Boston Therapeutics, Inc. - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - Boston Therapeutics, Inc.	Financial_Report.xls
EX-32.2 - EXHIBIT 32.2 - Boston Therapeutics, Inc.	exh32_2.htm
EX-31.2 - EXHIBIT 31.2 - Boston Therapeutics, Inc.	exh31_2.htm
EX-32.1 - EXHIBIT 32.1 - Boston Therapeutics, Inc.	exh32_1.htm
EX-31.1 - EXHIBIT 31.1 - Boston Therapeutics, Inc.	exh31_1.htm

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 March 31, 2013

	OR

o	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: 000-54586

BOSTON THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware		27-0801073
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1750 Elm Street, Suite 103, Manchester, NH		03104
(Address of principal executive offices)		(Zip Code)

603-935-9799

(Registrant’s telephone number, including area code)

(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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File 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 x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o

Non-accelerated filer o 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 o No x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class		Outstanding at May 7, 2013
Common Stock, $0.001 par value per share		19,363,539 shares

BOSTON THERAPEUTICS, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	3

Item 1. Unaudited Condensed Financial Statements	3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3. Quantitative and Qualitative Disclosures About Market Risk	15

Item 4. Controls and Procedures	15

PART II - OTHER INFORMATION	16

Item 1. Legal Proceedings	16

Item 1A. Risk Factors	16

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	16

Item 3. Defaults Upon Senior Securities	16

Item 4. (Removed and Reserved)	16

Item 5. Other Information	16

Item 6. Exhibits	17

SIGNATURES	18

Except as otherwise required by the context, all references in this report to "we", "us”, "our", “BTI” or "Company" refer to the consolidated operations of Boston Therapeutics, Inc., a Delaware corporation, formerly called Avanyx Therapeutics, Inc., and its wholly owned subsidiaries.

PART I - FINANCIAL INFORMATION

Item 1. Unaudited Condensed Financial Statements

Boston Therapeutics, Inc.
Balance Sheet (Unaudited)
March 31, 2013 and December 31, 2012

	March 31,			December 31,
	2013			2012
ASSETS
Cash	$	384,674		$	552,315
Accounts receivable		20,686			17,351
Prepaid expenses and other current assets		45,266			9,073
Inventory, net		25,379			16,809
Total current assets		476,005			595,548

Property and equipment, net		9,097			7,075
Intangible assets		744,643			760,714
Goodwill		69,782			69,782
Other assets		2,125			2,125
Total assets	$	1,301,652		$	1,435,244

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable	$	355,660		$	294,187
Accrued expenses and other current liabilities		157,716			146,774
Total current liabilities		513,376			440,961

Advances - related parties		297,820			297,820
Total liabilities		811,196			738,781

COMMITMENTS AND CONTINGENCIES (Note 6)

Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized,
none issued and outstanding		-			-
Common stock, $0.001 par value, 200,000,000 and 100,000,000 shares authorized
and 19,291,539 and 18,745,706 shares issued and outstanding at March 31, 2013
and at December 31, 2012, respectively		19,291			18,746
Additional paid-in capital		3,835,986			3,375,116
Accumulated deficit		(3,364,821	)		(2,697,399	)
Total stockholders’ equity		490,456			696,463

Total liabilities and stockholders’ equity	$	1,301,652		$	1,435,244

Boston Therapeutics, Inc.
Statement of Operations (Unaudited)
For the Three Month Periods Ended March 31, 2013 and 2012

	For the Three Months Ended
	March 31,			March 31,
	2013			2012

Revenue	$	23,336		$	18,854
Cost of goods sold		47,937			27,595
Gross margin		(24,601	)		(8,741	)

Operating expenses:
Research and development		28,661			51,628
Sales and marketing		81,226			67,180
General and administrative		528,170			124,536

Total operating expenses		638,057			243,344

Operating loss		(662,658	)		(252,085	)

Interest expense		4,764			4,178
Foreign currency loss		-			1,142
Net loss	$	(667,422	)	$	(257,405	)


Net loss per share- basic and diluted	$	(0.04	)	$	(0.02	)
Weighted average shares outstanding basic and diluted		18,880,845			16,223,206

