The following discussion and analysis should be read in conjunction with the
consolidated Financial Statements and Notes thereto appearing elsewhere in this
Annual Report.
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 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.
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TSOI is developing a range of immune-modulatory agents to target certain
cancers, schizophrenia, suicidal ideation, traumatic brain injury, 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 can 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).
SandBox Dental Labs, Inc. - is set to be dissolved as we are no longer pursuing
the dental market.
Results of Operations
We had a net loss of approximately $2.1 million in 2020 compared to a net loss
of approximately $1.7 million in 2019.
Net sales increased $35,186 from $27,495 to $62,681, for the years ended
December 31, 2019 and 2020, respectively. This increase was mainly due to an
increase in sales of the Company's nutraceutical line of products.
Cost of goods sold increased $9,777, from $3,015 to $12,792, for the years ended
December 31, 2019 and 2020, respectively. This increase was mainly due to higher
net sales of the Company's new nutraceutical line of products in 2020 vs 2019.
Operating expenses for the years ended December 31, 2020 and 2019 were
approximately $1.9 million and $1.1 million, respectively, an increase of
$816,000. This increase was mainly due a combination of increased general and
administrative expenses, increased stock compensation, an increase in legal and
accounting fees, and an increase in research and development.
General and administrative expenses increased approximately $17,000, from
$71,000 to $88,000, for the years ended December 31, 2019 and 2020,
respectively. This increase was mainly due to an icrease in marketing and
insurance during the year.
Salaries, wages and related expenses increased approximately $14,000, from
$305,000 to $319,000, for the years ended December 31, 2019 and 2020,
respectively. This increase was mainly due to an increase in salaries.
Consulting fees decreased approximately $62,000 from $181,000 to $119,000 for
the years ended December 31, 2019 and 2020, respectively, due to a decrease in
overall consulting services during 2020.
Legal and professional fees increased approximately $136,000, from $128,000 to
$264,000 for the years ended December 31, 2019 and 2020, respectively, due to a
increase in overall accounting, patent and general counsel services.
Research and development costs increased approximately $534,000 from $28,000 to
$562,000, for the years ended December 31, 2019 and 2020, respectively. This
increase was mainly due to research and development expenses related to the
Company's nutraceutical line of products.
Total loss from derivatives liabilities decreased approximately $262,000 from
$303,000 to $41,000 for the years ended December 31, 2019 and 2020,
respectively. This decrease was due to a derivative liability expense from
certain convertible notes in 2020 compared to 2019.
Net interest expense decreased approximately $27,000 from $351,000 to $302,000
for the years ended December 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 $11 million and a working capital deficit
of approximately $2 million at December 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.
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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.
As of December 31, 2020, we had approximately $252,000 in cash and cash
equivalents, representing an increase in cash and cash equivalents of
approximately $226,000 from December 31, 2019. Sources of cash were
predominantly from the sale of equity and debt. We anticipate that our current
sources of liquidity, including cash and cash equivalents, together with our
current projections of cash flow from operating activities, will provide us with
liquidity into the third quarter of 2021.
Cash Flows from Operating Activities
Our cash flows from operating activities are significantly affected by our cash
outflows to support the growth of our business in areas such as R&D and G&A
expenses. Our operating cash flows are also affected by our working capital
needs to support personnel related expenditures, accounts payable and other
current assets and liabilities.
During the year ended December 31, 2020, cash used in operating activities was
$663,079, which was primarily the result of our net loss incurred of $2,199,901,
partially offset by increases in the various accounts payable and accrued
liability accounts totaling $87,751 and non-cash expenses including stock-based
compensation of $1,165,050, change in value on derivative liabilities of
$247,620, and amortization of debt discount of $251,801.
During the year ended December 31, 2019, cash used in operating activities was
$310,714, which was primarily the result of our net loss incurred of $1,697,322,
partially offset by increases in the various accounts payable and accrued
liability accounts totaling $283,093 and non-cash expenses including stock-based
compensation of $468,000, loss on derivative liabilities of $352,934, and
amortization of debt discount of $278,593.
Cash Flows from Investing Activities
During the year ended December 31, 2020, net cash used by investing activities
was $5,448, compared to $0 during the year ended December 31, 2019. The increase
of approximately $5,000 in net cash used by investing activities is mainly
attributable to an increase of $5,000 in investment in equipment.
Cash Flows from Financing Activities
During the year ended December 31, 2020, net cash provided by financing
activities was $894,279, compared to $314,741 during the year ended December 31,
2019. The increase of approximately $580,000 in net cash provided by financing
activities is mainly attributable to an increase of $588,000 in cash received
from the sale of common stock. Other cash flows provided by financing activities
during the year ended December 31, 2020 included proceeds from convertible notes
payable to related and third parties totaling $315,000 offset by payments on
notes payable to related parties of $25,244. Other cash flows provided by
financing activities during the year ended December 31, 2019 included proceeds
from convertible notes payable to third parties totaling $250,000 offset by
payments on notes payable to related parties of 3,689 and payments on
convertible notes payable of $33,000.
Off-Balance Sheet Arrangements.
We currently do not have any off-balance sheet arrangements.
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