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Form 10-Q Boston Therapeutics, For: Sep 30

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UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

WASHINGTON,
D.C. 20549

 

FORM
10-Q

 


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For
the quarterly period ended September 30, 2020

 

OR

 


TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For
the transition period from __________ to __________

 

Commission
file number: 000-54586

 

BOSTON
THERAPEUTICS, INC.

(Exact
name of registrant as specified in its charter)

 

Delaware   27-0801073
(State
or other jurisdiction of
incorporation or organization)
  (I.R.S.
Employer
Identification No.)
     
354
Merrimack Street #4, Lawrence, MA
  01843
(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 ☒     No ☐

 

Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 ☒     No ☐

 

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

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller Reporting Company
Emerging growth company    

 

If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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

 

APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEEDING FIVE YEARS;

 

Indicate
by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐     No

 

Securities
registered pursuant to Section 12(b) of the Act:

 

Title
of each class
  Trading
Symbol(s)
  Name
of each exchange on which registered
         

 

APPLICABLE
ONLY TO CORPORATE ISSUERS:

 

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 December 23, 2020
Common Stock, $0.001
par value per share
  111,131,373 shares

 

 

 

BOSTON
THERAPEUTICS, INC.

 

FORM
10-Q

 

TABLE
OF CONTENTS

 

 

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

 

 

PART
I – FINANCIAL INFORMATION

 

Item
1. Unaudited Condensed Consolidated Financial Statements

 

Boston
Therapeutics, Inc.

Condensed
Consolidated Balance Sheets

         
    September 30,
2020
    December 31,
2019
 
    (Unaudited)          
ASSETS                
Current assets:                
Cash   $ 118,286     $ 6,701  
Prepaid expenses and other current assets     21,780       12,662  
Inventory, net     2,648       3,909  
Total current assets     142,714       23,272  
                 
Property and equipment, net           509  
Total assets   $ 142,714     $ 23,781  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
Current liabilities:                
Accounts payable   $ 498,188     $ 458,175  
Accounts payable – related party     282,302       152,302  
Accrued expenses and other current liabilities     1,181,197       1,361,194  
Accrued expenses – related party     1,294,450       1,097,974  
Deferred revenue – related party     104,782       104,782  
Convertible note payable, related party, net of discount     1,402,000       1,402,000  
Convertible note payable     200,000       250,000  
Notes payable – related parties     2,758,429       1,948,429  
Note payable – marketing agreement     450,000       450,000  
Derivative liability     2,703       9,451  
Warrant liability     193,108       461,744  
Total current liabilities     8,367,159       7,696,051  
                 
Total liabilities     8,367,159       7,696,051  
                 
COMMITMENTS AND CONTINGENCIES (Note 13)            
                 
Stockholders’ deficit:                
Preferred stock, $0.001 par value, 5,000,000 shares authorized:                
Series A preferred stock, 150,000 shares designated, 82,500 shares issued and outstanding at September 30, 2020 and December 31, 2019.     83       83  
Common stock, $0.001 par value, 2,000,000,000 shares authorized, 111,131,373 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively.     111,131       111,131  
Additional paid-in capital     19,322,864       19,322,864  
Accumulated deficit     (27,658,523 )     (27,106,348 )
Total stockholders’ deficit     (8,224,445 )     (7,672,270 )
                 
Total liabilities and stockholders’ deficit   $ 142,714     $ 23,781  

 

See
accompanying notes to unaudited condensed consolidated financial statements

 

 

Boston Therapeutics, Inc.

Condensed
Consolidated Statements of Operations (Unaudited)

 

    For The Three Months Ended     For The Nine Months Ended  
    September 30,
2020
    September 30,
2019
    September 30,
2020
    September 30,
2019
 
Revenue   $ 2,217     $ 3,658     $ 8,247     $ 13,114  
                                 
Operating expenses:                                
Direct expenses     5,541       7,588       15,327       20,395  
Research and development     55,405       386,715       126,004       1,258,259  
Sales and marketing           30,357       844       92,657  
General and administrative     151,299       227,080       378,551       636,888  
Total operating expenses     212,245       651,740       520,726       2,008,199  
                                 
Operating loss     (210,028 )     (648,082 )     (512,479 )     (1,995,085 )
                                 
Other income (expenses):                                
Interest expense     (111,295 )     (82,241 )     (315,080 )     (251,864 )
Change in fair value of warrant liability     129,255       421,476       268,636       658,111  
Change in fair value of derivative liabilities     3,124       5,410       6,748       51,900  
Total other income (expenses)     21,084       344,645       (39,696 )     458,147  
Net loss   $ (188,944 )   $ (303,437 )   $ (552,175 )   $ (1,536,938 )
                                 
Net loss per share- basic and diluted   $ 0.00     $ (0.00 )   $ 0.00     $ (0.01 )
Weighted average shares outstanding basic and diluted     111,131,373       111,131,373       111,131,373       111,131,373  

 

See
accompanying notes to unaudited condensed consolidated financial statements

 

 

Boston Therapeutics, Inc.

