**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM10-QSB**

 

**(Mark One)**

 
| **ý** |   | **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 EXCHANGE ACT**                                                                                                                                                                                                                                                          |
|       |   |                                                                                                                                                                                                                                                                                                                          |
| ** ** |   | **For the  transition period from                          to                        ** |
| ** ** |   | ** **                                                                                                                                                                                                                                                                                                                    |
| ** ** |   | **Commission  file number  0-51434**                                                                                                                                                                                                                                                                                |

 

**MOSAIC NUTRACEUTICALS CORP.**

(Exact name of smallbusiness issuer as specified in its charter)

 
| **Nevada**                                                      | ** ** | **88-0462298**                     |
|-----------------------------------------------------------------|------------|------------------------------------|
| (State or other  jurisdiction of incorporation or organization) |       | (IRS Employer  Identification No.) |
|                                                            |       |                               |
| **4100  Spring Valley Road, Suite 200, Dallas, Texas 75244**    |
| (Address of principal  executive offices)                       |

 

**(214) 866-0045**

(Issuer’s telephonenumber)

 

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

 

Check whether theissuer:  (1) filed all reports requiredto 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 suchreports), and (2) has been subject to such filing requirements for the past 90days.  Yes o  No ý

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act.) Yes o No ý

 

**APPLICABLEONLY TO ISSUERS INVOLVED IN BANKRUPTCYPROCEEDINGS DURING THE PRECEDING FIVE YEARS**

 

Check whether theregistrant 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 aplan confirmed by a court.  Yes o No o

 

**APPLICABLEONLY TO CORPORATE ISSUERS**

 

State the number ofshares outstanding of each of the issuer’s classes of common equity, as of thelatest practicable date:  54,363,306shares of Common Stock, par value $.001 per share, issued and outstanding onOctober 31, 2005.

 

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

 

 

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**TABLE OFCONTENTS**

 
| **PART I**     | **FINANCIAL  INFORMATION**                                           |       |
|----------------|----------------------------------------------------------------------|------------|
|           |                                                                 |       |
| **Item 1.**    | **Financial Statements.**                                            |       |
|           |                                                                 |       |
| ** **     | **Balance  Sheets**                                                  | ** ** |
| ** **     | **Statements of Operations**                                         | ** ** |
| ** **     | **Statements of Stockholders’  Equity**                         | ** ** |
| ** **     | **Statements of Cash Flows**                                         | ** ** |
| ** **     | **Notes to Financial Statements**                                    | ** ** |
|           |                                                                 |       |
| **Item 2.**    | **Management’s Discussion and Analysis  or Plan of Operation.** |       |
|           |                                                                 |       |
| **Item 3.**    | **Controls and Procedures.**                                         |       |
|           |                                                                 |       |
| **PART  II**   | **OTHER  INFORMATION**                                               |       |
|           |                                                                 |       |
| **Item 1.**    | **Legal Proceedings.**                                               |       |
|           |                                                                 |       |
| **Item 2.**    | **Unregistered Sales of Equity  Securities and Use of Proceeds.**    |       |
|           |                                                                 |       |
| **Item 4.**    | **Submission of Matters to a  Vote of Security Holders.**            |       |
|           |                                                                 |       |
| **Item 6.**    | **Exhibits.**                                                        |       |
| ** **     | ** **                                                           |       |
| **SIGNATURES** |                                                                 |

 

1

----

 

**PART IFINANCIAL INFORMATION**

**Item 1.****           Financial Statements.**

 

**MOSAIC NUTRACEUTICALS, CORP.**

**(FKA MOSAIC NUTRICEUTICALS, CORP.)**

**(ADevelopment Stage Enterprise)**

**BALANCE SHEETS**

 
| ** **                                                                                                                                                                                                  | ** ** | **September 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|------------------------|------------|
| ** **                                                                                                                                                                                                  | ** ** | **(unaudited)**         | ** ** | ** **             | ** ** |
| ASSETS                                                                                                                                                                                                      |       |                    |       |                   |       |
|                                                                                                                                                                                                        |       |                    |       |                   |       |
| CURRENT ASSETS                                                                                                                                                                                              |       |                    |       |                   |       |
| Cash                                                                                                                                                                                                        |       | $                       | 6,981      |                   | $          | 2,519 |   |
| Inventory                                                                                                                                                                                                   |       | 167,543                 |       | 23,596                 |       |
| Prepaid expenses                                                                                                                                                                                            |       | 285,917                 |       | 0                      |       |
| Total current  assets                                                                                                                                                                                       |       | $                       | 460,441    |                   | $          | 26,115 |   |
|                                                                                                                                                                                                        |       |                    |       |                   |       |
| OTHER ASSETS                                                                                                                                                                                                |       |                    |       |                   |       |
| Deposits                                                                                                                                                                                                    |       | $                       | 2,889      |                   | $          | — |   |
| Fixed assets,  net                                                                                                                                                                                          |       | 36,218                  |       | —                 |       |
| Intangible  assets, net                                                                                                                                                                                     |       | 22,000                  |       | 26,500                 |       |
|                                                                                                                                                                                                        |       |                    |       |                   |       |
| Total assets                                                                                                                                                                                                |       | $                       | 521,548    |                   | $          | 52,615 |   |
|                                                                                                                                                                                                        |       |                    |       |                   |       |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                                                                                                                                  |       |                    |       |                   |       |
|                                                                                                                                                                                                        |       |                    |       |                   |       |
| CURRENT LIABILITIES                                                                                                                                                                                         |       |                    |       |                   |       |
| Accounts payable  and accrued expenses                                                                                                                                                                      |       | $                       | 89,139     |                   | $          | 18,273 |   |
| Notes payable                                                                                                                                                                                               |       | 19,876                  |       | 19,876                 |       |
| Total current  liabilities                                                                                                                                                                                  |       | $                       | 109,015    |                   | $          | 38,149 |   |
|                                                                                                                                                                                                        |       |                    |       |                   |       |
| STOCKHOLDERS’ EQUITY                                                                                                                                                                                   |       |                    |       |                   |       |
| Preferred stock:  $0.001 par value; authorized 5,000,000 shares; no shares issued and  outstanding                                                                                                          |       |                    |       |                   |       |
| Common stock  subscribed, 33,334 shares at December 31, 2004 and 0 shares at September 30,  2005:                                                                                                           |       | $                       | —     |                   | $          | 20,000 |   |
| Common stock:  $0.001 par value; authorized 100,000,000 shares; issued and outstanding:  32,062,500 shares at December 31, 2003; 50,244,800 shares at December 31,  2004 and 53,907,455 September 30, 2005: |       | 53,907                  |       | 50,245                 |       |
| Common stock  subscribed                                                                                                                                                                                    |       | 157,500                 |       | —                 |       |
| Additional paid  in capital                                                                                                                                                                                 |       | 1,771,194               |       | 486,927                |       |
| Accumulated  deficit during development stage                                                                                                                                                               |       | (1,570,068              | )          | (542,706               | )          |
|                                                                                                                                                                                                        |       |                    |       |                   |       |
| Total  stockholders’ equity                                                                                                                                                                            |       | $                       | 412,533    |                   | $          | 14,466 |   |
|                                                                                                                                                                                                        |       |                    |       |                   |       |
| Total  liabilities and stockholders’ equity                                                                                                                                                            |       | $                       | 521,548    |                   | $          | 52,615 |   |

