Item 2. Managements 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/A for the fiscal year ended December 31, 2015 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 SECs 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 SECs Public Reference Room by calling the SEC at 1800SEC0330. 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) ones immune system.
Activating ones 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 ones immune system is vital for reducing inflammation, autoimmune disorders and allergic reactions.
TSI is developing a range of immune-modulatory agents to target certain cancers, improve maternal and fetal health, fight periodontal disease, and for daily health. The following outlines our relationships and divisions to focus on each of these programs:
Nutraceutical Division
TSI has been producing high quality nutraceuticals. Its flagship product, ProJuvenol
®
, is a proprietary mixture containing pterostilbene one of the most potent antioxidants known. TSOI filed a patent application for ProJuvenol
®
on 07-08-2015 titled: Augmentation of Oncology Immunotherapies by Pterostilbene Containing Compositions. On April 28, 2016 the Company announced the filing of a patent application covering the use of ProJuvenol© and its active ingredient pterostilbene for augmentation of stem cell activity. In addition we recently launched 4 new products in Liposomal formulation. They are CoQ10, Curcumin, Glutathione, and Vitamin-C in 16oz bottles.
OmniBiome, Inc.,
(OMNI) - is a majority-owned subsidiary of TSI, incorporated in the State of Delaware on October 20, 2015, where the intellectual property surrounding probiotics is housed.
Future programs will focus on the use of probiotics to prevent pre-term labor and on using probiotics to reverse periodontal disease.
11
Nutraceutical Division (TSOI)
ProJuvenol
®
is a 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 natures 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.
Pterostilbene (pronounced tero-STILL-bean) has created a buzz in the world of nutrition research. Scientists discovered this powerful antioxidant several decades ago and have since found that it rivals its cousin resveratrols multi-functional abilities, and may actually exceed its anti-aging and health promoting potential. Found naturally in blueberries, pterostilbene has been shown in emerging experimental studies to exhibit up to 7 times greater bioavailability than resveratrol as well as better metabolic stability. This translates to potentially higher levels of pterostilbene in the blood upon ingestion, and longer lasting effects in the body compared to resveratrol. More simply put, it remains active in your body for a much greater period of time and during this enhanced bio-available period your body has the opportunity to allow it to utilize this powerful antioxidant molecule.
A large body of experimental research has now documented a wide range of potential health effects associated with pterostilbene. In fact, the more researchers study pterostilbene, the greater its human health potential becomes. In addition to being a powerful antioxidant, emerging experimental research suggests this plant compound may also help regulate cell growth, promote fat metabolism, support glucose utilization, influence brain function, and improve the bodys natural detoxification enzymes that are required to help protect cells against potentially damaging compounds from the environment.
Patents:
TSOI filed a patent 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.
Immuno-Oncology, described by Science Magazine as Breakthrough of the Year offers the possibility of not only killing tumor cells in a non-toxic manner, but also establishing immunological memory, which patrols the body and destroys recurrent tumor cells. While great progress has been made in developing drugs that stimulate the immune system to recognize and kill tumors, a major pitfall of current approaches is that tumors produce chemicals and oxidative stress that suppresses the immune system, thus limiting efficacy of immune therapies.
Pterostilbene, which is chemically related to resveratrol, has been published to possess anticancer, antioxidant, and anti-inflammatory activities. Through the filing of the recent patent, the company is exploring whether its lead product, ProJuvenol
®
, may be useful as a nutraceutical adjuvant to conventional cancer immunotherapies.
The importance of proper nutrition in the context of immunotherapy cannot be overstated. Studies on one of the original cancer immunotherapies, interleukin-2, demonstrated that efficacy was related to anti-oxidant content in the patients at time of therapy. Accordingly, we are seeking through the current work to identify whether our currently marketed product, ProJuvenol
®
, may be utilized as part of an integrative approach to building up the immune response of cancer patients.
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 patients 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.
TSOI markets currently several other nutraceuticals, they include T-Rx
®
, a testosterone booster, and Vital
®
Female an estrogen enhancer, Liposomal CoQ10, Curcumin, and Vitamin-C, all powerful antioxidants.