Condensed
Consolidated Statement of Stockholders’ Deficit

For
the Nine Months Ended September 30, 2020

                                         
      Common Stock     Preferred Stock     Additional
Paid-in
    Accumulated     Total
Stockholders’
 
      Shares     Amount     Shares     Amount     Capital     Deficit     Deficit  
Balance, December 31, 2019       111,131,373     $ 111,131       82,500     $ 83     $ 19,322,864     $ (27,106,348 )   $ (7,672,270 )
                                                           
Net loss for the nine months ended September 30, 2020                                     (552,175 )     (552,175 )
                                                           
Balance, September 30, 2020 (unaudited)       111,131,373     $ 111,131       82,500     $ 83     $ 19,322,864     $ (27,658,523 )   $ (8,224,445 )

 

Boston Therapeutics, Inc.

Condensed
Consolidated Statement of Stockholders’ Deficit

For
the Nine Months Ended September 30, 2019

                                       
    Common Stock     Preferred Stock     Additional
Paid-in
    Accumulated     Total
Stockholders’
 
    Shares     Amount     Shares     Amount     Capital     Deficit     Deficit  
Balance, December 31, 2018     110,131,373     $ 110,131       82,500     $ 83     $ 19,156,138     $ (23,412,269 )   $ (4,145,917 )
                                                         
Stock based compensation                             40,779             40,779  
                                                         
Issuance of common stock in exchange for consulting services     1,000,000       1,000                   21,900             22,900  
                                                         
Net loss for the nine months ended September 30, 2019                                   (1,536,938 )     (1,536,938 )
                                                         
Balance, September 30, 2019 (unaudited)     111,131,373     $ 111,131       82,500     $ 83     $ 19,218,817     $ (24,949,207 )   $ (5,619,176 )

 

See
accompanying notes to unaudited condensed consolidated financial statements

 

 

Boston Therapeutics, Inc.

Condensed
Consolidated Statement of Stockholders’ Deficit

For
the three Months Ended September 30, 2020

 

      Common Stock     Preferred Stock     Additional
Paid-in
    Accumulated     Stockholders’  
      Shares     Amount     Shares     Amount     Capital     Deficit     Deficit  
Balance, June 30, 2020       111,131,373     $ 111,131       82,500     $ 83     $ 19,322,864     $ (27,469,579 )   $ (8,035,501 )
                                                           
Net loss for the three months ended September 30, 2020                                     (188,944 )     (188,944 )
                                                           
Balance, September 30, 2020 (unaudited)       111,131,373     $ 111,131       82,500     $ 83     $ 19,322,864     $ (27,658,523 )   $ (8,224,445 )

 

Boston Therapeutics, Inc.

Condensed
Consolidated Statement of Stockholders’ Deficit

For
the three Months Ended September 30, 2019

                                           
    Common Stock     Preferred Stock     Additional
Paid-in
    Accumulated     Total
Stockholders’
 
    Shares     Amount     Shares     Amount     Capital     Deficit     Deficit  
Balance, June 30, 2019     111,131,373     $ 111,131       82,500     $ 83     $ 19,205,224     $ (24,645,770 )   $ (5,329,332 )
                                                         
Stock based compensation                             13,593             13,593  
                                                         
Net loss for the three months ended September 30, 2019                                   (303,437 )     (303,437 )
                                                         
Balance, September 30, 2019 (unaudited)     111,131,373     $ 111,131       82,500     $ 83     $ 19,218,817     $ (24,949,207 )   $ (5,619,176 )

 

See
accompanying notes to unaudited condensed consolidated financial statements

 

 

Boston Therapeutics, Inc.

