Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis contains forward-looking statements within the meaning of the federal securities laws. The safe harbor provided in section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934 (“statutory safe harbors”) shall apply to forward-looking information provided pursuant to the statements made in this filing by the Company. We urge you to carefully review our description and examples of forward-looking statements included in the section entitled “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this report. Forward-looking statements speak only as of the date of this report and we undertake no obligation to publicly update any forward-looking statements to reflect new information, events or circumstances after the date of this report. Actual events or results may differ materially from such statements. In evaluating such statements, we urge you to specifically consider various factors identified in this report, any of which could cause actual results to differ materially from those indicated by such forward-looking statements. The following discussion and analysis should be read in conjunction with the accompanying financial statements and related notes, as well as the Financial Statements and related notes in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and the risk factors discussed therein.
General
Our principal executive office is located at 4093 Oceanside Blvd., Suite B, Oceanside, California 92056, our telephone number is (760) 295-7208 and our website is www.therapeuticsolutionsint.com. The reference to our website does not constitute incorporation by reference of the information contained on our website.
We file our quarterly and annual reports with the Securities and Exchange Commission (SEC), which the public may view and copy at the SEC’s Public Reference Room at 100 F Street, N.E. Washington D.C. 20549, on official business days during the hours of 10 a.m. to 3 p.m. The public may obtain information on the operation of the SEC’s Public Reference Room by calling the SEC at 1–800–SEC–0330. The SEC also maintains an Internet site, the address of which is www.sec.gov, which contains reports, proxy and information statements, and other information regarding issuers which file electronically with the SEC. The periodic and current reports that we file with the SEC can also be obtained from us free of charge by directing a request to Therapeutic Solutions International, Inc., 4093 Oceanside Blvd, Suite B, Oceanside, California 92056, Attn: Corporate Secretary.
DESCRIPTION OF BUSINESS
CURRENT BUSINESS DESCRIPTION
Currently the Company is focused on immune modulation for the treatment of several specific diseases. Immune modulation refers to the ability to upregulate (make more active) or downregulate (make less active) one’s immune system.
Activating one’s immune system is now an accepted method to treat certain cancers, reduce recovery time from viral or bacterial infections and to prevent illness. Additionally, inhibiting one’s immune system is vital for reducing inflammation, autoimmune disorders and allergic reactions.
TSOI is developing a range of immune-modulatory agents to target certain cancers, fight disease, and for daily health.
Nutraceutical Division – TSOI has been producing high quality nutraceuticals. Its current flagship product, NanoStilbene™ PKE, is prepared by low-energy emulsification which allows for better solubility, stability, and the release performance of pterostilbene nanoparticles. The pterostilbene placed in a nanoemulsion droplet is free from air, light, and hard environment; therefore, as a delivery system, nanoemulsion’s improve the bioavailability of pterostilbene but also protect it from oxidation and hydrolysis, while it possesses an ability of sustained release at the same time.
Cellular Division – TSOI recently obtained exclusive rights to a patented adult stem cell for development of therapeutics in the area of chronic traumatic encephalopathy (CTE) and traumatic brain injury (TBI).
The stem cell licensed, termed “JadiCell” is unique in that it possesses features of mesenchymal stem cells, however, outperforms these cells in terms of a) enhanced growth factor production; b) augmented ability to secrete exosomes; and c) superior angiogenic and neurogenic ability.
Chronic Traumatic Encephalopathy (CTE) is caused by repetitive concussive/sub-concussive hits to the head sustained over a period of years and is often found in football players. The condition is characterized by memory loss, impulsive/erratic behavior, impaired judgment, aggression, depression, and dementia. In many patients with CTE, it is anatomically characterized by brain atrophy, reduced mass of frontal and temporal cortices, and medial temporal lobe. TSOI has previously filed several patents in the area of CTE based on modulating the brain microenvironment to enhance receptivity of regenerative cells such as stem cells.
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SandBox Dental Labs, Inc. – is a wholly-owned subsidiary of TSOI consisting of a future dental laboratory to manufacture and fill prescriptions from dentists who will use our proprietary Sleep Appliance to treat their patients with mild to moderate obstructive sleep apnea. The Company needs to seek regulatory approval for its device to treat sleep apnea. As of March 31, 2020, and June 30, 2020, formal operations have not commenced.
