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, 2016 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, improve maternal and fetal health, fight periodontal disease, and for daily health.
Nutraceutical Division
– TSOI has been producing very high quality nutraceuticals. Its flagship product, ProJuvenol
®
, is a patented proprietary mixture containing pterostilbene – one of the most potent antioxidants known. On June 20th, 2017, TSOI was granted U.S. Patent No.: 9,682,047 for ProJuvenol
®
titled “Augmentation of Oncology Immunotherapies by Pterostilbene Containing Compositions”. 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 TSOI, incorporated in the State of Delaware on October 20, 2015, where the intellectual property surrounding probiotics is housed. OMNI is focused on therapeutic / RX approaches to either utilize or intervene with systemic effects of the vaginal, lactal-duct and oral microbiomes for improving maternal heathcare and resulting birth outcomes. The Officers and Directors of the Company are also Officers and Directors of OMNI. As of September 30, 2017 and November 15, 2017, TSOI owns approximately 73.75% of the outstanding share of OMNI. As of September 30, 2017 and November 15, 2017, formal operations have not commenced.
Emvolio, Inc.,
(“EMVO”) – is a wholly-owned subsidiary of TSOI, incorporated in the State of Delaware on October 3, 2016, where the intellectual property surrounding immune-oncology is housed. EMVO intends to develop products that can be used together to attack cancer at different levels, as well as to be used alone or in combination with existing therapies. The Officers and Directors of the Company are also the Officers and Directors of EMVO. As of September 30, 2017 and November 15, 2017, formal operations have not commenced.
11
SandBox Dental Labs, Inc.
, is a wholly-owned subsidiary of TSOI consisting of a dental laboratory to manufacture and fill prescriptions from dentists who will use our exclusively licensed Sleep Appliance to treat their patients with mild to moderate obstructive sleep apnea. The Officers and Directors of the Company are also the Officers and Directors of SandBox. As of September 26, 2017, limited operations have begun.
Nutraceutical Division (TSOI)
ProJuvenol
®
is a patented 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.
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 resveratrol’s 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 body’s 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. On June 20th, 2017, TSOI was granted U.S. Patent No.: 9,682,047 for ProJuvenol
®
titled “Augmentation of Oncology Immunotherapies by Pterostilbene Containing Compositions”.
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. In the Granted U.S. Patent No.: 9,682,047 for ProJuvenol
®
for example, contains a claim covering the combination of pterostilbene, the active ingredient in ProJuvenol
®
, together with an FDA-approved immunotherapeutic drug named Proleukin
®
(aldesleukin), which is a recombinant form of the cytokine interleukin-2 (IL-2) for treatment of cancer.
Proleukin
®
is one of the first immunotherapeutic drugs approved by the FDA, being indicated for treatment of metastatic melanoma and metastatic renal cell carcinoma1. Scientists working with Therapeutic Solutions International performed animal studies showing that administration of pterostilbene increased efficacy of Proleukin
®
in melanoma models. In the studies performed to obtain FDA approval for Proleukin
®
responses were seen in 16% of patients2. Based on animal data, it is hoped that the response rate of Proleukin® can be increased by administration of products containing pterostilbene, such as ProJuvenol
®
.
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.
Then on October 16, 2017, TSOI announced the filing of an additional patent on the use of pterostilbene. The invention pertains to utilization of pterostilbene for augmenting immunogenicity of cancer cells treated with various therapies and is titled as "Synergistic Inhibition of Glioma Using Pterostilbene and Analogues Thereof"
12
This third pterostilbene patent represents several years of research and literature review and 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.
What is particularly interesting is that pterostilbene appears to make cancer cells more visible to the immune system subsequent to their being attacked by conventional drug approaches, specifically, we observed that this increase of immunogenicity that pterostilbene causes in chemotherapy treated cancer cells allows for enhanced immunity to cancer cells that have escaped chemotherapy, thus theoretically enhancing patient prognosis.
