UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 
  FORM
10-Q
  
 (MARK
      ONE)x
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the quarterly period ended September 30, 2009ORo
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from  ______________ to
      ______________
 
 COMMISSION
FILE NUMBER: 000-52876
  THOMAS
PHARMACEUTICALS,
LTD.
 (Exact
name of registrant as specified in its charter)
  New Jersey
                20-3954826(State
      or Other Jurisdiction of Incorporation or Organization)
                (I.R.S.
      Employer Identification No.)
  750 Highway 34, Matawan, NJ
07747
 (Address
of Principal Executive Offices)(Zip Code)
  Registrant’s
Telephone Number, Including Area Code:    (732)
441-7700
  Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes xNoo
  Indicate by check mark
whether the registrant has submitted electronically and posted on its Web site,
if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files). Yes oNox
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated files, or a smaller reporting company. See
the definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the exchange act:
 
 Large
accelerated filero
Accelerated filero
Non-accelerated filero Smaller reporting companyx
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes x 
No o
  Number of
shares of Class A, common stock, No par
value, outstanding as of November 13, 2009: 
541,810,067
  Table of Contents
 
 THOMAS
PHARMACEUTICALS, LTD. AND SUBSIDIARY
 CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008
 
 TABLE OF CONTENTS
 Page
      No.PART
      I. FINANCIAL INFORMATIONItem
      1.
                Condensed Consolidated Financial
      Statements (Unaudited)
                2Balance Sheets – September30, 2009 (Unaudited) and December 31,
      2008
                2Statements of
      Operations - For the nine months and three months
      ended September30, 2009 and 2008 (Unaudited)
                3Statements of Cash Flows – For
      the nine months ended September 30, 2009 and 2008
      (Unaudited)
                4Notes to Condensed Consolidated
      Financial Statements (Unaudited)
                6-15Item
      2.
                Management’s Discussion and Analysis
      of Financial Condition and Results of
Operations
                16Item
      4T.
                Controls and
      Procedures
                19PART
      II. OTHER INFORMATIONItem
      5.
                Other
      Information
                20Item
      6.
                Exhibits
                20




Table of Contents




ITEM1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)




THOMAS PHARMACEUTICALS, LTD. AND SUBSIDIARY


CONDENSED
CONSOLIDATED BALANCE SHEETS




September
      30,
              
              
              December
      31,2009
              
              
              2008(unaudited)
              
              
              (restated)ASSETSCURRENT
      ASSETSCash
      and cash equivalents
              
              $
              1,276
              
              
              $
              6,557Prepaid
      expenses and other current assets
              
              
              4,699
              
              
              
              4,699Total
      current assets
              
              
              5,975
              
              
              
              11,256PROPERTY
      AND EQUIPMENT, net of accumulated depreciationof
      $119,400 and $118,555, respectively
              
              
              1,408
              
              
              
              2,253TOTAL
      ASSETS
              
              $
              7,383
              
              
              $
              13,509LIABILITIES
      AND STOCKHOLDERS' DEFICITCURRENT
      LIABILITIESAccounts
      payable and accrued expenses
              
              $
              1,358,918
              
              
              $
              1,121,244Notes
      payable
              
              
              230,952
              
              
              
              230,952Dividends
      payable
              
              
              198,452
              
              
              
              157,315Liability
      for conversion feature
              
              
              218,701
              
              
              
              209,945Convertible
      debentures payable
              
              
              735,812
              
              
              
              697,632Total current
      liabilities
              
              
              2,742,835
              
              
              
              2,417,088LONG
      TERM DEBTNotes
      payable
              
              
              154,000
              
              
              
              154,000Total
      liabilities
              
              
              2,896,835
              
              
              
              2,571,088COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      DEFICITSeries
      A Convertible Preferred stock, no par value; authorized 500,000
      shares;no
      shares issued and outstanding
              
              
              --
              
              
              
              --Series
      B Convertible Preferred stock, no par value; authorized 1,000
      shares;550
      shares issued and outstanding
              
              
              550,000
              
              
              
              550,000Common
      stock, Class A – no par value; authorized 10,000,000,000
      shares;541,810,067
      at September 30, 2009 and 477,810,067 at December 31, 2008shares
      issued and outstanding
              
              
              34,355
              
              
              
              28,291Common
      stock, Class B - no par value; authorized 50,000,000
    shares;no
      shares issued or outstanding
              
              
              --
              
              
              
              --Accumulated
      deficit
              
              
              (3,473,807
              )
              
              
              (3,135,870
              )Total stockholders'
      deficit
              
              
              (2,889,452
              )
              
              
              (2,557,579
              )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
              
              $
              7,383
              
              
              $
              13,509





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




2
 Table of Contents





THOMAS PHARMACEUTICALS, LTD. AND SUBSIDIARY


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)




For
      the nine months
              
              
              For
      the three monthsSeptember
      30,
              
              
              September
      30,2009
              
              
              2008
              
              
              2009
              
              
              2008(restated)
              
              
              
              
              
              (restated)NET
      REVENUES, net of provision for product returnsand credits of $0 and $0, respectively
              
              $
              --
              
              
              $
              27,375
              
              
              $
              --
              
              
              $
              --COST
      OF SALES
              
              
              --
              
              
              
              --
              
              
              
              --
              
              
              
              --GROSS
      PROFIT
              
              
              --
              
              
              
              27,375
              
              
              
              --
              
              
              
              --SELLING,
      GENERAL ANDADMINISTRATIVE
      EXPENSESGeneral
      and administrative expenses
              
              
              209,714
              
              
              
              373,702
              
              
              
              56,768
              
              
              
              86,270Depreciation
      and amortization
              
              
              845
              
              
              
              845
              
              
              
              282
              
              
              
              281Total
      selling, general and administrative expenses
              
              
              210,559
              
              
              
              374,547
              
              
              
              57,050
              
              
              
              86,551LOSS
      FROM OPERATIONS
              
              
              (210,559
              )
              
              
              (347,172
              )
              
              
              (57,050
              )
              
              
              (86,551
              )OTHER
      (INCOME) EXPENSEInterest
      expense
              
              
              101,955
              
              
              
              172,701
              
              
              
              34,891
              
              
              
              43,601Gain
      on settlement of debt
              
              
              (15,714
              )
              
              
              --
              
              
              
              --
              
              
              
              --Total
      other (income) expense
              
              
              86,241
              
              
              
              172,701
              
              
              
              34,891
              
              
              
              43,601LOSS
      BEFORE PROVISION FORINCOME
      TAXES
              
              
              (296,800
              )
              
              
              (519,873
              )
              
              
              (91,941
              )
              
              
              (130,152
              )PROVISION
      FOR INCOME TAXES
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -LOSS
      BEFORE PREFERRED DIVIDENDS
              
              
              (296,800
              )
              
              
              (519,873
              )
              
              
              (91,941
              )
              
              
              (130,152
              )PREFERRED
      DIVIDENDS
              
              
              41,137
              
              
              
              41,288
              
              
              
              13,863
              
              
              
              13,863NET
      LOSS APPLICABLE TO COMMON SHARES
              
              $
              (337,937
              )
              
              $
              (561,161
              )
              
              $
              (105,804
              )
              
              $
              (144,015
              )NET
      LOSS PER COMMON SHAREBasic
      and diluted
              
              $
              (0.00
              )
              
              $
              (0.00
              )
              
              $
              (0.00
              )
              
              $
              (0.00
              )WEIGHTED
      AVERAGE SHARES OUTSTANDINGBasic
      and diluted
              
              
              524,286,257
              
              
              
              287,054,207
              
              
              
              541,810,067
              
              
              
              310,158,714


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




3
 Table of Contents






THOMAS PHARMACEUTICALS, LTD. AND SUBSIDIARY


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


FOR
THE NINE MONTHS ENDED SEPTEMBER 30,








2009
              
              
              2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      (loss) before preferred dividends
              
              $
              (296,800
              )
              
              $
              (519,873
              )Adjustments
      to reconcile net (loss) to net cash (used in) operating
      activities:Depreciation
      expense
              
              
              845
              
              
              
              845Issuance
      of debt for compensation expenses
              
              
              --
              
              
              
              70,000Beneficial
      interest on convertible debt
              
              
              9,500
              
              
              
              89,434Gain
      on settlement of debt
              
              
              (15,714
              )
              
              
              --Changes
      in certain assets and liabilities:(Increase)
      in prepaid expenses and other assets
              
              
              --
              
              
              
              (294
              )Increase
      in accounts payable and accrued liabilities
              
              
              296,888
              
              
              
              304,061Total
      cash (used in) operating activities
              
              
              (5,281
              )
              