Nutraceutical Division (TSOI)
ProJuvenol® is a patented, (US No.: 9,682,047) and powerful synergistic blend of complex anti-aging ingredients in capsules.
NanoStilbeneÔ is an easily absorbed nanoemulsion of nanoparticle pterostilbene derived from the ‘047 patent.
DermalStilbene is a topical form of pterostilbene delivered via spray application onto skin, derived from the ‘047 patent.
IsoStilbene an injectable formulation of pterostilbene is available by prescription only, derived from the ‘047 patent.
NeuroStilbeneÔ is an intranasal form of pterostilbene delivered via spray application inside the nostril, derived from the ‘047 patent.
NanoPlus is a blend of NanoStilbene and NanoCannabidiol which are an easily absorbed Nanoparticles formulation of Pterostilbene and Cannabidiol.
NanoCannabidiol is an easily absorbed Nanoparticle formulation of Cannabidiol Isolate in the range of 75-90 nanometers. This product is built on the same nano platform as NanoStilbene and is delivered at a concentration of 200mg per milliliter.
NanoPSA is a blend of NanoStilbene™ and Broccoli Sprout Extract (BSE) providing 74mg of BSE and 125mg of our patented NanoStilbene, a proprietary formulation of nanoparticle pterostilbene.
NLRP3 Trifecta is a two-product combo and consists of one bottle of NanoPSA and one bottle of GTE-50 green tea extract.
QuadraMuneÔ is a synergistic blend of pterostilbene, sulforaphane, epigallocatechingallate, and thymoquinone.
Nutraceutical Patents:
TSOI filed a patent in July 2015 covering the use of its ProJuvenol® product, as well as various pterostilbene compositions, for use in augmenting efficacy of existing immuno-oncology drugs that are currently on the market. The patent is based on the ability of pterostilbene, one of the major ingredients of ProJuvenol®, to reduce oxidative stress produced by cancer cells, which in turn protects the immune system from cancer mediated immune suppression. That patent, U.S. No.: 9,682,047 was granted on 6-20-2017.
In addition, on April 28, 2016, the Company filed a patent application covering the use of ProJuvenol© and its active ingredient pterostilbene for augmentation of stem cell activity. Diseases such as diabetes, cardiovascular disease, and neurodegenerative diseases are characterized by deficient stem cell activity. The patent covers the stimulation of stem cells that already exist in the patient’s body, as well as stem cells that are administered therapeutically. Studies have shown that patients who have higher levels of endogenous stem cell activity have reduced cardiovascular disease risk and undergo accelerated neurological recovery after stroke as compared to patients with lower numbers of such stem cells.
On October 16, 2017, the Company filed a patent application titled "Synergistic Inhibition of Glioma Using Pterostilbene and Analogues Thereof" which was developed to utilize the ability of the immune system to augment the possibility of increasing overall survival of glioma patients after treatment with conventional therapies. Our data suggests that when pterostilbene is combined with brain cancer therapeutics such as Gefitinib, Sertraline, or Temozolomide, the prognosis is vastly improved.
On August 13, 2018, the Company filed a patent application titled “Enhancement of Ozone Therapy using Pterostilbene” showing pterostilbene potently augments killing of breast cancer, prostate cancer, and ovarian cancer cells by ozone therapy. The data obtained is an extension of ongoing work at the Company seeking to identify means of enhancing the effects of pterostilbene administration for treatment of a variety of cancers, as well as enhancing the efficacy of existing cancer therapies.
On September 17, 2018, the Company filed a patent application titled “Pterostilbene and Compositions Thereof for Prevention and Treatment of Chronic Traumatic Encephalopathy” with new data demonstrating the ability of its NeuroStilbene intranasal formulation of pterostilbene to successfully prevent the development of brain injury in an animal model of Chronic Traumatic Encephalopathy aka CTE.
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On September 25, 2018, the Company filed a patent application titled “Pterostilbene and Formulations Thereof for Treatment of Pathological Immune Activation” covering novel clinical data using its NanoStilbene™ formulation to reduce inflammatory cytokine production in cancer patients.
On September 9, 2019, the Company filed a patent application titled “Pterostilbene and Formulations Thereof for Protection of Hematopoiesis from Chemotherapy and Radiation” covering the ability of NanoStilbene™ and its active ingredient, pterostilbene, at accelerating recovery of blood cells after treatment with chemotherapy.