 

See Accompanying Notes toFinancial Statements.

 

2

----

 

**MOSAIC NUTRACEUTICALS, CORP.**

**(FKA MOSAIC NUTRICEUTICALS, CORP.)**

**(A Development Stage Enterprise)**

**STATEMENTS OF OPERATIONS**

 
| ** **                                                     | ** ** | ** **              | ** ** | ** **              | ** ** | ** **              | ** ** | ** **              | ** ** | **Aug 8, 1990**         | ** ** |
|----------------------------------------------------------------|------------|-------------------------|------------|-------------------------|------------|-------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                                                     | ** ** | **Three months ended**  | ** ** | **Nine months ended**   | ** ** | **(inception) to**      | ** ** |
| ** **                                                     | ** ** | **September 30,  2005** | ** ** | **September 30,  2004** | ** ** | **September 30,  2005** | ** ** | **September 30,  2004** | ** ** | **September 30,  2005** | ** ** |
| ** **                                                     | ** ** | **(unaudited)**         | ** ** | ** **              | ** ** | **(unaudited)**         | ** ** | ** **              | ** ** | **(unaudited)**         | ** ** |
|                                                           |       |                    |       |                    |       |                    |       |                    |       |                    |       |
| Revenues                                                       |       | $                       | 5,290      |                    | $          | —                  |       | $                       | 5,992      |                    | $          | — |   | $ | 5,992 |   |
|                                                           |       |                    |       |                    |       |                    |       |                    |       |                    |       |
| Cost of revenue                                                |       | 1,608                   |       | —                  |       | 1,729                   |       | —                  |       | 1,729                   |       |
|                                                           |       |                    |       |                    |       |                    |       |                    |       |                    |       |
| Gross profit                                                   |       | $                       | 3,682      | ** **              | **$**      | **—**              |       | $                       | 4,263      |                    | $          | — |   | $ | 4,263 |   |
|                                                           |       |                    |       |                    |       |                    |       |                    |       |                    |       |
| General, selling  and administrative expenses                  |       |                    |       |                    |       |                    |       |                    |       |                    |       |
| Operating  expenses                                            |       | $                       | 764,523    |                    | $          | 444,223                 |       | $                       | 1,023,461  |                    | 445,082    |   | $ | 1,505,945 |   |
| Depreciation and  amortization                                 |       | 3,061                   |       | —                  |       | 6,956                   |       | —                  |       | 10,456                  |       |
| Operating loss                                                 |       | (763,902                | )          | $                       | (444,223   | )                       | $          | (1,026,154              | )          | $                       | (445,082   | ) | $ | (1,512,138 | ) |
|                                                           |       |                    |       |                    |       |                    |       |                    |       |                    |       |
| Nonoperating income (expense)                                  |       | (400                    | )          | —                  |       | (1,208                  | )          | —                  |       | (1,853                  | )          |
|                                                           |       |                    |       |                    |       |                    |       |                    |       |                    |       |
| Net loss                                                       |       | $                       | (764,302   | )                       | $          | (444,223                | )          | $                       | (1,027,362 | )                       | $          | (445,082 | ) | $ | (1,513,991 | ) |
|                                                           |       |                    |       |                    |       |                    |       |                    |       |                    |       |
| Net loss per  share, basic and diluted                         |       | $                       | (0.01      | )                       | $          | (0.01                   | )          | $                       | (0.02      | )                       | $          | (0.01 | ) | $ | 0.00 |   |
|                                                           |       |                    |       |                    |       |                    |       |                    |       |                    |       |
| Weighted Average  number of shares of common stock outstanding |       | 53,299,935              |       | 49,684,756              |       | 52,301,417              |       | 40,268,236              |       |                    |       |

 

See Accompanying Notes to Financial Statements.

