Entia Biosciences (ERGO) 10-Q 2011 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the Quarterly Period ended June 30, 2011

[  ]	TRANSITION REPORT PURSUANT SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _______ to _______.

Commission File Number:  000-52864

 

Total Nutraceutical Solutions, Inc.

 (Exact name of Registrant as specified in its charter)

Nevada	26-0561199
(State or other jurisdiction	(IRS Employer
of incorporation or organization)	Identification No.)

80 Columbia St., Stevenson, WA 98648

 (Address of principal executive offices)

(509) 427-5132

 (Registrant’s telephone number)

__________________________

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes [X]  No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive DataFile required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).YES [  ] NO [  ]

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer [  ]	Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [  ] No [X]

On August 22, 2011, 61,976,757 shares of the registrant's common stock, par value $.001 per share, were outstanding.

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TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19
PART II – OTHER INFORMATION		20
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	20
Item 4.	[Removed and Reserved]	20
Item 5.	Other Information	20
Item 6.	Exhibits	21
SIGNATURES		23

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PART I – FINANCIAL INFORMATION

Item1. Financial Statements

TOTAL NUTRACEUTICAL SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
				June 30, 2011		December 31, 2010
				(Unaudited)
Assets
Current Assets
	Cash		$	11,289	$	65,061
	Accounts receivable, net			45,430		10,469
	Inventory, net			143,700		177,098
	Prepaid expenses			14,874		37,814
	Current maturities of lease receivable			7,467		11,861
	Other current assets			296		14,950
		Total Current Assets		223,056		317,253
Property and Equipment, net				39,534		43,217
Patents and license, net				90,590		80,994
Lease receivable, net of current maturities				-		1,078
Total Assets			$	353,180	$	442,542
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
	Accounts payable and accrued expenses		$	255,901	$	183,973
	Accrued compensation - officer			246,426		157,028
	Short-term convertible notes payable, net of discount-related party			37,500		25,000
	Short-term convertible notes payable, net of discount			127,763		170,000
	Notes payable			1,610		14,744
		Total Current Liabilities		669,200		550,745
Long Term Liabilities:
	Convertible notes payable, net of discount			-		196,950
		Total Long Term Liabilities		-		196,950
Total Liabilities				669,200		747,695
Stockholders' Equity (Deficit)
	Preferred stock, $.001 par value, 5,000,000 shares authorized,
		Series A preferred stock, 350,000 and zero shares designated,
		respectively, 21,500 and zero shares issued and outstanding,
		respectively, aggregate liquidation value of $107,500
		and zero, respectively		22		-
	Common stock, $.001 par value, 150,000,000 shares authorized,
		61,976,757 and 58,362,470 shares issued and outstanding, respectively		61,978		58,363
	Additional paid-in capital			2,836,647		1,959,462
	Deferred compensation			(7,283)		(9,704)
	Accumulated deficit			(3,207,384)		(2,313,274)
		Total Stockholders' Equity (Deficit)		(316,020)		(305,153)
Total Liabilities and Stockholders' Equity (Deficit)			$	353,180	$	442,542
See accompanying notes to the financial statements.

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TOTAL NUTRACEUTICAL SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
				Three Months		Three Months		Six Months		Six Months
				Ending		Ending		Ending		Ending
				June 30, 2011		June 30, 2010		June 30, 2011		June 30, 2010
				(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
REVENUES			$	116,506	$	174,134	$	200,743	$	199,032
COST OF GOODS SOLD				46,169		64,193		85,616		83,699
GROSS PROFIT				70,337		109,941		115,127		115,333
OPERATING EXPENSES
	Advertising and promotion			48,036		127,045		70,691		143,867
	Sales commissions			-		6,400		-		16,365
	Consulting fees - officer			30,000		30,000		60,000		60,000
	Professional fees			70,467		27,638		102,474		63,080
	Consulting fees			73,025		37,986		313,646		84,228
	Impairment of intangible asset			6,642		-		106,642		-
	General and administrative			49,052		74,517		276,502		125,606
		Total Operating Expenses		277,222		303,586		929,955		493,146
LOSS FROM OPERATIONS				(206,885)		(193,645)		(814,828)		(377,813)
OTHER (INCOME) EXPENSES
	Interest income			(56)		(376)		(191)		(653)
	Interest expense			83,222		73,252		158,315		116,168
	Gain on disposal of product line			(78,842)		-		(78,842)		-
		Total Other (Income)  Expense		4,324		72,876		79,282		115,515
LOSS BEFORE TAXES				(211,209)		(266,521)		(894,110)		(493,328)
INCOME TAXES				-		-		-		-
NET LOSS			$	(211,209)	$	(266,521)	$	(894,110)	$	(493,328)
NET LOSS PER COMMON  SHARE
	- BASIC AND DILUTED:		$	(0.00)	$	(0.01)	$	(0.01)	$	(0.01)
	Weighted common shares  outstanding
		- basic and diluted		61,565,000		52,012,470		61,243,257		52,012,470
See accompanying notes to the financial statements.