On November 4, 2019, the Company filed a patent application titled “Cellular, Organ, and Whole-Body Rejuvenation Utilizing Cord Blood Plasma and Pterostilbene” suggesting that pterostilbene, the active ingredient in commercially available NanoStilbene™, augments the ability of cord blood plasma to suppress biological properties associated with aging.
On May 4, 2020, the Company filed a patent application titled “Nutraceuticals for the Prevention, Inhibition and Treatment of SARS-Cov-2 and Associated COVID-19” developed to address issues of susceptibility, inflammation, and viral immunity, for COVID-19 patients.
On May 11, 2020, the Company filed a patent application titled “Treatment of COVID-19 Lung Injury Using Umbilical Cord Plasma Based Compositions” covers new data in which combinations of pterostilbene and other compounds with cord blood are shown to be capable of suppressing lung inflammation associated with COVID-19 in an animal model.
Key Flagship Products:
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QuadraMune™ Boosts “Good” Immunity
while Suppressing “Bad” Immunity
Protection from a virus is mediated by stimulation of the first layer of defense “innate” immunity: interferon-alpha production. NK cell activity Additional production from the virus by enhancement of Th1 cells, which are part of the adaptive immune system and cause immunological memory Suppression of excessive inflammation by inhibition of NLRP3 and chemicals that are toxic to the lung.
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ProJuvenol® contains 200mg of >99% pure Pterostilbene in each daily dose is powerful synergistic blend of complex anti-aging ingredients inspired by nature to help promote cellular rejuvenation and healthy functionality for everyday living. Based upon pterostilbene, one of nature's unique and intelligent antioxidants/anti-inflammatories. ProJuvenol® includes a scientifically valid blend of interactive ingredients with anti-aging and cellular protective properties to help support optimal health and provide the benefits of mental alertness and physical well-being.
ProJuvenol® was inspired by natures design and formulated to assist nature’s rejuvenation of the body's cells helping to slow and actually reverse the aging processes and decline in vitality. U.S. Patent No.: 9,682,047
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NanoStilbene PKE is prepared by low-energy emulsification which allows for better solubility, stability, and the release performance of pterostilbene nanoparticles. The pterostilbene placed in a nanoemulsion droplet is free from air, light, and hard environment; therefore, as a delivery system, nanoemulsion can not only improve the bioavailability of pterostilbene but also protect it from oxidation and hydrolysis, while it possesses an ability of sustained release at the same time.
The recommended dose is 1.5 milliliters yielding 300 milligrams per dose. In addition to the benefits of the nanoparticle pterostilbene we chose to use medium chain triglycerides (MCT), derived from coconut oil, as one of our oil mediums in preparing the nanoemulsion.
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NanoStilbene is available in 60ml bottles at a concentration of 200mg per ml with a recommended daily dose of 1.5ml which is equal to 300mg.
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Nanotechnology
Therapeutic uses of nanotechnology typically involve the delivery of small-molecule drugs, peptides, proteins, and nucleic acids. Nanoparticles have advanced pharmacological effects compared with the therapeutic entities they contain. Active intracellular delivery and improved pharmacokinetics and pharmacodynamics of drug nanoparticles depend on various factors, including their size and surface properties.
Nanoparticle therapeutics is an emerging treatment modality in cancer and other inflammatory disorders. The National Cancer Institute has recognized nanotechnology as an emerging field with the potential to revolutionize modern medicine for detection, treatment, and prevention of cancer.
On May 15, 2018 TSOI announced Institutional Review Board (IRB) clearance to initiate a pilot pharmacokinetic trial of “NanoStilbene.” Then on July 02, 2018 the Company announced receiving pilot clinical data providing proof of concept that NanoStilbene more effectively increases blood levels of the molecule as compared to conventional formulations. The clinical trial involved the administration of NanoStilbene in comparison to powder in capsule form pterostilbene with healthy volunteers, whom underwent a series of blood draws to determine the concentration of the compound.