 

3

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**MOSAIC NUTRACEUTICALS, CORP.**

**(FKA MOSAIC NUTRICEUTICALS, CORP.)**

**(A Development Stage Enterprise)**

**STATEMENTS OF STOCKHOLDERS’ EQUITY**

**(UNAUDITED)**

 
| ** **                                                                            | ** ** | ** **       | ** ** | ** **  | ** ** | ** **     | ** ** | ** **      | ** ** | **Accumulated**      | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------------------------|------------|------------------|------------|-------------|------------|----------------|------------|-----------------|------------|----------------------|------------|------------|------------|
| ** **                                                                            | ** ** | ** **       | ** ** | ** **  | ** ** | **Additional** | ** ** | **Common**      | ** ** | **(Deficit) During** | ** ** | ** ** | ** ** |
| ** **                                                                            | ** ** | **Common Stock** | ** ** | **Paid-In** | ** ** | **Stock**      | ** ** | **Development** | ** ** | ** **           | ** ** |
| ** **                                                                            | ** ** | **Shares**       | ** ** | **Amount**  | ** ** | **Capital**    | ** ** | **Subscribed**  | ** ** | **Stage**            | ** ** | **Total**  | ** ** |
|                                                                                  |       |             |       |        |       |           |       |            |       |                 |       |       |       |
| Balance,  December 31, 2003 May 24, 2004, forward stock split 25:1                    |       | 32,062,500       |       | $           | 32,063     |           | $          | 0               |       | $                    | 0          |       | $          | (32,063 | ) | $ | 0 |   |
| 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      |       |
| Contribution of  capital                                                              |       |             |       |        |       | 268            |       |            |       |                 |       | 268        |       |
| Issuance of  warrants for distribution rights                                         |       |             |       |        |       | 432,387        |       |            |       |                 |       | 432,387    |       |
| 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             | )          | (48,693    | )          |
|                                                                                  |       |             |       |        |       |           |       |            |       |                 |       |       |       |
| 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                                                            |       | 1,000,000        |       | 1,000       |       | 499,000        |       |            |       |                 |       | 500,000    |       |
| Stock issued                                                                          |       | 2,000,000        |       | 2,000       |       | 498,000        |       |            |       |                 |       | 500,000    |       |
| Stock issued for  advertising services                                                |       | 176,457          |       | 176         |       | 199,824        |       |            |       |                 |       | 200,000    |       |
| Stock issued for  director fees                                                       |       |             |       |        |       |           |       | 157,500         |       |                 |       | 157,500    |       |
|                                                                                  |       |             |       |        |       |           |       |            |       |                 |       |       |       |
| Net loss,  September 30, 2005                                                         |       |             |       |        |       |           |       |            |       | (1,027,362           | )          | (1,027,362 | )          |
|                                                                                  |       |             |       |        |       |           |       |            |       |                 |       |       |       |
| Balance,  September 30, 2005                                                          |       | 53,907,445       |       | $           | 53,907     |           | $          | 1,771,194       |       | $                    | 157,500    |       | $          | (1,570,068 | ) | $ | 412,533 |   |

 

See Accompanying Notes to Financial Statements.

 

4

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**MOSAIC NUTRACEUTICALS, CORP.**

**(FKA MOSAIC NUTRICEUTICALS, CORP.)**

**(A Development Stage Enterprise)**

**STATEMENTS OF CASH FLOWS**

 
| ** **                                                               | ** ** | ** **            | ** ** | ** **         | ** ** | **Aug. 8, 1990** | ** ** |
|--------------------------------------------------------------------------|------------|-----------------------|------------|--------------------|------------|------------------|------------|
| ** **                                                               | ** ** | **Nine Months Ended** | ** ** | **(inception) to** | ** ** |
| ** **                                                               | ** ** | **September 30,**     | ** ** | **September 30,**  | ** ** |
| ** **                                                               | ** ** | **2005**              | ** ** | **2004**           | ** ** | **2005**         | ** ** |
| ** **                                                               | ** ** | **(unaudited)**       | ** ** | **(unaudited)**    | ** ** | **(unaudited)**  | ** ** |
| Cash Flows From Operating Activities                                     |       |                  |       |               |       |             |       |
| Net loss                                                                 |       | $                     | (1,027,362 | )                  | $          | (445,082         | )          | $ | (1,513,991 | ) |
| Adjustments to  reconcile net loss to cash used in operating activities: |       |                  |       |               |       |             |       |
| Depreciation and  amortization                                           |       | 6,956                 |       | —             |       | 10,456           |       |
| Stock based  expenses                                                    |       | 700,000               |       | 432,387            |       | 632,387          |       |
| Stock based  compensation                                                |       | —                |       | 12,000             |       | 13,000           |       |
| Interest expense  paid by stock                                          |       | —                |       | —             |       | 300              |       |
| Changes in assets and liabilities                                        |       |                  |       |               |       |             |       |
| Increase in  inventory                                                   |       | (143,947              | )          | (7,766             | )          | (167,542         | )          |
| Increase in  prepaid expenses                                            |       | (128,417              | )          | —             |       | (388,043         | )          |
| Increase in  deposits                                                    |       | (2,889                | )          | —             |       | (2,889           | )          |
| Increase in  accounts payable and accrued liabilities                    |       | 88,795                |       | —             |       | 89,139           |       |
| Net cash used in  operating activities                                   |       | $                     | (506,864   | )                  | $          | (8,461           | )          | $ | (1,273,634 | ) |
|                                                                     |       |                  |       |               |       |             |       |
| Cash Flows From Investing Activities                                     |       |                  |       |               |       |             |       |
| Purchase of  fixed assets                                                |       | $                     | (38,674    | )                  | $          | —           |       | $ | (38,674 | ) |
| Purchase of  intangible asset                                            |       | —                |       | —             |       | (30,000          | )          |
| Acquisitions,  net of cash acquired                                      |       | —                |       | —             |       | 591              |       |
| Net cash used in  investing activities                                   |       | $                     | (38,674    | )                  | $          | —           |       | $ | (65,610 | ) |
|                                                                     |       |                  |       |               |       |             |       |
| Cash Flows From Financing Activities                                     |       |                  |       |               |       |             |       |
| Issuance of  common stock                                                |       | $                     | 550,000    |               | $          | —           |       | $ | 573,525 |   |
| Proceeds from  notes payable                                             |       | —                |       | —             |       | 49,876           |       |
| Contribution of  capital                                                 |       | —                |       | —             |       | 1,293            |       |
| Net cash  provided by financing activities                               |       | $                     | 550,000    |               | $          | —           |       | $ | 624,694 |   |
|                                                                     |       |                  |       |               |       |             |       |
| Net increase in  cash                                                    |       | $                     | 4,462      |               | $          | (8,461           | )          | $ | 6,981 |   |
| Cash, beginning of period                                                |       | $                     | 2,519      |               | $          | —           |       | $ | — |   |
|                                                                     |       |                  |       |               |       |             |       |
| Cash, end of period                                                      |       | $                     | 6,981      |               | $          | (8,461           | )          | $ | 6,981 |   |
|                                                                     |       |                  |       |               |       |             |       |
| Supplemental Information and Non-monetary  Transactions:                 |       |                  |       |               |       |             |       |
|                                                                     |       |                  |       |               |       |             |       |
| Interest paid                                                            |       | $                     | 742        |               | $          | —           |       | $ | 742 |   |
| Taxes paid                                                               |       | $                     | —     |               | $          | —           |       | $ | — |   |
|                                                                     |       |                  |       |               |       |             |       |
| Stock issued in settlement of accounts payable,  119,520 shares          |       | $                     | 17,929     |               | $          | —           |       | $ | 17,929 |   |
| Warrants issued for distribution services                                |       | $                     | —     |               | $          | —           |       | $ | 432,387 |   |
| Stock issued for advertising services, 1,000,000  shares at $0.50        |       | $                     | 700,000    |               | $          | —           |       | $ | 700,000 |   |
| Stock issued for debt 233,000 shares at $0.13                            |       | $                     | —     |               | $          | —           |       | $ | 30,300 |   |
| Stock subscribed for prepaid director fees                               |       | $                     | 157,500    |               | $          | —           |       | $ | 157,500 |   |

