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

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

On May 23, 2011, 61,362,470 shares of the registrant's common stock, par value $.001 per share, were outstanding.

TABLE OF CONTENTS

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PART I – FINANCIAL INFORMATION

Item1. Financial Statements

Total Nutraceutical Solutions, Inc.

March 31, 2011 and 2010

Index to Financial Statements

Contents                                                                                                                                                                                                         Page(s)

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Total Nutraceutical Solutions, Inc.

March 31, 2011 and 2010

Notes to the Consolidated Financial Statements

(Unaudited)

NOTE 1 - ORGANIZATION AND OPERATIONS

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

On March 26, 2010 we entered into a Profit Sharing Agreement or Direct Marketing Affiliates Project (DMAP) with American Charter & Marketing LLC (ACM) and Delta Group Investments Limited (DGI), with the primary focus of undertaking a direct mail marketing campaign designed to sell nutraceutical products developed and manufactured by TNS.  We acted as Managing Affiliate.  DGI provided $300,000 in the form of a loan, as starting capital for the project.   The net profits of the DMAP project were to be shared with 25% going to the Company, 25% to DGI, 25% to ACM and 25% as a return on the initial loan.  This agreement was terminated subsequent to December 31, 2010, effective February 17, 2011.

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

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

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and principles of consolidation

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

The consolidated financial statements include all accounts of TNS as of March 31, 2011 and 2010 and for the interim periods then ended; and all accounts of DMAP as of February 17, 2011 and for the period from March 26, 2010 (inception) through December 31, 2010.  All inter-company balances and transactions have been eliminated.

Use of estimates

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

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Inventory

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

Discount on convertible notes payable

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

Derivatives embedded in certain debt securities

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

Fair value of financial instruments

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

The carrying amounts of our financial assets and liabilities, such as cash, accounts receivable, prepaid expenses, accounts payable and accrued officer’s compensation, approximate their fair values because of the short maturity of these instruments.  Our lease receivable, notes payable and convertible notes payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to TNS for similar financial arrangements at March 31, 2011 and 2010.

We do not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis. Consequently, we did not have any fair value adjustments for assets and liabilities measured at fair value at March 31, 2011 or 2010, nor any gains or losses reported in the consolidated statement of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date for the periods ended March 31, 2011 and 2010.

Revenue recognition

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

Revenues from the sale of products, including shipping and handling fees but excluding statutory taxes collected from customers, as applicable, are recognized when shipment has occurred. We sell our products directly to customers.  Persuasive

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evidence of an arrangement is demonstrated via order and invoice, product delivery is evidenced by a bill of lading from the third party carrier and title transfers upon shipment, the sales price to the customer is fixed upon acceptance of the order and there is no separate sales rebate, discount, or volume incentive.

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

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

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

Net loss per common share

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

Reclassifications 

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

Segments

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

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Recently issued accounting pronouncements

        In October 2009, the FASB issued new authoritative guidance to require companies to allocate revenue in multiple-element arrangements based on an element's estimated selling price if vendor-specific or other third-party evidence of value is not available. The new guidance is effective for revenue transactions entered into during fiscal years beginning on or after June 15, 2010, with earlier application permitted. The early adoption of this guidance did not have a material impact on our consolidated financial position, results of operations or cash flows.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

NOTE 3 – INVENTORY

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

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment, stated at cost, less accumulated depreciation at March 31, 2011 and December 31, 2010 consisted of the following:

NOTE 5 – NOTE PAYABLE

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

NOTE 6 – SHORT-TERM CONVERTIBLE NOTE PAYABLE

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Proceeds from the issuance of $250,000 from short-term convertible promissory notes and warrants were allocated between the notes and warrants on a relative fair value basis.  The issuance of $250,000 includes one $100,000 promissory note that bears interest at 6% per annum and matured on December 31, 2010.  We are currently negotiating an extension to this note.  In addition, two promissory notes were issued with principal of $100,000 and $50,000 which bear interest at 6% per annum and mature on December 31, 2011.  The total value allocated to the warrants was approximately $123,750.  The fair value of the warrants was determined using the Black-Scholes option pricing model based on the following assumptions: expected dividend yield of 0%, risk-free interest rate of 2.46 – 2.49%, volatility of 72.67 – 78.08% and a contractual life of 5 years.  The value of the warrants was recorded as a debt discount against the proceeds of the notes.  In addition, the beneficial conversion features related to the notes were determined to be approximately $126,250.  As a result, the total discount on the notes totaled $250,000, and is being amortized over term of the notes.  Amortization of debt discount of approximately $45,600 and $10,000 was recorded for the three months ending March 31, 2011 and 2010, respectively. 

