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 September 30, 2008
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
------------------
Commission file number 0-52864
TOTAL NUTRACEUTICAL SOLUTIONS
------------------------------------------------------
(Exact name of registrant as specified in its charter)
------------------
Nevada 26-0561199
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2811 Reidville Road, Suite 23, Spartanburg, SC 29301
---------------------------------------------------
(Address of principal executive offices)(Zip Code)
Issuer's telephone number, including area code: (864) 316-2909
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 is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of
the Exchange Act (Check one).
Large accelerated filer |_| Accelerated filer |_|
Non-accelerated filer |_| Smaller Reporting Company |X|
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes |X| No |_|
As of November 13, 2008 the registrant had outstanding 49,423,750 shares of its
$0.001 par value Common Stock.
Table of Contents
Total Nutraceutical Solutions
Index to Form 10-Q
For the Quarterly Period Ended September 30, 2008
Part I. Financial Information
Page
Item 1. Financial Statements
Balance Sheets as of September 30, 2008 and July 31, 2008 3
Statements of Income for the three months
ended September 30, 2008 and 2007 4
Statements of Cash Flows for the three months
ended September 30, 2008 and 2007 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
Item 4. Controls and Procedures 15
Part II Other Information
Item 1. Legal Proceedings 17
Item 1A. Risk Factors 17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 17
Item 3 -- Defaults Upon Senior Securities 18
Item 4 -- Submission of Matters to a Vote of Security Holders 18
Item 5 -- Other Information 18
Item 6. Exhibits 19
Signatures 20
2
Part I. Financial Information
Item 1. Financial Statements
Total Nutraceutical Solutions
(Formerly known as Generic Marketing Services, Inc.)
(A Development Stage Company)
Balance Sheets
Balance Sheets
September 30,
2008 July 31,
(unaudited) 2008
------------- -------------
ASSETS
Current assets:
Cash and equivalents $ 423,405 $ 35,031
------------- -------------
Total current assets 423,405 35,031
------------- -------------
TOTAL ASSETS $ 423,405 $ 35,031
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 1,500 1,500
------------- -------------
Total liabilities 1,500 1,500
------------- -------------
Stockholders' equity:
Preferred stock, $0.001 par value, 5,000,000
Shares authorized, none issued - -
Common stock, $0.001 par value, 70,000,000
shares authorized; 59,423,750, 50,873,750
issued as of 9/30/08 and 7/31/08,
respectively 59,424 50,874
Additional paid-in capital 486,026 (10,424)
Subscriptions receivable (105,000) -
(Deficit) accumulated during development
stage (18,545) (6,919)
------------- -------------
Total stockholders' equity 421,905 33,531
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 423,405 $ 35,031
============= =============
The accompanying notes are an integral part of these financial statements.
3
Total Nutraceutical Solutions
(Formerly known as Generic Marketing Services, Inc.)
\ (A Development Stage Company)
Statements of Operations
(Unaudited)
Statements of Operations
For the For the
Three Months Nine Months July 19, 2007
Ending Ending (inception) to
September 30, September 30, September 30,
2008 2008 2008
---------------- ---------------- ----------------
Revenue $ - $ - $ -
---------------- ---------------- ----------------
Expenses:
Organizational Costs - - 400
General & Administrative
expenses 16,645 18,145 18,145
---------------- ---------------- ----------------
Total expenses 16,645 18,145 18,545
---------------- ---------------- ----------------
Net loss before income
taxes (16,645) (18,145) (18,545)
Provision for income tax - - -
---------------- ---------------- ----------------
Net income (loss) $ (16,645) $ (18,145) $ (18,545)
================ ================ ================
Net (loss) per share $ 0.00 $ (0.00)
================ ================
Weighted average number of
common shares outstanding 16,699,000 16,699,000
================ ================
The accompanying notes are an integral part of these financial statements.
4
Total Nutraceutical Solutions
(Formerly known as Generic Marketing Services, Inc.)