Condensed
Consolidated Statements of Cash Flows (Unaudited)

 

    For the Nine Months Ended  
    September 30,
2020
    September 30,
2019
 
Cash flows from operating activities:                
Net loss   $ (552,175 )   $ (1,536,938 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     509       114,168  
Stock-based compensation           40,779  
Amortization of discount on debt and deferred financing costs           30,332  
Change in fair value of warrant liability     (268,636 )     (658,111 )
Change in fair value of derivative liabilities     (6,748 )     (51,900 )
Issuance of common stock for consulting services           22,900  
Changes in operating assets and liabilities:                
Accounts receivable           24
Inventory     1,261       (4,600 )
Prepaid expenses and other current assets     (9,118 )     584,021  
Accounts payable     40,013       82,089  
Accounts payable-related party     130,000        
Accrued expenses     (179,997 )     532,959  
Accrued expenses-related party     196,476        
Net cash used in operating activities     (648,415 )     (844,277 )
                 
Cash flows from investing activities:                
Net cash provided by investing activities            
                 
Cash flows from financing activities:                
Proceeds from issuance of related party notes payable     810,000       841,171  
Payments on convertible notes payable     (50,000 )      
Net cash provided by financing activities     760,000       841,171  
                 
Net increase (decrease) in cash     111,585       (3,106 )
Cash, beginning of period     6,701       12,467  
Cash, end of period   $ 118,286     $ 9,361  
                 
Supplemental disclosure of cash flow information                
Cash paid during the period for:                
Interest   $ 7,627     $  
Income taxes   $     $  

 

See
accompanying notes to unaudited condensed consolidated financial statements

 

 

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

1. GENERAL ORGANIZATION AND BUSINESS

 

Boston Therapeutics, Inc. (the “Company”)
was formed as a Delaware corporation on August 24, 2009 under the name Avanyx Therapeutics, Inc. On November 10, 2010, the Company
entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Boston Therapeutics, Inc., a New Hampshire
corporation (“BTI”) providing for the merger of BTI into the Company with the Company being the surviving entity (the
“Merger”), the issuance by the Company of 4,000,000 shares of common stock to the stockholders of BTI in exchange for
100{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} of the outstanding common stock of BTI, and the change of the Company’s name to Boston Therapeutics, Inc. On February
12, 2018, the Company acquired CureDM Group Holdings LLC (“CureDM”), for 47,741,140 shares of common stock of which
25,000,000 were delivered at closing and 22,741,140 were to be delivered in four equal tranches of 5,685,285 each upon the achievement
of specific milestones. See Note 12.

 

The Company’s primary business is
the development, manufacture and commercialization of therapeutic drugs with a focus on complex carbohydrate chemistry to address
unmet medical needs in diabetes and inflammatory diseases. We have brought one product, SUGARDOWN®, to market and have begun
to make initial sales. We are currently focused on the development of two additional drug products: BTI-320, a non-systemic, non-toxic,
tablet for reduction of post-meal blood glucose in people living with diabetes that is fully developed, and IPOXYN, an injectable
anti-necrosis, anti-hypoxia drug that we are currently developing. Due to the lack of adequate funding, the Company has not done
any work with respect to IPOXYN to date.

 

Going Concern

 

The accompanying financial statements have
been prepared assuming the Company will continue as a going concern. The Company has limited cash resources, recurring cash used
in operations and operating losses history. As shown in the accompanying consolidated financial statements, the Company has an
accumulated deficit of approximately $27.7 million as of September 30, 2020 and used cash in operations of $648,415 during the
nine months ended September 30, 2020. These factors among others, raise substantial doubt about the Company’s ability to
continue as a going concern.

 

The Company has incurred recurring operating
losses since inception as it has worked to bring its SUGARDOWN® product to market and develop BTI-320 and IPOXYN. Management
expects such operating losses will continue until such time that substantial revenues are received from SUGARDOWN® or
the regulatory and clinical development of BTI-320 or IPOXYN is completed. The Company has $118,286 cash on hand at September 30,
2020. Management is currently seeking additional capital through private placements and public offerings of its common stock. In
addition, the Company may seek to raise additional capital through public or private debt or equity financings as well as collaboration
activities in order to fund our operations. The Company was advanced $250,000 through the issuance of 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} notes payable to a related
party during the first quarter of 2020. The Company was advanced $330,000 through the issuance of 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} notes payable to a related
party during the second quarter of 2020. The Company was advanced $230,000 through the issuance of 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} notes payable to a related
party during the third quarter of 2020. The Company was advanced $25,000 through the issuance of 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} notes payable to a related
party during the fourth quarter of 2020. Management anticipates that cash resources will be sufficient to fund our planned operations
into the first quarter of 2021. The future of the Company is dependent upon its ability to obtain continued financing and upon
future profitable operations from the partnering, development and clarity of its new business opportunities.

 

There can be no assurance that we will
be successful in accomplishing our objectives. Without such additional capital, we may be required to cease operations. The accompanying
financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.

 

 

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

 

Basis of Presentation

 

The financial statements have been prepared
in conformity with accounting principles generally accepting in the United States of America (“US GAAP”).