Boston Therapeutics, Inc.
Statement of Cash Flows (Unaudited)
For the Three Month Periods Ended March 31, 2013 and 2012

	For the Three Months Ended
	March 31,			March 31,
	2013			2012
Cash flows from operating activities:
Net loss	$	(667,422	)	$	(257,405	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization		16,500			16,071
Stock based compensation		192,165			73,482
Issuance of common stock for consulting services		5,250			-
Changes in:
Accounts receivable		(3,335	)		(8,188	)
Inventory		(8,570	)		(1,130	)
Prepaid expenses and other current assets		(36,193	)		(527	)
Accounts payable		61,473			(20,911	)
Accrued expenses		24,942			(1,852	)

Net cash used in operating activities		(415,190	)		(200,460	)

Cash flows from investing activities:
Purchase of property and equipment		(2,451	)		-
Net cash used in investing activities		(2,451	)		-

Cash flows from financing activities:
Proceeds from issuance of common stock and warrants		250,000			-
Net cash provided by financing activities:		250,000			-
Net decrease in cash and cash equivalents		(167,641	)		(200,460	)

Cash and cash equivalents, beginning of period		552,315			225,995
Cash and cash equivalents, end of period	$	384,674		$	25,535

Suplemental disclosure of cash flow informatin
Cash paid during the period for
Interest	$	-		$	-

Income taxes	$	-		$	-

Non-cash investing and financing activities
Value of common stock issued to settle accrued liabilities	$	14,000		$	-

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements

For the Three Month Periods Ended March 31, 2013 and 2012

1. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

Company Overview

Boston Therapeutics, headquartered in Manchester, NH, (OTC: BTHE) is a leader in the field of complex carbohydrate chemistry. The Company's initial product pipeline is focused on developing and commercializing therapeutic molecules for diabetes: PAZ320, a non-systemic chewable therapeutic compound designed to reduce post-meal glucose elevation; IPOXYN™, an injectable anti-necrosis drug specifically designed to treat lower limb ischemia associated with diabetes; SUGARDOWN®, a non-systemic chewable complex carbohydrate dietary supplement designed to moderate post-meal blood glucose , and BTI-7, a new, chewable dose form of the diabetes drug metformin hydrochloride.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has limited resources and operating history. As shown in the accompanying financial statements, the Company has an accumulated deficit of approximately $3,365,000 as of March 31, 2013 and has negative working capital of approximately $37,000 as of March 31, 2013. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its new business opportunities.

Management has plans to seek additional capital through private placements and public offerings of its common stock. There can be no assurance that the Company will be successful in accomplishing its objectives. Without such additional capital, the Company may be required to cease operations.

These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") for interim financial information and the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q. It is suggested that these condensed financial statements be read in conjunction with the Company's financial statements for its year ended December 31, 2012 included in its Form 10-K. In the opinion of management, the statements contain all adjustments, including normal recurring adjustments necessary in order to present fairly the financial position as of March 31, 2013 and the results of operations for the three month periods ended March 31, 2013 and 2012.

The year-end balance sheet data was derived from the audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results disclosed in the Statements of Operations for the three month period ended March 31, 2013 are not necessarily indicative of the results to be expected for the full fiscal year.

Use of Estimates

The preparation of financial statements in conformity with US 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

Inventory

Inventory consists of raw materials and finished goods of SUGARDOWN®. Inventories are stated at the lower of cost (first-in, first-out) or market, not in excess of net realizable value. The Company adjusts the carrying value of its inventory for excess and obsolete inventory. The Company continues to monitor the valuation of its inventory.

Revenue Recognition

The Company generates revenues from sales of SUGARDOWN®. Revenue is recognized when there is persuasive evidence that an arrangement exists, the price is fixed and determinable, the product is shipped and collectability is reasonably assured.

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements

For the Three Month Periods Ended March 31, 2013 and 2012

1. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES…continued

Revenue Recognition…continued

Revenue is recognized as product is shipped from an outside fulfillment operation. Terms of product sales provide for 30 day money back guarantee. In practice, the Company has not experienced or granted significant returns of product. Shipping fees charged to customers are included in revenue and shipping costs are included in costs of sales.

