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| TNUS.OB > SEC Filings for TNUS.OB > Form 10-Q on 23-Nov-2009 | All Recent SEC Filings |
23-Nov-2009
Quarterly Report
Total Nutraceutical Solutions, Inc. ("the Company", "we", or "us") may from time to time make written or oral "forward-looking statements" including statements contained in this report and in other communications by the Company, which are made in good faith by the Company pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include statements of the Company's plans, objectives, expectations, estimates and intentions, which are subject to change based on various important factors (some of which are beyond the Company's control). The following factors, in addition to others not listed, could cause the Company's actual results to differ materially from those expressed in forward looking statements: the strength of the domestic and local economies in which the Company conducts operations, the impact of current uncertainties in global economic conditions and the ongoing financial crisis affecting the domestic and foreign banking system and financial markets, including the impact on the Company's suppliers and customers, changes in client needs and consumer spending habits, the impact of competition and technological change on the Company, the Company's ability to manage its growth effectively, including its ability to successfully integrate any business which it might acquire, and currency fluctuations. All forward-looking statements in this report are based upon information available to the Company on the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.
The following discussion and analysis should be read in conjunction with our financial statements and the notes thereto appearing in Part I, Item 1.
Critical Accounting Policies
There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
Overview of Current Operations
Our Company was organized by the filing of Articles of Incorporation with the Secretary of State of the State of Nevada on July 19, 2007. On October 8, 2008, we filed amended Articles with the Secretary of State of the State of Nevada to change our corporate name to Total Nutraceutical Solutions, Inc.
We are a developmental stage company which plans to create and execute sales and
marketing programs with the goal of demonstrating our ability to maximize our
sales performance for nutraceutical products. Management and its scientific
consultants are working on proprietary formulations to produce, manufacture,
and market customized lines of non-FDA approved, over-the-counter products,
specifically nutraceutical products. As of September 30, the company has
formulated three new natural organic mushroom dietary supplements and made
application for trademarks for each of the three products. Mushroom dietary
supplements have the nutritional potential to provide multiple health benefits
for humans, including providing antioxidants, reducing inflammation, supporting
the immune system, promoting healthy joints, increasing stamina, and reducing
stress and anxiety. The three newly developed products are named ImmuSANO,
GlucoSANO, and EquiSANO. ImmuSANO is a proprietary nutritional blend of six
medicinal mushrooms and mycelia matrices, each of which has different
concentrations of bioactive enzymes and nutrients. ImmuSANO is a holistic and
natural approach to health care that nutritionally assists people in balancing
cellular function and supporting a stronger immune system. GlucoSANO is a
natural whole food product composed of a proprietary blend of exotic certified
organic mushrooms & mycelia matrices. GlucoSANO has been formulated to
nutritionally assist in metabolic function and stabilization of blood sugar.
EquiSANO is an organic mushroom blend product promoting health for horses.
On July 29, 2009, Mark Budzinski was appointed by the Board of Directors as our newly appointed Vice President of Sales & Marketing
Business
We are an emerging nutraceutical company with a focus on discovering, formulating, and marketing products composed primarily of organic natural mushrooms that contain bioactive nutrients for potential health benefits. We develop production and analytic technologies for food and nutritional supplements. Novel clinical models and biomarkers are used to show nutritional and clinical efficacy of our products. In addition to preventative healthcare formulations and nutritional approaches to a wide variety of human conditions and illnesses, the Company also develops and acquires breakthrough nutritional tools and products in the fields of animal husbandry and livestock feeds.
The Company has limited nutraceutical business activities. We are a development stage entity in the process of establishing a business focused on contract manufacture, distribution, and sale of nutraceutical products that are made entirely of naturally occurring food and dietary substances. These naturally occurring dietary substances have not been chemically altered, and we believe these products have both health benefits and mass appeal to people wanting natural and non-toxic nutritional-based healthcare. To date, we have developed three new proprietary products and have initiated sales of all three products.
These over-the-counter dietary supplements have been designed and formulated by the company and produced by outside contract manufacturers. Management defines nutraceutical as "a food or naturally occurring food supplement thought to have a beneficial effect on human and/or animal health." The Company had not developed, nor produced, any products at the close of its fiscal year. Emphasis had been placed on raising sufficient capital to enable the company to develop these products.