TSOI markets currently several other nutraceuticals, they include Liposomal CoQ10, Curcumin, and Vitamin-C, all powerful antioxidants.
|
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 nature’s unique and intelligent anti- oxidants/anti-inflammatories. U.S. Patent No.: 9,682,047.
|
|
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 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 nano-delivery 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 high absorption formulas are Liposomal Vitamin-C, CoQ10, Curcumin, and Glutathione, sold in 16oz bottles.
13
FUTURE BUSINESS DESCRIPTION
Dental
SandBox Dental Labs, Inc.
SandBox Dental Labs, Inc., (SandBox) is a wholly-owned subsidiary of TSOI consisting of a dental laboratory to manufacture and fill prescriptions from dentists who will use our exclusively licensed Sleep Appliance to treat their patients with mild to moderate obstructive sleep apnea. The Officers and Directors of the Company are also Officers and Directors of SandBox. As of September 36, 2017, limited operations have begun.
On June 26, 2017, SandBox Dental Labs, Inc., filed a 510(k) application with the U.S. Food and Drug Administration (FDA) for market clearance of their custom oral appliance to treat mild to moderate obstructive sleep apnea (OSA).
The SandBox Dental Sleep Appliance, named Morpheus (CE Marked in the European Union as Sleepwell by S4S UK Ltd., our supplier, and MDSA in Australia, by inventor), has been tested by its original inventor (known clinically as MDSA) in a randomized controlled cross over trial against CPAP and a placebo, and it is also one of the most technologically advanced and patient friendly MAS’s (mandibular advancement splint) on the market. The full clinical trial information is not contained in this document, but the headline success rate of Morpheus (MDSA) was 80.3% in fully apneic patients.
The appliance combines a high clinical success rate with key features that make it more comfortable and flexible for the patient.
Unlike some MAS devices, our appliance is fully patient adjustable negating the need for further clinical visits for simple titration. Should the patient need to modify the degree of mandibular advancement they can simply adjust with the key provided.
Our appliance is also uniquely designed with internal splint fixing, allowing the lips to be closed around the device preventing the dry lips and excess salivation associated with some splints. High levels of patient comfort meant that during clinical trials over 98% of patients found the device acceptable.
Our appliance is a laboratory-manufactured device molded specifically to patient impressions. As a soft, slim-line two-piece device it allows full lateral movement while retaining high levels of patient comfort and custom made accuracy. By allowing a degree of movement during the night the device remains in the mouth unlike some devices that may dislocate. In addition the lateral movement provides a solution to some patients who experience TMJ stress with a fixed block device.
Key Benefits:
Full lateral movement
Full patient adjustability
High Patient Comfort
Clinically proven and effective
Internal fixings improve comfort
Fetal-Maternal Health
OmniBiome, Inc.
OmniBiome, Inc. (OMNI), a majority-owned subsidiary of TSOI, 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 September 30, 2017 and August 11, 2017, TSOI owns approximately 73.75% of the outstanding shares of OMNI. As of September 30, 2017 and November 15, 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.
14
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
OmniBiome’s 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.
In-House Patents
On March 29, 2017 OmniBiome announced the filing of a new patent titled "Modulation of Oral Microbiome for Treatment of Periodontitis."
This product will be marketed as a probiotic paste to be used in oral appliances similar to bleaching trays.
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.
Immune-Oncology
Emvolio, Inc.
Emvolio, Inc., (EMVO) is a wholly-owned subsidiary of TSOI where the intellectual property surrounding immune-oncology is housed. The Company intends to develop products that can be used together to attack cancer at different levels, as well as to be used alone or in combination with existing therapies. The Officers and Directors of the Company are also Officers and Directors of EMVO. As of September 30, 2017 and November 15, 2017, formal operations have not commenced.
On April 10, 2017, TSOI licensed to EMVO a patent titled “Targeting the Tumor Microenvironment through Nutraceutical Based Immunoadjuvants” known clinically as “StemVacs”.