              
              (55,827
              )CASH
      FLOWS FROM FINANCING ACTIVITIES:Gross
      proceeds from debt financing
              
              
              --
              
              
              
              77,250Total
      cash provided by financing activities
              
              
              --
              
              
              
              77,250NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              (5,281
              )
              
              
              21,423CASH
      AND CASH EQUIVALENTS – BEGINNING OF PERIOD
              
              
              6,557
              
              
              
              9,705CASH
      AND CASH EQUIVALENTS – END OF PERIOD
              
              $
              1,276
              
              
              $
              31,128CASH
      PAID DURING THE PERIOD FOR:Interest
      expense
              
              $
              -
              
              
              $
              -Income
      taxes
              
              $
              -
              
              
              $
              -NON
      CASH TRANSACTIONS DURING THE PERIOD:Convertible
      debenture issued for unsecured debt
              
              $
              42,500
              
              
              $
              -Common
      stock issued for settlement of unsecured debt
              
              $
              1,000
              
              
              $
              -


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





4
 Table of Contents





THOMAS
PHARMACEUTICALS, LTD. AND SUBSIDIARY


CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)(Continued)





SUPPLEMENTAL
CASH FLOW INFORMATION





For the nine months ended
September 30, 2009:





a)
            The
      Company issued 10,000,000 shares of Class A common stock as partial
      settlement of outstanding unsecured debt, valued at
  $1,000.





b)
            The
      Company issued 54,000,000 shares of Class A common stock to iVoice, Inc.
      as repayment of principal on an outstanding convertible debenture, valued
      at $4,320.





c)
            The
      Company issued a 6% convertible debenture as settlement of outstanding
      unsecured debt, valued at $42,500.





d)
            The
      Company accrued $41,137 of preferred stock
  dividends.








For the nine months ended
September 30, 2008:





a)
            The
      Company issued 96,600,000 shares of Class A common stock to iVoice, Inc.
      as repayment of principal on an outstanding convertible debenture, valued
      at $61,800. The difference in the market value and the reduction in debt
      of $8,928 was charged to beneficial interest in the amount of
      $52,872.





b)
            The
      Company executed an employment agreement and a consulting agreement with
      Mr. Meller and Mr. Mahoney, respectively. The Company issued two
      promissory notes, in lieu of cash, in the amount of $70,000 for signing
      bonuses.





c)
            The
      Company received an initial investment of $75,000 for its newly formed
      subsidiary Small Cap Advisors, Inc. The investment was secured by a
      Convertible Promissory Note in the amount of $77,750. The difference of
      $2,250 was charged to interest expense in the statements of
      operations.





d)
            The
      Company accrued $41,288 of preferred stock
  dividends.





e)
            The
      Company converted its outstanding accounts due to iVoice, Inc. for unpaid
      administrative services in the amount of $71,302 into a convertible
      promissory note.










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






5
 Table of Contents




THOMAS PHARMACEUTICALS, LTD. AND SUBSIDIARY
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 SEPTEMBER
30, 2009 AND 2008




NOTE
1 - ORGANIZATION AND BASIS OF PRESENTATION








Thomas
Pharmaceuticals, Ltd. (the “Company” or “Thomas Pharmaceuticals”) was a wholly
owned subsidiary of iVoice, Inc. (“iVoice”) by virtue of iVoice’s ownership of
all of the shares of Class A Common Stock prior to the spin-off. The Company was
incorporated as iVoice Acquisitions Corp. in New Jersey on May 19,
2005.  On January 6, 2006, iVoice Acquisitions Corp. completed the
merger with Thomas Pharmaceuticals, Ltd., a New York Corporation (“Thomas NY”).
Pursuant to the terms of the Agreement and Plan of Merger with Thomas NY, iVoice
Acquisition Corp’s name was changed to Thomas Pharmaceuticals, Ltd. On November
21, 2007, the Company was spun-off from iVoice and is now an independent public
reporting company. The Company develops and markets over the counter
non-prescription healthcare products. The Company focuses on high-end, branded
consumables. Its first product, Acid + AllTM, is a calcium-enriched, sugar free,
anti-gas antacid.





Currently
the Company no longer produces any products. Earned sales are derived from
finished goods inventory on hand and the reversal of reserves recorded in 2007
for chargebacks, rebates and product returns as the criteria for meeting the
recognition of this revenue has occurred in 2008.





In June
2008, the Company formed a new, wholly owned subsidiary, Small Cap Advisors,
Inc., to provide investor relation (“IR”) services to small and medium sized
public companies. Micro-cap public companies typically take a stock promotion
approach to IR. This involves sending out  un-targeted mass emails to
potential investors, or getting profiled on investor relations
websites.  The Company believes this is no longer a viable approach to
gaining new investors, and in fact, current IR strategies may actually be
undermining marketing efforts and diminishing shareholder
goodwill.  The Company has developed a process which it calls
“SEO-IR”, which involves a search engine optimization approach to
IR.  SEO-IR is designed to build awareness,
credibility,  relevance, and a community of dedicated shareholders for
the Company’s clients. Furthermore, SEO-IR will facilitate the convergence of
the client’s corporate marketing strategy and IR strategy by aligning multiple
distribution channels to reach a targeted, engaged audience. However, the
Company abandoned this business model in the fall of 2008 after the economic
crisis in the U.S. began and the stock markets began to rapidly deteriorate in
value.  The Company does not anticipate re-starting the operations of
SEO-IR.





The
Company operates its businesses from the home office of iVoice in Matawan,
NJ.





Basis
of Presentation





The
accompanying unaudited condensed consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary, Small Cap Advisors,
Inc. (“Small Cap Advisors”). Prior to November 21, 2007, the financial
statements of Thomas Pharmaceuticals had been derived from the consolidated
financial statements and accounting records of iVoice using the historical
results of operations and historical basis of assets and liabilities of iVoice’s
over the counter non-prescription healthcare products business and are prepared
on the accrual basis of accounting in accordance with the accounting principles
generally accepted in the United States of America. Management believes the
assumptions underlying the financial statements are reasonable and include all
costs directly applicable to the Company. These financial statements do not
include any allocation of expenses and assets from the parent,
iVoice.  However, the financial statements included herein may not
necessarily reflect the Company’s results of operations, financial position and
cash flows had the Company been a stand-alone company during the periods
presented.





These
condensed consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States for interim
financial information and with the instructions to Form 10-Q and Regulation
S-X.  Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.  In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation have been included.  It is suggested that these
condensed consolidated financial statements be read in conjunction with the
December 31, 2008 audited financial statements and the accompanying notes
thereto.





NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Principles
of Consolidation





The
accompanying condensed consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, Small Cap Advisors, Inc. All
significant inter-company transactions and balances have been eliminated in
consolidation.




6
 Table of Contents




THOMAS
PHARMACEUTICALS, LTD. AND SUBSIDIARY
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 SEPTEMBER
30, 2009 AND 2008


Use
of Estimates





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





Cash
and Cash Equivalents





The
Company considers all highly liquid debt instruments and other short-term
investments with an initial maturity of three months or less to be cash or cash
equivalents. As of September 30, 2009 and December 31, 2008, the Company has no
cash equivalents.





The
Company maintains cash and cash equivalents with a financial institution, which
is insured by the Federal Deposit Insurance Corporation up to $250,000. The
Company had no uninsured cash balances at September 30, 2009 or December 31,
2008.





Revenue
and Cost Recognition





Product
sales revenue, net of estimated provisions, is recognized when persuasive
evidence that an arrangement exists, delivery has occurred, the selling price is
fixed or determinable, and collectability is reasonably assured. Provisions for
sales discounts, and estimates for chargebacks, rebates, and product returns are
established as a reduction of product sales revenue at the time revenues are
recognized, based on historical experience adjusted to reflect known changes in
the factors that impact these reserves.  Cost of revenue includes
direct costs to produce and distribute the products.





Advertising
Costs





Advertising
costs are expensed as incurred and are included in selling and marketing
expenses.  For the nine months ended September 30, 2009 and 2008, the
Company incurred $0 in advertising costs.





Income
Taxes





Prior to
November 2007, the Company was a subsidiary of iVoice and as such, its results
of operations were reported as part of the consolidated federal income tax
returns of iVoice. Upon the spin-off from iVoice, Inc, the Company will no
longer be included in the consolidated returns of iVoice, Inc and will be
required to account for income taxes in accordance with provisions of ASC 740
“Income Taxes”, which requires an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income taxes and liabilities
are computed annually for differences between the financial statement and the
tax basis of assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.





Accounting
for Certain Financial Instruments With Characteristics of both Liabilities and
Equity – Change in Accounting  Principle.