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TOTAL NUTRACEUTICAL SOLUTIONS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE INTERIM PERIOD ENDED JUNE 30, 2011
(UNAUDITED)
									Additional						Total
		Preferred Stock			Common Stock				Paid		Deferred		Accumulated		Stockholders'
		Shares		Amount	Shares		Amount		In Capital		Compensation		Deficit		Equity
Balance - December 31, 2009		-	$	-	52,012,470	$	52,013	$	1,148,009	$	(20,303)	$	(1,046,959)	$	132,760
Issuance of warrants in connection with
	convertible notes payable								192,450						192,450
Beneficial conversion feature in connection with
	convertible note payable								194,950						194,950
Shares issued for cash in December 2010,
	net of offering costs of $1,500				3,050,000		3,050		25,870						28,920
Issuance of warrants in connection with the
	sale of common shares in December 2010								91,580						91,580
Issuance of warrants for future services									32,555		(32,555)
Issuance of common stock for services					3,300,000		3,300		274,048						277,348
Amortization of deferred compensation											43,154				43,154
Net loss													(1,266,315)		(1,266,315)
Balance - December 31, 2010		-		-	58,362,470		58,363		1,959,462		(9,704)		(2,313,274)		(305,153)
Conversion of note payable into preferred stock		21,500		22					107,478						107,500
Issuance of warrants in connection with
	convertible notes payable								45,937						45,937
Beneficial conversion feature in connection with
	convertible note payable								167,030						167,030
Issuance of common stock for license agreement					1,000,000		1,000		99,000						100,000
Issuance of common stock for services					2,000,000		2,000		208,000						210,000
Issuance of common stock and warrants for cash					614,287		615		42,385						43,000
Stock compensation									164,511						164,511
Issuance of warrants for services									42,844		(42,844)				-
Amortization of deferred compensation											45,265				45,265
Net loss													(894,110)		(894,110)
Balance - June 30, 2011		21,500	$	22	61,976,757	$	61,978	$	2,836,647	$	(7,283)	$	(3,207,384)	$	(316,020)
See accompanying notes to the financial statements.

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TOTAL NUTRACEUTICAL SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
				Six Months		Six Months
				Ended		Ended
				June 30, 2011		June 30, 2010
				(Unaudited)		(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss			$	(894,110)	$	(493,328)
Adjustments to reconcile net loss to net cash
	used in operating activities:
	Gain on disposal of product line			(78,842)		-
	Bad debt expense			2,059		-
	Depreciation			7,391		2,224
	Impairment of intangible asset			106,642		-
	Amortization of discount on convertible notes			154,406		104,218
	Stock-based compensation			419,932		25,928
	Changes in operating assets and liabilities:
		Accounts receivable		(12,756)		(42,655)
		Inventory		12,334		(12,005)
		Prepaid expenses		22,940		(19,448)
		Other current assets		14,654		(882)
		Accounts payable and accrued expenses		86,788		17,698
		Accrued compensation - officer		89,398		43,979
NET CASH USED IN OPERATING ACTIVITIES				(69,164)		(374,271)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Note receivable			-		(62,185)
	Purchase of furniture and equipment			(3,708)		(17,616)
	Acquisition of patents and patents pending, net			(16,238)		(26,258)
	Collections on lease receivable			5,472		9,577
	Payments of lease receivable			-		(5,261)
NET CASH USED IN INVESTING ACTIVITIES				(14,474)		(101,743)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from issuance of common stock and warrants			43,000		-
	Proceeds from convertible notes payable short-term			-		100,000
	Repayment of note payable			(13,134)		(12,472)
	Proceeds from convertible notes payable long-term			-		450,000
NET CASH PROVIDED BY FINANCING ACTIVITIES				29,866		537,528
NET CHANGE IN CASH				(53,772)		61,514
Cash at beginning of period				65,061		48,141
Cash at end of period			$	11,289	$	109,655
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
	Interest paid		$	1,674	$	575
	Taxes paid		$	-	$	-
SUPPLEMENTAL DISCLOSURE OF NONCASH FLOWS FINANCING
	AND INVESTING ACTIVITIES:
	Conversion of notes payable to preferred stock		$	107,500	$	-
	Warrants issued for services		$	42,844	$	22,530
See accompanying notes to the financial statements.

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Total Nutraceutical Solutions, Inc.

June 30, 2011 and 2010

Notes to the Consolidated Financial Statements

(Unaudited)

NOTE 1 - ORGANIZATION AND OPERATIONS

Generic Marketing Services, Inc. was incorporated on July 19, 2007 under the laws of the State of Nevada as a subsidiary of Basic Services, Inc., also a Nevada corporation.   On December 31, 2007, Basic Services spun off Generic Marketing Services.  On October 8, 2008, Generic Marketing Services changed its name to Total Nutraceutical Solutions, Inc. (TNS, the Company, us, we, or our).  We engage in the distribution of organic dietary supplement nutraceutical products in the United States of America.

Effective May 27, 2011, we sold our Equisano dietary supplement product line and related rights, as defined, to an unrelated party.  Under the terms of the sale, we transferred our Equisano inventory to the purchaser, and negotiated the extension and conversion of notes payable into preferred stock with a note holder as described in Note 6.  In addition, we are to receive cash consideration of $18,000 in connection with the sale.  The product line did not represent a reportable segment, operating segment, or asset group, and as such is not presented as discontinued operations in the consolidated financial statements.

On March 26, 2010 we entered into a Profit Sharing Agreement or Direct Marketing Affiliates Project (DMAP) with American Charter & Marketing LLC (ACM) and Delta Group Investments Limited (DGI), with the primary focus of undertaking a direct mail marketing campaign designed to sell nutraceutical products developed and manufactured by TNS.  We acted as Managing Affiliate.  DGI provided $300,000 in the form of a loan, as starting capital for the project.   The net profits of the DMAP project were to be shared with 25% going to the Company, 25% to DGI, 25% to ACM and 25% as a return on the initial loan.  This agreement was terminated effective February 17, 2011.

While the Company is attempting to generate sufficient revenues, our cash position may not be sufficient to support our daily operations.  Management intends to raise additional funds by way of a public or private offering.  Management believes that the actions presently being taken to generate sufficient revenues provide the opportunity for the Company to continue as a going concern.  While we believe in the viability of our strategy to generate revenues and in our ability to raise additional funds, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon our ability to generate sufficient revenues.

The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and principles of consolidation

The accompanying consolidated unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented.  Unaudited interim results are not necessarily indicative of the results for the full year.  These unaudited interim financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2010 and notes thereto contained in the  Company’s Annual Report on Form 10-K filed with the SEC on May 18, 2011.

The consolidated financial statements include the accounts of the Company and the accounts of the DMAP for the period from March 26, 2010 (inception) through February 17, 2011.  All inter-company balances and transactions have been eliminated.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

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Inventory

Inventory, which consists primarily of raw materials to be used in the production of our dietary supplement products, is stated at the lower of cost or market using the first-in, first-out method. We regularly review our inventory on hand and, when necessary, record a provision for excess or obsolete inventory.  The inventory reserve was $149,602 at both June 30, 2011 and December 31 2010.