NanoStilbene Administration Results in Superior Pharmacokinetic Profile
Compared to Pterostilbene Administration
Blood was collected in EDTA tubes and plasma collected subsequent to centrifugation at 700g for 10 minutes. Collection time points were prior to administration of test compound, as well as at times 2hr, 4hr, 6hr, 8hr, 10hr, and 12 hrs. Test compounds were 10 ml of NanoStilbene (provided by Therapeutic Solutions International) and 6 capsules of 50 mg pterostilbene (VitaMonk). A wash out period of 3 days was allowed between two test compound administration.
Results
The results were that at peak concentration NanoStilbene (Square) had a 55% increase in serum levels over the traditional powder (Triangle) form of pterostilbene. The data also shows the half-life to be double to that of the powder form.
The data in Granted U.S. Patent No.: 9,682,047 strongly suggest that pterostilbene administration may be an inexpensive and safe method of augmenting efficacy of numerous immunotherapeutic drugs. Although cancer immunotherapy has revolutionized the prognosis of many patients, the majority of patients still possess poor or suboptimal responses to this approach.
Clinical Trial of NanoStilbene for Immune Derepression in Advanced Cancer
Patients
Twelve advanced cancer patients were recruited for the study. All patients signed informed consent and were told of the investigational nature of the clinical trial. To be eligible patients must have at least 6 months life expectancy, ECOG over 2, metastatic advanced solid tumor, be ambulatory, and not suffer organ failure. Characteristics of the patients is described in Table 1.
NanoStilbene
NanoStilbene, was administered at a concentration of 10 ml orally per day (300mg) for a total of three weeks. Administration was performed by the patients at home and patients were instructed to note the time of dose intake as well as any side effects associated with ingestion. Patients were also instructed to ingest NanoStilbene on a full stomach.
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Results
The study assessed whether the administration of NanoStilbene, a nanoformulation of pterostilbene, is effective at reducing inflammatory markers and augmenting immune function in 12 advanced cancer patients.
It has previously been known that pterostilbene possesses direct anticancer activity in the majority of cancers including melanoma1, glioma2, ovarian cancer3, prostate cancer4, pancreatic cancer5, breast cancer6, liver cancer7, colorectal cancer8, and various liquid tumors (leukemias)9.
Chronic inflammation, as measured by CRP, TNF-alpha and IL-6 levels in the blood, has been reported to be immune suppressive in cancer patients and we sought to reduce them through orally administered NanoStilbene. On average we saw CRP reduced by 27%, Interleukin 6 (IL-6) by 26% and TNF-alpha also by 26%. This dramatic reduction showed clinically relevant levels of downregulation of inflammatory cytokines as a result of the NanoStilbene administration.
The suppression of interferon gamma (IFN-g) is a hallmark of cancer immune evasion. Given that this cancer immune evasion is typically associated with inflammatory mediators such as TNF-alpha, we assessed the impact of NanoStilbene administration on the production of interferon gamma. We observed an average increase by 12% among the patients treated. The augmentation of interferon gamma production was due to the reduction of pro-inflammatory cytokines CRP, TNF-a, and IL-6.
The augmentation of natural killer cell (NK) activity is one of the most sensitive indicators of anticancer immunity seen clinically. Previous studies have shown that efficacy of antibody, as well as chemotherapy-induced cancer cell death, is dependent on NK activity. Unfortunately, cancer patients have suppressed NK activity, usually as a result of oxidative stress, therefore, it was postulated that NanoStilbene may reverse cancer associated NK depression. We observed on average an increase in NK activity of 37%, validating that 300mg of NanoStilbene daily was sufficient to cause these results.
These results suggest that NanoStilbene may be a useful adjuvant to immunotherapy of cancer rescuing T cell and NK cell activities. Augmentation of NK cell function may stimulate efficacy of approved therapies that depend on an active NK compartment such as Herceptin, Rituximab, and Cetuximab.
*The data provided here is partial and does not contain all materials submitted for publication and is preliminary until peer review is complete. These statements have not been evaluated by the Food and Drug Administration. These products are not intended to diagnose, treat, cure, or prevent any disease.
Dental
SandBox Dental Labs, Inc. – is a wholly-owned subsidiary of TSOI) consisting of a future dental laboratory to manufacture and fill prescriptions from dentists who will use our proprietary Sleep Appliance to treat their patients with mild to moderate obstructive sleep apnea. The Company needs to seek regulatory approval for its device to treat sleep apnea. As of December 31, 2018, and May 21, 2020, formal operations have not commenced.