As of
June 30, 2009 we have adopted ASC 480 “Distinguishing Liabilities from
Equity”. Previously, we
had accounted for our variable weighted average priced convertible debt
instruments in accordance with ASC 815-40 “Contracts in Entity’s Own Equity”,
solely based on the variability in the shares to be issued in our convertible
debt instruments. Upon further review of ASC 470-20-65-2 “Transition Related to
EITF Issue No. 08-4, Transition Guidance for Conforming Changes to Issue No.
98-5” and ASC 480, we have changed our accounting policy to account for the
conversion feature as a debt discount without bifurcating any additional
component from the debt instrument as a derivative. We believe that the
treatment under ASC 480, among the diversity in accounting treatments that
exist, is more appropriate. Due to our change in accounting principle we have
retroactively updated our financial statements as of December 31, 2008 and for
the three and nine months ended September 30, 2008.





Fair
Value of Financial Instruments





The
carrying amount reported in the balance sheet for cash and cash equivalents,
accounts receivable, accounts payable and accrued expenses approximate fair
value because of the immediate or short-term maturity of these financial
instruments. The carrying amount reported for notes payable and convertible
debentures approximates fair value because the interest on the underlying
instruments is comparable with current market rates.





7
 Table of Contents




THOMAS
PHARMACEUTICALS, LTD. AND SUBSIDIARY
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 SEPTEMBER
30, 2009 AND 2008


Loss
Per Share of Common Stock





Historical
net loss per common share is computed using the weighted average number of
common shares outstanding. Common stock equivalents were not included in the
computation of diluted earnings per share when the Company reported a loss
because to do so would be antidilutive for periods presented.





The
following is a reconciliation of the computation for basic and diluted
EPS:




Nine
      months ended September 30,2009
              
              
              2008Net
      (loss) applicable to common shares
              
              $
              (337,937
              )
              
              $
              (561,161
              )Weighted-average
      common sharesOutstanding
              
              
              524,286,257
              
              
              
              287,054,207Net
      (loss) per share (basic and diluted)
              
              $
              (0.00
              )
              
              $
              (0.00
              )





The
Company has shares issuable upon conversion of the iVoice Convertible
Debentures, the iVoice Promissory Notes, the Thomas Acquisition Convertible
Debenture and the Series B Convertible Preferred Stock. At September 30, 2009
and 2008, the Company had common stock equivalents of 19,890,034,694 and
19,995,300,000, respectively.





Recent
Accounting Pronouncements





In May
2009, the FASB issued ASC 855, “Subsequent Events”, which establishes general
standards of accounting for and disclosure of events that occur after the
balance sheet date but before the financial statements are issued or are
available to be issued. The Company adopted FASB ASC 855 effective April 1,
2009 and has evaluated subsequent events after the balance sheet date of
September 30, 2009 through the date the financial statements were
issued.





In
June 2009, the FASB issued Accounting Standards Update 2009-01, “The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles-a replacement of FASB Statement No. 162”. The FASB
Accounting Standards Codification (“ASC”) is intended to be the source of
authoritative U.S. generally accepted accounting principles (“GAAP”) and
reporting standards as issued by the Financial Accounting Standards Board. Its
primary purpose is to improve clarity and use of existing standards by grouping
authoritative literature under common topics. This Statement is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009. The Codification does not change or alter existing GAAP and
there was no impact on our consolidated financial position or results of
operations.





In
August 2009, the FASB issued Accounting Standards Update 2009-05, “Fair
Value Measurements and Disclosures (Topic 820)”. The purpose of this Update is
to clarify that in circumstances in which a quoted price in an active market for
the identical liability is not available, a reporting entity is required to
measure fair value using a valuation technique that uses either the quoted price
of the identical liability when traded as an asset or quoted prices for similar
liabilities or similar liabilities when traded as assets. This guidance is
effective upon issuance. There was no material impact to the Company from the
adoption of this standard.





In
October 2009, the FASB issued Accounting Standards Update 2009-13, “Revenue
Recognition (Topic 605)”. This Update provides amendments to the criteria in
Subtopic 605-24 for separating consideration in multiple-deliverable revenue
arrangements. It establishes a hierarchy of selling prices to determine the
selling price of each specific deliverable which includes vendor-specific
objective evidence (if available), third-party evidence (if vendor-specific
evidence is not available), or estimated selling price if neither of the first
two are available. This Update also eliminates the residual method for
allocating revenue between the elements of an arrangement and requires that
arrangement consideration be allocated at the inception of the arrangement.
Finally, this Update expands the disclosure requirements regarding a vendor’s
multiple-deliverable revenue arrangements. This Update is effective for fiscal
years beginning on or after June 15, 2010. We do not anticipate any
material impact from this Update.




8
 Table of Contents
 
 THOMAS
PHARMACEUTICALS, LTD. AND SUBSIDIARY
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 SEPTEMBER
30, 2009 AND 2008





NOTE
3 – FAIR VALUE MEASUREMENTS





Effective
January 1, 2008, the Company adopted ASC 820 “Fair Value Measurements and
Disclosures” (previously Statement of Financial Accounting Standards No. 157,
Fair Value Measurements). This Statement defines fair value for certain
financial and nonfinancial assets and liabilities that are recorded at fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. This guidance applies to other accounting
pronouncements that require or permit fair value measurements. The adoption of
ASC 820 had no effect on the Company’s condensed consolidated financial position
or results of operations.





NOTE
4 – CONVERTIBLE DEBENTURES





On
January 6, 2006 the Company issued to iVoice a $360,000 secured convertible
debenture due on January 1, 2013 bearing interest of 10%, compounded quarterly.
During the nine months ended September 30, 2009, the Company issued 54,000,000
shares of Class A common stock as repayment of principal of $4,320. As of
September 30, 2009 the remaining principal balance of the convertible debenture
was $343,312 plus $158,774 of accrued interest.





On
January 6, 2006 the Company issued to iVoice a $100,000 administrative service
convertible debenture due on January 1, 2013 bearing interest of 10%, compounded
quarterly. This debenture is issued in lieu of payments on the Administrative
Services Agreement of the same date. As of September 30, 2009 the remaining
principal balance of the convertible debenture was $100,000 plus $44,594 of
accrued interest.





On April
27, 2006 the Company issued to iVoice a $225,000 secured convertible debenture
due on January 1, 2013 bearing interest of 10%, compounded quarterly. As of
September 30, 2009 the remaining principal balance of the convertible debenture
was $225,000 plus $90,725 of accrued interest.





On
February 7, 2007, the Company issued to iVoice a $25,000 secured convertible
debenture due on February 6, 2014 bearing interest of 10%, compounded quarterly.
As of September 30, 2009 the remaining principal balance of the convertible
debenture was $25,000 plus $7,452 of accrued interest.





The
Company can redeem a portion or all amounts outstanding under the iVoice
Convertible Debentures at any time upon thirty (30) business days advanced
written notice.  The redemption price shall be equal to one hundred
twenty-five percent (125%) multiplied by the portion of the principal sum being
redeemed, plus any accrued and unpaid interest.





iVoice
may, at its discretion, convert the outstanding principal and accrued interest,
in whole or in part, into a number of shares of Thomas Pharmaceuticals Class A
Common Stock at the price per share equal to eighty percent (80%) of the
lowest closing bid price of the Common Stock for the five (5) trading days
immediately preceding the conversion date. The Company determined that the
conversion feature of the iVoice Debentures met the criteria of ASC 480 as it
could result in the note being converted into a variable number of shares. At
the commitment dates, the Company determined the value of the iVoice Convertible
Debentures to be an aggregate $832,957, which represented their face values of
$710,000 plus the present values of the liability for the conversion features of
$122,957. The Company recorded the $122,957 to interest expense at the
commitment dates of the debentures.  The difference between the fair
value of the conversion feature and the present value is being accreted through
interest expense.  As of September 30, 2009 and 2008, an expense of
$5,795 and $5,859 was recorded as interest expense for the accretion of the
discount from the liability of the conversion feature.





On March
30, 2009, the Company issued to Bagell Josephs Levine & Co, LLC (“BJL”) a
$42,500 convertible debenture (the “BJL Debenture”) due on March 30, 2012
bearing interest of 6% per annum. BJL may, at its discretion, convert the
outstanding principal and accrued interest, in whole or in part, into a number
of shares of Thomas Pharmaceuticals Class A Common Stock at the price per share
equal to ninety eighty percent (98%) of the lowest closing bid price of the
Common Stock for the five (5) trading days immediately preceding the conversion
date. The Company determined that the beneficial conversion feature of the BJL
Debenture met the criteria of ASC 480 and therefore the conversion feature was
accounted at its intrinsic value of $867 and was charged to interest expenses on
the consolidated statements of operations.