12
|
|
|
ProJuvenol
®
- Is a powerful synergistic blend of complex anti-aging ingredients inspired by nature to help promote cellular rejuvenation and healthy functionality for everyday living. Based upon one of natures unique and intelligent anti- oxidants/anti-inflammatories.
|
|
T-Rx
®
- Is specifically designed just for men and is formulated to assist in increasing testosterone levels and keeping them high. The result is a significant increase in testosterone levels, which assist in adding lean muscle mass, bone density, increased energy and the reduction of fat.
|
|
VITAL
®
- Is specifically formulated for women and is designed to increase energy, increase bone density, reduce fat and improve muscle tone. Additionally this supplement will also optimize hormone levels, increase libido, and decrease symptoms of stress and anxiety.
|
|
Coenzyme Q10 (CoQ10
) is a substance similar to a vitamin. It is found in every cell of the body. Your body makes CoQ10, and your cells use it to produce energy your body needs for cell growth and maintenance. It also functions as an antioxidant, which protects the body from damage caused by harmful molecules.
|
|
Curcumin
is an anti-inflammatory molecule in the turmeric root, a relative of ginger. The properties of curcumin can best be summarized as protective of the integrity of bio molecules in the body by being both a fabulous antioxidant and anti-inflammatory all rolled up in one.
|
|
Glutathione
is one of the most powerful antioxidants that the body produces and is used to bind and remove toxins, including heavy metals such as mercury and lead from the body. Levels may drop as result of oxidative stress due to disease, drugs, aging, toxic chemicals, inflammation and stress. Adequate levels of glutathione are necessary to provide important antioxidant protection.
|
|
Vitamin-C
is absorbed at approximately 19%, the balance remains in the gastrointestinal tract to attract water and loosen the bowels. Liposomalized vitamin C is absorbed much more efficiently than traditional delivery methods. A huge advance in both efficiency and effectiveness of supplemental nutrients.
|
On June 22, 2016 the Company announced the addition of four new consumer products to our nutraceutical division.
The four new products are all be in Liposome formulas. Many orally consumed nutrients are absorbed from 4% to 19%! Those same nutrients in a Liposomal Delivery System are absorbed at a much higher level in the bloodstream. Liposomes have layers that can encapsulate an ingredient and serve to protect the ingredient from the environment as well as act as a slow release mechanism. A liposome is a microscopic, fluid-filled pouch whose walls are made of layers of phospholipids identical in makeup to the phospholipids that make up cell membranes.
Liposomes represent a versatile and advanced nanodelivery system for a wide range of biologically active compounds. Liposomes have been used to improve the therapeutic index of new or established ingredients by modifying their absorption, reducing metabolism, and prolonging biological half-life.
Liposomes can be used to deliver substances to the blood stream and even target cells much more efficiently than normal. The liposomes offer a unique delivery system for nutrients because these microscopic spheres are so tiny that absorption becomes almost perfect.
The four new high absorption formulas are Liposomal Vitamin-C, CoQ10, Curcumin, and Glutathione, sold in 16oz bottles.
13
FUTURE BUSINESS DESCRIPTION
Fetal-Maternal Health
OmniBiome, Inc.
OmniBiome, Inc. (OMNI), a majority-owned subsidiary of TSI, is focused on therapeutic / Rx approaches to either utilize or intervene with the systemic effects of the vaginal, lactal-duct and oral microbiomes for improving maternal healthcare and resulting birth outcomes. The Officers and Directors of the Company are also officers and Directors of OMNI. As of September30, 2016 and April 17, 2017, TSI owns approximately 73.75% of the outstanding shares of OMNI. As of April 17, 2017 operations have not commenced.
The Company will focus initially on developing CLIA Dx services for both pre-pregnancy-associated and pregnancy-associated conditions or diseases where there is a substantive link with microbiome dysbiosis (disruption or imbalance), as well as on restoring eubiosis (proper balance).
In parallel OmniBiome will build a database of aggregated patient data that will later inform development of Rx / therapeutic and medical device & drug-device combination approaches for treating the same conditions or diseases.
MicroBiome Targets
Certain microbiome target markets offer immediate revenue-generating business opportunities such as vaginal and lactal-duct microbiome banking & transplants from mother to child in the case of C-section-born babies, babies of non-nursing mothers, and children under 5 years of age receiving broad-spectrum antibiotics
OmniBiomes main focus will be on developing Dx / Rx products & services for pregnancy-associated conditions or diseases where there is a documented or substantive putative link with microbiome dysbiosis and resulting inflammatory cascades
In parallel the Company will look to create alliances and/or out-license its Medical Device / Drug Device Combinations patent portfolio.
The Company also plans to in-license microbiome - and pregnancy-related Rx & Dx innovations from universities and research institutes with several having been identified.
Licensed Patents
Omni is the licensee of the following patents:
Patent titled Prevention of Pregnancy Complications by Probiotic Administration.