 

See Accompanying Notes to Financial Statements.

 

5

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**MOSAIC NUTRACEUTICALS, CORP.**

**(FKA MOSAIC NUTRICEUTICALS, CORP.)**

**(A Development Stage Enterprise)**

**NOTES TO FINANCIAL STATEMENTS**

 

**Note 1.**                        Nature of Business and SignificantAccounting Policies

 

Basis of Presentation

 

The accompanyingunaudited financial statements have been prepared in accordance with Securitiesand Exchange Commission requirements for interim financial statements.Therefore, they do not include all of the information and footnotes required byaccounting principles generally accepted in the United States for completefinancial statements. The financial statements should be read in conjunctionwith the Form 10SB for the period ended September 30, 2005 of MosaicNutraceuticals, Corp.  (the “Company”).

 

The interim financial statements present the balancesheet, statements of operations, stockholders’ equity and cash flows of MosaicNutraceuticals, Corp. The financial statements have been prepared in accordancewith accounting principles generally accepted in the United States.

 

The interim financial information is unaudited. In theopinion of management, all adjustments necessary to present fairly thefinancial position as of September 30, 2005 and the results of operations,stockholders’ deficit and cash flows presented herein have been included in thefinancial statements. Interim results are not necessarily indicative of resultsof operations for the full year.

 

Nature of business:

 

Mosaic Nutraceuticals,Corp. (fka Mosaic Nutriceuticals, Corp.) (“Company”) was organized August 8,1990 under the laws of the State of Nevada. The Company currently has limited operations and, in accordance withStatement of Financial Accounting Standard (SFAS) No. 7, “*Accountingand Reporting by Development Stage Enterprises*,” is considered aDevelopment Stage Enterprise.  OnFebruary 15, 2005, the Certificate of Amendment was accepted by the Secretaryof State changing the name of the Company from Mosaic Nutriceuticals, Corp. toMosaic Nutraceuticals, Corp.

 

The Company ownsdevelopment and marketing rights for various nutriceutical chew products.  The Company is in the process of bringingthis new line of health products to market. As of the date of this report, full operations and revenue productionhad not begun.  A few test transactionswere accepted through its internet site.

 

The Company was organizedon August 8, 1990 under the laws of the State of Nevada, as Hot Spot Tours,Inc.  On July 29, 1995, the Companychanged its name from Hot Spot Tours, Inc. to Westchester Group, Inc.  The Company ceased operations in January1993.

 

ePublishedBooks.com wasorganized on March 14, 2000 under the laws of the State of Nevada.  With its limited operations and, inaccordance with Statement of Financial Accounting Standard (SFAS) No. 7, “*Accounting and Reporting by Development Stage Enterprises*,”it was considered a Development Stage Enterprise.

 

ePubishedBooks.com wasestablished to build an internet presence to offer an outlet for new authors topublish their literary work electronically.

 

Merger betweenWestchester Group, Inc. and ePublishedBooks.com

 

On May 24, 2004, theState of Nevada approved the Amendment and Plan of Reorganization and Merger ofWestchester Group, Inc. (“Westchester”), a Nevada corporation, intoePublishedBooks.com (“ePub”), a Nevada Corporation.  This plan was effective with the filing ofthe document with the State of Nevada on May 24, 2004.  Through the agreement, each outstanding shareof Westchester was automatically converted to one share of ePub.  In addition, ePub agreed to issue 11,000,000shares of restricted stock to Westchester directors as part of the merger.  The transaction results in 49,011,800 sharesof ePub.  ePub assumed all liabilitiesand obligations of Westchester.