The
aggregate principal value of the iVoice and BJL debentures at September 30, 2009
is $735,812.





NOTE
5 – NOTES PAYABLE





CURRENT
PORTION





As part
of the merger with Thomas NY, the Company assumed a $20,000 promissory note due
to Jana M. Wesley which bears interest at the rate of 5% per annum, compounded
annually.  The promissory note matured on January 19, 2009 with a lump
sum payment due of any remaining principal and interest. As of the date of this
filing, the Company is in default of this obligation and will incur additional
interest charges at a rate of the lesser of 15% per annum or the maximum
interest rate provided by law, and the interest shall be payable monthly. As of
September 30, 2009, the unpaid balance on the promissory note is $20,000 plus
accrued interest of $6,851.




9
 Table of Contents
 
 THOMAS
PHARMACEUTICALS, LTD. AND SUBSIDIARY
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 SEPTEMBER
30, 2009 AND 2008





On June
10, 2008, the Company received $77,250 from iVoice, Inc. for an initial
investment in Small Cap Advisors. The Company secured the receipt with a
convertible promissory note, at an interest of prime plus 1 (4.25% at September
30, 2009) percent per annum. Additional amounts may be added to this note based
on any unpaid administrative service fees and will accrue interest at the above
specified rate from date of advance until paid. The principal and interest shall
be due and payable as follows: (a) interest shall accrue monthly on the unpaid
balance and shall be paid annually, and (b) principal shall be payable on
demand. As of September 30, 2009, the balance due on the note is $69,650, plus
accrued interest of $4,604.





On June
11, 2008, the Company converted its outstanding accounts due to iVoice, Inc. for
unpaid administrative services in the amount of $47,302 into a convertible
promissory note at the rate of prime plus 1 (4.25% at September 30, 2009)
percent per annum. Additional amounts may be added to this note based on any
unpaid administrative service fees and will accrue interest at the above
specified rate from date of advance until paid. The principal and interest shall
be due and payable as follows: (a) interest shall accrue monthly on the unpaid
balance and shall be paid annually, and (b) principal shall be payable on
demand. At September 30, 2009, the principal balance of the note is $71,302,
plus accrued interest of $3,797.





The
Company determined that the beneficial conversion feature of the iVoice
convertible promissory notes met the criteria of ASC 480 and therefore the
conversion feature was accounted at its intrinsic value of
$35,239  and was charged to interest expenses on the consolidated
statements of operations.





On April
16, 2008 and May 7, 2008, the Company executed a consulting agreement with
Jerome Mahoney and an employment agreement with Mark Meller, respectively. As
part of their individual compensation agreements, the Company issued two five
(5) year promissory notes in the amount of $35,000, each, for signing bonuses.
The notes carry interest charges of 3% per annum and are convertible into Class
B common stock on a dollar for dollar basis plus accrued interest. As of
September 30, 2009, the balance due on the notes is $35,000 each, plus accrued
interest of $1,530 and $1,467, respectively.





The
aggregate principal balances of the promissory notes at September 30, 2009 is
$230,952.




LONG
TERM PORTION





On
January 26, 2007, Thomas Acquisition issued to an investor a debenture in the
principal amount of $103,200 convertible into Class A Common Stock of Thomas
Pharmaceuticals and a debenture in the principal amount of $96,800 convertible
into Series B Convertible Preferred Stock of the Company. The $103,200
convertible debentures provide that, at the holder’s option, principal and
interest due on the debentures can be converted into the number of shares of the
Company’s Class A Common Stock determined by dividing the amount of the
debenture being converted by a 20% discount to the lowest closing bid price of
the Company’s Class A Common Stock for the five trading days before the
conversion date.  The $96,800 convertible debentures provide that, at
the holder’s option, principal and interest due on the debentures can be
converted into the Company’s Series B Convertible Preferred Stock having a
stated value of $1,000 per share. The $103,200 convertible debenture was secured
with the assets of the Company, subordinate to the security interest previously
granted to iVoice. The net proceeds of $160,000 from the convertible debentures
were loaned to the Company in the form of a Promissory Note. The Promissory Note
bears interest at the rate of ten percent per annum and the term shall be seven
(7) years and shall be due and payable on January 8, 2014. On February 12, 2007,
the Company repaid $6,000 that was applied to the principal balance of the
promissory note. As of September 30, 2009, the unpaid balance on the promissory
note is $154,000 plus accrued interest of $41,865.





The
Company determined that the beneficial conversion feature of the Thomas
Acquisition Debentures met the criteria of ASC 480 and therefore the conversion
feature was accounted at its intrinsic value of $50,000 and was charged to
interest expenses on the consolidated statements of operations.





NOTE
6 - LIABILITY FOR CONVERSION FEATURE





In
accordance with ASC 480 “Distinguishing Liabilities from Equity”, the conversion
feature of the iVoice Convertible Debentures, the iVoice Promissory Notes, the
Thomas Acquisition Convertible Debentures and the BJL Debentures has an
aggregate intrinsic value of $263,606 and had a present value of $185,186 at
issuance. The difference is being accreted over the term of the debt to interest
expense and its current value is $218,701 at September 30, 2009. Interest
expense for the nine months ended September 30, 2009 include a charge of $8,711
for accretion and new charges for the period.





NOTE
7 - RELATED PARTY TRANSACTIONS





In
addition to the financing provided, iVoice provided administrative services and
other miscellaneous support to the Company from time to time. As of January 1,
2009, iVoice no longer provides administrative services to the Company. For the
nine months ended September 30, 2009 and 2008, the Company has recorded $0 and
$52,000 of these charges in the financial accounts of the Company. As of
September 30, 2009, the unpaid balance of the current accounts due was
transferred to a secured promissory note payable to iVoice. These amounts will
remain unpaid until the Board of Directors determines that the Company has
sufficient liquidity to make such payments.





10
 Table of Contents
 
 THOMAS
PHARMACEUTICALS, LTD. AND SUBSIDIARY
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 SEPTEMBER
30, 2009 AND 2008





NOTE
8 – COMMITMENTS AND CONTINGENCIES





On
January 2, 2006 the Company entered into an Employment Agreement with John E.
Lucas to serve as its Chief Executive Officer through December 31, 2008 at an
annual salary of $60,000 with annual cost of living increases.  On
June 11, 2007, this agreement was amended to add the additional title of
President and allow the Company to issue Class A Common Stock in lieu of cash
payments for any compensation due and owing to Mr. Lucas. On April 29, 2008, Mr.
Lucas resigned his positions with the Company and the board accepted his
resignation. At the time of Mr. Lucas’ resignation, the Company had accumulated
unpaid compensation of $73,558 which is due and owing in cash or Class A Common
Stock, as determined by the Board of Directors.





On March
1, 2007 the Company entered into a five-year employment agreement with Jerome
Mahoney, which became effective at the time of the distribution, to serve as its
Non-Executive Chairman of the Board for a term of five years. As consideration,
the Company will pay Mr. Mahoney the sum of $85,000 the first year with an
annual increase based on the Consumer Price Index every year thereafter. The
compensation payable to Mr. Mahoney under the agreement may be paid in the form
of cash, debt or shares of Class B Common Stock. On April 16, 2008, Mr. Mahoney
resigned his positions with the Company and the board accepted his resignation.
At the time of Mr. Mahoney’s resignation, the Company had accumulated unpaid
compensation of $48,997 which is due and owing in cash or Class A Common Stock,
as determined by the Board of Directors.




On March
1, 2007,the
Company entered into an administrative services agreement with iVoice which
became effective at the time of the distribution and replaced the administrative
services agreement entered into on January 6, 2006. Under this agreement, iVoice
provides the Company with physical premises, contract review, sales issuance,
invoicing and collection services, financial accounting and reporting, claims
administration and reporting, and other areas where the Company needs
transitional assistance and support. Under the administrative services
agreement, iVoice provides the Company substantially the same level of service
and use substantially the same degree of care as iVoice’s personnel provided and
used in providing such services prior to the execution of the agreement. For
these services, the Company will pay iVoice a fee of $4,000 per month. On June
11, 2008, the administrative services agreement was amended to provide that any
fees that are earned and remain unpaid shall be converted into a secured
convertible promissory note which shall accrue interest at prime plus 1% (4.25%
at September 30, 2009) per annum. As of January 1, 2009, iVoice no longer
provides administrative services to the Company. As of September 30, 2009, the
unpaid fees in the amount of $71,302 were converted to the promissory note and
remain unpaid.