On June 9, 2009 the Company closed a private offering and issued 819,000 Units at $.50 per unit to nine accredited investors for $409,500. The Units consisted of two (2) shares of its par value $.001 unregistered common stock, One (1) "A" Stock Purchase Warrant to Purchase One Additional Share of Common Stock at $.75 Per Share and One (1) "B" Stock Purchase Warrant to Purchase One Additional Share of Common Stock at $1.00 Per Share for a Period of Three Years. Total Nutraceutical Solutions, Inc. sold these shares and warrants to further capitalize the Company in order to execute its business plan. The Company relied on the exemption from registration provided by Section 4(2) and Rule 506 of Regulation D under the Securities Act of 1933, as amended ("Regulation D"), for sales to "accredited investors" (as such term is defined in Rule 501 of Regulation D). The purchaser has represented to the Company that they are an "accredited investor." We believed that Section 4(2) was available because the offer and sale did not involve a public offering and there was not general solicitation or general advertising involved in the offer or sale. These funds are being used to develop and market nutraceutical products.
Our nutraceutical business activities to date have been minimal and have included the acquisition of certain intellectual property pursuant to research agreements in association with Pennsylvania State University. These research endeavors resulted in the filing of U.S. Provisional Patent Application No. 60/782,204, entitled "Identification of Selenoergothioneine as a Natural Organic Form of Selenium from Cultivated Mushrooms." We purchased an option assignment to license from Pennsylvania State University the technologies associated with this intellectual property. We view this intellectual property as one of the cornerstones to our business.
Marketing Strategy
We believe our potential for growth involves the development of nutraceutical
products that can be marketed and sold through physicians and health care
professionals, retail channels in North America, and through distributors
internationally, in addition to wholesalers and multi-level marketing groups.
Retail channels would include independent and chain health food stores,
pharmacies, internet sales, grocery and drug store chains, and other
direct-to-consumer retailers. Our web site is a key component of our proposed
sales and marketing program- www.totalnutraceutical.com. We have signed one
exclusive distribution agreement with Caribbean International Medical N.V. who
will focus their marketing efforts in the Caribbean.
We presented our research technology and preclinical studies at the 51st Mushroom Industry Conference that was held September 20-22, 2009, in Avondale, Pennsylvania. The conference was hosted by Pennsylvania State University.
Brand Awareness
The market for nutraceuticals is highly competitive, with many well-known brands. Our ability to compete effectively and generate revenue will be based upon our ability to differentiate awareness of our products from those of our competitors. However, advertising, packaging and labeling of such products will be limited by various regulations. Our success will be dependent upon our ability to convey this message to consumers.
The nutraceutical industry is subject to rapid change. New products are constantly introduced to the market. Our ability to remain competitive depends on our ability to develop and manufacture new products in a timely and cost effective manner, to accurately predict market transitions, and to effectively market our products. Our future financial results will depend to a great extent on the successful introduction of several new products. We cannot be certain that we will be successful in selecting, developing, contract manufacturing and marketing new products.
o proper new product selection;
o availability of raw materials;
o pricing of raw materials;
o timely delivery of new products;
o regulatory allowance of the products;
o successful sales and marketing efforts; and
o customer acceptance of new products.
We face challenges in developing new products, primarily with funding development costs and diversion of management time. On a regular basis, we will evaluate opportunities to develop new products through product line extensions and product modifications. There is no assurance that we will successfully develop product line extensions or integrate newly developed products into our business. In addition, there are no assurances that newly developed products will contribute favorably to our operations and financial condition. Our failure to develop and introduce new products on a timely basis could adversely affect our future operating results.
Results of Operations for the quarter ended September 30, 2009
During the nine months ended September 30, 2009, we had a net loss of $(424,419) versus a $(18,145) net loss for the same period last year, when our Company was inactive.
We earned nominal revenues since its inception on July 19, 2007 through September 30, 2009. Management does not anticipate earning any significant revenues until such time as it fully market one or more nutraceutical product(s). We are presently in the development stage of business and have just recently developed three products. There are no assurances that we will be successful in significant sales of any nutraceutical product(s).
For the period since inception through September 30, 2009, we generated $39,863 in income. Since inception on July 19, 2007, we experienced a net loss of $(545,954). The loss was attributed to organizational expenses, accounting and legal fees, marketing expenses and building company infrastructure. Management anticipates its operating expenses will increase as we start to develop and market nutraceutical products.