Discount on convertible notes payable

We allocate the proceeds received from convertible notes between convertible notes payable and warrants, if applicable. The resulting discount for warrants is amortized using the effective interest method over the life of the debt instrument. After allocating a portion of the proceeds to the warrants, the effective conversion price of the convertible note payable can be determined. If the effective conversion price is lower than the market price at the date of issuance, a beneficial conversion feature is recorded as an additional discount to the convertible note payable. The beneficial conversion feature discount is amortized using the effective interest method over the life of the debt instrument.  The amortization is recorded as interest expense on the consolidated statements of operations.

Derivatives embedded in certain debt securities

We evaluate financial instruments for freestanding or embedded derivatives.  Derivative instruments that have been separated from the host contract and do not qualify for hedge accounting are recorded at fair value with changes in value recognized as other income (expense) in the consolidated statements of operations.

Fair value of financial instruments

We measure fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. We utilize a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1	Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2	Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3	Unobservable inputs where there is little or no market data, which require the reporting entity to develop its ownassumptions.

The carrying amounts of our financial assets and liabilities, such as cash, accounts receivable, accounts payable and accrued officer’s compensation, approximate their fair values because of the short maturity of these instruments.  Our lease receivable, notes payable and convertible notes payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to TNS for similar financial arrangements.

We do not have any assets or liabilities measured at fair value on a recurring. Consequently, we did not have any fair value adjustments for assets and liabilities measured at fair value at the reporting date, nor any gains or losses reported in the consolidated statements of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date.

Revenue recognition

We recognize revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been performed, (iii) amounts are fixed or determinable and (iv) collectibility of amounts is reasonably assured.

Revenues from the sale of products, including shipping and handling fees but excluding statutory taxes collected from customers, as applicable, are recognized when shipment has occurred. We sell our consumer products directly to customers utilizing network marketing programs, direct mail order, internet marketing, and commission sales people and indirectly through resellers.  We also sell out ingredients directly to manufacturers of cosmetic and nutraceutical products and indirectly through resellers.  Persuasive evidence of an arrangement is demonstrated via order and invoice, product delivery is evidenced by a bill of lading from the third party carrier and title transfers upon shipment, the sales price to the customer is fixed upon acceptance of the order and there is no separate sales rebate, discount, or volume incentive.

Equity instruments issued to parties other than employees for acquiring goods or services

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We account for all transactions in which goods or services are the consideration received for the issuance of equity instruments based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.  The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.  Currently such transactions are primarily awards of warrants to purchase common stock.

The fair value of each warrant award is estimated on the date of grant using a Black-Scholes option-pricing valuation model.  The assumptions used to determine the fair value of our warrants are as follows:

· The expected life of warrants issued represents the period of time the warrants are expected to be outstanding.

· The expected volatility is generally based on the historical volatility of comparable companies’ stock over the contractual life of the warrant.

· The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the warrant.

· The expected dividend yield is zero based on our best estimate of projected dividend yield for periods within the contractual life of the warrant.

Net loss per common share

Basic and diluted net loss per share has been computed by dividing our net loss by the weighted average number of common shares issued and outstanding. Options and warrants to purchase our common stock as well as debt which is convertible into common stock are anti-dilutive and therefore are not included in the determination of the diluted net loss per share for 2011 and 2010. The following table presents a reconciliation of basic and diluted loss per share:

		For the three months ending June 30,			For the six  months ending June 30,
		2011		2010	2011	2010
Numerator:
	Net loss applicable to common shareholders	$	(211,209)	$     (266,521)	$      (894,110)	$            (493,328)
Denominator:
	Weighted-average common shares outstanding		61,565,000	52,012,470	61,243,257	52,012,470
	Basic and diluted net loss per share	$	(0.00)	$            (0.01)	$             (0.01)	$                  (0.01)
Common stock warrants			16,897,474	7,682,800	16,897,474	7,682,800
Convertible debt including interest			5,880,417	2,764,500	5,880,417	2,764,500
Excluded dilutive securities			22,777,891	10,447,300	22,777,891	10,447,300

Reclassifications

Certain reclassifications have been made to prior period financial statements and footnotes in order to conform to the current period's presentation.

Segments

We have determined that we operate in one segment for financial reporting purposes.

Recently issued accounting pronouncements

From time to time, new accounting guidance is issued by the Financial Accounting Standards Board that we adopt as of the specified effective date.  If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on our financial statements.

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NOTE 3 – INVENTORY

Inventory at June 30, 2011 and December 31, 2010 consisted of the following:

	June 30, 2011		December 31, 2010
Raw materials	$	259,064	$	293,391
Finished goods		34,238		33,309
		293,302		326,700
Less reserve for excess and obsolete inventory		(149,602)		(149,602)
	$	143,700	$	177,098

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment at June 30, 2011 and December 31, 2010 consisted of the following:

	June 30, 2011		December 31, 2010
Office equipment	$	23,072	$	19,364
Production equipment		30,964		30,964
Leasehold improvements		2,192		2,192
		56,228		52,520
Less accumulated depreciation		(16,694)		(9,303)
	$	39,534	$	43,217

NOTE 5 – NOTE PAYABLE

Note payable at June 30, 2011 and December 31, 2010 consisted of the following:

	June 30, 2011		December 31, 2010
On November 18, 2010 we entered into a short term financing agreement for principal of $13,810 for director’s and officer’s insurance.  Payments are due monthly, with interest at 4.85% per annum.	$	1,610	$	12,300
On August 11, 2010 we entered into a short term financing agreement for principal of $4,796 for property insurance.  Payments are due monthly, with interest at 9.65% per annum. This note was paid in full in June 2011.		-		2,444
	$	1,610	$	14,744

NOTE 6 – SHORT-TERM CONVERTIBLE NOTE PAYABLE

Proceeds from the issuance of $250,000 from short-term convertible promissory notes and warrants were allocated between the notes and warrants on a relative fair value basis.  The issuance of $250,000 includes one $100,000 promissory note that bears interest at 6% per annum and matured on December 31, 2010.  In addition, two promissory notes were issued with principal of $100,000 and $50,000 which bear interest at 6% per annum and mature on December 31, 2011.  