(A Development Stage Company)
Statements of Cash Flow
(Unaudited)
Statements of Cash Flow
For the Nine July 19, 2007
Months Ending (inception) to
September 30, September 30,
2008 2008
---------------- ----------------
Operating activities:
Net income (loss) $ (18,145) $ (18,545)
Adjustments to reconcile
net (loss) to net cash (used) by
operating activities:
Increase in accounts payable 1,500 1,500
---------------- ----------------
Net cash (used) by operating activities (16,645) (17,045)
---------------- ----------------
Financing activities:
Issuance of common stock 45,050 59,424
Subscriptions receivable (105,000) (105,000)
Additional paid-in capital 499,950 485,976
Contributed capital 50 50
---------------- ----------------
Net cash provided by financing activities 440,050 440,450
---------------- ----------------
Net increase (decrease)
in cash 423,405 423,405
Cash - beginning - -
---------------- ----------------
Cash - ending $ 423,405 $ 423,405
================ ================
Supplemental disclosures:
Interest paid $ - $ -
================ ================
Income taxes paid $ - $ -
================ ================
Non-cash activities $ - $ -
================ ================
The accompanying notes are an integral part of these financial statements.
5
Total Nutraceutical Solutions
(Formerly known as Generic Marketing Services, Inc.)
(A Development Stage Company)
Notes to Financial Statements
NOTE 1 - BASIS OF PRESENTATION
The interim financial statements included herein, presented in
accordance with United States generally accepted accounting principles and
stated in US dollars, have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading.
These statements reflect all adjustments, consisting of normal recurring
adjustments, which, in the opinion of management, are necessary for fair
presentation of the information contained therein. It is suggested that these
consolidated interim financial statements be read in conjunction with the
financial statements of the Company for the period ended July 31, 2008 and
notes thereto included in the Company's 10-KSB annual report. The
Company follows the same accounting policies in the preparation of interim
reports.
Results of operations for the interim periods are not indicative of annual
results.
Year-End
- --------
The board of directors approved a change in fiscal year-end financials to
December 31.
NOTE 2 - GOING CONCERN
These consolidated financial statements have been prepared in accordance with
generally accepted accounting principles applicable to a going concern which
contemplates the realization of assets and the satisfaction of liabilities and
commitments in the normal course of business. As at September 30, 2008, the
Company has not recognized any revenues to date and has accumulated
operating losses of approximately $(18,545) since inception. The Company's
ability to continue as a going concern is contingent upon the successful
completion of additional financing arrangements and its ability to achieve and
maintain profitable operations. While the Company is expending its best
efforts to achieve the above plans, there is no assurance that any such
activity will generate funds that will be available for operations.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. These financial statements do not include any
adjustments that might arise from this uncertainty.
6
Total Nutraceutical Solutions
(Formerly known as Generic Marketing Services, Inc.)
(A Development Stage Company)
Notes to Financial Statements
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company does not lease or rent any property. Office services are provided
without charge by a director. Such costs are immaterial to the financial
statements and, accordingly, have not been reflected therein. The officers and
directors of the Company are involved in other business activities and may, in
the future, become involved in other business opportunities. If a specific
business opportunity becomes available, such persons may face a conflict in
selecting between the Company and their other business interests. The Company
has not formulated a policy for the resolution of such conflicts.
NOTE 4 - STOCKHOLDERS' EQUITY
The Company is authorized to issue 70,000,000 shares of its $0.001 par value
common stock and 5,000,000 shares of its $0.001 par value preferred stock.
On August 13, 2007, record shareholders of the Company's common
stock were entitled to receive a special stock dividend of Generic Marketing
Services, Inc., a Nevada corporation, a wholly owned subsidiary of Basic
Services, Inc. This subsidiary was formed to focus on marketing
pharmaceutical and over-the-counter products, as compared to developing
products. This spin off will allow both companies to focus on their
different business plans and not compete in accessing funding in capital
markets.
On October 25, 2007, the record shareholders received one (1) common share,
par value $0.001, of Generic Marketing Services common stock for every share
of Basic Services, Inc. common stock owned. The Generic Marketing Services
stock dividend is based on 10,873,750 shares of Basic Services, Inc. common
stock that were issued and outstanding as of the record date. Subsequently,
10,873,750 shares were issued to the shareholders of Generic Marketing
Services, Inc., now known as Total Nutraceutical Solutions.
On July 10, 2008, the Company issued 40,000,000 unregistered shares of its
common stock, par value $0.001, from its treasury to fifteen individuals in
exchange for $40,000 cash.
On September 4, 2008, the Company issued 3,500,000 unregistered restricted
shares of its common stock, par value $0.001, from its treasury to Northwest
Medical Research Partners, Inc., in exchange for an Assignment and Assumption
Agreement, pursuant to which the Company has assumed the obligations of NW
Research Partners to maintain the patent prosecution associated with the
intellectual property and has an option to license from Pennsylvania State
University the technologies associated with the intellectual property.
