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.
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, QuadraMune®, is a multi-patented synergistic blend of
pterostilbene, sulforaphane, epigallocatechingallate, and thymoquinone.
QuadraMune has been shown to increase Natural Killer Cell activity and healthy
Cytokine production. Our synergistic blend of ingredients helps the immune
system fight off common and complex ailments and promote healthy T Cell
activity. Recently the Company was approved to sell certain nutraceuticals on
the Amazon Platform.
Cellular Division. SOI recently obtained exclusive rights to a patented adult
stem cell for development of therapeutics in the area of chronic traumatic
encephalopathy (CTE), traumatic brain injury (TBI), and lung pathology.
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.
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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. On March 4, 2021, the Company received an IND Serial #
27377 for a clinical trial of 10 patients with CTE.
On August 4th, 2021, the Company announced clearance from the Food and Drug
Administration (FDA) to initiate a Phase III pivotal trial for registration of
the Company's JadiCell™ universal donor stem cell as a treatment for COVID-19
associated lung failure under IND # 19757. In previous studies the Company has
demonstrated the superior activity of JadiCell™ to other types of stem cells
including bone marrow, adipose, cord blood, and placenta. Furthermore, the
JadiCell™ was shown to be 100% effective in saving the lives of COVID-19
patients under the age of 85 in a double-blind placebo controlled clinical trial
with patients in the ICU on a ventilator. In patients over the age of 85 the
survival rate was 91%.
In addition, the Company has filed data with the FDA, as part of IND #17448,
which demonstrated that treatment of cancer patients with StemVacs™ resulted in
enhanced activity of a type of immunological cell called "natural killer" cells,
otherwise known as "NK cells."
The Company has also developed an allogenic version of StemVacs and has filed
patents to cover activating universal donor immune system cells called dendritic
cells in a manner so that upon injection they reprogram the body's NK cells.
Most recently the Company announced filing of a patent for a new hybrid cell
created by the Company capable of training the immune system to kill blood
vessels feeding cancer but sparing healthy blood vessels. These discoveries are
an extension of previous findings from the Company showing that StemVacs is
capable of suppressing new blood vessel production.
On May 9, 2022, the Company filed an Investigational New Drug Application for
Treatment of Chronic Obstructive Pulmonary Disease (COPD) Using JadiCell™
Universal Donor Adult Stem Cells under IND Serial # 28508.
Results of Operations
We had a net loss of approximately $3.2 million in 2022 compared to a net loss
of approximately $3 million in 2021.
Net sales increased $60,811 from $145,956 to $206,767, for the years ended
December 31, 2021 and 2022, respectively. This increase was mainly due to an
increase in sales of the Company's nutraceutical line of products.
Cost of goods sold increased $36,896, from $42,544 to $79,440, for the years
ended December 31, 2021 and 2022, respectively. This increase was mainly due to
higher net sales of the Company's new nutraceutical line of products in 2022 vs
2021.
Operating expenses for the years ended December 31, 2022 and 2021 were
approximately $3.2million and $2.5 million, respectively, an increase of
$700,000. This increase was mainly due a combination of increased general and
administrative expenses, an increase in consulting fees, an increase in legal
and accounting fees, and an increase in research and development.
General and administrative expenses increased approximately $355,000, from
$139,000 to $494,000, for the years ended December 31, 2021 and 2022,
respectively. This increase was mainly due to an icrease in amortization,
marketing and travel during the year.
Salaries, wages and related expenses increased approximately $8,000, from
$437,000 to $445,000, for the years ended December 31, 2021 and 2022,
respectively. This increase was mainly due to an increase in salaries.
Consulting fees increased approximately $150,000 from $265,000 to $414,000 for
the years ended December 31, 2021 and 2022, respectively, due to an increase in
overall consulting services during 2022.
Legal and professional fees decreased approximately $388,000, from $773,000 to
$385,000 for the years ended December 31, 2021 and 2022, respectively, due to a
decrease in overall patent and general counsel services.
Research and development costs increased approximately $696,000 from $795,000 to
$1,441,000, for the years ended December 31, 2021 and 2022, 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 $405,000 from
$539,000 to $134,000 for the years ended December 31, 2021 and 2022,
respectively. This decrease was due to a derivative liability expense from
certain convertible notes in 2022 compared to 2021.
Net interest expense increased approximately $34,000 from $612,000 to $646,000
for the years ended December 31, 2021 and 2022, respectively. This increase was
mainly due to increased debt balances.
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Liquidity and Capital Resources
We have experienced recurring losses over the past years which have resulted in
accumulated deficits of approximately $17.3 million and a working capital
deficit of approximately $1.9 million at December 31, 2022. 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.
As of December 31, 2022 we had approximately $28,000 in cash and cash
equivalents, representing a decrease in cash and cash equivalents of
approximately $66,000 from December 31, 2021. 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 end of 2023.
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, 2022, cash used in operating activities was
$1,018,304, which was primarily the result of our net loss incurred of
$3,677,812, partially offset by increases in the various accounts payable and
accrued liability accounts totaling $174,826 and non-cash expenses including
stock-based compensation of $537,778, change in value on derivative liabilities
of $291,123, amortization of debt discount of $593,463 and amortization and
depreciation of $244,631.
During the year ended December 31, 2021, cash used in operating activities was
$718,922, which was primarily the result of our net loss incurred of $2,961,445,
partially offset by increases in the various accounts payable and accrued
liability accounts totaling $283,117 and non-cash expenses including stock-based
compensation of $858,900, change in fair value of derivative liabilities of a
gain of $44,505, and amortization of debt discount of $541,612.
Cash Flows from Investing Activities
During the year ended December 31, 2022, net cash used by investing activities
was $0, compared to $256,550 during the year ended December 31, 2021. The
decrease of approximately $257,000 in net cash used by investing activities is
mainly attributable to an decrease of $257,000 in investment in land and
equipment.
Cash Flows from Financing Activities
During the year ended December 31, 2022, net cash provided by financing
activities was $943,088, compared to $817,382 during the year ended December 31,
2021. The increase of approximately $126,000 in net cash provided by financing
activities is mainly attributable to an increase of $160,000 in cash received
from the sale of common stock. Other cash flows provided by financing activities
during the year ended December 31, 2022 included proceeds from convertible notes
payable to related and third parties totaling $505,000 offset by payments on
notes payable to related parties and third parties of $6,900.
Off-Balance Sheet Arrangements.
We currently do not have any off-balance sheet arrangements.
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