On April 12, 2017, EMVO filed an Investigational New Drug (IND) application #17448 for use of its StemVacs cancer immunotherapeutic licensed to EMVO by TSOI, in patients with solid tumors. The trial seeks to establish safety and immune response of the cancer, targeting a new personalized dendritic cell vaccine.
On May 01, 2017, TSOI licensed to EMVO a patent titled “Targeting the Tumor Microenvironment through Nutraceutical Based Immunoadjuvants” known clinically as “Cancer Metabolic Detox”.
On May 17, 2017, TSOI licensed to EMVO a patent titled “Activated Leukocyte Extract for Repair of Innate Immunity in Cancer Patients” known clinically as “innaMune”.
On June 01, 2017, TSOI licensed to EMVO a patent titled “Augmentation of Anti-Tumor Immunity by Mifepristone and Analogues Thereof” known clinically as “LymphoBoost”.
15
On June 12, 2017, TSOI licensed to EMVO a patent titled “Methods of Re-Activating Dormant Memory Cells with Anticancer Activity” known clinically as “MemoryMune”.
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.
There have been no material changes to the critical accounting policies as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on June 7, 2017.
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.
16
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 very high quality nutraceuticals. Its flagship product, ProJuvenol
®
, is a patented proprietary mixture containing pterostilbene – one of the most potent antioxidants known. On June 20th, 2017, TSOI was granted U.S. Patent No.: 9,682,047 for ProJuvenol
®
titled “Augmentation of Oncology Immunotherapies by Pterostilbene Containing Compositions”. In addition we recently launched 4 new products in Liposomal formulation. They are CoQ10, Curcumin, Glutathione, and Vitamin-C in 16oz bottles.
For the three months and nine months ended September 30, 2017 and 2016
We had a net loss of $266,763 for the three months ended September 30, 2017, compared to a net loss of $182,748 for the three months ended September 30, 2016, an increase of $84,015. This increase was mainly due to increases in Salaries, wages and related expenses, consulting fees and legal and professional fees. We had a net loss of $700,573 for the nine months ended September 30, 2017, compared to a net loss of $691,200 for the nine months ended September 30, 2016, an increase of $9,373. This increase was mainly due to increases in legal and professional fees and decreases in general and administration expenses and consulting fees. .
Net sales decreased $691, from $1,321 to $630, for the three months ended September 30, 2016 and September 30, 2017, respectively. Net sales slightly decreased $663, from $2,586 to $1,923, for the nine months ended September 30, 2016 and September 30, 2017, respectively.
Cost of goods sold decreased $203, from $394 to $191, for the three months ended September 30, 2016 and September 30, 2017, respectively. Cost of goods sold decreased $134, from $750 to $616, for the nine months ended September 30, 2016 and September 30, 2017, respectively.
Operating expenses for the three month periods ended September 30, 2017 and 2016 were $208,156 and $180,309, an increase of $27,847. This increase was mainly due to increases in salaries, wages and related expenses, consulting fees and legal and professional fees. Operating expenses for the nine month periods ended September 30, 2017 and 2016 were $628,522 and $683,419, a decrease of $54,897. This decrease was mainly due to decreases in General and Administration expenses and consulting fees along with increases in legal and professional fees.
General and administrative expenses decreased $3,371, from $26,065 to $22,694, for the three months ended September 30, 2016 and 2017, respectively. General and administrative expenses decreased $26,349, from $101,786 to $75,437, for the nine months ended September 30, 2016 and 2017, respectively. These decreases were mainly due decreased bad debt expense in the comparable quarters in 2017 vs 2016.
Salaries, wages and related expenses increased $5,625, from $89,911 to $95,536 for the three months ended September 30, 2016 and 2017, respectively. Salaries, wages and related expenses increased $12,200, from $267,638 to $279,838 for the nine months ended September 30, 2016 and 2017, respectively. These increases are mainly due to an increase in wage related expenses.