Under an agreement with the note holder and an unrelated entity for the sale of our Equisano dietary supplement product line, on May 27, 2011 we negotiated an extension of the term of the $50,000 note to June 30, 2012.  Under the same agreement, the $100,000 note that matured on December 31, 2010 was cancelled and the $100,000 note that matured on December 31, 2011 was converted into Series A preferred stock.

The total value originally allocated to the warrants was approximately $123,750 and was recorded as a debt discount against the proceeds of the notes.  In addition, the beneficial conversion features related to the notes were determined to be approximately $126,250.  As a result, the total discount on the notes totaled $250,000, and is being amortized over term of the notes  Amortization of debt discount of approximately $14,530 and $34,530 was recorded for the three months and six months

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ended June 30, 2011, and amortization of debt discount of approximately $45,600 and $78,700 was recorded for the three months and six months ended June 30, 2010.  The unamortized debt discount on the cancelled and converted notes was written off to the gain on disposal of product line.

NOTE 7 – CONVERTIBLE NOTES PAYABLE - RELATED PARTIES

Proceeds from the issuance of a $50,000 convertible promissory note and warrants from related parties was allocated between the notes and warrants on a relative fair value basis.  This note bears interest at 6% per annum and matures on December 31, 2011.  The related party note holders are (i) Marvin Hausman, M.D., Chief Executive Officer, Director and Stockholder of TNS and (ii) Philip Sobol, a Director of the TNS.  The total value allocated to the warrants was approximately $22,200.   The value of the warrants was recorded as a debt discount against the proceeds of the note.  In addition, the beneficial conversion feature related to the note was determined to be approximately $27,800.  As a result, the total discount on the note totaled $50,000, and is being amortized over term of the note.  Amortization of debt discount of approximately $6,250, $12,500, $6,250 and $12,500 was recorded for the three months and six months ended June 30, 2011 and 2010, respectively.

NOTE 8 – CONVERTIBLE NOTES PAYABLE

Proceeds from the issuance of a $312,500 convertible promissory note and warrants were allocated between the note and warrants on a relative fair value basis.  This note bears interest at 5% per annum and matures on June 30, 2012.  This note was issued in replacement of a $300,000 convertible promissory note which had a maturity date of March 26, 2013.  The total value allocated to the warrants was approximately $45,900.  The fair value of the warrants was determined using the Black-Scholes option pricing model based on the following assumptions: expected dividend yield of 0%, risk-free interest rate of 1.05%, volatility of 192.8% and a contractual life of 3 years.  In addition, approximately $49,600 of the value of the warrants issued under the previous note remained unamortized. The value of the warrants was recorded as a debt discount against the proceeds of the note.  The beneficial conversion feature related to the note was determined to be approximately $216,600.  As a result, the total discount on the note totaled $312,100, and is being amortized over term of the note.  Amortization of debt discount of approximately $55,100 and $95,600 was recorded for the three months and six months ended June 30, 2011, and amortization of debt discount of zero was recorded for the three months and six months ended June 30, 2010.  The balance of the note payable, net of unamortized discount, was $127,763 at June 30, 2011, and is reported as a current liability on the accompanying consolidated balance sheets.

NOTE 9 – RELATED PARTY TRANSACTIONS

Consulting services from Chairman and CEO

Consulting services provided by and compensation to the Chairman and CEO were $30,000, $60,000, $30,000 and $60,000 for the three months and six months ended June 30, 2011 and 2010, respectively.

NOTE 10 – STOCKHOLDERS’ EQUITY

Preferred Stock

On May 26, 2011, our board of directors designated 350,000 shares of preferred stock as Series A preferred stock, $0.001 par value.  The Series A preferred stock is entitled to a liquidation preference in the amount of $5 per share, votes on an as converted basis with the common stock on all matters as to which holders of common stock shall be entitled to vote, and is convertible into common stock on a one-for-one hundred basis.

Under the agreement for the sale of our Equisano dietary product line dated May 27, 2011 described above, 21,500 shares of Series A preferred stock were issued for conversion of an outstanding promissory note in the amount of $100,000 plus $7,500 in accrued interest.

Common stock

In February 2011 we opened a private placement offering to sell up to 2,142,857 units at an offering price of $0.07 per unit.  Each unit is comprised of one share of common stock $0.001 par value, and an “A” warrant to purchase one share of common stock exercisable at $0.20 per share and a “B” warrant to purchase one share of common stock exercisable at $0.40 per share.  This private placement offering closed on May 31, 2011 and 614,287 shares of common stock were issued for an aggregate funding amount of $43,000.

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On August 26, 2010, we entered into a consulting agreement for marketing services.  Under this agreement the consultant will provide certain marketing services in exchange for 4,000,000 shares of our common stock valued at $420,000 at the date of grant, based upon the stock price on the date of grant.   2,000,000 shares were issued at signing and 2,000,000 shares were issued on January 3, 2011.

On February 3, 2011, our board of directors approved a grant of 1,000,000 shares of common stock to a third party in consideration for an Assignment and Assumption Agreement.  The stock was valued at $100,000 at the date of grant based upon the stock price on the grant date.  The shares were issued in April, 2011.  Upon the acquisition of the intangible asset, management determined the asset was impaired and recorded an impairment loss of $100,000..

Stock incentive plan

During the first quarter of 2011, we granted 2,379,998 options under our 2010 Stock Incentive Plan with a contractual term of 5 to 10 years and an aggregate fair value on the date of grant of $231,465.  The vesting schedule of these options ranges from immediate vesting to vesting over two years.