On June
10, 2008,the
Company entered into an administrative services agreement with iVoice on behalf
of its wholly owned subsidiary, Small Cap Advisors. Under this agreement, iVoice
provides the Company with physical premises, contract review, sales issuance,
invoicing and collection services, financial accounting and reporting, claims
administration and reporting, and other areas where the Company needs
transitional assistance and support. For these services, Small Cap Advisors will
pay iVoice a fee of $4,000 per month. In addition, fees that are earned and
remain unpaid at the end of a month shall be added to iVoice secured convertible
promissory note which shall accrue interest at prime plus 1% (4.25% at September
30, 2009) per annum. As of January 1, 2009, iVoice no longer provides
administrative services to the Company. As of September 30, 2009, the unpaid
fees in the amount of $19,400 were converted to the promissory note and remain
unpaid.





On May
22, 2008, the Company entered into a consulting agreement with Jerome Mahoney to
provide consulting services on strategic plans, policies and procedures,
acquisitions, personnel matters and other assignments as directed by the Chief
Executive Officer. As consideration, the Company will pay Mr. Mahoney the sum of
$80,000 the first year with an annual increase of 10% every year thereafter.
This compensation may be paid in Class B Common Stock, in lieu of cash, at the
option of Board of Directors. In addition, the Company issued a five (5) year
promissory note in the amount of $35,000 for a signing bonus. The promissory
note carries an interest charge of 3% per annum and is convertible into Class B
common stock on a dollar for dollar basis plus accrued interest. As of September
30, 2009, the total unpaid compensation in the amount of $148,120 is due and
owing.





On May
22, 2008, the Company entered into an Employment Agreement with Mark Meller to
serve as its Chief Executive Officer and Director through May 7, 2013 at an
annual salary of $80,000 with an annual increase of 10% every year thereafter.
This compensation may be paid in Class B Common Stock, in lieu of cash, at the
option of Board of Directors. In addition, the Company issued a five (5) year
promissory note in the amount of $35,000 for a signing bonus. The promissory
note carries an interest charge of 3% per annum and is convertible into Class B
common stock on a dollar for dollar basis plus accrued interest. On September
29, 2009, Mr. Meller resigned his positions with the Company and the board
accepted his resignation. At the time of Mr. Meller’s resignation, the Company
had accumulated unpaid compensation of $129,839 which is due and owing in cash
or Class A Common Stock, as determined by the Board of Directors.





On
December 13, 2007, Independent Can filed suit against the Company seeking
payment of monies owed equal to $19,100.80. Independent Can had provided the
Company the tins that held the Acid+All® tablets.  In June 2008, the
Company defaulted on a settlement agreement and Independent Can was awarded a
judgment for $14,785.32 for amounts due on the original stipulation of
settlement. As of the date of this filing, the judgment is still
outstanding.




11
 Table of Contents
 
 THOMAS
PHARMACEUTICALS, LTD. AND SUBSIDIARY
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 SEPTEMBER
30, 2009 AND 2008




On August
7, 2008, the intellectual property attorney Ursula Day asserted a claim against
the Company for unpaid bills equal to $9,547.  The Company had been in
discussions attempting to resolve this dispute. However, counsel for Ms. Day has
been uncooperative in providing us the support necessary for Ms. Day to
substantiate her claim.




On
January 22, 2009, the accounting firm of Rosen, Seymour, Shapss, Martin &
Company LLP (“Rosen”) filed suit against the Company for the sum of $25,000
claiming that the Company did not pay the accounting firm fees previously agreed
upon.  Rosen has entered a default judgment against the
Company.





NOTE
9 - STOCKHOLDERS’ DEFICIT





Pursuant
to the Company’s Certificate of Incorporation, the Company is authorized to
issue 1,000,000 shares of preferred stock, no par value per share,
10,000,000,000 shares of Class A Common Stock, no par value per share, and
50,000,000 shares of Class B Common Stock, no par value per share. Of the
1,000,000 authorized shares of Preferred Stock, 500,000 shares are designated as
“Series A Convertible Preferred Stock” and 1,000 shares are designated as
“Series B Convertible Preferred Stock”.




a) Preferred
Stock




Preferred
Stock consists of 1,000,000 shares of authorized preferred stock with no par
value, of which 501,000 shares are in the designations listed below. The balance
of the shares, 499,000, remain available for designation by the
Company.





Series A Convertible
Preferred Stock





Series A
Convertible Preferred Stock consisted of 500,000 shares with no par value. The
initial value of each share is $.01 and were subject to adjustment for stock
dividends, combinations, splits, recapitalizations and the like. On January 6,
2006, the Company completed the merger with Thomas NY and as a result of the
merger; the shareholders of Thomas NY exchanged all of their common stock shares
of Thomas NY for 500,000 shares of Series A Convertible Preferred Stock.
Following the spin-off from iVoice in November 2007, the holders of the 500,000
shares of Series A Convertible Preferred Stock shares were exchanged for
5,091,237 shares of Class A Common Stock pursuant to the provisions of the
spin-off agreement.





As of
September 30, 2009 and 2008, there are no shares issued and
outstanding.





Series B Convertible
Preferred Stock





Series B
Convertible Preferred Stock consists of 1,000 shares with no par value. The
initial value of each share is $1,000 and is subject to adjustment for stock
dividends, combinations, splits, recapitalizations and the like. The holders of
these shares are entitled to receive dividends at a rate of 10% per annum based
on the initial value of the shares outstanding. Upon liquidation, the holders of
these shares will receive up to 125% of the initial value of the shares plus
accumulated and unpaid dividends, but following the distribution to any senior
debt or senior equities. On June 12, 2008, the Certificate of Incorporation was
amended such that the holders of these shares may convert their shares into
Class A Common Stock at the price per share equal to eighty percent (80%)
of the lowest closing bid price of the Common Stock for the thirty (30) trading
days immediately preceding the conversion date and to limit the Series B
Preferred stockholders to hold no more than 9.99% of the total Class A Common
Stock at that time of conversion.   The holders of these shares
shall have one vote for each share of Class A Common Stock into which each share
of Series B Preferred Shares could be converted, assuming a conversion price of
eighty percent (80%) of the lowest closing bid price of the Common Stock
for the thirty (30) trading days immediately preceding the record date and to
limit the voting rights of the Series B Preferred stockholders to no more than
9.99% of the total voting rights of the aggregate of the Series B Preferred
Stock, Class A Common Stock and Class B Common Stock shareholders. The
Corporation must also get a majority approval from the holders of the Series B
Preferred Stock to make any changes to the structure of the Company or to
authorize or issue any equity or debt security that has a preference or priority
over the Series B Preferred Stock as to liquidation preferences, dividend
rights, voting rights, or otherwise.





On
January 6, 2006, the Company issued 550 shares of Series B Convertible Preferred
Stock valued at $550,000 to iVoice, Inc., a related party, pursuant to the terms
of the Agreement and Plan of Merger, with Thomas NY.





As of
September 30, 2009 and 2008, there are 550 shares issued and
outstanding.




12
 Table of Contents
 
 THOMAS
PHARMACEUTICALS, LTD. AND SUBSIDIARY
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 SEPTEMBER
30, 2009 AND 2008





b)
            Class A Common
      Stock





Class A
Common Stock consists of 10,000,000,000 shares with no par value.  As
of September 30, 2009, there are 541,810,067 shares issued and outstanding. As
of September 30, 2008, there are 347,876,105 shares issued and
outstanding.




Each
holder of Class A common stock is entitled to one vote for each share held of
record.  Holders of our Class A common stock have no preemptive,
subscription, conversion, or redemption rights.  Upon liquidation,
dissolution or winding-up, the holders of Class A common stock are entitled to
receive net assets pro rata.  Each holder of Class A common stock is
entitled to receive ratably any dividends declared by our board of directors out
of funds legally available for the payment of dividends.




For
the nine months ended September 30, 2009, the Company had the following
transactions in its Class A common stock:





On
February 11, 2009, the Company issued 10,000,000 shares of Class A Common Stock
to Lebhar Friedman as part of a settlement of all outstanding debts due to
Lebhar Friedman pursuant to the agreement executed on the same day.





On March
23, 2009, the Company issued 54,000,000 shares of Class A common stock to
iVoice, Inc. as repayment of principal on an outstanding convertible debenture,
valued at $5,400.





For
the nine months ended September 30, 2008, the Company had the following
transactions in its Class A common stock:





The
Company issued 96,600,000 shares of Class A common stock to iVoice, Inc. as
repayment of principal on an outstanding convertible debenture, valued at
$61,800. The difference in the market value and the reduction in debt of $8,928
was charged to beneficial interest in the amount of $52,872.





c)
            Class B Common
      Stock





Class B
Common Stock consists of 50,000,000 shares with no par value.  As of
September 30, 2009 and 2008 there are no shares issued and
outstanding.