NOTE 7 – CONVERTIBLE NOTES PAYABLE - RELATED PARTIES

Proceeds from the issuance of a $50,000 convertible promissory note and warrants from related parties was allocated between the notes and warrants on a relative fair value basis.  This note bears interest at 6% per annum and matures on December 31, 2011.  The related party note holders are (i) Marvin Hausman, M.D., Chief Executive Officer, Director and Stockholder of TNS and (ii) Philip Sobol, a Director of the TNS.  The total value allocated to the warrants was approximately $22,200.  The fair value of the warrants was determined using the Black-Scholes option pricing model based on the following assumptions: expected dividend yield of 0%, risk-free interest rate of 2.69%,volatility of 80.52% and a contractual life of 5 years.  The value of the warrants was recorded as a debt discount against the proceeds of the note.  In addition, the beneficial conversion feature related to the note was determined to be approximately $27,800.  As a result, the total discount on the note totaled $50,000, and is being amortized over term of the note.  Amortization of debt discount of approximately $6,250 was recorded for three months ending March 31, 2011 and 2010, respectively. 

NOTE 8 – CONVERTIBLE NOTES PAYABLE

Proceeds from the issuance of a $312,500 convertible promissory note and warrants were allocated between the note and warrants on a relative fair value basis.  This note bears interest at 5% per annum and matures on June 30, 2012.  This note was issued in replacement of a $300,000 convertible promissory note which had a maturity date of March 26, 2013.  The total value allocated to the warrants was approximately $45,900.  The fair value of the warrants was determined using the Black-Scholes option pricing model based on the following assumptions: expected dividend yield of 0%, risk-free interest rate of 1.05%, volatility of 192.8% and a contractual life of 3 years.  In addition, approximately $49,900 of the value of the warrants issued under the previous note remained unamortized. The value of the warrants was recorded as a debt discount against the proceeds of the note.  The beneficial conversion feature related to the note was determined to be approximately $216,600.  As a result, the total discount on the note totaled $312,500, and is being amortized over term of the note.  Amortization of debt discount of approximately $40,500 and zero was recorded for 2011 and 2010, respectively. 

NOTE 9 – RELATED PARTY TRANSACTIONS

Consulting services from Chairman and CEO

Consulting services provided by and compensation to the Chairman and CEO were $30,000 for the three months ended March 31, 2011 and 2010, respectively.

Receivables from and payables to Related Parties

During the first quarter of 2010 we loaned $12,500 to one of the principals of ACM, Gary Ballen. ACM is one of the affiliates of the DMAP. In the quarter ended December 31, 2010 we determined that this loan was uncollectible and established a reserve for the entire amount of the loan.

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NOTE 10 – STOCKHOLDERS’ EQUITY

Common stock

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

On February 3, 2011, our board of directors approved a grant of 1,000,000 shares of common stock to a third party in consideration for an Assignment and Assumption Agreement.  The stock was valued at $70,000 at the date of grant based upon the stock price on the grant date.  The shares were issued in April, 2011.

Stock incentive plan

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

Stock-based compensation expense is recognized using the straight-line attribution method over the optionees’ requisite service period.  Stock-based compensation expense of approximately $146,250 and zero was recorded for three months ending March 31, 2011 and 2010, respectively, as a component of general and administrative expense.    