Stock-based compensation expense is recognized using the straight-line attribution method over the optionees’ requisite service period.  Stock-based compensation expense of approximately $18,300 and $164,500 was recorded for three months and six months ending June 30, 2011 and  stock compensation expense of zero was recorded for both the three and six months ending June 30, 2010,  as a component of general and administrative expense.

We use the Black-Scholes option-pricing model to determine the fair value of options on the date of grant.  In determining the fair value of options, we employed the following key assumptions.

	Six months ended
	March 31, 2011
Expected dividend yield		—
Expected stock price volatility		187.22% - 187.30	%
Risk-free interest rate		1.98% – 2.03	%
Expected term (in years)		5 – 5.4 years
Weighted-average grant date fair-value	$	0.097

There were no stock option grants during the three months ending June 30, 2011 or the three months or six months ending  June 30, 2010.

Warrants

During the second quarter of fiscal 2011, we issued warrants to purchase 1,016,100 shares of common stock under agreements for consulting services.  These warrants have exercise prices of $0.05 to $0.25 per share and have terms from five to seven years.  The fair value of warrants issued under consulting agreements is recorded as deferred compensation.  The amortization of deferred compensation is recorded as consulting expense and was approximately $36,600 and $44,800 for the three months and six months ending June 30, 2011.

In connection with the private placement of common stock on May 31, 2011, we issued warrants to purchase common stock to the investors.  There were a total of 614,287 warrants to purchase shares of common stock exercisable at $0.20 per share and 614,287 warrants to purchase shares of common stock exercisable at $0.40 per share.  These warrants have a term of three years.

During the first quarter of fiscal 2011, we issued warrants to purchase 600,000 shares of common stock at $0.12 per share in conjunction with the issuance of convertible promissory notes.  The warrants have a term of three years.   The fair value of these warrants was recorded as debt discount.  The amortization related to these warrants is recorded as interest expense and was $55,100 and $95,600 for the three and six months ending June 30, 2011 and zero for the both the three and six months ending June 30, 2010.

In the first quarter of fiscal 2011, we changed the methodology for determining certain inputs to the Black-Scholes model. The methodology for determining the volatility was changed from using an average volatility of comparable companies within TNS’ industry to using an average of TNS’ volatility and the comparable companies’ volatility. There were no changes to the methodology for determining the remaining Black-Scholes inputs.

We use the Black-Scholes option-pricing model to determine the fair value of warrants on the date of grant.  In determining the fair value of warrants, we employed the following key assumptions:

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	Six months ended	Six months ended
	June 30, 2011	June 30, 2011
Expected dividend yield	—		—
Expected stock price volatility	189.60 to 193.64%		189.60 to 193.64%	%
Risk-free interest rate	0.79 to 2.53%		0.79 to 2.53	%
Expected term (in years)	3 to 7 years		3 to 7years
Weighted-average grant date fair-value	$ 0.04 to 0.10		$ 0.04 to 0.10

NOTE 11 – SUBSEQUENT EVENTS

In May 2011 we opened a private placement offering to sell up to 300,000 shares of Series A preferred stock at an offering price of $5.00 per share.  This private placement offering is still open as of the date of this filing.  To date, 41,500 preferred shares were issued under this offering, with 21,500 issued to Mark C. Wolf prior to June 30, 2011 and an aggregate of 20,000 preferred shares were issued to two investors subsequent to June 30, 2011.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

We may from time to time make written or oral "forward-looking statements" including statements contained in this report and in other communications, which are made in good faith by us pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include statements of our plans, objectives, expectations, estimates and intentions, which are subject to change based on various important factors (some of which are beyond our company's control).  The following factors, in addition to others not listed, could cause our actual results to differ materially from those expressed in forward looking statements: the strength of the domestic and local economies in which our 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 our suppliers and customers, changes in client needs and consumer spending habits, the impact of competition and technological change on our company, our 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 us on the date of this report.  We undertake 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.

Overview of Current Operations

Total Nutraceutical Solutions, Inc. (TNS) is an emerging biotechnology company engaged in the discovery, formulation, and marketing of natural ingredients that can be used in organic nutraceutical and cosmetic products developed and sold by TNS and by third parties.  Our current portfolio of ingredients includes ERGO D2, vitamin D, L-Ergothioneine, beta-glucans, polyphenols and curcumin.  These highly potent antioxidants provide multiple health benefits for both humans and animals and address multi-billion dollar markets for inflammation control, immune system support, increased energy and stamina, reduced stress and anxiety, and hair and nail growth.  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.  We develop production and analytic technologies for food and nutritional supplements composed primarily of mushrooms.  We naturally enhance the vitamin D content of mushrooms supplied by domestic growers, utilizing TNS patent pending proprietary UV-light methodology at our Sherwood, Oregon facility.  In addition to preventative healthcare formulations and nutritional approaches to a wide variety of human conditions and illnesses, we also develop and acquire nutritional tools and products in the fields of animal husbandry and livestock feeds.

We also use our ingredients in nutraceutical products that we formulate and market to consumers.  We have developed mushroom based nutraceutical dietary supplement products that are made entirely of naturally occurring dietary substances which are manufactured under contract by third party contractors, Columbia Nutritional Services, Inc. of Vancouver, Washington and Pro-Tech Laboratories of Quitman, Texas.  We currently market three natural organic nutraceutical mushroom dietary supplement products, ImmuSANO and GlucoSANO, and Gröh, which has been designed to nutritionally support hair follicles and nail beds.  We sold our EquiSANO product for the equine market to FunGuys LLC on May 27, 2011 (see details below in Quarterly Highlights). 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.  We sell our ingredients directly to manufacturers of cosmetic and nutraceutical products and indirectly through resellers.  We market and sell our consumer products directly to consumers utilizing network marketing programs, direct mail order, internet marketing, and commission sales people and indirectly through resellers.  Our current portfolio of consumer products include proprietary formulations of over the counter mushroom based nutraceutical products produced by outside contract manufacturers.  Fulfillment and distribution is performed at facilities in Stevenson, Washington, Sherwood, Oregon and Quitman, Texas.

