10QSB 1 v045968.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 March 31, 2006 |_| 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 June 20, 2006, there were issued and outstanding 798,157,996, 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 NUMBER ------ PART I. FINANCIAL INFORMATION Item 1. Condensed financial statements (unaudited) Condensed Balance sheet as of March 31, 2006 3 Condensed Statements of operations for the three months ended March 31, 2006 and 2005 4 Condensed Statements of cash flows for the three months ended March 31, 2006 and 2005 5 Notes to the condensed financial statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 3. Controls and Procedures 15 PART II. OTHER INFORMATION 16 SIGNATURES 17

PART I ITEM 1. CONDENSED FINANCIAL STATEMENTS Item 1. Financial Statements ADVANCED PLANT PHARMACEUTICALS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

March 31, December 31, 2006 2005 ------------ ------------ Unaudited (Restated) ASSETS CURRENT ASSETS Cash and cash equivalents $ 25,567 $ 11,688 Accounts receivable 1,188 Prepaid expenses - officers 24,850 31,550 Prepaid offering costs 5,000 ------------ ------------ Total Current Assets 55,417 44,426 OFFICE EQUIPMENT, net of accumulated depreciation of $3,221 and $2,942, respectively 1,132 1,411 OTHER ASSETS Goodwill 10,406 10,406 Due from related company 11,250 9,000 Other assets 7,144 7,144 ------------ ------------ 28,800 26,550 ------------ ------------ Total Assets $ 85,349 $ 72,387 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT LIABILITIES Bank overdraft $ 8,096 $ 7,977 Accounts payable 218,301 192,371 Accrued expenses 269,976 229,794 Accrued expenses - officers 1,331,986 1,220,481 Due to stockholder - asset acquisition 1,315,000 1,315,000 Deposits 150,000 Loans payable - stockholders 369,290 369,290 ------------ ------------ Total Current Liabilities 3,662,649 3,334,913 DEFERRED CREDIT 4,610,105 4,286,105 STOCKHOLDERS' DEFICIENCY Preferred stock, authorized 10,000,000 shares; $0.0007 par value; 5,000,000 shares issued and outstanding at March 31, 2006 and December 31, 2005 3,500 3,500 Common stock, authorized 880,000,000 shares; $0.0007 par value; 798,157,996 shares issued and outstanding at March 31, 2006 and December 31, 2005 558,711 558,711 Additional paid-in capital 14,681,548 14,681,548 Accumulated deficit (23,431,164) (22,792,390) ------------ ------------ Total Stockholders' Deficiency (8,187,405) (7,548,631) ------------ ------------ Total Liabilities and Stockholders' Deficiency $ 85,349 $ 72,387 ============ ============

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

For the Three Months Ended March 31, 2006 2005 ------------- ------------- REVENUE - SALES $ 1,976 $ 2,130 COSTS AND EXPENSES Cost of goods sold 1,122 Salaries and consulting fees - officers 266,700 79,800 Selling, general and administrative expenses 369,728 223,452 Depreciation 279 279 ------------- ------------- Total Costs and Expenses 636,707 304,653 ------------- ------------- NET OPERATING LOSS (634,731) (302,523) OTHER EXPENSE Interest expense (4,043) ------------- ------------- NET LOSS $ (638,774) $ (302,523) ============= ============= NET LOSS PER SHARE OF COMMON STOCK (basic and fully diluted) $ (0.001) $ (0.001) ============= ============= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (basic and fully diluted) 798,157,996 786,269,107 ============= =============

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

For the Three Months Ended March 31, 2006 2005 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (638,774) $ (302,523) Adjustments to reconcile net loss to cash flows used in operating activities Stock issued for services 324,000 106,803 Depreciation expense 279 279 Changes in assets and liabilities: Decrease in accounts receivable 1,188 306 (Decrease) in inventory (1,391) Decrease in prepaid expenses - officers 6,700 Increase in prepaid offering costs (5,000) Increase in due from related company (2,250) Increase in accounts payable 25,930 7,686 Increase in accrued expenses 40,182 11,746 Increase in accrued expenses - officers 111,505 55,550 ------------ ------------ Net cash used in operating activities (136,240) (121,544) CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for office equipment Cash paid for intangible assets Due from related parties (1,000) ------------ ------------ Net cash (used in) provided by investing activities (1,000) CASH FLOWS FROM FINANCING ACTIVITIES Bank overdraft 119 2,291 Loans payable - stockholders' - net 99,850 Proceeds from deposits 150,000 Proceeds from issuance of common stock 20,000 ------------ ------------ Net cash provided by financing activities 150,119 122,141 ------------ ------------ Net increase (decrease) in cash 13,879 (403) CASH AT BEGINNING OF PERIOD 11,688 1,045 ------------ ------------ CASH AT END OF PERIOD $ 25,567 $ 642 ============ ============