Upon the
consummation of a Spin-off Transaction and the commencement of public trading of
the Class A Common Stock of the Corporation, each holder of Class B Common Stock
shall have the right to convert each share of Class B Common Stock into the
number of Class A Common Stock Shares calculated by dividing the number of Class
B Common Stock Shares being converted by eighty percent (80%) of the lowest
price that the Company had previously issued its Class A Common Stock since the
Class B Common Stock Shares were issued.





Each
holder of Class B common stock is entitled to one vote for each share of Class B
common stock held.  Each holder has full voting rights and powers
equal to the voting rights and powers of the holders of Class A Common Stock and
is entitled to vote, together with holders of Class A Common Stock and not as a
separate class (except as required by law), with respect to any question upon
which holders of Class A Common Stock have the right to vote. Upon the
consummation of a Spin-off Transaction and the commencement of public trading of
the Class A common stock, then every holder of the outstanding shares of the
Class B Common Stock shall be entitled on each matter to cast the number of
votes equal to the number of Class A Common Stock Shares that would be issued
upon the conversion of the Class B Common Stock Shares held by that holder, had
all of the outstanding Class B Common Stock Shares held by that holder been
converted on the record date used for purposes of determining which shareholders
would vote in such an election.  With respect to all matters upon
which shareholders are entitled to vote or to which shareholders are entitled to
give consent, the holders of the outstanding shares of Class B Common Stock
Shares shall vote together with Class A Common Stock Shares without regard to
class, except as to those matters on which separate class voting is required by
applicable law.





Each
share of Class B Common Stock shall receive dividends or other distributions, as
declared, equal to the number of Class A Common Stock Shares that would be
issued upon the conversion of the Class B Common Stock Shares, had all of the
outstanding Class B Common Stock Shares been converted on the record date
established for the purposes distributing any dividend or other shareholder
distribution.




13
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 THOMAS
PHARMACEUTICALS, LTD. AND SUBSIDIARY
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 SEPTEMBER
30, 2009 AND 2008





d)
            Dividends





Pursuant
to the Company’s amended certificate of incorporation, the Company is required
to accrue dividends at the rate of 10% per annum of the Series B Initial Value
of each share of Series B Convertible Preferred Stock outstanding on each
Dividend Payment Date, being March 31, June 30, September 30 and December 31.
Dividends on the Series B Preferred Stock shall be cumulative from the date of
issue. Accrued and unpaid dividends for any past Dividend Period, being the
quarterly period commencing on and including the day after the preceding
Dividend Payment Date, may be declared and paid at any time as may be fixed by
the Board of Directors. The Company has not paid any dividends on its Series B
Convertible Preferred Stock or its common stock and management does not
contemplate doing so in the foreseeable future. The Company anticipates that any
earnings generated from operations will be used to finance growth.




NOTE
10 - INCOME TAXES





Deferred
income taxes will be determined using the liability method for the temporary
differences between the financial reporting basis and income tax basis of the
Company’s assets and liabilities.  Deferred income taxes will be
measured based on the tax rates expected to be in effect when the temporary
differences are included in the Company’s tax return.  Deferred tax
assets and liabilities are recognized based on anticipated future tax
consequences attributable to differences between financial statement carrying
amounts of assets and liabilities and their respective tax bases. At September
30, 2009 and December 31, 2008 deferred tax assets consist of the
following:




September 30, 2009
              
              
              December 31, 2008Deferred
      tax assets
              
              $
              470,000
              
              
              $
              350,000Less:
      Valuation allowance
              
              
              (470,000
              )
              
              
              (350,000
              )Net
      deferred tax assets
              
              $
              0
              
              
              $
              0


At
September 30, 2009 and December 31, 2008, the Company had a federal net
operating loss carry forwards in the approximate amount of $1,175,000 and
$875,000, respectively, available to offset future taxable
income.  The Company established a valuation allowance equal to the
full amount of the deferred tax asset due to the uncertainty of the utilization
of the operating loss in future periods. Prior to the spin-off from iVoice, Inc,
the Company was a subsidiary of iVoice and as such, did not have its’ own
federal tax liability or federal net operating loss carry forward.





NOTE
11 - GOING CONCERN





The
Company has sustained net operating losses, has a deficit working capital and
has negative cash flows from operations for the year ended December 31, 2008 and
for the nine months ended September 30, 2009. There is no guarantee that the
Company will be able to raise enough capital or generate revenues to sustain its
operations. This raises substantial doubt about the Company’s ability to
continue as a going concern.





The
Company’s future success is dependent upon its ability to achieve profitable
operations and generate cash from operating activities, and from additional
financing. There is no guarantee that the Company will be able to raise enough
capital or generate revenues to sustain its operations. The Company continues to
search for potential merger candidates with or without compatible technology and
products, which management feels may make financing more appealing to potential
investors.





The
financial statements do not include any adjustments relating to the
recoverability or classification of recorded assets and liabilities that might
result should the Company be unable to continue as a going concern.





14
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 THOMAS
PHARMACEUTICALS, LTD. AND SUBSIDIARY
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 SEPTEMBER
30, 2009 AND 2008


NOTE
12 - RESTATEMENT





As of
June 30, 2009 we have adopted ASC 480 “Distinguishing Liabilities from
Equity”. Previously, we
had accounted for our variable weighted average priced convertible debt
instruments in accordance with ASC 815-40 “Contracts in Entity’s Own Equity”,
solely based on the variability in the shares to be issued in our convertible
debt instruments. Upon further review of ASC 470-20-65-2 “Transition Related to
EITF Issue No. 08-4, Transition Guidance for Conforming Changes to Issue No.
98.5” and ASC 480, we have changed our accounting policy to account for the
conversion feature as a debt discount without bifurcating any additional
component from the debt instrument as a derivative. We believe that the
treatment under ASC 480, among the diversity in accounting treatments that
exist, is more appropriate. Due to our change in accounting principle we have
retroactively updated our financial statements as of December 31, 2008 and for
the three and nine months ended September 30, 2008.





The table
below summarizes various accounts that were affected by the
restatement:





Restated
              
              
              As
      ReportedThree
      months ended September 30, 2008Net
      loss applicable to common shares
              
              $
              (144,015
              )
              
              $
              (199,895
              )Nine
      months ended September 30, 2008Net
      loss applicable to common shares
              
              $
              (561,161
              )
              
              $
              (682,749
              )Year
      ended December 31, 2008Total
      liabilities
              
              $
              2,571,088
              
              
              $
              3,022,847Total
      stockholders’ deficit
              
              $
              (2,557,579
              )
              
              $
              (3,009,338
              )


NOTE
13 – SUBSEQUENT EVENTS





On
October 27, 2009, the Board of Directors authorized management to negotiate and
enter into an Employment Agreement or Consulting Agreement with Mr. Harold
Halman to fill the vacant position of President of the Company.Mr. Halman has agreed to
serve as Interim President until the Board of Directors formally accepts his
assignment.





On
November 16, 2009, Mr. Halman was also appointed to the position of President,
Chief Executive Officer and Chief Financial Officer.




15
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ITEM2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS





This
discussion and analysis of our financial condition and results of operations
includes “forward-looking” statements that reflect our current views with
respect to future events and financial performance. We use words such as we
“expect,” “anticipate,” “believe,” and “intend” and similar expressions to
identify forward-looking statements. You should be aware that actual results may
differ materially from our expressed expectations because of risks and
uncertainties inherent in future events and you should not rely unduly on these
forward looking statements. We will not necessarily update the information in
this discussion if any forward-looking statement later turns out to be
inaccurate.





You
should read the following discussion in conjunction with our audited financial
statements and related notes included in the Form 10-K previously filed with the
SEC. Our fiscal year currently ends on December 31, and each of our fiscal
quarters ends on the final day of a calendar quarter (each March 31, June 30 and
September 30). The following discussion contains forward-looking statements.
Please see Forward-Looking Statements for a discussion of uncertainties, risks
and assumptions associated with these statements





Overview





Thomas
Pharmaceuticals, Ltd. (the “Company” or “Thomas Pharmaceuticals”) was a
wholly-owned subsidiary of iVoice.  Thomas Pharmaceuticals was founded
on the premise that money can be made by making the “humdrum hip” or by
retooling a mundane product to make it new and exciting.  The strategy
of Thomas Pharmaceuticals is to capitalize on “old school” or “retro” products,
such as antacids, with proven effectiveness and usefulness, but with improved
formulation, packaging, marketing and advertising to articulate the brand
attributes to a new generation of consumer who demand substance with
style.





Currently
the Company no longer produces any products. Earned sales are derived from
finished goods inventory on hand and cash receipts from previously written off
bad debts.