7
Total Nutraceutical Solutions
(Formerly known as Generic Marketing Services, Inc.)
(A Development Stage Company)
Notes to Financial Statements
NOTE 4 - STOCKHOLDERS' EQUITY (Continued)
On September 30, 2008, the Company received $400,000 cash and $105,000 in
subscriptions receivable to issue 5,050,000 unregistered shares of its common
stock, par value $0.001, to thirteen individuals at $0.10 per share. This
offering also included one warrant for every two shares purchased. The
warrant is exercisable at $0.25, callable at the option of the company at
$0.001, if the stock traded at $0.50 per share for 2 consecutive days. The
Company sold these shares to further capitalize the Company. 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. The offer
and sale did not involve a public offering and there was not any general
solicitation or general advertising involved in the offer or sale.
There have been no other issuances of common or preferred stock.
NOTE 5 - SUBSEQUENT EVENTS
On October 7, 2008 the Company filed a Certificate of Amendment with the
Nevada Secretary of State changing its name to Total Nutraceutical Solutions.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Information
The Company 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.
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 July 31, 2008.
9
Results of Operations
- ---------------------
Overview of Current Operations
- ------------------------------
Total Nutraceutical Solutions, 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, the Company filed amended Articles with the
Secretary of State of the State of Nevada to change its corporate name to
Total Nutraceutical Solutions.
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 is currently
working on its own formulations to produce, manufacture and market is own
line of over-the-counter products, specifically nutraceutical products. The
Company has not developed nor produced any products at the close of its
fiscal year. Emphasis has been placed on raising sufficient capital to
develop these products. On October 8, 2008, the Company closed a private
offering whereby the Company raised $505,000 in exchange for 5,050,000
unregistered shares of its common stock. This figure does not include an
additional $25,000 raised in this offering which will equate to the issuance
of an additional 250,000 when the funds have cleared. These funds will be
used to develop and market nutraceutical products.
Business Strategy
- -----------------
We have had limited nutraceutical business activities. We are a development
stage entity in the process of establishing a business engaged in the contract
manufacture, distribution, and sale of nutraceutical products that are made
entirely of naturally occurring 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. We anticipate that the company
will sell directly to consumers products that have been designed by the
company and produced by outside contract manufacturers.
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.
10
Marketing Strategy
- ------------------
We believe our potential for growth involves the development of nutraceutical
product(s) that can be marketed and sold through physicians, 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 chains and other direct to consumer retailers.
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 and 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.
The success of new product introductions depends on various factors,
including, but not limited to the following:
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 may not 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.
11
Results of Operations for the quarter ended September 30, 2008
- --------------------------------------------------------------
We earned no revenues since our inception on July 19, 2007 through September
30, 2008. We do not anticipate earning any significant revenues until such
time as we can bring to the market a nutraceutical product(s). We are
presently in the development stage of our business and we can provide no
assurance that we will be successful in developing any nutraceutical
product(s).
For the period since inception through September 30, 2008, we generated no
income. Since our inception on July 19, 2007 we experienced a net loss of
$(18,545). Our loss was attributed to organizational expenses, accounting and
legal fees. We anticipate our operating expenses will increase as we start to
develop and market nutraceutical product(s). We anticipate our ongoing
operating expenses will also increase since we are a reporting company under
the Securities Exchange Act of 1934.
Revenues
- --------
We generated no revenues for the period from August 14, 2006 (inception)
through September 30, 2008. We do not anticipate generating any revenues for
at least 6-12 months.
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.
Summary of any product research and development that we will perform for the
term of our plan of operation.
- -----------------------------------------------------------------------------
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.
12
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, 2008, 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, 2008 reflects cash of $423,405 and
current liabilities of $1,500. Cash and cash equivalents from inception to
date have been sufficient to provide the operating capital necessary to
operate to date.
On October 8, 2008, we issued 5,050,000 unregistered shares of our common
stock, par value $0.001, from our treasury to thirteen individuals in exchange
for $505,000 cash. This figure does not include an additional $25,000 raised
in this offering which will equate to the issuance of an additional 250,000
when the funds have cleared. Management believes it has sufficient funds to
remain operational for next twelve months.
As a result of the Company's current limited available cash, no officer or
director received cash compensation during the quarter ended September 30,
2008. The Company has no employment agreements in place with its officers.
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.