Stock-Based Compensation

Stock–based compensation, including grants of employee and non-employee stock options and modifications to existing stock options, is recognized in the income statement based on the estimated fair value of the awards. The Company uses the Black-Scholes option pricing model to determine the fair value of options granted and recognizes the compensation cost of share-based awards on a straight-line basis over the vesting period of the award.

The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by the stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. The Company does not have a history of market prices of the common stock as, and as such volatility is estimated using historical volatilities of similar public entities. The expected life of the awards is estimated based on the simplified method. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of our awards. The dividend yield assumption is based on history and expectation of paying no dividends. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Stock-based compensation expense is recognized in the financial statements on a straight-line basis over the vesting period, based on awards that are ultimately expected to vest.

The Company grants stock options to non-employee consultants from time to time in exchange for services performed for the Company. Equity instruments granted to non-employees are subject to periodic revaluation over their vesting terms. In general, the options vest over the contractual period of the respective consulting arrangement and, therefore, the Company revalues the options periodically and records additional compensation expense related to these options over the remaining vesting period.

Loss per Share

Basic net loss per share is computed based on the net loss for the period divided by the weighted average actual shares outstanding during the period. Diluted net loss per share is computed based on the net loss for the period divided by the weighted average number of common shares and common equivalent shares outstanding during each period unless the effect of such common equivalent shares would be anti-dilutive. Common stock equivalents represent the dilutive effect of the assumed exercise of certain outstanding stock options and warrants using the treasury stock method. The weighted average number of common shares for the three months ended March 31, 2013 and 2012 did not include 8,821,400 and 1,898,400 options and warrants, respectively, because of their anti-dilutive effect.

2. STOCKHOLDERS’ EQUITY

The Company is authorized to issue up to 5,000,000 shares of its $0.001 par value preferred stock. During the period ended March 31, 2013, the board of directors of the Company approved an amendment to the Company’s Certificate of Incorporation to increase the number of $0.001 par value common stock shares from 100,000,000 shares to 200,000,000 shares.

Common Stock

On May 7, 2012 the Company issued 20,000 shares of common stock at a price per share of $1.10 and issued a warrant to purchase an additional 20,000 shares of common stock at $1.15 per share for gross proceeds of $22,000. The warrant associated with the subscription agreement is exercisable immediately and has a five year term. The Company estimated the relative fair value of the warrant to be $8,754 using the Black Scholes model, which has been recorded as a component of permanent equity in additional paid in capital.

During May 2012 the Company entered into a consulting agreement under which it is required to pay the consultant a monthly fee consisting of 25,000 shares of restricted common stock beginning May 21, 2012 through May 21, 2013. As of December 31, 2012 the Company has issued 150,000 shares due under this agreement for services rendered during June through November 2012 with a fair value of $76,500. An accrual in the amount of $14,000 representing the fair value of the 33,333 unissued shares for services rendered in December 2012 is included in the accompanying December 31, 2012 balance sheet.

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements

For the Three Month Periods Ended March 31, 2013 and 2012

2. STOCKHOLDERS’ EQUITY…continued

Common Stock…continued

During June 2012 the Company issued 80,000 shares of its common stock with a fair value of $40,800 in exchange for professional consulting services.

On June 29, 2012 the Company issued 1,000,000 shares to an affiliate of Advance Pharmaceutical Co., Ltd. (APC) in a private placement for net proceeds of $500,000. APC is licensed to distribute SUGARDOWN® in Hong Kong, China and Macau. The Company reviewed the private placement issuance and determined that the issuance price of $0.50 per share approximates fair value as of the date of issuance.

During July 2012 the Company entered into a consulting agreement under which it is required to pay the consultant a monthly fee consisting of $4,000 paid in cash and 7,500 shares of restricted common stock. As of December 31, 2012 the Company has issued the 22,500 total shares due under this agreement for services rendered during July, August and September 2012 with an aggregate fair value of $11,475. The agreement was terminated as of September 30, 2012.

