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
 

 
1

 
 
 
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.
 
 
 
2

 
 
 
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  
 
 
 
3

 
 
 
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  
 
 
 
4

 
 
 
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     $ -  

 
 
5

 
 
 
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.
 
 
 
6

 
 
 
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.
 
 
 
7

 
 
 
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.
 

 
8

 
 
 
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.
 
 
 
9

 

 
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  

 
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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.
 
 
 
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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.
 
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.
 
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.
 
 
 
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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.
 
 
 
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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.
 
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.
 
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. 


 
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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.
 
 
 
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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.

 
 
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Item 6.  Exhibits
 
 
Exhibit No.
  
Title of Document
     
     
 
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*
     
 
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*
     
 
Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002 (Chief Executive Officer)**
     
 
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.

 
 
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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, there unto duly authorized.
  
 
BOSTON THERAPEUTICS, INC.
 
       
Date:  May 15, 2013
By:
/s/ David Platt                                             
 
   
David Platt
 
   
Chief Executive Officer and
Chief Financial Officer
 
 
 
 
 
 
 
 
 

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