Selling expenses decreased $485, from $1,197 to $712, for the three months ended September 30, 2016 and 2017, respectively. This was mainly due a decrease in selling and marketing expenses related to the Company’s products during the period. Selling expenses increased $1,581, from $957 to $2,538, for the nine months ended September 30, 2016 and 2017, respectively. This increase was mainly due to selling and marketing expenses related to the Company’s products.
Consulting fees increased $20,950 from $2,000 to $22,950 for the three months ended September 30, 2016 and 2017, respectively, due to an increase in overall consulting services. Consulting fees decreased $119,100 from $148,750 to $29,650 for the nine months ended September 30, 2016 and 2017, respectively, due to a decrease in overall consulting services.
17
Legal and professional fees increased $3,090, from $61,136 to $64,226 for the three months ended September 30, 2016 and 2017, respectively, due to an increase in independent public accounting fees and legal expense. Legal and professional fees increased $58,647, from $158,298 to $216,945, for the nine months ended September 30, 2016 and 2017, respectively, due to an increase in independent public accounting fees and legal expense.
Research and Development costs increased $2,038, from $0 to $2,038, for the three months ended September 30, 2016 and 2017, respectively. This increase was mainly due to increased research and development expenses for the comparable three month periods. Research and Development costs increased $18,124, from $5,990 to $24,114, for the nine months ended September 30, 2016 and 2017, respectively. This increase was mainly due to research and development expenses incurred in the first three months of 2017.
Net interest expense increased $6,997 from $3,366 to $10,363 for the three months ended September 30, 2016 and 2017, respectively. This increase was mainly due to increased debt balances. Net interest expense increased $15,058 from $9,617 to $24,675 for the nine months ended September 30, 2016 and 2017, respectively. This increase was mainly due to increased debt balances.
Loss on derivative liabilities increased $83,968, from $0 to $83,968, for the three and nine months ended September 30, 2016 and 2017, respectively. This increase was due to a loss incurred on derivative liabilities during the three months ended September 30, 2017.
Change in fair value of derivative liability was $35,285 for the three and nine months ended September 30, 2017 verses $0 for the three and nine months ended September 30, 2016. This change was due to a change in derivative liability during the three months ended September 30, 2017.
Liquidity and Capital Resources
As of September 30, 2017, the Company has incurred losses over the past years which have resulted in accumulated deficits of $4,973,767, has not yet generated material revenue from operations, and will require additional funds to maintain its operations. Management does not expect existing cash resources as of September 30, 2017 to be sufficient to fund the Company’s operations for at least twelve months from the issuance date of these interim financial statements. These financial statements have been prepared on a going concern basis which assumes the Company will continue to realize its assets and discharge its liabilities in the normal course of business. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern within one year after the consolidated financial statements are issued. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. The Company intends to finance operating costs over the next twelve months through its existing financial resources and by raising additional capital through equity offerings, debt financings, collaborations and/or licensing arrangements. If adequate funds are not available on acceptable terms, the Company may be required to delay, reduce the scope of, or curtail, its operations. The accompanying consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern
As of September 30, 2017, our cash and cash equivalents were $5,283 compared to $21,910 at December 31, 2016. Our current cash reserves are not adequate to fund our operations for the 12 month period subsequent to the issuance of our financial statement contained in Item 1. Cash used in operating activities for the nine months ended September 30, 2017 was $306,862, compared to $287,806 for the same period in 2016. The increase was primarily due to decreased prepaid expenses, and increased accrued expenses and other current liabilities. For the nine months ended September 30, 2017 net cash provided in financing activities was $290,235, compared to $330,856 for the same period in 2016. The decrease was mainly due a decrease in the issuance of common stock. At September 30, 2017, we had negative working capital of $1,117,132, compared to negative working capital of $611,558 at December 31, 2016. This increase was mainly due to an overall increase in current liabilities. The Company plans to continue to reduce costs and seek additional funding for operations.
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 independent registered public accounting firm has stated in their opinion on our 2016 annual financial statements dated June 7, 2017, 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.
18