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

For the Three Months Ended March 31, 2006 2005 ------------- ------------ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION NON-CASH INVESTING AND FINANCING ACTIVITIES Issuance of common stock for services $106,803 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 Purchase of intangible assets for loan payable to stockholder 19,000 Issuance of Mazal common stock for services classified as a deferred credit $324,000

See accompanying notes to financial statements. ADVANCED PLANT PHARMACEUTICALS, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS March 31, 2006 1. 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 three months ended March 31, 2006 are not indicative of the results of operations for the year ended December 31, 2006. 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, 2005. 2. STOCK WARRANTS At March 31, 2006, 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. 3. COMMITMENTS AND CONTINGENCIES The Company has employment agreements with nine employees, and a consulting contract with a key consultant, who are also stockholders of the Company and Mazal. At March 31, 2006, the Company has a total liability for accrued salaries and consulting expense to stockholders of $1,221,200. 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. 4. DEPOSITS The deposits at March 31, 2006 in the amount of $150,000 represent deposits to acquire 200,000 shares of common stock in Mazal at $0.25 per share pursuant to a Securities Purchase Agreement, and an additional 400,000 shares of common stock in Mazal at $0.25 per share for which there is no written agreement. The deposits are non-interest bearing. 5. ISSUANCE OF COMMON STOCK On January 24, 2006, Mazal issued 200,000 shares of its common stock to a consultant at $1.08 per share. The aggregate remuneration of $216,000 has been treated as stock based compensation and expensed in the current period. On January 25, 2006, Mazal issued 100,000 shares of its common stock to its President at $1.08 per share. The aggregate remuneration of $108,000 has been treated as stock based compensation and expensed in the current period. ADVANCED PLANT PHARMACEUTICALS, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS March 31, 2006 6. GOING CONCERN UNCERTAINTY AND MANAGEMENT'S PLANS As reflected in the accompanying financial statements, the Company has current liabilities in excess of current assets of $3,607,232, resulting in negative working capital and an accumulated deficit of $23,431,164. 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 and could result in the Company having to curtail or cease operations. Additionally, even if the Company does raise sufficient capital to support its operating expenses and generate revenues, there can be no assurances that the revenue will be sufficient to enable it to develop business to a level where it will generate profits and cash flows from operations. These matters raise substantial doubt about the Company's ability to continue as a going concern. However, the accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. 7. SUBSEQUENT EVENT In connection with a private placement on April 25, 2006, Mazal issued 400,000 shares of its common stock at $0.25 per share realizing $100,000. 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 Results of Operations - Three Months Ended March 31, 2006 Compared to the Three Months Ended March 31, 2005. Revenues Revenues generated during the three months ended March 31, 2006, aggregated $1,976, as compared to $2,130 for the three months ended Mach 31, 2005. The decrease of $154 in revenues from the comparable period in the prior year is primarily due to a decrease in marketing due to a lack of funding. Costs of Goods Sold Cost of Goods Sold for the three months ended March 31, 2006 aggregated $-0- as compared to $1,122 for the three months ended March 31, 2005. The decrease for the three months ended March 31, 2006 is the result of a decrease in sales of our products. Operating Expenses Operating Expenses incurred for the three months ended March 31, 2006, aggregated $637,707 as compared to $304,653 for three months ended March 31, 2005, which is an increase of $333,054. This increase was primarily due to an increase in the issuance of stock for services and the payment of fees for officers and consultants. Net Loss and Loss Per Common Share The net loss and the loss per common share was $638,731 and $.001 for the three months ended March 31, 2006, as compared to net loss of $302,523 and $.001 for the three months ended March 31, 2005. This increase was due primarily to the increase in the issuance of stock for services and the payment of fees to officers and consultants. Liquidity and Capital Resources At March 31, 2006, we had working capital deficit of $3,577,300 as compared with $3,282,188 at December 31, 2005. The increase in the working capital deficit is primarily the result of an increase 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. 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. 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 (a) 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. 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: June 21, 2006