We utilize novel clinical models, biomarkers, and analytical tools to validate the nutritional and clinical efficacy of our ingredients and the products that incorporate them.  Our scientific strategy and technology platform initially focused on the unique manufacturing and health benefits of specific bioactive nutrients found in certain whole natural mushrooms and their

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mycelial biomasses (mushroom powder and its active components).  In early 2011, we expanded into curcumin extracted from tumeric.  

Research and development of new ingredients and nutraceutical products are also performed under contract with outside laboratories, such as the Department of Food Science, Pennsylvania State University.

In March 2010 we entered into a Profit Sharing Agreement with American Charter and Marketing LLC and Delta Group Investments Limited under which we agreed to form an association referred to as the Direct Marketing Affiliates Project (“DMAP”).  Pursuant to the agreement the parties agreed to work together to undertake a direct mail campaign designed to sell TNS nutraceutical products for a period of three years, with the day to day management and control of business operations of the association being vested in TNS as the managing affiliate.  Between March 2010 and February 2011, six nutraceutical products under the NuFlex trademark were marketed and sold through the DMAP for joint support and joint pain.  The six products were NuFlex LTR (Long Term Relief), NuFlex IR (Instant Relief, a topical spray for muscle aches and strains), NuFlex AF (Accelerator Formula, to boost the long term benefits of NuFlex long term relief formula), NuFlex Advanced Joint Repair NuFlex Multi Joint Support and NuFex MSM.  These products were produced by Pro-Tech Laboratories of Quitman, Texas and Columbia Nutritional Services of Vancouver, Washington and were sold through direct marketing contract vendors.  In February 2011 the parties to the Profit Sharing Agreement agreed to terminate the DMAP leaving TNS in possession of the property and assets of the DMAP.  

In February 2009 we signed an Agreement for Removal of Mushroom Substrate Waste with Hokto Kinoko Co. to acquire mushroom spent substrate from the Hokto Kinoko 250,000 square foot mushroom growing facility in San Marcos, California.  The facility, which is designed to produce fresh specialty mushrooms, has the potential at full capacity to produce 20-25 tons of spent substrate per day.  Mushroom substrate waste is defined as the spent substrate (growing media) and all mushroom residuals resulting from cleaning the growing bottles after the harvest of mushroom fruit bodies at the growing facility.  The Hokto state-of-the-art facility, the largest of its kind in the United States, produces the following mushrooms:  Brown Beech (Buna Shimeji), White Beech (Bunapi), King Trumpet (Pleurotus eryngii), and Maitake.  

Under the agreement we purchased an auger and other related equipment to facilitate collection and removal of the mushroom substrate and we are leasing that equipment to Hokto Kinoko on a monthly basis at $944 per month.  Golden Gourmet Mushrooms personnel used the facilities on the Hokto Kinoko premises to grow mushrooms and also supervised the use of the auger for collection and removal of the mushroom substrate.  The mushroom substrate waste is sold by TNS to Evergreen Nurseries, San Diego, California.  Golden Gourmet Mushrooms has changed its name to M2i.  Under the terms of an amendment to the Agreement Removal of Mushroom Substrate Waste with Hokto Kinoko signed in March 2011 TNS shares the gross proceeds of its sales of mushroom substrate to Evergreen Nurseries with Hokto Kinoko and M2i on an equal basis.

Quarterly Highlights

On May 27, 2011, we entered into an Asset Sales Agreement with FunGuys LLC and Mark C. Wolf, the Co-Manager of FunGuys, under which we agreed to sell to FunGuys all rights to the mushroom based nutraceutical product EquiSANO^TM, including our wholesale and retail customer accounts, product proprietary formulation and know-how and 556 Kilos of dried mushroom ingredients.  FunGuys LLC is one of our larger ingredients customers, has already developed a nutraceutical product for animals under the “D is for Dogs” brand, and intends to expand into the equine market.  EquiSANO^TM is formulated for consumption by horses, and is composed of a proprietary blend of 5 types of certified organic medicinal mushrooms, each of which contains bioactive nutrients that assist the horse in balancing cellular function and promoting a stronger immune system which is associated with increased resistance to infections.  

As consideration for the sale of EquiSANO^TM, Mark Wolf agreed to cancel the Convertible Promissory Note issued by TNS to Larry Johnson on January 12, 2010, in the principal amount of $100,000, with interest payable at maturity of 6% per annum.  This promissory note, which had matured on December 31, 2010 and remained unpaid, was assigned to by Mr. Johnson to Mr. Wolf on December 31, 2010.  In addition, Mr. Wolf agreed to extend the maturity date of a promissory note issued by TNS to him on February 18, 2010 in the principal amount of $50,000 and interest in the amount of 6% per annum, from December 31, 2011 to June 30, 2012.  Mr. Wolf also converted a promissory note in the amount of $107,500, including principal and accrued interest to the date of the Asset Sales Agreement, issued to him on February 18, 2010 into 21,500 shares of TNS Series A convertible preferred stock,.  In addition, FunGuys agreed to purchase TNS’s remaining inventory of EquiSANO plus a mutually agreed amount of TNS ingredients over the next three years provided the pricing of those ingredients remains competitive.

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In April 2011 we issued 1,000,000 shares to MSH Ventures pursuant to an Assignment and Assumption Agreement between TNS and MSH Ventures dated October 26, 2009 under which MSH Ventures assigned all of its rights to an Exclusive License Agreement with the University of Cologne in Germany pertaining to a patent application entitled “Identification of Ergothioneine Transporter and Therapeutic Uses Thereof.”  Our President and Chief Executive Officer, Marvin S. Hausman, M.D. owns a 66% equity interest in MSH Ventures.

In April 2011 we closed a private placement of units to two investors, with each unit comprised of one share of common stock, one A warrant exercisable at $0.20 per share and one B warrant exercisable at $0.40 per share, for a price of $0.07 per unit.  We issued an aggregate of 614,287 units (614,287 shares of common stock, 614,287 A warrants and 614,287 B warrants) and had net proceeds of $43,000 from the private placement.