Immune-Oncology – Right To Try
In May of 2018 President Donald J. Trump signed into the law, the Right To Try bill. In 2015/2016 TSOI began and completed a 10-patient clinical trial of advanced cancer patients in Mexico at the Pan Am Cancer Treatment Center located in Tijuana Mexico using our dendritic cell vaccine code named StemVacs. TSOI has since generated GCP documentation for the previously treated 10 patients into a Phase I trial, which will be presented to the FDA by TSOI as part of an Ex-US trial compliant with 21 CFR 312.120 Foreign clinical studies not conducted under an IND. This is a required step to conform to the new Right To Try law.
StemVacs is an immunotherapy platform that consists of 5 components. The overarching approach to the StemVacs Immunotherapy Platform is as follows:
1.Treat innate immune suppression: Administration of oral apigenin/NanoStilbene (Cancer DeTox Product) to decrease immune suppressive toxic molecules made by tumor and tumor microenvironment.
2.Treat adaptive immune suppression: Administration of MemoryMune to activate dormant memory cells recognizing the tumor. Administration of LymphoBoost to repair deficient IL-12 production.
3.Stimulation of immune response to cancer stem cells (StemVacs).
4.Consolidation and maintenance of immunity: Cycles of StemVacs, supported by innaMune and LymphoBoost
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StemVacs: StemVacs is a subcutaneously administered vaccine comprised of immune stimulatory peptides resembling cancer stem cell specific proteins.
Cancer Metabolic DeTox: This is an orally administered agent that is derived from various herbs termed apigenin. The unique property of apigenin is that it inhibits a cancer associated metabolic pathway that degrades the amino acid tryptophan. Specifically, apigenin inhibits the enzyme indolamine 2,3 deoxygenase (IDO), which is responsible for breaking down tryptophan in the vicinity of the tumor and generating by-products such as kynurenine. It is known that immune activation is dependent on tryptophan being present in the tumor environment. The depletion of tryptophan and generation of kynurenine by tumor cells and tumor associated cells is a major cause of immune suppression in cancer. By administering Cancer Metabolic DeTox, the innate arm of the immune system has a chance to regenerate. This positions the patient for better outcome after administration of specific immune stimulating vaccines.
MemoryMune: This is a product derived from a two-step culture process of donor blood cells. The product MemoryMune reawakens dormant immune memory cells. It is known that many cancer patients possess memory T cells that enter the tumor, however, once inside the tumor these cells are inactivated. MemoryMune contains a unique combination of growth factors specific for immune system cells called “cytokines”.
LymphoBoost: LymphoBoost is a proprietary formulation of Misoprostol, a drug approved for another indication, which we have shown to be capable of stimulating lymphocytes, particularly NK cells and T cells, both critical in maintaining anti-tumor immunity.
innaMune: This is a biological product derived from tissue culture of blood cells derived from healthy donors. It is a combination of cytokines that maintain activity of innate immune system cells, as well as having ability to shift M2 macrophages to M1.
Chronic Traumatic Encephalopathy (CTE), and Traumatic Brain Injury (TBI) – Right To Try
On December 10, 2018, Therapeutic Solutions International, Inc., announced the signing of an agreement between TSOI and Jadi Cell LLC for licensing of the Jadi Cell universal donor adult stem cell, as covered in US Patent No.: 9,803,176 B2 for use in Chronic Traumatic Encephalopathy (CTE), and Traumatic Brain Injury (TBI).
The Jadi Cell product, which belongs to the mesenchymal stem cell (MSC) family of cells, is a unique adult stem cell, which produces higher levels of therapeutic factors compared to other stem cells. The cells have demonstrated safety in animal models and pilot human trials. The Jadi Cell product is generated from umbilical cords, which are a source of medical waste and available in large quantities at inexpensive prices.
Chronic Traumatic Encephalopathy (CTE) is caused by repetitive concussive/sub-concussive hits to the head sustained over a period of years and is often found in football players. The condition is characterized by memory loss, impulsive/erratic behavior, impaired judgment, aggression, depression, and dementia. In many patients with CTE, it is anatomically characterized by brain atrophy, reduced mass of frontal and temporal cortices, and medial temporal lobe.