 

Principles of Consolidation

 

The consolidated financial statements include
the Company and its wholly owned subsidiary, CureDM, from the date of acquisition. All significant intercompany transactions are
eliminated in consolidation.

 

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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid
investments with original maturities of 90 days or less at the time of acquisition to be cash equivalents. The Company maintains
its cash in institutions insured by the Federal Deposit Insurance Corporation. The Company had no cash equivalents at September
30, 2020 and December 31, 2019.

 

Revenue Recognition

 

For revenue from product sales, the Company
recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) 606 (“ASC 606”). A five-step analysis must be met as outlined in ASC 606: (i) identify the contract
with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate
the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied.
Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in
the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or
is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or
no refund will be required.

 

The Company generates revenues from sales
of SUGARDOWN®. 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.

 

The Company generates revenue from royalties
pursuant to a licensing and manufacturing agreement with Advance Pharmaceutical Company Limited (“APC”), whereby the
licensee sells and distributes territory licensed products, excluding those manufactured and supplied by the Company in the territory.
APC is a related party as a director and significant stockholder of the Company is an owner and director of APC. The Company did
not recognize any revenue from royalties from APC during the three or nine months ended September 30, 2020 and 2019 respectively.

 

 

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

Accounts Receivable

 

Accounts receivable is stated at the amount
management expects to collect from outstanding balances. Management establishes a reserve for doubtful accounts based on its assessment
of the current status of individual accounts. Balances that remain outstanding after management has used reasonable collection
efforts are written off against the allowance. There were no allowances for doubtful accounts as of September 30, 2020 and December
31, 2019.

 

Inventory

 

Inventory consists of raw materials, work-in-process
and finished goods of SUGARDOWN®. Inventories are stated at the lower of cost (weighted average cost method) 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.

 

Property and Equipment

 

Property and equipment is depreciated using
the straight-line method over the following estimated useful lives:

 

Asset Category   Estimated
Useful Life
Office Furniture and Equipment   5 years
Computer Equipment and Software   3 years

 

The Company begins to depreciate assets
when they are placed in service. The costs of repairs and maintenance are expensed as incurred; major renewals and betterments
are capitalized. Upon sale or retirement, the cost and related accumulated depreciation are removed from the accounts and any resulting
gain or loss is included in the statement of operations. For the three months ended September 30, 2020 and 2019, the Company recorded
depreciation expense of $0 and $404, respectively. For the nine months ended September 30, 2020 and 2019, the Company recorded
depreciation expense of $509 and $1,217, respectively.

 

Intangible Assets

 

Intangible assets consist of identifiable
finite-lived assets acquired in business acquisitions. Acquired intangible assets are recorded at fair value on the date of acquisition
and are amortized over their economic useful lives on a straight line basis.

 

Impairment of Long-lived Assets

 

The Company reviews long-lived assets,
which include the Company’s intangible assets, for impairment whenever events or changes in business circumstances indicate
that the carrying amounts of the assets may not be fully recoverable. Future undiscounted cash flows of the underlying assets are
compared to the assets’ carrying values. Adjustments to fair value are made if the sum of expected future undiscounted cash
flows is less than book value. To date, no adjustments for impairment have been made.

 

The Company performed its impairment review
of intangible assets for the year ended December 31, 2019 and concluded that intangibles were impaired at December 31, 2019. The
Company recorded impairment of intangibles in the amount of $367,181 for the year ended December 31, 2019. The Company has no intangible
assets at September 30, 2020.

   

 

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

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 using the treasury stock method. The
weighted average number of common shares for the three and nine months ended September 30, 2020 did not include 9,184,000, 38,208,320,
40,399,987 and 8,250,000 for options, warrants and shares to be issued upon conversion of notes payable and Series A Preferred
Stock, respectively, because of their anti-dilutive effect. The weighted average number of common shares for the three and nine
months ended September 30, 2019 did not include 9,494,000, 38,458,320, 38,445,167 and 8,250,000 for options, warrants and shares
to be issued upon conversion of notes payable and Series A Preferred Stock, respectively, because of their anti-dilutive effect.

 

Income Taxes

 

The Company accounts for income taxes under
the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or be settled. The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date. A valuation allowance is provided when it is more likely
than not that some portion of the gross deferred tax asset will not be realized. The Company records interest and penalties related
to income taxes as a component of provision for income taxes. The Company did not recognize any interest and penalty expense for
the three or nine months ended September 30, 2020 and 2019.

 

Advertising Costs

 

Advertising costs are expensed as incurred
and are reported as a component of operating expenses in the sales and marketing expenses in the statements of operations. The
Company did not incur any advertising costs for either three or nine month period ended September 30, 2020 and 2019, respectively.