Revenues
We generated $39,863 in revenue for the period from July 19, 2007 (inception) through September 30, 2009. We anticipate an increase of revenues in the fourth quarter of this year associated with the introduction of three products to the market.
Going Concern
Our independent auditors included an explanatory paragraph in their report on the accompanying financial statements regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
Intellectual Property
We acquired certain intellectual property pursuant to research agreements in association with Pennsylvania State University. These research endeavors resulted in the filing of U.S. Provisional Patent Application No. 60/782,204, entitled "Identification of Selenoergothioneine as a Natural Organic Form of Selenium from Cultivated Mushrooms." We purchased an option assignment to license from Pennsylvania State University the technologies associated with the intellectual property. This intellectual property is the cornerstone of our business. Other intellectual properties include an option to license an invention entitled "Rapid Generation of Vitamin D2 from Mushroom and Fungi using Pulsed UV Light." A US Provisional Patent Application was filed on April 23, 2008 and names Professor Robert B. Beelman and Graduate student Micheal Kalaras as co-inventors, Department of Food Science, Pennsylvania State University.
Expected purchase or sale of plant and significant equipment
We do not anticipate the purchase or sale of any plant or significant equipment; as such items are not required by us at this time.
Significant changes in the number of employees
As of September 30, 2009, we did not have any employees. We are dependent upon our officers and directors for our future business development. As our operations expand, we anticipate the need to hire additional employees, consultants and professionals; however, the exact number is not quantifiable at this time.
Liquidity and Capital Resources
Our balance sheet as of September 30, 2009 reflects cash of $189,862, current assets of $602,579 and current Liabilities of $67,551. Cash and cash equivalents from inception to date have been sufficient to provide the operating capital necessary to operate to date. Management believes it has sufficient funds to remain operational for the next six months.
Notwithstanding, we anticipate generating losses and therefore we may be unable
to continue operations in the future. We anticipate we will require additional
capital and we intend to raise the monies by selling equity in our Company.
Without realization of additional capital, it would be unlikely for the Company
to continue as a going concern. In order for the Company to remain a Going
Concern it will need to find additional capital. Additional working capital may
be sought through additional debt or equity private placements, additional notes
payable to banks or related parties (officers, directors or stockholders), or
from other available funding sources at market rates of interest, or a
combination of these. The ability to raise necessary financing will depend on
many factors, including the nature and prospects of any business to be acquired
and the economic and market conditions prevailing at the time financing is
sought.
There can be no assurance that additional capital will be available to us. We currently have no agreements, arrangements, or understandings with any person to obtain funds through bank loans, lines of credit, or any other sources.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors.
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
New Accounting Standards
In June 2003, the Securities and Exchange Commission ("SEC") adopted final rules under Section 404 of the Sarbanes-Oxley Act of 2002 ("Section 404"), as amended by SEC Release No. 33-8934 on June 26, 2008. Commencing with its annual report for the year ending December 31, 2009, the Company will be required to include a report of management on its internal control over financial reporting. The internal control report must include a statement of:
• management's responsibility for establishing and maintaining adequate
internal control over its financial reporting;
• management's assessment of the effectiveness of its internal control over
financial reporting as of year end; and
• the framework used by management to evaluate the effectiveness of the
Company's internal control over financial reporting.
Furthermore, in the following fiscal year, it is required to file the auditor's attestation report separately on the Company's internal control over financial reporting on whether it believes that the Company has maintained, in all material respects, effective internal control over financial reporting.
In March 2008, the FASB issued FASB Statement No. 161 "Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133" ("SFAS No. 161"), which changes the disclosure requirements for derivative instruments and hedging activities. Pursuant to SFAS No.161, Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal
In May 2009, FASB issued FASB Statement No. 165 "Subsequent events" ("SFAS No. 165") to be effective for the interim or annual financial periods ending after June15, 2009. SFAS No. 165 The objective of this Statement is to establish general standards of accounting for, and disclosure of, events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this Statement sets forth: 1. The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements. 2. The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements. 3. The disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The effect of adoption of SFAS No. 165 on the Company's financial position and results of operations is not expected to be material.
In June 2009, the FASB approved the "FASB Accounting Standards Codification" (the "Codification") as the single source of authoritative nongovernmental U.S. GAAP to be launched on July 1, 2009. The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. All existing accounting standard documents will be superseded and all other accounting literature not included in the Codification will be considered non-authoritative. The Codification is effective for interim and annual periods ending after September 15, 2009. The Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.
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