On December 12, 2012 the Company issued 1,250,000 shares of its common stock at a price per share of $0.50 and issued a warrant to purchase 625,000 additional shares for $1.00 per share for gross proceeds of $625,000. The warrant associated with the subscription agreement is exercisable immediately and has a five year term. The Company estimated the relative fair value of the warrant to be $124,019 using the Black Scholes model, which has been recorded as a component of permanent equity in additional paid in capital.

On January 22, 2013 the Company issued 45,833 shares of its common stock with a fair value of $19,250 in exchange for consulting services incurred in fiscal 2012 and January of 2013. As of December 31, 2012, the Company had accrued $14,000 representing the fair value of the 33,333 unissued shares for services rendered in December 2012 which was included in the accompanying December 31, 2012 balance sheet. The agreement was terminated in January 2013.

On March 14, 2013 the Company issued 500,000 shares of its common stock at a price per share of $0.50 and issued a warrant to purchase 250,000 additional shares for $1.00 per share for gross proceeds of $250,000. The warrant associated with the subscription agreement is exercisable immediately and has a five year term. The Company estimated the relative fair value of the warrant to be $35,457 using the Black Scholes model, which has been recorded as a component of permanent equity in additional paid in capital.

As of March 31, 2013 the Company has an accrual in the amount of $16,000 representing the fair value of unissued shares of restricted common stock for services rendered during the period ended March 31, 2013 in the accompanying balance sheet for the period ended March 31, 2013.

3. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION

During the period ended March 31, 2013, the board of directors of the Company aproved an amendment of the stock option plan entitled “The 2010 Stock Plan” (2010 Plan) to increase the number of shares which the Company may grant options to purchase shares of common stock from 5,000,000 to 7,500,000. As of March 31, 2013 and December 31, 2012, there were 578,400 options outstanding under the 2010 Plan, respectively. The amendment will be effective upon approval by the Company's stockholders.

During the period ended March 31, 2013, the Company amended the non-qualified stock option plan entitled “2011 Non-Qualified Stock Plan” (2011 Plan) to increase the number of shares which the Company may grant options to purchase shares of common stock from 12,000,000 to 17,500,000. As of March 31, 2013 and December 31, 2012, there were 7,348,000 and 7,130,000 options outstanding under the 2011 Plan, respectively.

Under the terms of the stock plans, the Board of Directors shall specify the exercise price and vesting period of each stock option on the grant date. Vesting of the options is typically three to four years and the options expire ten years from the date of grant.

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements

For the Three Month Periods Ended March 31, 2013 and 2012

3. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION…continued

The fair value of stock options granted for three months ended March 31, 2013 and 2012 was calculated with the following assumptions:

	2013			2012
Risk-free interest rate		0.66% - 1.00	%		1.27	%
Expected dividend yield		0	%		0	%
Volatility factor		85	%		90	%
Expected life of option	4.50 to 6 years			5 to 7 years

The weighted-average fair value of stock options granted during the periods ended March 31, 2013 and 2012, under the Black-Scholes option pricing model was $0.25 and $0.22 per share, respectively.

The Company recognized $192,165 and $73,482 of stock-based compensation costs in the accompanying statement of operations for the three months ended March 31, 2013 and 2012, respectively. As of March 31, 2013, there was approximately $1,448,000 of unrecognized compensation expense related to non-vested stock option awards that is expected to be recognized over a weighted average period of 2.25 years.

	Shares		Exercise Price per Share		Weighted Average Exercise Price per Share
Outstanding as of December 31, 2012		7,708,400	$	0.10-1.85	$	0.42
Granted		218,000		0.42-1.00		0.74
Exercised		-		-		-
Options forfeited/cancelled		-		-		-
Outstanding as of March 31, 2013		7,926,400	$	0.10-1.85	$	0.43

The following table summarizes information about stock options that are vested or expected to vest at March 31, 2013:

Vested or Expected to Vest										Exercisable Options
				Weighted		Weighted						Weighted		Weighted
				Average		Average						Average		Average
				Exercise		Remaining		Aggregate		Number		Exercise		Remaining		Aggregate
Exercise		Number of		Price Per		Contractual		Intrinsic		of		Price		Contractual		Intrinsic
Price		Options		Share		Life (Years)		Value		Options		Per Share		Life (Years)		Value
$	0.10		1,800,000	$	0.10		3.63	$	378,000		1,425,000	$	0.10		3.67	$	299,250
	0.42		98,000		0.42		7.76		-		-		0.42		-		-
	0.50		5,830,000		0.50		7.76		-		1,413,334		0.50		5.43		-
	1.00		120,000		1.00		5.76		-		30,000		1.00		5.76		-
	1.85		78,400		1.85		2.50		-		78,400		1.85		2.50		-
$	0.10-1.85		7,926,400	$	0.43		4.63	$	378,000		2,946,734	$	0.32		4.50	$	299,250

The weighted-average remaining contractual life for options exercisable at March 31, 2103 is 4.50 years. At March 31, 2013 the Company has 10,152,000 and 4,421,600 options available for grant under the 2011 Plan and 2010 Plan, respectively. The intrinsic value for fully vested, exercisable options was $299,250 and $418,000 at March 31, 2013 and December 31, 2012, respectively. No actual tax benefit was realized from stock option exercises during these periods.

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements

For the Three Month Periods Ended March 31, 2013 and 2012

4. RELATED PARTY TRANSACTIONS

Through December 31, 2011, the CEO advanced $257,820 to BTI to fund start-up costs and operations of the Company. Advances by the CEO carry an interest rate of 6.5% and were due on June 29, 2013. On May 7, 2012, the Company’s CEO and President entered into promissory notes to advance to the Company an aggregate of $40,000. The notes accrue interest at 6.5% per year were due June 30, 2013. As of March 31, 2013, and December 31, 2012, $48,854 and $44,090, respectively, of accrued interest had been included in accrued expenses on the accompanying balance sheet. On August 6, 2012, the outstanding notes of $297,820 were amended to extend the maturity dates to June 29, 2014. The CEO and President intend to, but are not legally obligated, to fund the Company’s operations in this manner until the Company raises sufficient capital.

On November 13, 2012, Jonathan B. Rome, the Company's Chief Operating Officer, and the Company entered into a securities purchase agreement pursuant to which Mr. Rome invested $625,000 in the Company's offering of common stock and warrants on Form S-1 to purchase an aggregate of 1,250,000 shares of the Company's common stock at $0.50 per share and 625,000 warrants to purchase 625,000 shares of its common stock. The exercise price of the warrants is $1.00 per share. The warrants have a five-year term.

5. INTANGIBLE ASSETS

The SUGARDOWN® technology and provisional patents are being amortized on a straight-line basis over their useful lives of 14 years. Goodwill is not amortized, but is evaluated annually for impairment.

Intangible assets consist of the following at March 31, 2013 and December 31, 2012:

	2013			2012
SUGARDOWN® technology and provisional patents	$	900,000		$	900,000
Less accumulated amortization		(155,357	)		(139,286	)
Intangible assets, net	$	744,643		$	760,714

Amortization expense was $16,071 for the three months ended March 31, 2013 and 2012, respectively.

6. COMMITMENTS AND CONTINGENCIES

The Company entered into a three year lease agreement for their office lease facility commencing July 1, 2012, with escalating rental payments. On February 21, 2013, the Company amended the lease agreement to extend the lease through March 2018 and increase rental space. The effects of variable rent disbursements have been expensed on a straight-line basis over the life of the lease. The Company has recognized rent expense of $19,728 and $1,115 for the three months ended March 31, 2013 and 2012, respectively. As of March 31, 2013 and December 31, 2012, there was $15,260 and $2,267, respectively, of deferred rent included in accrued expenses and other current liabilities in the accompanying balance sheets.

Future minimum lease payments under all non-cancelable operating leases as of March 31, 2013 are as follows:

Fiscal year
2013	$	43,902
2014		60,093
2015		62,169
2016		64,299
2017		66,519
2018		16,770
	$	313,752

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements

For the Three Month Periods Ended March 31, 2013 and 2012

7. SUBSEQUENT EVENTS

The Company has evaluated events and transactions that occurred from March 31, 2013 through the date of filing, for possible disclosure and recognition in the financial statements. Except as discussed below, the Company did not have any material subsequent events that impact its financial statements or disclosures.