13
Critical Accounting Policies and Estimates
- ------------------------------------------
Revenue Recognition: We recognize revenue from product sales once all of the
following criteria for revenue recognition have been met: pervasive evidence
that an agreement exists; the services have been rendered; the fee is fixed
and determinable and not subject to refund or adjustment; and collection of
the amount due is reasonable assured.
New Accounting Standards
- ------------------------
In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in
Consolidated Financial Statements". This statement amends ARB 51 to
establish accounting and reporting standards for the non-controlling
(minority) interest in a subsidiary and for the de-consolidation of a
subsidiary. It clarifies that a non-controlling interest in a subsidiary
is equity in the consolidated financial statements. SFAS No. 160 is effective
for fiscal years and interim periods beginning after December 15, 2008. The
adoption of SFAS 160 is not expected to have a material impact on the
Company's financial position, results of operation or cash flows.
As of January 1, 2008 we adopted SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities" ("SFAS No. 159"). SFAS No. 159
allows the company to choose to measure many financial assets and financial
liabilities at fair value. Unrealized gains and losses on items for which the
fair value option has been elected are reported in earnings. The adoption of
SFAS 159 has not had a material impact on our financial position, results of
operation or cash flows.
As of January 1, 2008 we adopted SFAS No. 157, "Fair Value Measurements"
("SFAS No. 157"). SFAS No. 157 defines fair value and provides guidance for
measuring and disclosing fair value. The adoption of SFAS 157 has not had a
material impact on our financial position, results of operation or cash flows.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
14
Item 4T. Controls and Procedures
(a) Evaluation of Internal Controls and Procedures
We are committed to maintaining disclosure controls and procedures that are
designed to ensure that information required to be disclosed in its Exchange
Act reports is recorded, processed, summarized, and reported within the time
periods specified in the U.S. Securities and Exchange Commission's rules and
forms, and that such information is accumulated and communicated to its
management, including its Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.
As required by Rule 13a-15(b) of the Exchange Act, we carried out an
evaluation, under the supervision and with the participation of its
management, including its Chief Executive Officer and the Chief Financial
Officer, to provide reasonable assurance regarding the reliability of
financial reporting and the reparation of the financial statements in
accordance with U. S. generally accepted accounting principles.
The evaluation examined those disclosure controls and procedures as of
September 30, 2008, the end of the period covered by this report Based
on that evaluation, they concluded that, during the period covered by this
report, such internal controls and procedures were not effective to detect
the inappropriate application of US GAAP rules as more fully described below.
This was due to deficiencies that existed in the design or operation of our
internal controls over financial reporting that adversely affected our
internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management
considered to be material weaknesses under the standards of the Public
Company Accounting Oversight Board were: (1) lack of a functioning audit
committee resulting in ineffective oversight in the establishment and
monitoring of required internal controls and procedures; (2) inadequate
segregation of duties consistent with control objectives; and (3) ineffective
controls over period end financial disclosure and reporting processes. The
aforementioned material weaknesses were identified by our President in
connection with the review of our financial statements as of September 30,
2008.
Management believes that the material weaknesses set forth in items (2) and
(3) above did not have an effect on our financial results. However,
management believes that the lack of a functioning audit committee resulted in
ineffective oversight in the establishment and monitoring of required
internal controls and procedures, which could result in a material
misstatement in our financial statements in future periods.
15
Additional procedures were performed in order for management to conclude with
reasonable assurance that the Company's financial statements contained in
this Quarterly Report on Form 10-Q present fairly, in all material respects,
the Company's financial position, results of operations and cash flows for
the periods presented.
This annual report does not include an attestation report of the
Corporation's registered public accounting firm regarding internal control
over financial reporting. Management's report was not subject to attestation
by the Corporation's registered public accounting firm pursuant to temporary
rules of the SEC that permit the Corporation to provide only the management's
report in this annual report.
(b) Management's Remediation Initiatives
- -----------------------------------------
In an effort to remediate the identified material weaknesses and other
deficiencies and enhance our internal controls, we have initiated, or plan to
initiate, the following series of measures:
We will create a position to segregate duties consistent with control
objectives and will increase our personnel resources and technical accounting
expertise within the accounting function when funds are available to us.
And, on August 28, 2008, we appointed outside directors to our board of
directors who shall appoint an audit committee resulting in a fully
functioning audit committee who will undertake the oversight in the
establishment and monitoring of required internal controls and procedures
such as reviewing and approving estimates and assumptions made by management
when funds are available to us.
Management believes that the appointment of the outside directors, who shall
appoint a fully functioning audit committee, will remedy the lack of a
functioning audit committee.