 

Research and Development Costs

 

Research and development expenditures are
charged to the statement of operations as incurred. Such costs include proprietary research and development activities, purchased
research and development, and expenses associated with research and development contracts, whether performed by the Company or
contracted with independent third parties.

 

Fair Value of Financial Instruments

 

Fair values determined by Level 1 inputs
utilize observable data such as quoted prices in active markets. Fair values determined by Level 2 inputs utilize data points other
than quoted prices in active markets that are observable either directly or indirectly. Fair values determined by Level 3 inputs
utilize unobservable data points in which there is little or no market data, which require the reporting entity to develop its
own assumptions. The Company’s financial instruments consist of cash, accounts receivable, prepaid expenses, accounts payable,
accrued expenses, and notes payable. The carrying value of cash, accounts receivable, prepaid expenses, accounts payable and accrued
expenses approximates fair value due to their short-term nature using level 1 and level 2 inputs as defined above. The carrying
value of the notes payable as of September 30, 2020 and December 31, 2019, evaluated using level 2 inputs defined above based on
quoted market prices on rates available to the Company for debt with similar terms and maturities, approximates the fair value.
The carrying value of, Derivative liability and warrant liability as of September 30, 2020 and December 31, 2019 were determined
using Level 3 inputs as defined above.

  

 

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

Concentration of Credit Risk

 

Financial instruments that potentially
subject the Company to concentrations of credit risk are principally cash. The Company places its cash and cash equivalents in
highly rated financial institutions. The Company maintains cash balances with financial institutions that occasionally exceed federally
insured limits. The Company has not experienced any losses related to these balances, and management believes its credit risk to
be minimal.

 

Convertible Instruments

 

U.S. GAAP requires companies to bifurcate
conversion options from their host instruments and account for them as free standing derivative financial instruments according
to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative
instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument
that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable
generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument
with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule
is when the host instrument is deemed to be conventional, as that term is described under applicable ASC 480-10.

 

When the Company has determined that the
embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts
to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between
the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price
embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date
of redemption.

 

Common Stock Purchase Warrants and Other
Derivative Financial Instruments

 

The Company classifies as equity any contracts
that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or
settlement in its own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the Company’s
own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement
to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii) gives the
counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company
assesses classification of its common stock purchase warrants and other free standing derivatives at each reporting date to determine
whether a change in classification between assets and liabilities is required.

 

The Company’s free standing derivatives
consisted of warrants to purchase common stock that were issued in connection with the issuance of debt and of embedded conversion
options with senior convertible debentures. The Company evaluated these derivatives to assess their proper classification in the
balance sheet as of September 30, 2020 and December 31, 2019 using the applicable classification criteria enumerated under ASC
815-Derivatives and Hedging. The Company determined that certain embedded conversion and/or exercise features do not contain fixed
settlement provisions. The convertible debentures contain a conversion feature such that the Company could not ensure it would
have adequate authorized shares to meet all possible conversion demands.

 

As such, the Company was required to record
the debt and warrant derivatives which do not have fixed settlement provisions as liabilities and mark to market all such derivatives
to fair value at the end of each reporting period.

 

 

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

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 recognizes the compensation cost of share-based awards on a
straight-line basis over the requisite service period, which is generally 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 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 requisite service
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.

 

Recent Accounting Pronouncements

 

In February 2016, the FASB established
ASC Topic 842, Leases (Topic 842), by issuing ASU No. 2016-02, which requires lessees to recognize leases on-balance sheet and
disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical
Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted
Improvements. The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease
liability on the balance sheet. Leases will be classified as finance or operating, with classification affecting the pattern and
classification of expense recognition in the statement of operations. The Company adopted the new standard on January 1, 2019.

 

The new standard provides a number of optional
practical expedients in transition. The Company has elected the ‘package of practical expedients’, which permit it
not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct
costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not
applicable to the Company.

 

The new standard did not have a material
effect on the Company’s consolidated Financial statements as the Company does not have any leases that meet the requirements
for recognition.

 

There are various updates recently issued,
most of which represented technical corrections to the accounting literature or application to specific industries and are not
expected to have a material impact on the Company’s financial position, results of operations or cash flows.

 

Reclassification

 

Certain prior period amounts have been
reclassified to conform to current period presentation.

 

 

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

3. INVENTORY

 

Inventory consist of material, labor and
manufacturing overhead and are recorded at the lower of cost, using the weighted average cost method, or net realizable value.
The components of inventory at September 30, 2020 and December 31, 2019, net of inventory reserves, were as follows:

 

    2020     2019  
Finished goods   $ 2,648     $ 3,909  

 

The Company periodically reviews quantities
of inventory on hand and compares these amounts to expected usage of each particular product or product line. The Company records,
as a charge to cost of sales, any amounts required to reduce the carrying value to net realizable value.