 

6

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Based on the terms of themerger agreement, through Rule 12g-3(a) of the general rules and regulations ofthe Securities Exchange Act of 1934, as amended, ePub became the survivingentity for reporting purposes to the Securities and Exchange Commission.

 

The transaction isaccounted for as a reverse acquisition with Westchester Group, Inc. thesurviving registrant.  As a result,Westchester Group, Inc.’s former stockholders exercised control over ePub. Theaccounting for the merger is identical to that resulting from a reverse merger,except no goodwill or other intangible assets are recorded. For accounting purposes, Westchester Group,Inc. as been treated as the accounting acquirer and, accordingly, is presentedas the continuing entity.  The historicalfinancial statements are those of Westchester Group, Inc.  ePublishedBooks.com changed its name toMosaic Nutraceuticals, Corp. (fka Mosaic Nutriceuticals, Corp.), which is thelegal entity going forward and is referred to hereafter as the “Company.”

 

A summary of the Company’ssignificant accounting policies is as follows:

 

Going Concern

 

The Company’s financialstatements are prepared in accordance with generally accepted accountingprinciples applicable to a going concern. Currently, the Company does not have significant cash of other materialassets, nor does it have operations or a source of revenue sufficient to coverits operation costs and raises substantial doubt about its ability to continueas a going concern.  The Company will bedependent upon the raising of additional capital through placement of ourcommon stock in order to continue with the business plan. There can be noassurance that the Company will be successful in raising the capital itrequires through the sale of our common stock in order to continue as a goingconcern.  Until the Company has sufficient operations, thestockholders, officers, and directors have committed to advancing the operatingcosts of the company.

 

*Recent Accounting Pronouncements*

 

InNovember 2004, the FASB issued SFAS No. 151, “*Inventory Costs (an amendment of Accounting ResearchBulletin No. 43, Chapter 4)*.” SFAS No. 151 seeks toclarify the accounting for abnormal amounts of idle facility expense, freight,handling costs, and wasted material (spoilage) in the determination of inventorycarrying costs. The statement requires such costs to be treated as a currentperiod expense and is effective for fiscal years beginning after July 15,2005. The Company does not believe the adoption of SFAS No. 151 will havea significant impact on its financial position or results of operations.

 

In December 2004, the FASB issued SFAS No. 123 (revised2004), “Share-Based SFAS No. 123R replaced SFAS No. 123 and supersededAccounting Principles Board Opinion No. 25. SFAS No. 123R will require compensationcosts related to share-based payment transactions to be recognized in thefinancial statements. The effective date of SFAS No. 123R is the firstreporting period beginning after June 15, 2005. The adoption of SFAS No. 123(revised 2004) should not have a significant impact on the Company’s financialposition or results of operations until such time the Company has share-basedpayments.

 

On April 14, 2005, the Securities and Exchange Commission issued anannouncement amending the compliance dates for the FASB’s SFAS 123R thataddresses accounting for equity based compensation arrangements. Under SFAS123R registrants would have been required to implement the standard as of thebeginning of the first interim or annual period that begins after June 15, 2005.The Commission’s new rule will allow companies to implement SFAS 123R at thebeginning of the next fiscal year after June 15, 2005. The Company anticipatesadopting SFAS 123R in the first quarter 2006.

 

In March 2005, the FASBissued FASB Interpretation (“FIN”) No. 47 “Accounting for ConditionalAsset Retirement Obligations—an Interpretation of FASB Statement No. 143”(“FIN No. 47”). FIN No. 47 clarifies the timing of liabilityrecognition for legal obligations associated with the retirement of a tangiblelong-lived asset when the timing and/or method of settlement are conditional ona future event. FIN No. 47 is effective for us no later thanDecember 31, 2005. We do not expect that the adoption of FIN No. 47will have a material impact on our consolidated financial condition or resultsof operations.

 

7

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In December 2004, theFASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets—an amendment ofAPB Opinion No. 29” (“SFAS No. 153”). The guidance in APB OpinionNo. 29, “Accounting for Nonmonetary Transactions” (“APB No. 29”), isbased on the principle that exchanges of nonmonetary assets should be measuredbased on the fair value of the assets exchanged. The guidance in APB OpinionNo. 29, however, included certain exceptions to that principle. SFASNo. 153 amends APB Opinion No. 29 to eliminate the exception fornonmonetary exchanges of similar productive assets and replaces it with ageneral exception for exchanges of nonmonetary assets that do not havecommercial substance. SFAS No. 153 is effective for such exchangetransactions occurring in fiscal periods beginning after June 15, 2005.

 

In May 2005, the FASB issued SFAS No. 154, “AccountingChanges and Error Corrections—a replacement of APB Opinion No. 20 and FASBStatement No. 3” (“SFAS No. 154”). This Statement replaces APBOpinion No. 20, “Accounting Changes” and FASB Statement No. 3, “ReportingAccounting Changes in Interim Financial Statements,” and changes therequirements for the accounting for and reporting of a change in accountingprinciple. SFAS No. 154 applies to all voluntary changes in an accountingprinciple. It also applies to changes required by an accounting pronouncementin the unusual instance that the pronouncement does not include specifictransition provisions. When a pronouncement includes specific transitionprovisions, those provisions should be followed. SFAS No. 154 is effectivefor accounting changes and error corrections occurring in fiscal yearsbeginning after December 15, 2005.

 

**Note 2.**                      Stockholders’ Equity

 

Common stock

 

The authorized stock ofthe Company consists of 5,000,000 shares of preferred stock with a par value of$0.001 and 100,000,000 shares of common stock with par value of $0.001.