In June
2008, the Company formed a new, wholly owned subsidiary, Small Cap Advisors,
Inc., to provide investor relation (“IR”) services to small and medium sized
public companies. Micro-cap public companies typically take a stock promotion
approach to IR. This involves sending out un-targeted mass emails to potential
investors, or getting profiled on investor relations websites.  The
Company believed this was no longer a viable approach to gaining new investors,
and in fact, current IR strategies may have actually undermined marketing
efforts and diminishing shareholder goodwill.  The Company developed a
process which it called “SEO-IR”, which involved a search engine optimization
approach to IR.  SEO-IR was designed to build awareness, credibility,
relevance, and a community of dedicated shareholders for the Company’s clients.
Furthermore, SEO-IR would have facilitated the convergence of the client’s
corporate marketing strategy and IR strategy by aligning multiple distribution
channels to reach a targeted, engaged audience. However, the Company abandoned
this business model in the fall of 2008 after the economic crisis in the U.S.
began and the stock markets began to rapidly deteriorate in
value.  The Company does not anticipate re-starting the operations of
SEO-IR.





Results
of Operations





Nine
months ended September 30, 2009 compared to nine months ended September 30,
2008.





Total
revenues for the nine months ended September 30, 2009 and 2008 were $0 and
$27,375, respectively. There were no revenues in the nine months ended September
30, 2009. Revenues in the nine months ended September 30, 2008 were from the
reversal of reserves recorded in 2007 for chargebacks, rebates and product
returns as the criteria for meeting the recognition of this revenue has occurred
in 2008.





Gross
profit for the nine months ended September 30, 2009 and 2008 was $0 and $27,375,
respectively. There is no gross profit in the nine months ended September 30,
2009. The gross profit for the nine months ended September 30, 2008 was the
result of the sales of finished goods that had previously been written down to
$0 and there were no costs on collections.





Operating
expenses for the nine months ended September 30, 2009 and 2008 were $210,559 and
$374,547, respectively, for a decrease of $163,988.  The decrease
primarily consist of a decrease in executive salaries and taxes of $55,102,
decreases of $48,279 in the curtailment of expenses in Small Cap Advisors,
decrease of $52,000 in administrative services fees and other decreases in
insurance and professional services when compared to the prior
year.





Total
other expense for the nine months ended September 30, 2009 was an expense of
$86,241. This total was comprised of $92,455 of interest expense on the
debentures and promissory notes and $9,500 accretion of discount from present
value of conversion liability offset by $15,714 gain on the write-off of the
Lebhar-Friedman debt in the settlement. Total other expense for the nine months
ended September 30, 2008 was an expense of $172,701. This total was comprised of
$89,434 of accretion of discount from present value of conversion liability and
$83,267 of interest expense on the debentures and promissory notes. The increase
in interest expense was related to the increase in convertible debt as compared
to the prior year.





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 Table of Contents




The
restated loss before preferred dividends for the nine months ended September 30,
2009 and 2008 were $296,800 and $519,873, respectively. The decrease in the loss
before preferred dividends of $223,073 was primarily the results of the lower
operating expenses and the non-recurrence of the beneficial interest charge
offset the gain on the write-off of debt in the current year.





Preferred
dividends for the nine months ended September 30, 2009 and 2008 were $41,137 and
$41,288, respectively. These dividends are accrued pursuant to the provisions of
the Series B Convertible Preferred Stock and remain unpaid.





Three
months ended September 30, 2009 compared to three months ended September 30,
2008.





Total
revenues for the three months ended September 30, 2009 and 2008 were $0. There
were no revenues in the three months ended September 30, 2009 or
2008.





Gross
profit for the three months ended September 30, 2009 and 2008 were $0. There is
no gross profit in the three months ended September 30, 2009 or
2008.





Operating
expenses for the three months ended September 30, 2009 and 2008 were $57,050 and
$86,551, respectively, for a decrease of $29,501.  The decrease
primarily consists of a decrease in administrative service fees of $24,000 and
decreases of $4,949 in the curtailment of expenses in Small Cap
Advisors.





Total
other expense for the three months ended September 30, 2009 was an expense of
$34,891. This total was comprised of $31,987 of interest expense on the
debentures and promissory notes and $2,904 accretion of discount from present
value of conversion liability. Total other expense for the three months ended
September 30, 2008 was an expense of $43,601. This total was comprised of
$28,692 of interest expense on the debentures and promissory notes and $14,909
accretion of discount from present value of conversion liability. The increase
in interest expense was related to the increase in convertible debt as compared
to the prior year.





Loss
before preferred dividends for the three months ended September 30, 2009 was
$91,941. Restated loss for the three months ended September 30, 2008 was
$130,152. The decrease in loss before preferred dividends of $38,211 was
primarily the results of the lower operating expenses and total interest
expenses when compared to the prior year.





Preferred
dividends for the three months ended September 30, 2009 and 2008 were $13,863.
These dividends are accrued pursuant to the provisions of the Series B
Convertible Preferred Stock and remain unpaid.





Liquidity
and Capital Resources





Between
January 6, 2006 and February 7, 2007, iVoice purchased from Thomas
Pharmaceuticals an aggregate of $550,000 of Thomas Pharmaceuticals Series B
Convertible Preferred Stock (550 shares), an aggregate of $610,000 10% secured
convertible debenture and a $100,000 10% administrative service convertible
debenture. The administrative service debenture was issued by Thomas
Pharmaceuticals to compensate iVoice for the administrative services that iVoice
provided to Thomas Pharmaceuticals under the administrative services agreement.
The purchase of the Series B Convertible Preferred Stock and the convertible
debentures provided working capital to Thomas Pharmaceuticals.  The
debentures are due between January 1, 2013 and February 6, 2015 and bear
interest of 10%, compounded quarterly.





iVoice
has the right to convert $710,000 in principal (plus accrued and unpaid
interest) of convertible debentures into an indeterminate number of shares of
Thomas Pharmaceuticals Class A Common Stock. The debentures are convertible at
the option of iVoice any time up to maturity at a conversion price equal to 80%
of the lowest closing bid price of the common stock for the 30 trading days
immediately preceding the conversion date. In the event the debentures are
redeemed, Thomas Pharmaceuticals will pay $125,000 plus interest for each
$100,000 redeemed. There is no limitation on the number of shares of Class A
Common Stock that we may be required to issue to iVoice upon the conversion of
this indebtedness.





iVoice
also has the right to convert each share of Series B Convertible Preferred Stock
into the number of shares of Thomas Pharmaceuticals’ Class A Common Stock
determined by dividing the number of shares of Series B Convertible Preferred
Stock being converted by 80% of the lowest closing bid price of the common stock
for the 30 trading days immediately preceding the conversion date. There is no
limit upon the number of shares of Class A Common Stock that we may be required
to issue upon conversion of any of these shares, except that the holders of the
Series B Convertible Preferred Stock cannot hold more than 9.99% of the total
Class A Common stock at the time of the conversion.





iVoice
executed a Security Agreement with Thomas Pharmaceuticals to secure the
obligations of Thomas Pharmaceuticals under the various debentures set forth
above.





On August
9, 2006, iVoice entered into a Stock Purchase Agreement (the “Stock Purchase
Agreement”) by and among Thomas Pharmaceuticals, Thomas Pharmaceutical
Acquisition Corp. (“Thomas Acquisition”) and iVoice, whereby Thomas Acquisition,
an entity unaffiliated with Thomas Pharmaceuticals or iVoice, agreed to purchase
all of the securities of Thomas Pharmaceuticals outstanding as of such date and
owned by iVoice (the “Securities”), for the purchase price of $1,235,100 plus
twenty-five (25%) percent thereof, plus interest and dividends accrued under the
terms of such securities through the closing date. iVoice had the right to
terminate the Stock Purchase Agreement in the event the closing did not occur by
October 31, 2006.





17
 Table of Contents




On
January 26, 2007, iVoice entered into an Extension Agreement (the “Extension
Agreement”) by and among Thomas Pharmaceuticals, Thomas Acquisition and iVoice.
The Extension Agreement amended the Stock Purchase Agreement whereby the
expiration date provided for in the Stock Purchase Agreement was extended to and
through the date on which the Securities and Exchange Commission declares
effective a registration statement for the distribution of Class A Common Stock
of Thomas Pharmaceuticals to the shareholders of the iVoice (the “Effective
Date”). It was also agreed by the parties that Thomas Acquisition would provide
$160,000 to Thomas Pharmaceuticals as bridge financing.  Upon
effectiveness of the registration statement on October 26, 2007, the Stock
Purchase Agreement was terminated and Thomas Acquisition no longer had the
right to purchase the iVoice Securities and iVoice is proceeding with the
Distribution.