 

4. INTANGIBLE ASSETS

 

The SUGARDOWN® technology and patent
applications, which were obtained through the acquisition of BTI in 2010, were being amortized on a straight-line basis over their
estimated useful lives of 14 years. The BTI-420 technology and patent applications, which were obtained through the acquisition
of CureDM in 2018, were being amortized on a straight-line basis over their estimated useful lives of 5 years.

 

Intangible assets consist of the following
at September 30, 2020 and December 31, 2019:

 

    2020     2019  
SUGARDOWN® technology and patent applications   $ 1,134,122     $ 1,134,122  
Less accumulated amortization     (1,134,122 )     (1,134,122 )
Intangible assets, net   $     $  

 

Amortization expense was $0 and $36,625
for the three months ended September 30, 2020 and 2019, respectively. Amortization expense was $0 and $112,951 for the nine months
ended September 30, 2020 and 2019, respectively.

 

The Company performed its impairment review
of intangible assets for the year ended December 31, 2019 and concluded that intangibles were impaired at December 31, 2019. The
Company recorded impairment of intangibles in the amount of $367,181 for the year ended December 31, 2019.

 

5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

The following table represents the major
components of accrued expenses and other current liabilities at September 30, 2020 and December 31, 2019:

 

    2020     2019  
Accrued payroll   $ 188,716     $ 188,716  
Professional fees     67,273       145,358  
Accrued consulting fees     741,600       741,600  
Interest     121,501       92,003  
Accrued expense reimbursement and other     62,107       193,517  
Total   $ 1,181,197     $ 1,361,194  

 

  

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The Company measures the fair value of
financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” which defines
fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 defines
fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value.

 

ASC 820 describes three levels of inputs that may be used to
measure fair value:

 

  Level 1 – quoted prices in active markets for identical assets or liabilities
  Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable
  Level 3 – inputs that are unobservable based on an entity’s own assumptions, as there is little, if any, related market activity (for example, cash flow modeling inputs based on assumptions)

 

Financial liabilities as of September 30,
2020 measured at fair value on a recurring basis are summarized below:

 

    September 30,
2020
    Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
    Significant
Other
Observable
Inputs
(Level 2)
    Significant
Unobservable
Inputs
(Level 3)
 
Derivative liability   $ 2,703     $     $     $ 2,703  
Warrant liability     193,108                   193,108  
Total   $ 195,811     $     $     $ 195,811  

 

Financial liabilities as of December 31,
2019 measured at fair value on a recurring basis are summarized below:

 

    December 31,
2019
    Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
    Significant
Other
Observable
Inputs
(Level 2)
    Significant
Unobservable
Inputs
(Level 3)
 
Derivative liability   $ 9,451     $     $     $ 9,451  
Warrant liability     461,744                   461,744  
Total   $ 471,195     $     $     $ 471,195  

 

The Company determined that certain conversion/exercise
option related to a convertible note and issued warrants did not have fixed settlement provisions and are deemed to be derivative
financial instruments, since the conversion/exercise prices was subject to reset adjustment should the Company issue any option
to acquire the Company’s common stock lower than the conversion /exercise price. Accordingly, the Company was required to
record such conversion/exercise options as a liability and mark such derivative to fair value each reporting period. Such instrument
was classified within Level 3 of the valuation hierarchy.

 

  

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

The fair value of the conversion/exercise
options were calculated using a Black-Scholes formula with the following weighted average assumptions during the nine months ended
September 30, 2020 and the year ended December 31, 2019. No options were converted or exercised during the year ended December
31, 2019 or for the nine month period ended September 30, 2020.

 

The risk-free interest rate is the United
States Treasury rate on the measurement date having a term equal to the remaining contractual life of the instrument. The volatility
is a measure of the amount by which the Company’s share price has fluctuated or is expected to fluctuate. The dividend yield
is 0{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} as the Company has not made any dividend payment and has no plans to pay dividends in the foreseeable future. Level 3 liabilities
are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of
the derivative liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s
Chief Financial Officer, who reports to the Chief Executive Officer, determine its valuation policies and procedures. The development
and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility
of the Company’s Chief Financial Officer and are approved by the Chief Executive Officer. Level 3 financial liabilities consist
of the derivative liabilities for which there is no current market for these securities such that the determination of fair value
requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy
are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. Significant observable and unobservable
inputs include stock price, exercise price, annual risk free rate, term, and expected volatility, and are classified within Level
3 of the valuation hierarchy. An increase or decrease in volatility or interest free rate, in isolation, can significantly increase
or decrease the fair value of the derivative liabilities. Changes in the values of the derivative liabilities are recorded as a
component of other income (expense) on the Company’s statements of operations.