Traumatic brain injury (TBI) is an insult to the brain, not of a degenerative or congenital nature, but caused by external physical force that may produce a diminished or altered state of consciousness, which results in an impairment of cognitive abilities or physical functioning.
CTE represents a significant unmet medical need which we believe is amenable to stem cell intervention. We are eager to accelerate treatments and potential cures for debilitating conditions such as CTE and traumatic brain injury and plan to leverage New regulatory pathways such as the recently approved “Right to Try” Law to deliver these medicines as soon as possible to patients which currently have no other options.
The Jadi Cell product because of its advanced stage of development in contrast to other stem cell types, which require years, if not decades of development before entry into American patients, will allow us we believe to be treating patients within 12 months. Currently means of isolating, producing, scaling up, and delivery of the cells has all been worked out by Jadi Cell and Collaborators.
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GOVERNMENT REGULATION
The Company’s business is subject to varying degrees of regulation by a number of government authorities in the United States, including the United States Food and Drug Administration (FDA), the Federal Trade Commission (FTC), and the Consumer Product Safety Commission. The Company will be subject to additional agencies and regulations if it enters the manufacturing business. Various agencies of the state and localities in which we operate and in which our products are sold also regulate our business, such as the California Department of Health Services, Food and Drug Branch. The areas of our business that these and other authorities regulate include, among others:
·product claims and advertising;
·product labels;
·product ingredients; and
·how we package, distribute, import, export, sell and store our products.
The FDA, in particular, regulates the formulation, manufacturing, packaging, storage, labeling, promotion, distribution and sale of vitamins and other nutritional supplements in the United States, while the FTC regulates marketing and advertising claims. The FDA issued a final rule called “Statements Made for Dietary Supplements Concerning the Effect of the Product on the Structure or Function of the Body,” which includes regulations requiring companies, their suppliers and manufacturers to meet Good Manufacturing Practices in the preparation, packaging, storage and shipment of their products. Management is committed to meeting or exceeding the standards set by the FDA.
The FDA has also issued regulations governing the labeling and marketing of dietary and nutritional supplement products. They include:
·the identification of dietary or nutritional supplements and their nutrition and ingredient labeling;
·requirements related to the wording used for claims about nutrients, health claims, and statements of nutritional support;
·labeling requirements for dietary or nutritional supplements for which “high potency” and “antioxidant” claims are made;
·notification procedures for statements on dietary and nutritional supplements; and
·pre-market notification procedures for new dietary ingredients in nutritional supplements.
The Dietary Supplement Health and Education Act of 1994 (DSHEA) revised the existing provisions of the Federal Food, Drug and Cosmetic Act concerning the composition and labeling of dietary supplements and defined dietary supplements to include vitamins, minerals, herbs, amino acids and other dietary substances used to supplement diets. DSHEA generally provides a regulatory framework to help ensure safe, quality dietary supplements and the dissemination of accurate information about such products. The FDA is generally prohibited from regulating active ingredients in dietary supplements as drugs unless product claims, such as claims that a product may heal, mitigate, cure or prevent an illness, disease or malady, trigger drug status.
The Company is also subject to a variety of other regulations in the United States, including those relating to taxes, labor and employment, import and export, and intellectual property.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that re not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.
Recent Accounting Pronouncements
Recent accounting pronouncements are disclosed in Note 2 to the accompanying unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on form 10-Q.
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Results of Operations
You should read the following discussion of our financial condition and results of operations together with the unaudited financial statements and the notes to the unaudited financial statements included in this quarterly report. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements.
Overview
Currently, the Company is focused on immune modulation for the treatment of several specific diseases. Immune modulation refers to the ability to upregulate (make more active) or downregulate (make less active) one’s immune system.
Activating one’s immune system is now an accepted method to cure certain cancers, reduce recovery time from viral or bacterial infections and to prevent illness. Additionally, inhibiting one’s immune system is vital for reducing inflammation, autoimmune disorders and allergic reactions.
Nutraceutical Division – TSOI has been producing high quality nutraceuticals. Its current flagship product, NanoStilbene™ PKE, is prepared by low-energy emulsification which allows for better solubility, stability, and the release performance of pterostilbene nanoparticles. The pterostilbene placed in a nanoemulsion droplet is free from air, light, and hard environment; therefore, as a delivery system, nanoemulsion’s improve the bioavailability of pterostilbene but also protect it from oxidation and hydrolysis, while it possesses an ability of sustained release at the same time.