 

On March 9, 2005, the Companysubscribed 333,334 shares of restricted stock in consideration of $50,000.  The Company also converted $17,929 inaccounts payable to 119,520 shares.  The452,854 shares were issued in May 2005.

 

The Company issued1,000,000 shares on April 14, 2005 in accordance with the agreement as outlinedin Note 4.  The Company issued 2,000,000shares on April 26, 2005 in consideration of $500,000.

 

On September 23,2005, the Board of Directors authorized the payment of 450,000 restrictedshares to a director for services.  Theshares were issued on October 25, 2005. If the event the director ceases to be a director of the Company priorto January 1, 2006, he shall forfeit and surrender all 450,000 shares of stock,retaining none; if he ceases to be a director of the Company prior to January1, 2007, he shall forfeit and surrender 300,000 shares of stock, retaining150,000; and if he ceases to be a director of the Company prior to January 1,2008, he shall forfeit and surrender 150,000 shares of stock, retaining 300,000.  If the director remains a director throughJanuary 1, 2008, all shares so granted shall become permanently vested andnon-forfeitable.  The Company valued therestricted shares at $157,500.  Theunvested shares are recorded at a prepaid expense of $157,500 at September 30,2005.

 

The Company entered intoan International Distributor Agreement (“IDA”) with AHB Trading Limited, S.A.September 13, 2004.  The IDA authorizesfour warrants; 1) 1,000,000 shares exercisable at $0.60 per share, 2) 1,000,000shares exercisable at $1.00 per share, 3) 1,000,000 shares exercisable at $1.40per share, and 4) 500,000 shares exercisable at $2.00 per share.  The warrants are exercisable throughSeptember 13, 2009.  Additional warrantsshall be issued at the conclusion of every three months during the term of theagreement (“Quarter”) for an amount equal to 5% of the gross sales proceedspurchased by the distributor.  Exerciseprice on these warrants will be the greater of the closing price on the lastday of the quarter or the average closing price for the last ten trading daysof the quarter.  As of the report date,the four warrants were issued at 500,000 shares each at the above mentionedexercisable prices.

 

The Company has alsoentered into distribution agreements where warrants are based on sales to thedistributor.  Sales to distributors hadnot commenced and no warrants have been issued on these agreements.

 

8

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As of the report date,the warrants have not been exercised.

 

The Company hasauthorized 5,000,000 shares of preferred stock at a par value of $0.001.  No shares are issued or outstanding.

 

Net loss per common share

 

Net loss per share iscalculated in accordance with SFAS No. 128, “Earnings Per Share”.  The weighted-average number of common sharesoutstanding during each period is used to compute basic loss per share.  Diluted loss per share is computed using theweighted averaged number of shares and dilutive potential common sharesoutstanding.  Potentially dilutive commonshares consist of employee stock options, warrants, and restricted stock, andare excluded from the diluted earnings per share computation in periods wherethe Company has incurred a net loss.

 

**Note 3.**                        Income Taxes

 

**We didnot provide any current or deferred U.S. federal income tax provision orbenefit for any of the periods presented because we have experienced operatinglosses since inception. We provided a full valuation allowance on the netdeferred tax asset, consisting of net operating loss carryforwards, becausemanagement has determined that it is more likely than not that we will not earnincome sufficient to realize the deferred tax assets during the carryforwardperiod.**

 

**The federal operating loss carryforward will expire between 2005 and 2025. This carry forward may be limited upon the consummation of a businesscombination under IRC Section 381.**

 

**Note 4.****                     ****Commitments and Contingencies**

 

Memorandum ofUnderstanding with Global Media Fund

 

On April 8, 2005,the Company entered into a marketing agreement with the Global Media Fund, LLC(GMF).  Under the terms of the agreement,GMF will provide the Company with future marketing (Media Due Bill) totaling$1,000,000, inconsideration for the following:

 

1.               Issuance of 1,000,000 shares to be valued at $500,000.

2.               Issuance of shares for the remaining $500,000, $50,000of restricted stock will be issued each month for 10 consecutive months, valuedat 90% of the arithmetic average closing price for the ten (10) trading dayspreceding the issuance date.  The companyexpects issuances to begin in August 2005.

 

The Company issued1,000,000 shares on April 14, 2005 in accordance with this agreement which willbe recorded as a prepaid expense.  Thiswill be expensed as such marketing services are rendered.

 

In accordance with theagreement, 176,457 shares of common stock were issued for the first 4installments for a total of $200,000 in advertising.  Through September 30, 2005, the Companyreceived $580,722 value in advertising placements.  The Company had prepaid advertising expensesof $119,278 and $0 at September 30, 2005 and December 31, 2004, respectively.

 

The Company is engaged ina non-cancelable operating lease for a sales office.  Under the term of the lease agreement, theCompany is obligated to make minimum monthly payments of $2,889 with anexpiration date through May 2010.

 

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Minimum future lease obligations for the five yearsimmediately following the balance sheet date are as follows:

 
| 2005                                   |   | $      | 8,667   |   |
|----------------------------------------|--------|--------|---------|--------|
| 2006                                   |   | 34,668 |    |
| 2007                                   |   | 34,668 |    |
| 2008                                   |   | 34,668 |    |
| 2009 and thereafter                    |   | 49,113 |    |
|                                   |   |   |    |
| Total future minimum lease commitments |   | $      | 161,784 |   |

 

Through September 30,2005 and 2004, the Company had lease expense of $11,556 and $0, respectively.