 

The following tables set forth a summary
of the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring
basis using significant unobservable input for the nine months ended September 30, 2020 and 2019:

 

    Debt     Warrant  
    Derivative     Liability  
Balance, December 31, 2019   $ 9,451     $ 461,744  
Aggregate amount of derivative instruments issued            
Transferred in due to conversions            
Change in fair value of derivative liabilities     (6,748 )     (268,636 )
Balance, September 30, 2020   $ 2,703     $ 193,108  

 

 

    Debt     Warrant  
    Derivative     Liability  
Balance, December 31, 2018   $ 54,242     $ 925,806  
Aggregate amount of derivative instruments issued            
Transferred in due to conversions            
Change in fair value of derivative liabilities     (51,900 )     (658,111 )
Balance, September 30, 2019   $ 2,342     $ 267,695  

 

 

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

7. CONVERTIBLE NOTES PAYABLE

 

In August and September 2016, the Company
issued senior convertible debentures for an aggregate of $1,600,000 (the “Convertible Debentures”) in exchange for
an aggregate net cash proceeds of $1,327,300, net of financing costs. The Convertible Debentures have a stated interest rate of
6{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} per annum payable quarterly beginning June 30, 2017 and were due two years from the date of issuance, the latest due September
15, 2018 and are convertible into shares of the Company’s common stock at the option of the holder at a conversion price
of $0.075 with certain anti-dilutive (reset) provisions and are subject to forced conversion if either i) the volume weighted average
common stock price for each of any 10 consecutive trading days equals or exceeds $0.50, or (ii) the Company’s elects to lists
a class of securities on a national securities exchange.

 

As long as the convertible notes remain
outstanding, the Company is restricted from incurring any indebtedness or liens, except as permitted (as defined), amend its charter
in any matter that materially effects rights of noteholders, repay or repurchase more than de minimis number of shares of common
stock other than conversion or warrant shares, repay or repurchase all or any portion of any indebtedness or pay cash dividends.

 

In connection with the issuance of the
Convertible Debentures, the Company issued an aggregate of 16,000,000 warrants to purchase the Company’s common stock at
$0.10 per share, expiring five years from the date of issuance, the latest being September 15, 2021. These warrants contain a cashless
exercise and certain anti-dilutive (reset) provisions.

 

The Company determined that certain conversion/exercise
option related to a convertible note and issued warrants did not have fixed settlement provisions and are deemed to be derivative
financial instruments due to price protection features present in the conversion/ exercise price that are not consistent with a
fixed for fixed model.

 

The accounting treatment of derivative
financial instruments requires that the Company record the fair value of the derivative as of the issuance date of the debenture
and warrants and to re-measure the derivatives at fair value as of each subsequent reporting date.

 

The Company recognized the value attributable
to the conversion feature of the convertible debenture and issued warrants of $2,203,336 and together with financing costs of $272,700
(aggregate of $2,476,036) as a discount against the notes up to $1,600,000 with the excess of $876,036 charged to current period
interest. The Company valued the conversion option and the warrants using the Black-Scholes pricing model as described in Note
6. The debt discount was fully amortized over the note’s maturity period as interest expense.

 

 

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

During the first quarter of 2020, the Company
paid the note of one of the two remaining investors of $50,000. The Company also paid accrued interest on that note totaling $7,627

 

Convertible notes payable consist of the
following at September 30, 2020 and December 31, 2019:

 

    2020     2019  
Principal balance   $ 200,000     $ 250,000  
Debt discount            
Deferred finance costs            
Outstanding, net of debt discount   $ 200,000     $ 250,000  

 

8. MARKETING AGREEMENT

 

On June 26, 2018, the Company entered into
a License Agreement with Level Brands, Inc. (NYSE: LEVB), an innovative licensing, marketing and brand management company with
a focus on lifestyle-based products which includes an exclusive license to the kathy ireland® Health & Wellness™
brand. Under the terms of the License Agreement, the Company received a non-exclusive, non-transferrable license to use the kathy
ireland
Health & Wellness™ trademark in the marketing, development, manufacture, sale and distribution of the Sugardown®
product domestically and internationally. The initial term of the License Agreement is seven years, with an automatic two-year
extension unless either party notifies the other of non-renewal at least 90 days prior to the end of the then current term. Level
Brands has agreed to use its commercially reasonable efforts to perform certain promotional obligations, including: (i) producing
four branded videos to promote the licensed product and/or the Company; (ii) creation of an electronic press kit; (iii) making
their media and marketing teams available for use in creating the video content for which the Company will separately compensate;
and (iv) curate social media posts in multiple social media channels.