We use the Black-Scholes option-pricing model to determine the fair value of options on the date of grant.  In determining the fair value of options, we employed the following key assumptions.  There were no stock option grants during the quarter ended March 31, 2010:

Warrants

During the first quarter of fiscal 2010, we issued warrants to purchase 125,000 shares of common stock under agreements for consulting services. These warrants have exercise prices of $0.25 per share and have terms of five years.  There were no warrants issued under agreements for consulting services in the first quarter of fiscal 2011.  The fair value of the warrants issued under consulting agreements is recorded as deferred compensation. The amortization of deferred compensation is recorded as consulting expense and was $8,621 and $13,741 for the three months ending March 31, 2011 and 2010, respectively.

During the first quarter of fiscal 2011, we issued warrants to purchase 600,000 shares of common stock at $0.12 per share in conjunction with the issuance of convertible promissory notes.  The warrants have a term of three years.   The fair value of these warrants was recorded as debt discount.  The amortization related to these warrants is recorded as interest expense and was $40,546 and zero for the three months ending March 31, 2011 and 2010, respectively.

During the first quarter of fiscal 2010, we issued warrants to purchase 1,250,000 shares of common stock at $0.10 per share in conjunction with the issuance of convertible promissory notes. The warrants have as term of five years. The fair value of these warrants was recorded as debt discount.  The amortization related to these warrants is recorded as interest expense and was $22,556 and $16,325 for the three months ending March 31, 2011 and 2010, respectively.

During the first quarter of fiscal 2010, we issued warrants to purchase 600,000 shares of common stock at $0.15 per share in conjunction with the issuance of convertible promissory notes. The warrants have as term of three years. The fair value of these warrants was recorded as debt discount. The amortization related to these warrants is recorded as interest expense and was $5,725 and zero for the three months ending March 31, 2011 and 2010, respectively.

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We use the Black-Scholes option-pricing model to determine the fair value of warrants on the date of grant. In the first quarter of fiscal 2011, we changed the methodology for determining certain inputs to the Black-Scholes model. The methodology for determining the volatility was changed from using an average volatility of comparable companies within TNS’ industry to using an average of TNS’ volatility and the comparable companies’ volatility. There were no changes to the methodology for determining the remaining Black-Scholes inputs.

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

NOTE 11 – SUBSEQUENT EVENTS

We have evaluated all events that occurred after the balance sheet date of March 31, 2011 through May 23, 2011, the date when the financial statements were issued to determine if they must be reported.  We determined that there were no reportable subsequent events to be disclosed.

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

Forward-Looking Information

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

These forward-looking statements include statements of our plans, objectives, expectations, estimates and intentions, which are subject to change based on various important factors (some of which are beyond the Company's control).  The following factors, in addition to others not listed, could cause our actual results to differ materially from those expressed in forward looking statements: the strength of the domestic and local economies in which the Company conducts operations, the impact of current uncertainties in global economic conditions and the ongoing financial crisis affecting the domestic and foreign banking system and financial markets, including the impact on our suppliers and customers, changes in client needs and consumer spending habits, the impact of competition and technological change on our company, our ability to manage its growth effectively, including its ability to successfully integrate any business which it might acquire, and currency fluctuations. All forward-looking statements in this report are based upon information available to us on the date of this report.  We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.

The following discussion and analysis should be read in conjunction with our financial statements and the notes thereto appearing in Part I, Item 1.

Overview of Current Operations

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

We also use our ingredients in nutraceutical products that we formulate and market to consumers.  We have developed mushroom based nutraceutical dietary supplement products that are made entirely of naturally occurring dietary substances which are manufactured under contract by third party contractors, Columbia Nutritional Services, Inc. of Vancouver, Washington and Pro-Tech Laboratories of Quitman, Texas.  We currently market four natural organic nutraceutical mushroom dietary supplement products, ImmuSANO and GlucoSANO for human consumption, Gröh, which has been designed to nutritionally support hair follicles and  nail beds, and EquiSANO for the equine market.  These naturally occurring dietary substances have not been chemically altered, and we believe these products have both health benefits and mass appeal to people wanting natural and non-toxic nutritional-based healthcare.  We sell our ingredients directly to manufacturers of cosmetic and nutraceutical products and indirectly through resellers.  We market and sell our consumer products directly to consumers utilizing network marketing programs, direct mail order, internet marketing, and commission sales people and indirectly through resellers.  Our current portfolio of consumer products include proprietary formulations of over the counter mushroom based nutraceutical products produced by outside contract manufacturers.  Fulfillment and distribution is performed at facilities in Stevenson, Washington, Sherwood, Oregon and Quitman, Texas.