On
January 26, 2007, Thomas Acquisition issued to BioBridge LLC a debenture in the
principal amount of $103,200 convertible into Class A Common Stock of Thomas
Pharmaceuticals and a debenture in the principal amount of $96,800 convertible
into Series B Convertible Preferred Stock of Thomas Pharmaceuticals. The
$103,200 convertible debentures provide that, at the holder’s option, principal
and interest due on the debentures can be converted into the number of shares of
Thomas Pharmaceuticals Class A Common Stock determined by dividing the amount of
the debenture being converted by a 20% discount to the lowest closing bid price
of the Thomas Pharmaceuticals Class A Common Stock for the five trading days
before the conversion date. The $96,800 convertible debentures provide that, at
the holder’s option, principal and interest due on the debentures can be
converted into the Thomas Pharmaceuticals Series B Convertible Preferred Stock
having a stated value of $1,000 per share. The Thomas Pharmaceuticals Series B
Convertible Preferred Stock is convertible at the holder’s option into the
number of shares of Thomas Pharmaceuticals Class A Common Stock determined
by dividing the stated value of the shares of Thomas Pharmaceuticals Series B
Convertible Preferred Stock being converted by a 20% discount to the lowest
closing bid price of the Thomas Pharmaceuticals Class A Common Stock for the
five trading days before the conversion date. There is no limit upon the number
of shares that Thomas Pharmaceuticals may be required to issue upon conversion
of any of these obligations. The $103,200 convertible debenture was secured by
substantially all of the assets of Thomas Pharmaceuticals (including goods,
inventory, contract rights, accounts receivable, products and proceeds),
subordinate to the security interest previously granted to iVoice. The net
proceeds of $160,000 from the convertible debentures were loaned by Thomas
Acquisition to Thomas Pharmaceuticals and Thomas Pharmaceuticals executed a
Promissory Note for such funds. The Promissory Note bears interest at the rate
of ten (10%) percent per annum and has a term of seven years.  In
exchange for and in consideration of BioBridge LLC purchasing the secured
convertible debenture and thereby permitting Thomas Acquisition to loan the net
proceeds to Thomas Pharmaceuticals for operations, Thomas Pharmaceuticals agreed
to have the convertible debenture secured with assets of Thomas Pharmaceuticals
and convertible into shares of Thomas Pharmaceuticals.





On April
16, 2008 and May 7, 2008, the Company executed a consulting agreement with
Jerome Mahoney and an employment agreement with Mark Meller, respectively. As
part of their individual compensation agreements, the Company issued two five
(5) year promissory notes in the amount of $35,000, each, for signing bonuses.
The notes carry an interest charge of 3% per annum and are convertible into
Class B common stock on a dollar for dollar basis plus accrued
interest.





On June
10, 2008, the Company received $77,250 from iVoice, Inc. for an initial
investment in Small Cap Advisors. The Company secured the receipt with a
convertible promissory note, at an interest of prime plus 1 percent per annum.
Additional amounts of $19,400 were added to this note based on any unpaid
administrative service fees. In November 2008, $27,000 of the principal balance
of the note was repaid to iVoice, Inc in cash. The outstanding principal balance
of the note will accrue interest at the above specified rate from date of
advance until paid.





On June
11, 2008, the Company converted its outstanding accounts due to iVoice, Inc. for
unpaid administrative services in the amount of $47,302 into a convertible
promissory note at the rate of prime plus 1 percent per annum. During 2008,
additional amounts of $24,000 was added to this note based on any unpaid
administrative service fees and will accrue interest at the above specified rate
from date of advance until paid.





On March
30, 2009, the Company issued to Bagell Josephs Levine & Co, LLC a $42,500
convertible debenture due on March 30, 2012 bearing interest of 6% per annum.
BJL may, at its discretion, convert the outstanding principal and accrued
interest, in whole or in part, into a number of shares of Thomas Pharmaceuticals
Class A Common Stock at the price per share equal to ninety eighty
percent (98%) of the lowest closing bid price of the Common Stock for the
five (5) trading days immediately preceding the conversion date.





To date,
the Company has incurred substantial losses, and will require financing for
working capital to meet its operating obligations. We anticipate that we will
require financing on an ongoing basis for the foreseeable future to fund our
working capital needs.




18
 Table of Contents




During
the nine months ended September 30, 2009, the Company had a net decrease in cash
of $5,281. The Company’s principal sources and uses of funds were as
follows:





Cash used by operating
activities. The Company used $5,281 in cash for operating activities in
the nine months ended September 30, 2009. The use of funds is primarily the
result of the cash losses from operations sustained by the Company offset by
increases in accounts payable and accrued expenses.




Off-balance
Sheet Arrangements





The
Company has no off-balance sheet arrangements that have or are reasonably likely
to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to
investors.





Forward
Looking Statements - Cautionary Factors





Certain
information included in this Form 10-Q and other materials filed or to be filed
by us with the Securities and Exchange Commission (as well as information
included in oral or written statements made by us or on our behalf), may contain
forward-looking statements about our current and expected performance trends,
growth plans, business goals and other matters.  These statements may
be contained in our filings with the Securities and Exchange Commission, in our
press releases, in other written communications, and in oral statements made by
or with the approval of one of our authorized officers.  Information
set forth in this discussion and analysis contains various “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934.  The Private
Securities Litigation Reform Act of 1995 (the “Act”) provides certain “safe
harbor” provisions for forward-looking statements.  The reader is
cautioned that such forward-looking statements are based on information
available at the time and/or management’s good faith belief with respect to
future events, and are subject to risks and uncertainties that could cause
actual performance or results to differ materially from those expressed in the
statements.  Forward-looking statements speak only as of the date the
statement was made.  We assume no obligation to update forward-looking
information to reflect actual results, changes in assumptions or changes in
other factors affecting forward-looking information.  Forward-looking
statements are typically identified by the use of terms such as “anticipate,”
“believe,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,”
“predict,” “project,” “should,” “will,” and similar words, although some
forward-looking statements are expressed differently.  Although we
believe that the expectations reflected in such forward-looking statements are
reasonable, we can give no assurance that such expectations will prove to be
correct.





ITEM4T - CONTROLS AND PROCEDURES





Management's
report on internal control over financial reporting.





Management
of the Company has evaluated, with the participation of the Chief Executive
Officer and Chief Financial Officer of the Company, the effectiveness of the
Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or
15d-15(e) promulgated by the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this Quarterly Report on Form 10-Q. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer of the
Company had concluded that the Company's disclosure controls and procedures as
of the period covered by this Quarterly Report on Form 10-Q were not effective
for the following reasons:





a)           The
deficiency was identified as the Company's limited segregation of duties amongst
the Company's employees with respect to the Company's control activities. This
deficiency is the result of the Company's limited number of employees. This
deficiency may affect management's ability to determine if errors or
inappropriate actions have taken place. Management is required to apply its
judgment in evaluating the cost-benefit relationship of possible changes in our
disclosure controls and procedures.





b)           The
deficiency was identified in respect to the Company's Board of Directors. This
deficiency is the result of the Company's limited number of external board
members. This deficiency may give the impression to the investors that the board
is not independent from management. Management and the Board of Directors are
required to apply their judgment in evaluating the cost-benefit relationship of
possible changes in the organization of the Board of Directors.





Changes
in internal control over financial reporting.





Management
of the Company has also evaluated, with the participation of the Chief Executive
Officer of the Company, any change in the Company’s internal control over
financial reporting that occurred during the period covered by this Quarterly
Report on Form 10-Q and determined that there was no change in the Company’s
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.




19
 Table of Contents





PART
II – OTHER INFORMATION





ITEM5 - OTHER INFORMATION





(b)
            The
      Company does not have a standing nominating committee or a committee
      performing similar functions as the Company’s Board of Directors consists
      of only two members and therefore there would be no benefit in having a
      separate nominating committee that would consist of the same number of
      members as the full board of directors.  Both members of the
      Board of Directors participate in the consideration of director
      nominees.





ITEM6 - EXHIBITS





31.1
            Rule 13a-14(a)/15d-14(a)
    Certifications.


32.1
            Certification of Chief Executive and Chief Financial
      Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002.








20
 Table of Contents




SIGNATURES





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






Thomas
      Pharmaceuticals, Ltd.Date:
      November 16, 2009
              By:
              /s/
      Harold
      HalmanHarold
      HalmanPresident,
      Chief
      Executive Officer
                andChief
      Financial Officer












21
 Table of Contents




Indexof Exhibits








31.1
            Rule 13a-14(a)/15d-14(a)
    Certifications.





32.1
            Certification of Chief Executive and Chief Financial
      Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002.