THERAPEUTIC INTERNATIONAL : MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-K)

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The following discussion and analysis should be read in conjunction with the
consolidated Financial Statements and Notes thereto appearing elsewhere in this
Annual Report.



Overview


Currently, the Company is focused on immune modulation for the treatment of
several specific diseases. Immune modulation refers to the ability to upregulate
(make more active) or downregulate (make less active) one’s immune system.

Activating one’s immune system is now an accepted method to cure certain
cancers, reduce recovery time from viral or bacterial infections and to prevent
illness. Additionally, inhibiting one’s immune system is vital for reducing
inflammation, autoimmune disorders and allergic reactions.

Nutraceutical Division – TSI has been producing high quality nutraceuticals. Its
flagship product, ProJuvenol®, is a proprietary mixture containing pterostilbene
– one of the most potent antioxidants known. TSI filed a patent application for
ProJuvenol® on 07-08-2015 titled: “Augmentation of Oncology Immunotherapies by
Pterostilbene Containing Compositions”.

SandBox Dental Labs, Inc. – is a wholly-owned subsidiary of TSI consisting of a
future dental laboratory to manufacture and fill prescriptions from dentists who
will use our proprietary Sleep Appliance to treat their patients with mild to
moderate obstructive sleep apnea. The Company needs to seek regulatory approval
for its device to treat sleep apnea. As of December 31, 2019 and April 1, 2020,
formal operations have not commenced.



Results of Operations


We had a net loss of approximately $1.7 million in 2019 compared to a net loss
of approximately $1.9 million in 2018.

Net sales increased $24,011 from $3,484 to $27,495, for the years ended December
31, 2018
and 2019, respectively. This increase was mainly due to an increase in
sales of the Company’s nutraceutical line of products.

Cost of goods sold increased $858, from $2,157 to $3,015, for the years ended
December 31, 2018 and 2019, respectively. This increase was mainly due to higher
net sales of the Company’s new nutraceutical line of products in 2019 vs 2018.

Operating expenses for the years ended December 31, 2019 and 2018 were
approximately $1.1 million and $1.2 million, respectively, a decrease of
$100,000. This decrease was mainly due a combination of decreased general and
administrative expenses, decreased salaries, wages and related costs, an
increase in consulting fees, a decrease in legal and accounting fees, and a
decrease in research and development.

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General and administrative expenses decreased approximately $337,000, from
$408,000 to $71,000, for the years ended December 31, 2018 and 2019,
respectively. This decrease was mainly due to a decrease in bad debt, marketing
and insurance during the year.

Salaries, wages and related expenses decreased approximately $110,000, from
$415,000 to $305,000, for the years ended December 31, 2018 and 2019,
respectively. This decrease was mainly due to a decrease in officers’ salaries.

Consulting fees increased approximately $468,000 from $113,000 to $181,000 for
the years ended December 31, 2018 and 2019, respectively, due to an increase in
overall consulting services during 2019.

Legal and professional fees decreased approximately $62,000, from $190,000 to
$128,000 for the years ended December 31, 2018 and 2019, respectively, due to a
decrease in overall accounting, patent and general counsel services.

Research and development costs decreased approximately $47,000 from $75,000 to
$28,000, for the years ended December 31, 2018 and 2019, respectively. This
decrease was mainly due to research and development expenses related to the
Company’s nutraceutical line of products.

Total loss from derivatives liabilities decreased approximately $122,000 from
$425,000 to $303,000 for the years ended December 31, 2018 and 2019,
respectively. This decrease was due to a derivative liability expense from
certain convertible notes in 2019 compared to 2018.

Net interest expense increased approximately $109,000 from $242,000 to $351,000
for the years ended December 31, 2018 and 2019, respectively. This increase was
mainly due to increased debt balances.

Liquidity and Capital Resources

We have experienced recurring losses over the past years which have resulted in
accumulated deficits of approximately $8.8 million and a working capital deficit
of approximately $2 million at December 31, 2019. These conditions raise
significant doubt about the Company’s ability to continue as a going concern.
The Company’s ability to continue as a going concern is contingent upon its
ability to secure additional financing, increase sales of its products and
attain profitable operations. It is the intent of management to continue to
raise additional capital. However, there can be no assurance that the Company
will be able to secure such additional funds or obtain such on terms
satisfactory to the Company, if at all.

There is no guarantee we will receive the required financing to complete our
business strategies, and it is uncertain whether future financing will be
available to us on acceptable terms. If financing is not available on
satisfactory terms, we may be unable to continue, develop or expand our
operations.

As of December 31, 2019, we had approximately $26,000 in cash and cash
equivalents, representing an increase in cash and cash equivalents of
approximately $4,000 from December 31, 2018. Sources of cash were predominantly
from the sale of equity and debt. We anticipate that our current sources of
liquidity, including cash and cash equivalents, together with our current
projections of cash flow from operating activities, will provide us with
liquidity into the third quarter of 2020.

Cash Flows from Operating Activities

Our cash flows from operating activities are significantly affected by our cash
outflows to support the growth of our business in areas such as R&D and G&A
expenses. Our operating cash flows are also affected by our working capital
needs to support personnel related expenditures, accounts payable and other
current assets and liabilities.

During the year ended December 31, 2019, cash used in operating activities was
$315,609, which was primarily the result of our net loss incurred of $1,697,322,
partially offset by increases in the various accounts payable and accrued
liability accounts totaling $283,093 and non-cash expenses including stock-based
compensation of $468,000, loss on derivative liabilities of $352,934, and
amortization of debt discount of $278,593.

During the year ended December 31, 2018, cash used in operating activities was
$469,172, which was primarily the result of our net loss incurred of $1,866,912,
and increases in prepaids and other current assets of $112,467 and the
right-of-use asset of $47,086. This was partially offset by non-cash expenses
including stock-based compensation of $623,250, loss on derivative liabilities
of $388,121, and amortization of debt discount of $194,985.

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Cash Flows from Financing Activities

During the year ended December 31, 2019, net cash provided by financing
activities was $314,741, compared to $491,540 during the year ended December 31,
2018
. The decrease of approximately $177,000 in net cash provided by financing
activities is mainly attributable to a decrease of $173,000 in cash received
from the sale of common stock due to the Company’s declining stock price. Other
cash flows provided by financing activities during the year ended December 31,
2019
included proceeds from convertible notes payable to related and third
parties totaling $275,000 offset by payments on notes payable to related parties
of $3,689 and payments on convertible notes payable of $33,000. Other cash flows
provided by financing activities during the year ended December 31, 2018
included proceeds from convertible notes payable to third parties totaling
$245,000 offset by payments on notes payable to related parties of $2,460.

Off-Balance Sheet Arrangements.

We currently do not have any off-balance sheet arrangements.

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