We utilize novel clinical models, biomarkers, and analytical tools to validate the nutritional and clinical efficacy of our ingredients and the products that incorporate them.  Our scientific strategy and technology platform initially focused on the unique manufacturing and health benefits of specific bioactive nutrients found in certain whole natural mushrooms and their mycelial biomasses (mushroom powder and its active components).  In early 2011, we expanded into curcumin extracted from tumeric.  

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

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

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

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

Quarterly Highlights

In January 2011, we issued 2,000,000 shares of common stock to Keith Manfred under a Consulting Agreement dated August 26, 2010 pursuant to which Mr. Manfred has performed various marketing services to TNS.  

Effective January 26, 2011, we entered into a convertible note payable with Delta Group Investments Limited (DGI) which replaces the convertible note payable with DGI dated March 26, 2010.  This convertible note payable is in the amount of $312,500 and bears interest at 5% per year and expires on June 30, 2012.  DGI has the option to convert the outstanding note into TNS restricted common shares at $0.06 per share at any time prior to payment in full of the principal balance of the convertible note payable. In connection with the issuance of the convertible note payable, we granted DGI a warrant to purchase 600,000 common shares exercisable at $0.12 per share expiring 3 years from the date of issuance.

On Jaunary 27, 2011 TNS entered into an Investment Banking and Business Development Agreement with Corporate Finance Resources, Inc. (CFR) under which will serve as a non-exclusive placement agent concerning private placements, business combinations and business development transactions (such as customer, vendor, supplier or distributor arrangements).  Under the agreement TNS will compensate CFR with cash and equity fees in relations to transactions which are not excluded from the investment banking agreement with CFR.  In addition TNS agreed to issue seven year warrants to purchase one million shares of common stock at $0.10 per share to CFR, with 25% becoming exercisable upon the effective date of the agreement, 25% upon the date that offering materials for a private placement are first distributed, 25% upon the date that a covered transaction occurs and consideration is paid upon closing and the final 25% (or 100% if some of the earlier milestones had not occurred yet) upon the earlier to occur of the receipt of $500,000 in consideration from a closing or the expiration, suspension or termination of a covered private placement offering.  Subsequently CFR agreed to delay the initial issuance of the warrants until May 31, 2011.  No warrants have been issued under this agreement to date.

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Effective February 17, 2011, we entered into a Termination of Profit Sharing Agreement, whereby the DMAP was terminated.  Per this termination agreement, all assets and property of the DMAP were transferred to TNS.  As managing affiliate of the DMAP, TNS was responsible for the wind up the activities of the DMAP.

On March 15, 2011 we entered into two lease agreements with Sherwood Venture LLC for premises located at 1499 S.W. Tualatin-Sherwood Road, Sherwood, Oregon 97140, with both leases terminating on May 31, 2012.  With the two new leases, TNS will pay an aggregate of $1,950 per month for 3,520 square feet of office and warehouse space.

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

Results of Operations for the quarter ended March 31, 2011

During the three months ended March 31, 2011, we had a net loss of $(682,900) versus a $(301,835) net loss for the same period last year.  The increase in the net loss was primarily attributable to increased operating expenses.   Our total operating expenses increased from $264,588 for the three months ended March 31, 2010 to $652,734 for the three months ended March 31, 2011.  This increase was due primarily to an increase in consulting fees primarily due to expenses related to a consulting arrangement whereby we issued shares of our common stock in exchange for certain marketing services, an increase in general and administrative expense due to stock compensation expense related to the issuance of stock options, and impairment expense related to the write-off of an intangible asset..  Total  liabilities decreased modestly from $747,695 at December 31, 2010 to $695,628 for the three months ended March 31, 2011.  

Revenues

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