Cellular Division – TSOI recently obtained exclusive rights to a patented adult stem cell for development of therapeutics in the area of chronic traumatic encephalopathy (CTE) and traumatic brain injury (TBI).
The stem cell licensed, termed “JadiCell” is unique in that it possesses features of mesenchymal stem cells, however, outperforms these cells in terms of a) enhanced growth factor production; b) augmented ability to secrete exosomes; and c) superior angiogenic and neurogenic ability.
For the three months ended March 31, 2020 and 2019
We had net income of $32,136 for the three months ended March 31, 2020, compared to a net loss of $375,146 for the three months ended March 31, 2019, an increase of $407,282. This decrease was mainly due to decreases in interest expenses and gains on changes in derivative liabilities.
Net sales increased $17,050, from $2,464 to $19,514, for the three months ended March 31, 2019 and March 31, 2020, respectively.
Cost of goods sold increased $3,344, from $146 to $3,490, for the three months ended March 31, 2019 and March 31, 2020, respectively. These increases were mainly a result of the increases in net sales for products in 2020 and 2019.
Operating expenses for the three-month periods ended March 31, 2020 and 2019 were $138,400 and $434,908, a decrease of $296,508. This decrease was mainly due to a significant decrease in stock-based compensation as well as decreases in salaries, wages and related expenses, and legal and professional fees.
General and administrative expenses increased $1,948, from $13,483 to $15,431 for the three months ended March 31, 2019 and 2020, respectively.
Salaries, wages, and related expenses decreased $53,236, from $106,406 to $53,170 for the three months ended March 31, 2019 and 2020, respectively. This decrease was mainly due to a decrease in wage related expenses for the three months ended March 31, 2020.
Stock compensation decreased from $225,000 to $0, for the three months ended March 31, 2019 and 2020, respectively. This was mainly due an issuance to Restricted Stock Awards to two officers and one director for the three months ended March 31, 2019. There were no such issuances during the three months ended March 31, 2020.
Consulting fees increased $3,834 from $33,385 to $37,219 for the three months ended March 31, 2019 and 2020, respectively, due to an increase in overall consulting services.
Legal and professional fees decreased $24,054, from $56,634 to $32,580 for the three months ended March 31, 2019 and 2020, respectively, due to a decrease in independent public accounting fees and legal expense.
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Loss on derivatives liability decreased approximately $187,172, from $207,927 to $20,755, for the three months ended March 31, 2019 and 2020, respectively. This decrease was mainly due to a reduction in the amount of new convertible notes being issued during the current period.
Change in fair derivatives liabilities gains decreased approximately $116,469 from $352,871 to $236,402 for the three months ended March 31, 2019 and 2020, respectively. This decrease was largely due to a reduction in the balance of convertible notes outstanding upon which the derivative liability is recorded.
Net interest expense decreased $26,365 from $87,500 to $61,135 for the three months ended March 31, 2019 and 2020, respectively. This decrease was mainly due to decreased debt balances.
Liquidity and Capital Resources
We have experienced recurring losses over the past years which have resulted in accumulated deficits of approximately $8.8 million and a working capital deficit of approximately $2 million at March 31, 2020. These conditions raise significant doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is contingent upon its ability to secure additional financing, increase sales of its products and attain profitable operations. It is the intent of management to continue to raise additional capital. However, there can be no assurance that the Company will be able to secure such additional funds or obtain such on terms satisfactory to the Company, if at all.
There is no guarantee we will receive the required financing to complete our business strategies, and it is uncertain whether future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations.
Off Balance Sheet Arrangements
We currently do not have any off-balance sheet arrangements.
Item 4. Controls and Procedures
A. Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, or Exchange Act, our principal executive officer and principal financial officer evaluated our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of March 31, 2020. Based on this evaluation, these officers concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, these disclosure controls and procedures were not operating effectively to ensure that the information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and include controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our principal executive officer, to allow timely decisions regarding required disclosure.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
B. Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our fiscal quarter ended March 31, 2020 that materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
Our management, including the Chief Executive Officer assessed the effectiveness of our internal control over financial reporting as of March 31, 2020. In making our assessment, we used the framework and criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) (2013). Based on that assessment, our management has identified certain material weaknesses in our internal control over financial reporting.