Patent titled Preventative Methods and Therapeutic or Pharmaceutical Compositions for the Treatment or Prevention of Pregnancy Complications covers utility of vaccines and various agents to alter pathological conditions in which the maternal immune system induces a process of inflammation that culminates in placental alterations leading to either fetal loss or preterm labor.
Patent titled Diagnostic Methods For The Assessment Of Pregnancy Complications a cytokine-based diagnostic kit aimed at stratifying risk of preterm labor and other pregnancy associated complications.
Patent titled A Medical Device For Reducing The Risk Of Preterm-Labor And Preterm-Birth covering various medical devices aimed at immune modulating the cervical microenvironment in order to prevent preterm labor.
14
GOVERNMENT REGULATION
The Companys 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 pacK/Age, distribute, import, export, sell and store our products.
The FDA, in particular, regulates the formulation, manufacturing, pacK/Aging, 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, pacK/Aging, 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.
There have been no material changes to the critical accounting policies as previously disclosed in our Annual Report on Form 10-K/A for the year ended December 31, 2015, which was filed with the SEC on January 25, 2017.
15
Recent Accounting Pronouncements
Recent accounting pronouncements are disclosed in Note 2 to the accompanying unaudited condensed consolidated financial statements included in Item1 of this Quarterly Report on form 10-Q.
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.
For the three and nine months ended September 30, 2016 and 2015
Operating expenses for the three month periods ended September 30, 2016 and 2015 were $180,309 and $178,654, an increase of $1,655. Operating expenses for the nine month periods ended September 30, 2016 and 2015 were $683,419 and $365,237, an increase of $318,182. This was mainly due to increased salaries, wages, and related costs, increased consulting fees and increased legal expenses.
General and administrative expenses increased $338, from $25,727 to $26,065, for the three months ended September 30, 2015 and 2016, respectively. General and administrative expenses stayed relatively stable for these periods. General and administrative expenses increased $44,795, from $56,991 to $101,786, for the nine months ended September 30, 2015 and 2016, respectively. This increase was mainly due to an increase in bad debt expense.
Salaries, wages and related expenses increased $18,588, from $71,323 to $89,911 for the three months ended September 30, 2015 and 2016, respectively. Salaries, wages and related expenses increased $74,149, from $193,489 to $267,638 for the nine months ended September 30, 2015 and 2016, respectively. This increase was mainly due to an increase in officers salaries.
Selling expenses increased $768, from $429 to $1,197, for the three months ended September 30, 2015 and 2016, respectively. Selling expenses increased $46, from $911 to $957, for the nine months ended September 30, 2015 and 2016, respectively. This increase was mainly due to selling and marketing expenses related to the Companys new products in 2016.
Consulting fees decreased $53,467 from $55,467 to $2,000 for the three months ended September 30, 2015 and 2016, respectively, due to a decrease in overall consulting services for the periods. Consulting fees increased $64,950 from $83,800 to $148,750 for the nine months ended September 30, 2015 and 2016, respectively, due to an increase in overall consulting services for the periods.
Legal and professional fees increased $35,428, from $25,708 to $61,136 for the three months ended September 30, 2015 and 2016, respectively, due to an increase in overall patent and general counsel services. Legal and professional fees increased $128,252, from $30,046 to $158,298 for the nine months ended September 30, 2015 and 2016, respectively, due to an increase in overall patent and general counsel services.
Research and Development costs were $0 and $0 for the three months ended September 30, 2015 and 2016, respectively. Research and Development costs increased $5,990, from $0 to $5,990, for the nine months ended September 30, 2015 and 2016, respectively. This increase was mainly due to research and development expenses related to the Companys new products in 2016.
Net interest expense increased $2,065 from $1,301 to $3,366 for the three months ended September 30, 2015 and 2016, respectively. Net interest expense increased $5,477 from $4,140 to $9,617 for the nine months ended September 30, 2015 and 2016, respectively. These increases were mainly due to increased debt balances.
Liquidity and Capital Resources
Net cash used in operating activities totaled $287,806 for the nine months ended September 30, 2016. As of September 30, 2016, we had cash of $45,233. During the nine months ended September 30, 2016 the Company raised $332,000 through the sale of common stock in private transactions. Subsequent to September 30, 2016, the Company raised $100,000 through the sale of common stock in private transactions.
16
We believe we will need additional outside financing to execute our business plan in 2017 and beyond. 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. Our former independent registered public accounting firm has stated in their opinion on our 2015 annual financial statements dated October 31, 2016, that there is substantial doubt about our ability to continue as a going concern.
Off Balance Sheet Arrangements
We currently do not have any off-balance sheet arrangements.