In April 2013, the Company approved a grant of stock options to a Consultant under the 2011 Plan for the purchase of 7,500 shares of the Company’s common stock at an exercise price of $1.00 per share as part of the Consultants compensation for each month of service.

In April 2013, the Company approved a grant of warrants and restricted shares to a corporate communications and investor relations Consultant and service provider as partial consideration for her services to the Company: (a) a five-year warrant to purchase 100,000 shares of the Corporation’s common stock at a strike price of $1.00 per share, and (b) 12,000 shares of the Corporation’s common stock per month of service.

In April 2013, the Company approved a grant to a Consultant of 48,000 shares of the Company’s common stock for services to be delivered over a period of up to six months in connection with the identification and engagement of a pharma partner or partners for the Company’s products.

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

The following discussion and analysis is based on, and should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Form 10-Q . This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Report on Form 10-Q.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2013 COMPARED TO MARCH 31, 2012

Overview

Boston Therapeutics, headquartered in Manchester, NH, (OTC: BTHE) is a leader in the field of complex carbohydrate chemistry. The Company's initial product pipeline is focused on developing and commercializing therapeutic molecules for diabetes: PAZ320, a non-systemic chewable complex carbohydrate-based, drug candidate designed to moderate post-meal blood glucose; IPOXYN, an injectable anti-necrosis drug specifically designed to treat lower limb ischemia associated with diabetes; SUGARDOWN®, a non-systemic dietary food supplement designed to reduce the post prandial glucose in the blood, and BTI -7, a new, chewable dose form of the diabetes drug metformin hydrochloride.

Overall Results

Revenue for the three month period ended March 31, 2013 was $23,336 compared with $18,854 for the same period in the prior year, an increase of $4,482. Revenues for both periods were generated from the sale of SUGARDOWN®. The increase was the result of a shipment of SUGARDOWN® to one customer in the amount of $20,687 during the three months ended March 31, 2013.

Costs of Goods Sold

Cost of goods sold for the three months ended March 31, 2013 were $47,937 compared with $27,595, for the same period in the prior year, an increase of $20,342. The increase in cost of goods sold relates to the shipment of product to the customer described above. The Company's negative gross profit is attributable to cost of goods sold out-pacing sales as a result of additional fixed costs related to the outsourced fulfillment operation, and manufacturing scale-up from small to production-grade equipment.

Operating Expenses

We had research and development expense of $28,661 for the three months ended March 31, 2013 compared with $51,628 for the same period in the prior year, a decrease of $22,967. The decrease is primarily the result of less research and development activity during the three months ended March 31, 2013 compared to the same period in 2012.

Sales and marketing expense for the three months ended March 31, 2013 was $81,226 compared with $67,180 for the same period in the prior year, an increase of $14,046. This expense category consists primarily of costs incurred with third parties for product marketing and redesigning the SUGARDOWN ® website in 2013 and 2012.

General and administrative expense for the three months ended March 31, 2013 was $528,170 compared with $124,536 for the same period in the prior year, an increase of $403,634. The increase is primarily the result of the addition of three employees during the fourth quarter of 2012 and the first quarter of 2013 resulting in payroll related expenses of approximately $45,000, cost of a consultant in the first quarter of 2013 to increase the Company’s visibility in the securities markets totaling $50,000, increased professional fees of $30,000, increased consulting fees fo $44,000, increased office, rent and administrative expense of $37,000, increased legal expense of $30,000, and increased stock based compensation of approximately $147,000.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2013

As of March 31, 2013, we had cash of $384,674 and accounts payable and accrued expenses and other current liabilities of $513,376. The cash is largely attributable to cash received from the sale of equity during the period.

We must raise new capital to continue our business operations and intend to use the provisional patent, patent and know-how contributed by our CEO and the assets acquired from BTI to raise capital. Our CEO may provide minimal cash to fund critical needs until shares are sold to raise capital. We anticipate the need for approximately $2,000,000 to $8,000,000 in additional funding to support the planned expansion of our operations over the next approximately 12 to 24 months. There is no guarantee that we will be successful in raising additional funds

We have received minimal revenues from our SUGARDOWN® product. Without substantial revenue and known, adequate and available financing, there is uncertainty regarding the Company's ability to continue as a going concern.