Results of Operations for the three and six months ended June 30, 2011

During the three months and six months ended June 30, 2011, we had a net loss of $(211,209) and $(894,110) respectively versus a $(266,521) and $(493,328) net loss for the same periods last year.  The decrease in the net loss for the three month period was primarily due to lower revenues.  The increase in the net loss for the six month period was primarily attributable to increased consulting expense, increased general and administrative expense and impairment of an intangible asset.   Our total operating expenses increased from $303,586 and $493,146 for the three months and six months ended June 30, 2010 to $277,221 and $929,954 for the three months and six months ended June 30, 2011.  The increase for the six month period was due to an increase in consulting fees primarily due to expenses related to a consulting arrangement whereby we issued shares of our common stock in exchange for certain marketing services, an increase in general and administrative expense due to stock compensation expense related to the issuance of stock options, and an impairment expense related to the write-off of an intangible asset.  

Revenues

Revenues and Cost of Goods Sold (in thousands, except percentages):

	For the Three Months Ended June 30,				Change
	2011		2010		$		%
Revenues	$	117	$	174	$	57		(33)%
Cost of Goods Sold	$	46	$	64	$	18		(28)%
	For the Six Months Ended June 30,				Change
	2011		2010		$		%
Revenues	$	201	$	199	$	2		1%
Cost of Goods Sold	$	86	$	84	$	2		2%

Revenues.  Revenues are generated primarily from the sale of our mushroom based nutraceutical dietary supplement products.  We generated $116,506 in revenues for the three months ended June 30, 2011 as compared to $174,134 in revenues for the same period last year.  The decrease in revenues was primarily due to the decrease in our revenues from sales of Nuflex.  For the six month period ended June 30, 2011 our revenues remained substantially the same as the same period last year.  We generated $200,743 in revenues for the six months ended June 30, 2011 as compared to $199,032 in revenues for the same period last year.  Overall, approximately 49% of our revenues came from sales of Groh, 25% came from sales of GlucoSANO and ImmunoSANO, 5% from sales of Nu-Flex products, 10% from sales of EquiSANO, and 8% from sales of bulk mushroom substrate.  Our revenues from the sales of Groh increased from 18% for the quarter ended March 31, 2011 of our revenue to 49% of total revenue for the quarter ended June 30, 2011 while our sales of natural ingredients decreased from 9% for the quarter ended March 31, 2011 to less than one percent for the recent quarter.

Cost of Goods Sold.    Cost of goods sold includes raw materials such as nutraceutical mushrooms, as well as production costs for manufacturing our supplement products.  Our cost of goods sold was $46,169 for the three months ended June 30, 2011 resulting in a gross profit of $70,337 as compared to a cost of goods sold of $64,193 and a gross profit of $109,941 for the three months ended June 30, 2010.  Our cost of goods as a percentage of revenue for first quarter of 2011 decreased from the first quarter of 2010 as our production processes have become more efficient in our second year of production.  Our cost of goods sold

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for the six months ended June 30, 2011 was $85,616 which was largely unchanged from our cost of goods sold of $83,699 for the six months ended June 30, 2010.

Going Concern

Our independent auditors have included an explanatory paragraph in their report on the 2010 financial statements regarding substantial doubt about our ability to continue as a going concern.  Our 2010 financial statements contain additional note disclosure describing the circumstances that lead to this disclosure by our independent auditors.

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 June 30, 2011, we did not have any employees.  Our Chief Executive Officer, Marvin S. Hausman, M.D. and our Vice President for Marketing and Sales, Devin Andres, each provide employee like services pursuant to consulting arrangements.  As our operations expand, we anticipate the need to hire employees however, the exact number of employees that would be hired is not quantifiable at this time.

Liquidity and Capital Resources

As of June 30, 2011 we had cash of $11,289 as compared with cash of $65,061 on December 31, 2010.  We have incurred debts in an aggregate principal amount of $412,500 at various rates of interest.  $50,000 of debt plus accrued interest at 6% is due December 31, 2011, $312,500 plus accrued interest at 5% matures on June 30, 2012 and $50,000 and accrued interest at 6% matures on June 30, 2012.  Given the revenues received after the quarter end and the proceeds from a private placement of convertible preferred stock, management believes it has sufficient funds to remain operational through October 2011.

We anticipate that we will continue to generate losses during the remainder of this fiscal year and therefore, unless we are able to raise capital through equity private placements we may be unable to continue operations in the future.  In April 2011 we closed a private placement of units to two investors, with each unit comprised of one share of common stock, one A warrant exercisable at $0.20 per share and one B warrant exercisable at $0.40 per share, for a price of $0.07 per unit.  We had net proceeds of $43,000 from the private placement through the issuance of 614,287 units.  We have undertaken a private placement of convertible preferred stock for $1.5 million.  Additional working capital may also be sought through 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 debt or equity 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, 2010.

New Accounting Standards

Please see Note 2 of the Notes to Financial Statements in this quarterly report concerning new accounting standards.

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Subsequent Events

On July 27, 2011, TNS entered into an Exclusive License Agreement with the Penn State Research Foundation, or PSRF, covering any Canadian patent applications filed claiming priority to the US PCT patent application entitled “Methods and Compositions for Improving the Nutritional Content of Mushrooms and Fungi” filed April 23, 2009.  TNS will now have the exclusive right and license to the patent application within the field of Agaricus bisporus mushrooms in Canada.  Previously, TNS and PSRF had entered into an exclusive worldwide license agreement dated June 9, 2010 under which TNS has the exclusive worldwide right to make licensed products covered by the same patent application within a field limited to non-Agaricus bisporus mushrooms.  In return for the license, TNS must pay all of its financial obligations outstanding on its previous license agreement with PSRF dated June 9, 2010 as well as a license issue fee and an annual license maintenance fee each November 15 beginning November 15, 2013.  In addition, TNS must pay royalties on various sliding scales for net sales of licensed products covered by the licensed intellectual property comprising dietary supplements, nutraceutical products or medical foods, pharmaceutical products, food products and sales of the Agaricus bisporus mushrooms sold by TNS or its sublicensee for licensed products comprising a food product.  Finally, TNS must pay the costs of all Canadian patent filings and maintenance.

