all of its rights relating to or connected with developing, manufacturing and distributing of three of its products, plant based compositions designed to treat elevated cholesterol, leukemia and Alzheimer's disease in consideration for 7,000,000 shares of Mazal's common stock and a receivable of $50,000. On June 6, 2005, the Company consummated the transactions contemplated by the Share Exchange Agreement dated as of May 2005 (the "Share Exchange Agreement") by and among the Company, Akid Corporation ("Akid") and James B. Wiegand. Pursuant to the Share Exchange Agreement, the Company sold its entire ownership interest in 7,000,000 shares of the common stock of Mazal to Akid. In exchange, Akid agreed to issue to the Company 20,000,000 shares (the "Exchange Shares") of Akid's common stock. Following the consummation of such share exchange, the Company holds a majority of the issued and outstanding common shares of Akid, and Akid holds a majority of the issued and outstanding common shares of Mazal. Akid issued to the Company 17,500,000 of the Exchange Shares at the closing, and agreed to issue the remaining 2,500,000 of the Exchange Shares upon increasing its authorized common stock from 20,000,000 shares to 40,000,000 shares. RESULTS OF OPERATIONS SIX MONTHS ENDED SEPTEMBER 30, 2005 COMPARED TO THE SIX MONTHS ENDED SEPTEMBER 30, 2004 REVENUES Revenues generated during the nine months ended September 30, 2005, aggregated $7,387, as compared to $52,532 for the nine months ended September 30, 2004. The decrease of $42,145 in revenues from the comparable period in the prior year is primarily due to less purchases by our exclusive distributors. 9 COSTS OF GOODS SOLD Cost of Goods Sold for the nine months ended September 30, 2005, aggregated $1,948 as compared to $30,978 for the nine months ended September 30, 2004. The decrease of $29,030 for the nine months ended September 30, 2005 as compared to the nine months ended September 30, 2004, was primarily due to the use of product in connection with clinical trials. OPERATING EXPENSES Operating Expenses incurred for the nine months ended September 30, 2005 aggregated $1,080,952 as compared to $3,341,130 for the nine months ended September 30, 2004, which is a decrease of $2,260,178. This decrease was the result of a decrease in stock issued for marketing services. NET LOSS The net loss was $439,294 for the nine months ended September 30, 2005, as compared to net loss of $3,319,576 for the nine months ended September 30, 2004, which represents an decrease in the net loss of $2,880,282. The reason for the decreased net loss is a result of the reasons described above. THREE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2004. REVENUES Revenues generated during the three months ended September 30, 2005, aggregated $1,458, as compared to $3,557 for the three months ended September 30, 2004. The decrease of $2,099 in revenues from the comparable period in the prior year is primarily due to less purchases by our exclusive distributors. COSTS OF GOODS SOLD Cost of Goods Sold for the three months ended September 30, 2005, aggregated $122 as compared to $719 for the three months ended September 30, 2004. The $597 decrease for the three months ended September 30, 2005, was primarily due to decreased sales. OPERATING EXPENSES Operating Expenses incurred for the three months ended September 30, 2005, aggregated $408,799 as compared to $520,259 for three months ended September 30, 2004, which is a decrease of $111,460. This decrease was the result of a decrease in the amount of shares issue for marketing services. NET LOSS The net loss was $228,786 for the three months ended September 30, 2005, as compared to net loss of $517,421 for the three months ended September 30, 2004. The reason for the increased net loss is a result of the reasons described above. LIQUIDITY AND CAPITAL RESOURCES At September 30, 2005, we had working capital deficit of $3,246,533 as compared with $3,288,393 at December 31, 2004. The decrease in the working capital deficit is primarily the result of a slight increase in prepaid expenses and a decrease in accrued expenses. We have historically sustained our operations and funded our capital requirements with the funds received from the sale of our products, loans received from related parties and the sale of our securities. We will still need additional investments in order to continue operations. Additional investments are being sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and the downturn in the U.S. stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations again. 10 CRITICAL ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management of the Company to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. The Company considers its critical accounting policies to be those that require the more significant judgments and estimates in the preparation of the Company's financial statements, including the following: valuation of inventories and intangible assets, valuation of stock options and warrants, and valuation of all accrued liabilities including payroll taxes and other contingent liabilities. Management relies on historical experience and on other assumptions believed to be reasonable under the circumstances in making its judgment and estimates. Actual results could differ materially from those estimates. ITEM 3 - CONTROLS AND PROCEDURES As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and principal financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and principal financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. There was no change in our internal controls or in other factors that could affect these controls during our last fiscal year that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 11 PART II ITEM 1 - LEGAL PROCEEDINGS From time to time, the Company is a party to litigation or other legal proceedings that it considers to be a part of the ordinary course of its business. The Company is not involved currently in legal proceedings that could reasonably be expected to have a material adverse effect on its business, prospects, financial condition or results of operations except as set forth below. We may become involved in material legal proceedings in the future. ITEM 2 - CHANGES IN SECURITIES 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 ITEM 6. - EXHIBITS 31.1 Certification of the Chief Executive Officer and Principal Financial Officer of Advanced Plant Pharmaceuticals, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of the Chief Executive Officer and Principal Financial Officer of Advanced Plant Pharmaceuticals, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 12 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. ADVANCED PLANT PHARMACEUTICALS, INC. By:/s/ David Lieberman ---------------------------------------- David Lieberman, Chief Executive Officer and Principal Financial Officer Dated: November 21, 2005 13