Our CEO and our President may continue to provide minimal cash to fund critical needs until shares are sold to raise capital or SUGARDOWN® or other products generate sufficient revenues to fund the operations of the Company, but is not obligated to do so.

Our CEO also contributed a provisional patent, a patent and know-how to the Company. We intend to use these assets and PAZ320 and IPOXYN as well as SUGARDOWN® to attract investors in order to raise the capital required to fund operations.

Other than our CEO’s and our President's intention to provide minimal cash, we have no current commitment from our officers and directors or any of our shareholders, to supplement our operations or provide us with financing in the future. If we are unable to raise additional capital from conventional sources and/or additional sales of stock in the future, we may be forced to curtail or cease our operations. Even if we are able to continue our operations, the failure to obtain financing could have a substantial adverse effect on our business and financial results. In the future, we may be required to seek additional capital by selling debt or equity securities, and we may be required to cease operations, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. The sale of additional equity or debt securities, if accomplished, may result in dilution to our then shareholders. We provide no assurance that financing will be available in amounts or on terms acceptable to us, or at all.

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 of operations, liquidity, capital expenditures or capital resources that are material to our investors.

CRITICAL ACCOUNTING POLICIES

See Note 1 Summary of Significant Accounting Policies, of the Notes to Unaudited Condensed Financial Statements in Part I, Item 1 herein for a discussion of critical accounting policies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide the information requested by this item, as provided by Regulation S-K Item 305(e).

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Pursuant to Rules 13a-15(b) and 15-d-15(b) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer (“CEO/CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. The term “disclosure controls and procedures”, as defined under Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based upon the evaluation of the disclosure controls and procedures at the end of the period covered by this report, the Company’s CEO/CFO concluded that the Company’s disclosure controls and procedures were not effective due to a material weakness in the Company’s internal control over financial reporting as discussed below.

Changes in Internal Control over Financial Reporting

The Company has evaluated the changes in its internal control over financial reporting that occurred during the quarter ended March 31, 2013 and concluded that the following matters have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As of March 31, 2013, there was a material weakness in the Company’s internal control over financial reporting due to the fact that the Company did not have a process established to ensure adequate levels of review of accounting and financial reporting matters, which resulted in our closing process not identifying all required adjustments in a timely fashion.

Although the Company has hired consultants to assist with SEC reporting and accounting matters, we expect that the Company will need to hire accounting personnel with the requisite knowledge to improve the levels of review of accounting and financial reporting matters. The Company may experience delays in doing so and any such additional employees would require time and training to learn the Company’s business and operating processes and procedures. For the near-term future, until such personnel are in place, this will continue to constitute a material weakness in the Company’s internal control over financial reporting that could result in material misstatements in the Company’s financial statements not being prevented or detected. The Company’s management, including the Company’s CEO/CFO, does not expect that the Company’s internal control over financial reporting will prevent all errors and all fraud. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

There have not been any material changes from the risk factors previously disclosed under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2012.

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

None

Item 3. Defaults Upon Senior Securities

None.

Item 4. (Removed and Reserved)

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit No.		Title of Document


31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended*

31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as amended*

32.1		Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002 (Chief Executive Officer)**

32.2		Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002 (Chief Financial Officer)**

101		The following financial statements from the Quarterly Report on Form 10-Q of Boston Therapeutics, Inc. for the quarter ended March 31, 2012 formatted in XBRL: (i) Condensed Balance Sheets (unaudited), (ii) Condensed Statements of Operations (unaudited), (iii) Condensed Statements of Cash Flows (unaudited), and (iv) Notes to Condensed Financial Statements (unaudited), tagged as blocks of text.*

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

*Filed as an exhibit hereto.

**These certificates are furnished to, but shall not be deemed to be filed with, the Securities and Exchange Commission.

SIGNATURES

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

	BOSTON THERAPEUTICS, INC.

Date: May 15, 2013	By:	/s/ David Platt
		David Platt
		Chief Executive Officer and Chief Financial Officer

Boston Therapeutics, Inc. - FORM 10-Q - May 15, 2013

Attached files

Boston Therapeutics, Inc. Reports