Also on July 27, 2011, TNS and PSRF entered into an Addendum to the Exclusive License Agreement between the parties signed on June 9, 2010 under which the definition of “dietary supplements” is expanded to include non-prescription topical products and the definition of “food products” was expanded to include food extracts and food formulations derived from non-Agaricus bisporus which are used to enhance non-ingestible and digestible products.

On August 11, 2011 TNS entered into a Research Agreement with Jack Rogers, Ph.D. and Catherine Cahill, Ph.D. pursuant to which Drs. Rogers and Cahill will undertake certain laboratory testing in transgenic mice on the therapeutic activity towards the progression of Parkinson’s disease of ergothioneine and vitamin D2 from proprietary mushrooms owned by TNS.  The testing will occur over a four month period from August to December 2011 at the Neurochemistry Laboratory at Massachusetts General Hospital East in Charleston, Mass.  The cost for the research study will be approximately $20,000.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Not required

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by our management, with the participation of our Chief Executive Officer who is also our principal financial and accounting officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of June 30, 2011.  Based on that evaluation, our principal executive officer and principal financial officer concluded that the material weaknesses identified in our management report on internal controls and procedures contained in our Form 10-K for the fiscal year ended December 31, 2010, Item 9A filed on May 18, 2011 still exist, and therefore our disclosure controls and procedures were not effective as of June 30, 2011.

Changes in Internal Control Over Financial Reporting

As of June 30, 2011, there have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended June 30, 2011, that materially affected, or are reasonably likely to materially affect, our company’s internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1.  Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business.  However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us, which may materially affect us.

Item 1A.  Risk Factors

See Risk Factors set forth in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and the discussion above in Part I, Item 2, under " Liquidity and Capital Resources.”

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds 

In April 2011 we closed a private placement of units to two investors Keith Manfred and David and Barbara Wilson, with each unit comprised of one share of common stock, one A warrant exercisable at $0.20 per share and one B warrant exercisable at $0.40 per share, for a price of $0.07 per unit.  We had net proceeds of $43,000 from the private placement through the issuance of 614,287 units.  The issuance of the shares was exempt from registration based on Section 4(2) under the Securities Act.

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Submission of Matters to a Vote of Security Holders

None.

Item 5.  Other Information

None.

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Item 6.  Exhibits 

Exhibit Number	Description of Exhibit	Filed Herewith	Form	Exhibit	Filing Date
3.1	Amended and Restated Articles of Incorporation of Registrant		8-K	3.1	10/29/2010
3.2	Amended and Restated Bylaws of Registrant		8-K	3.2	09/22/2010
3.3	Amended Articles of Merger Incorporation as currently in effect		8-K	3.3	10/13/2008
10.1	Exclusive Option Agreement dated May 1, 2006, between The Penn State Research Foundation and Northwest Medical Research Inc.		8-K	10.1	09/04/2008
10.2	Assignment Agreement to the Option Agreement, dated July 31, 2008, among The Penn State Research Foundation, Northwest Medical Research Inc. and Generic Marketing Services, Inc.		8-K	10.2	09/04/2008
10.3	Assignment and Assumption Agreement, dated July 31, 2008, between Northwest Medical Research Inc. and Generic Marketing Services, Inc.		8-K	10.3	09/04/2008
10.4	Form of Common Stock and Warrant Purchase Agreement		8-K	10.1	06/12/2009
10.5	Form of Securities Purchase Agreement		8-K	10.1	09/21/2009
10.6	$50,000 Promissory Note between TNS and Marvin S. Hausman, M.D. and Philip Sobol dated December 30, 2009		8-K	10.1	12/31/2010
10.7	$100,000 Promissory Note between TNS and Larry A. Johnson dated January 12, 2010		8-K	10.1	2/24/2010
10.8	$100,000 Promissory Note between TNS and Mark C. Wolf dated February 18, 2010		8-K	10.2	2/24/2010
10.9	$50,000 Promissory Note between TNS and Mark C. Wolf dated February 18, 2010		10-K	10.9	4/15/2010
10.10	Profit Sharing Agreement between TNS, American Charter & Marketing LLC, and Delta Group Investments, Limited dated March 26, 2010		10-K	10.10	4/15/2010
10.11	Form of Common Stock and Warrant Agreement 2010		8-K	10.1	12/20/2010
10.12	$312,500 Promissory Note between TNS and Delta Group Investments Limited dated January 26, 2011		8-K	10.2	2/22/2010
10.13	Termination of Profit Sharing Agreement dated February 21, 2011		8-K	10.1	2/22/2011
10.14	Lease Agreement between TNS and Sherwood Venture LLC dated March 15, 2011		8-K	10.1	4/6/2011
10.15	Form of Warrant A Agreement 2010		8-K	10.2	12/22/2010
10.16	Form of Warrant B Agreement 2010		8-K	10.3	12/22/2010
10.15	Form of Warrant A Agreement 2010		8-K	10.2	12/22/2010
10.16	Form of Warrant B Agreement 2010		8-K	10.3	12/22/2010

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10.17	Asset Purchase Agreement between TNS, FunGuys, LLC and Mark C. Wolf dated May 27, 2011	X	8-K	10.1	3/3/2011
10.18	Certificate of Designation of Preferences, Rights and Limitations of the Series A Preferred Stock of Total Nutraceutical Solutions, Inc. dated May 26, 2011.		8-K	10.3	3/3/2011
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).	X
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).	X

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Total Nutraceutical Solutions, Inc.
August 22, 2011	By:	/s/ Marvin Hausman, M.D.
		Marvin Hausman, M.D. Chief Executive Officer (Principal Executive Officer and Acting Principal Financial and Accounting Officer)

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