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Our management concluded that as of March 31, 2020, our internal control over financial reporting was not effective, and that material weaknesses existed in the following areas as of March 31, 2020.
(1)we do not employ full time in-house personnel with the technical knowledge to identify and address some of the reporting issues surrounding certain complex or non-routine transactions. With respect to material, complex and non-routine transactions, management has and will continue to seek guidance from third-party experts and/or consultants to gain a thorough understanding of these transactions;
(2)we have inadequate segregation of duties consistent with the control objectives including but not limited to the disbursement process, transaction or account changes, and the performance of account reconciliations and approval;
(3)we have ineffective controls over the period end financial disclosure and reporting process caused by insufficient accounting staff.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, claims are made against us in the ordinary course of business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as monetary damages, fines, penalties or injunctions prohibiting us from selling one or more products or engaging in other activities. The occurrence of an unfavorable outcome in any specific period could have a material adverse effect on our results of operations for that period or future periods.
However, as of the date of this report, management believes the outcome of currently identified potential claims and lawsuits will not have a material adverse effect on our financial condition or results of operations.
Item 1A. Risk Factors
No material changes to risk factors have occurred as previously disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on May 21, 2020.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On March 2, 2020 we issued 8,333,333 shares of common stock for the partial conversion of $10,000 for a convertible note dated August 28, 2019.
On March 12, 2020 we issued 11,764,706 shares of common stock for the partial conversion of $10,000 for convertible note dated August 28, 2019.
On March 26, 2020 we issued 21,818,182 shares of common stock for the partial conversion of $12,000 for convertible note dated August 28, 2019.
On June 4, 2020, we issued 24,733,333 shares of common stock for the complete conversion of $29,680 for convertible note dated October 30, 2019.
On June 4, 2020, we issued 5,000,000 shares of common stock, valued at $0.0021 per share, for consulting services.
On June 4, 2020 we issued 70,000,000 shares of common stock, valued at .0021 each to three officers and one director of the Company under a Restricted Stock Award.
On June 8, 2020, we issued 10,000,000 shares of common stock, valued at $0.01 per share, for consulting services.
On June 9, 2020, we issued 18,292,818 shares of common stock for the complete conversion of $60,000 for convertible note dated June 9, 2020.
On June 11, 2020 we issued 40,000,000 shares of common stock, valued at .0046 each to three officers and one director of the Company under a Restricted Stock Award.
On June 15, 2020 we issued 3,000,000 shares of common stock, valued at .0017 each to one officer and one director of the Company under a Restricted Stock Award.
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On June 15, 2020, we issued 10,000,000 shares of common stock, valued at $0.0023 per share, to the medical officer for consulting services.
On June 16, 2020, we issued 33,566,667 shares of common stock for the complete conversion of $40,280 for convertible note dated December 12, 2019.
On June 22, 2020, we issued 13,634,482 shares of common stock, valued at $0.005 per share, for an investment in the Company’s Private Placement.
On June 22, 2020, we issued 8,000,000 shares of common stock, valued at $0.0029 per share, for a donation in Triton Funds LP pursuant to the Donation Agreement (“DA”) and Registration Rights Agreement (“RRA”) dated January 24, 2020.
On June 25, 2020, we issued 10,000,000 shares of common stock, valued at $0.0083 per share, to the medical officer for consulting services.
On June 29, 2020, we issued 344,827 shares of common stock, valued at $0.0029 per share, for an investment in the Company’s Private Placement.
On June 29, 2020, we issued 2,200,000 shares of common stock, valued at $0.005 per share, for an investment in the Company’s Private Placement.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
No disclosure required.
Item 5. Other Information
None.
Item 6. Exhibits
EXHIBIT NUMBER
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DESCRIPTION
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31.1
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Rule 13a-14(a)/Section 302 Certification of Principal Executive Officer
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31.2
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Rule 13a-14(a)/Section 302 Certification of Principal Financial Officer
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32.1
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Certification pursuant to 18 U.S.C. Section 1350/Rule 13a-14(b)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
THERAPEUTIC SOLUTIONS INTERNATIONAL, INC.
Date: July 6, 2020
By: /s/ Timothy G. Dixon
Timothy G. Dixon
President and Chief Executive Officer
(Principal Executive Officer)
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