 

10

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**Item 2.****                       Management’sDiscussion and Analysis or Plan of Operation.**

 

FORWARD-LOOKING STATEMENTWARNING

 

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

 

**Plan of Operation**

 

**The Company has obtained a media credit for onemillion dollars ($1,000,000) in prepaid advertising and is using theadvertising to generate interest and traffic to the Mosaic website. The printads started in August 2005 and radio ads started in July 2005. Thefirst ads addressed Joint2Life and 24/7 Instant Relief. The July/August 2005ads addressed Lipotrene and the benefits of Policosanol. The Company has alsorun new ads on the Premium Noni Chews, Joint 2 Life Chews, and the LeanLiciousChews. The Company will run ads on the VitalHealth products available in the fall.This includes Premium Vitamin C, Premium Multivitamin and Premium Creatine. Theads will be run in at least 25 newspapers each month for six months.**

 

**We anticipate that the Company will requireapproximately $844,213 to sustain operations through December 2006. Theforegoing estimate takes into consideration estimated costs relating toanticipated internet services, payroll, administrative expenses, advertising,freight, legal services, accounting services, insurance, samples and promotion,equipment and office supplies.**

 

**Internet traffic to the Mosaic website has notgenerated and is not currently expected to generate the revenue necessary tosustain the operations of the Company through December 2006. We believethat sales fell short of projections as a result of problems with our website.The Company received numerous telephone and e-mail communications frompotential customers reporting difficulties with the website. As a result, wehave spent a large amount of time testing and correcting the reported problemsand identifying and preventing potential problems that could result in a futureloss of sales.  We believe that thewebsite is now stable and expect to see an increase in sales as a result.**

 

**The Company is also pursuing purchase orders fromretailers and export accounts to generate revenue necessary to sustainoperations.  In November we received thefirst purchase order under our International Distributor Agreement with AHBTrading Limited, S.A., our distributor in Mexico, Central America and SouthAmerica.**

 

**Though the Company believes it will eventually beable to generate purchase orders and internet sales sufficient to sustainoperations, it will be forced to pursue loans, capital infusions from privatesale of common stock, deferment of compensation to certain officers, or somecombination thereof until such time. There can be no assurance that the Companywill be successful in obtaining loans, equity financing or deferments ofcompensation upon favorable terms. The Company also anticipates funding additionaladvertising with Global Media Fund through exchange of its restricted commonstock for additional media credit.**

 

**The Company intends to raise money through privateplacement sale of its restricted common stock during the next**

 

11

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**twelve months. This will be done to sustainoperations until the company begins to generate sufficient revenue frominternet sales and purchase orders from retailers and export accounts.  The Company will attempt to raise $500,000 to$2,000,000.**

 

**In addition, the Company intends to set up anadvisory board made up of medical and related experts in the food supplementarea. The Company has preliminary and informal arrangements with its primarymanufacturer to produce any large orders from major retailers in the event thatwe receive such purchase orders.** Nosignificant changes in the number of employees of the Company are planned.

 

**Off Balance Sheet Arrangements**

 

The Company has no offbalance sheet arrangements.

 

**Item 3.****                    Controls andProcedures.**

 

Pursuant to paragraph (b) of Rule 13a-15 or Rule15d-15 of the Securities Exchange Act of 1934 (the “Exchange Act”) and onNovember 10, 2005, 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, asdefined in Rule 13a-15(e) or Rule 15d-15(e) and concluded that, as of September30, 2005, and based on the evaluation of these controls and procedures asrequired by paragraph (b) of Rule 13a-15 or Rule 15d-15, there were nosignificant deficiencies in these procedures. The CEO determined that ourdisclosure controls and procedures are effective.

 

There have been no material changes during the thirdquarter of 2005 in our internal controls over financial reporting or in anyother factor that has materially affected, or is reasonably likely tomaterially affect, our internal controls over financial reporting.

 

**PART II**

**OTHERINFORMATION**

 

**Item 1.****                       LegalProceedings.**

 

The Securities and Exchange Commission (the “Commission”) temporarily suspended trading in the securities of the Company from February 2, 2005 through February 15, 2005, based on concerns about the accuracy and adequacy of publicly disseminated information regarding, among other things, Mosaic’s financial condition and its ability to fund advertising campaigns in support of its products. The Commission has also expressed concern that Mosaic and/or certain of its shareholders may have unjustifiably relied on Rule 144(k) of the Securities Act of 1933 (“Securities Act”) in conducting an unlawful distribution of its securities that failed to comply with the resale restrictions of Rules 144 and 145 of the Securities Act. The Commission is currently conducting an investigation regarding the foregoing concerns.

 

We are not a party to any other material pending legal proceeding, nor are we aware of any 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.****                       UnregisteredSales of Equity Securities and Use of Proceeds.**

 

The following discussionoutlines all securities sold by us for cash or services rendered during thethird quarter of 2005. All of the shares sold or granted were issued pursuantto the authority granted by the private offering exemption outlined in Section4(2) and/or Regulation D under the Securities Act to a limited number ofpersons and without a view toward distribution.

 

**On April 8, 2005 the Companyentered into a Memorandum of Understanding (“MOU”) with Global Media Fund,**

 

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**LLC. The MOU provides forissuance of restricted common stock to Global Media Fund, LLC valued at$500,000, to be issued in ten (10) consecutive monthly installments, beginningon June 30, 2005. Each of the ten installments are to be the number ofshares of common stock equaling a “market value” of $50,000 determined as ofthe month of the installment.  “Marketvalue” is to be calculated as 90% of the average closing price of the commonstock for tens days immediately preceding the stock issuance date.** On July 15, 2005 the Company issued 40,880 sharesof restricted common stock to Global Media Fund, LLC valued at $50,000 pursuant to the terms of its MOUdated April 8, 2005.