We anticipate that these initiatives will be at least partially, if not
fully, implemented by July 31, 2009. Additionally, we plan to test our
updated controls and remediate our deficiencies by July 31, 2009.
(c) Changes in internal controls over financial reporting
- ----------------------------------------------------------
There was no change in our internal controls over financial reporting that
occurred during the period covered by this report, that has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.
16
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 July 31, 2008 and the
discussion in Item 1, above, under "Financial Condition - Liquidity and Capital
resources.
Item 2 -- Unregistered Sales of Equity Securities and Use of Proceeds
On July 10, 2008, the Company issued 40,000,000 unregistered shares of its
common stock, par value $0.001, from its treasury to fifteen individuals in
exchange for $40,000 cash. 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. The offer and sale did not involve a
public offering and there was not any general solicitation or general
advertising involved in the offer or sale.
On September 4, 2008, the Company issued 3,500,000 unregistered restricted
shares of its common stock, par value $0.001, from its treasury to Northwest
Medical Research Partners, Inc., in exchange for an Assignment and Assumption
Agreement, pursuant to which the Company has assumed the obligations of NW
Research Partners to maintain the patent prosecution associated with the
intellectual property and has an option to license from Pennsylvania State
University the technologies associated with the intellectual property. These
shares will not be registered under the Securities Act of 1933, as amended
(the "Act") and were issued in the reliance upon the exemption from
registration provided by section 4(2) of the Act, on the basis that the
transaction does not involve a public offering.
17
On September 30, 2008, the Company issued 5,050,000 unregistered shares of its
common stock, par value $0.001, from its treasury to thirteen individuals in
exchange for $505,000 cash. This figure does not include an additional $25,000
raised in this offering which will equate to the issuance of an additional
250,000 when the funds have cleared. This offering also included one warrant
for every two shares purchased. The warrant is exercisable at $0.25, callable
at the option of the company at $0.001, if the stock traded at $0.50 per share
for 2 consecutive days. 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. The offer and sale did not involve a public offering and
there was not any general solicitation or general advertising involved in the
offer or sale.
Item 3 -- Defaults Upon Senior Securities
None.
Item 4 -- Submission of Matters to a Vote of Security Holders
None.
Item 5 -- Other Information
On or about November 1, 2008, Marvin Hausman, M.D., Chief Executive Officer of
the Company returned to the Treasury and the Company cancelled 10,000,000
shares of its common stock, $0.001 par value per share, that had been issued
and outstanding in the name of Marvin Hausman, M.D. Following the cancellation
of these shares, the Company has 45,923,750 common shares issued and
outstanding.
18
Item 6 -- Exhibits
Filed Period Filing
Exhibit Exhibit Description herewith Form ending Exhibit date
- -------------------------------------------------------------------------------
3.1 Articles of Incorporation, SB-2 3.1 08/06/2007
as currently in effect
- -------------------------------------------------------------------------------
3.2 Bylaws SB-2 3.2 08/06/2007
as currently in effect
- -------------------------------------------------------------------------------
3.3 Amended Articles of Merger 8-K 3.3 10/13/2008
Incorporation as currently
in effect
- -------------------------------------------------------------------------------
10.1 Exclusive Option Agreement 8-K 10.1 09/04/2008
dated May 1, 2006, between
The Penn State Research
Foundation and Northwest
Medical Research Inc.
- -------------------------------------------------------------------------------
10.2 Assignment Agreement to the 8-K 10.2 09/04/2008
Option Agreement, dated
July 31, 2008, among The Penn
State Research Foundation,
Northwest Medical Research Inc.
and Generic Marketing
Services, Inc.
- -------------------------------------------------------------------------------
10.3 Assignment and Assumption 8-K 10.3 09/04/2008
Agreement, dated July 31, 2008,
between Northwest Medical
Research Inc. and Generic
Marketing Services, Inc.
- -------------------------------------------------------------------------------
31.1 Certification of President X
and Principal Financial
Officer, pursuant to Section
302 of the Sarbanes-Oxley
Act
- -------------------------------------------------------------------------------
31.2 Certification of President X
and Principal Financial
Officer, pursuant to Section
906 of the Sarbanes-Oxley
Act
- -------------------------------------------------------------------------------
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Total Nutraceutical Solutions
-----------------------------
Registrant
Date: November 13, 2008 By: /s/ Frank Arnone
----------------- --------------------
Frank Arnone
President
20