 

**On July 30, 2005 the Company issued 33,079 shares ofrestricted common stock to**Global Media Fund, LLC valued at $50,000 pursuant to the terms of the MOU.

** **

**On August 1, 2005 the Company issued 50,186 shares ofrestricted common stock to**Global Media Fund, LLC valued at $50,000 pursuant to the terms of its MOUdated April 8, 2005.

** **

**On September 23, 2005 the board of directors of the Companygranted 450,000 shares of restricted common stock to**CharlesE. Lowe valued at $50,000 for servingon the board of directors of the Company.

 

**Item 4.****                    Submission ofMatters to a Vote of Security Holders.**

 

A special meeting (the “Special Meeting”) of theshareholders of the Company was held on September 23, 2005, at 10:00 a.m., CST.The purposes of the meeting were to: (1) elect three directors; (2) to ratify,affirm and approve all prior acts and transactions which have been performedand/or entered into for or on behalf of the Company by the directors andofficers of the Company; and (3) to remove Rounsevelle Schaum from the board ofdirectors.

 

Of the 53,855,133 shares of Common Stock of theCompany entitled to vote, 31,697,239 shares were represented in person or by proxy at theSpecial Meeting, which is more than the 26,927,567 shares (50% of all issuedand outstanding shares) required to constitute a quorum. Accordingly, thefollowing matters were submitted to a vote.

 

1. The election of three Directors was put to a voteand the results were as follows:

 
| **NOMINEES**     | ** ** | **F****OR** | ** ** | **WITHHELD** | ** ** |
|------------------|------------|-------------|------------|--------------|------------|
| Charles Townsend |       | 31,697,239  |       | 0            |       |
| John Castleberry |       | 31,697,239  |       | 0            |       |
| Charles Lowe     |       | 31,697,239  |       | 0            |       |

 

Accordingly, Charles Townsend, John Castleberry andCharles Lowe were elected to comprise the board of directors of the Company.

 

2.  The proposal to ratify, affirm and approveall prior acts and transactions which have been performed and/or entered intofor or on behalf of the Company by the directors and officers of the Companywas put to a vote and the results were as follows:

 
| **FOR**    | ** ** | **AGAINST** | ** ** |
|------------|------------|-------------|------------|
| 31,697,239 |       | 0           |       |
| 31,697,239 |       | 0           |       |
| 31,697,239 |       | 0           |       |

 

Accordingly, all prior actions taken by the Board ofDirectors and Officers of the Corporation were confirmed, ratified andapproved.

 

3.  The proposal to remove Rounsevelle Schaumfrom the board of directors was put to a vote and the result was as follows:

 

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| **FOR**    | ** ** | **AGAINST** | ** ** |
|------------|------------|-------------|------------|
| 31,697,239 |       | 0           |       |
| 31,697,239 |       | 0           |       |
| 31,697,239 |       | 0           |       |

 

Accordingly, the common stockholders authorized theremoval of Rounsevelle Schaum from the board of directors.

 

**Item 5.****                       OtherInformation.**

 

Amendmentto Bylaws

 

On September 23, 2005, a special meeting of the boardof directors of Mosaic Nutraceuticals Corp. (the “Company”) was held at theprincipal office of the Company. At the special meeting of the board ofdirectors, the board unanimously resolved to amend Article II, Section 7 of theBylaws of the Corporation.

 

Prior to the amendment, Article II, Section 7 read:

 

“The Directors shall be allowed and paid all necessaryexpenses incurred in attending any meeting of the Board, but shall not receiveany compensation for their services as Directors until such time as the companyis able to declare and pay dividends on its capital stock.”

 

As amended, Article II, Section 7 now reads:

 

“The Directors shall be allowed and paid all necessaryexpenses incurred in attending any meeting of the Board.”

 

The amendment took effect on September 23, 2005, the date of theresolution.

 

Departure of Director;Election of Directors. 

 

On September 23, 2005, a special shareholders meetingof Mosaic Nutraceuticals Corp. (the Company”) was held for the purpose ofelecting a new Board of Directors.  Atthe special shareholders meeting, the following actions were taken byresolution adopted by the shareholders:

 

Charles Townsend, John Castleberry and Charles E. Lowewere elected to serve as Directors of the Company; and

 

Rounsevelle W. Schaum was removed as a Director of theCompany and as Chairman of the Board.

 

**Item 6.****                       Exhibitsand Reports on Form 8-K.**

 
| **Exhibit No.** | ** ** | **Description of Document**                                                                     |
|-----------------|------------|-------------------------------------------------------------------------------------------------|
|            |       |                                                                                            |
| 3(ii)           |       | Amended and Restated Bylaws of Mosaic Nutraceuticals  Corp. effective as of September 23, 2005* |
|            |       |                                                                                            |
| 31.1            |       | Certification of Principal Executive Officer                                                    |
|            |       |                                                                                            |
| 31.2            |       | Certification of Principal Financial Officer                                                    |
|            |       |                                                                                            |
| 32              |       | Certification Pursuant to 18 U.S.C. Section 1350                                                |

 

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| * |   | Incorporated herein by reference to the Company’s  Form 8-K filed on November 3, 2005 |
|---|--------|--------------------------------------------------------------------------------------------|

 

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**SIGNATURES**

 

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

 

 
| DATE:  | November 14, 2005 | MOSAIC NUTRACEUTICALS  CORP. |
|--------|-------------------|------------------------------|
|   |              | (Registrant)                 |   |
|   |              |                         |
|   |              |                         |
|   |              | BY:                          | /s/ CHARLES TOWNSEND |   |
|   |              |                         | CHARLES TOWNSEND |   |
|   |              |                         | PRESIDENT AND CHIEF  EXECUTIVE OFFICER |
|        |                   |                              |  |  |  |

 

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