 

As compensation, the Company will provide
Level Brands with the following:

 

  A marketing fee of $850,000, for development of video content and an electronic press kit which will be used ongoing to support product marketing. This fee is paid with a promissory note of $450,000 and a number of shares of stock of the Company valued at $400,000, based on the closing price on the day prior to the effective date;

 

  Quarterly fees for the first two years of up to $100,000 and issuance of 100,000 shares each quarter, based on sales volumes. The Company has the right to make all the stock payments in cash; and

 

  a royalty of 5{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} of the gross licensed marks sales up to $10,000,000, 7.5{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} royalty on sales from $10,000,000 to $50,000,0000 and 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} on sales over $50,000,000, payable monthly as well as a 1{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} of all revenue for all Company products as of the date hereof.

 

The Note Payable of $450,000 bears interest
at 8{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} and matures December 31, 2019, unless the Company raises $750,000 through Level Brands prior to that date in which case the
Note is to be repaid in full including accrued interest. Accrued interest at September 30, 2020 and December 31, 2019 totaled $81,493
and $54,493, respectively.

 

 

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

As of September 30, 2020, the Company has
not issued the $400,000 of common stock.

 

Level Brands sued the Company for non-performance
under the contract. The matter was taken to arbitration with both parties claiming non performance under the contract. In October
2019, the arbitration was dismissed without prejudice. See Note 12.

 

9. STOCKHOLDERS’ EQUITY

 

The Company is authorized to issue up to
5,000,000 shares of its $0.001 par value preferred stock and up to 2,000,000,000 shares of its $0.001 par value common stock. During
the year ended December 31, 2013, the Company amended its certificate of incorporation to increase the number of common shares
from 100,000,000 to 200,000,000. The amendment went into effect September 7, 2013.

 

On January 9, 2018, the Company’s
Board of Directors voted to approve an increase in authorized common stock shares outstanding from 200 million shares to 2 billion
shares of the Company’s common stock. This increase was approved by the shareholders in the first quarter of 2018.

 

Series A Preferred Stock

 

The Company has designated 150,000 shares
of its preferred stock as Series A Preferred Stock. Each share of Series A Preferred Stock has a stated value of $10. The Series
A Preferred Stock is convertible into shares of the Company’s common stock by dividing the stated value by a conversion price
of $0.10 per share. The Series A Preferred Stock shall have voting rights on an as converted basis (subject to limitations) and
liquidation preference for each share of Series A Preferred Stock at an amount equal to the stated value per share. As of Sepember
30, 2020 and December 31, 2019, the Company has 82,500 shares of Series A Preferred Stock outstanding.

 

On August 14, 2017, the Company entered
into Securities Purchase Agreements with two accredited investors. In connection with these agreements, the Company issued 45,000
shares of Series A Preferred Stock and warrants to acquire 9,000,000 shares of common stock. The shares of Series A Preferred Stock
are convertible, at any time at the option of the holder, into an aggregate of 4,500,000 shares of the Company’s common stock.
The Warrants shall be exercisable for a period of five years at an exercise price of $0.15 per share.

 

The Company recognized the value attributable
to the conversion feature of the issued warrants of $650,421 as a charge against additional paid in capital up to $450,000 with
the excess of $200,421 charged to change in fair value of warrant liability during the year ended December 31, 2017. The Company
valued the warrants using the Black-Scholes pricing model as described in Note 6.

 

On October 24, 2017, the Company entered
into Securities Purchase Agreements with an accredited investor. In connection with the agreement, the Company issued 10,000 shares
of Series A Preferred Stock and warrants to acquire 2,000,000 shares of common stock. The shares of Series A Preferred Stock are
convertible, at any time at the option of the holder, into an aggregate of 1,000,000 shares of the Company’s common stock.
The Warrants shall be exercisable for a period of five years at an exercise price of $0.15 per share.

 

The Company recognized the value attributable
to the conversion feature of the issued warrants of $93,312 as a charge against additional paid in capital. The Company valued
the warrants using the Black-Scholes pricing model as described in Note 6.

 

On February 2, 2018, the Company entered
into Securities Purchase Agreements with four accredited investors. In connection with these agreements, the Company issued 27,500
shares of Series A Preferred Stock and warrants to acquire 5,500,000 shares of common stock in consideration of $275,000. The shares
of Series A Preferred Stock are convertible, at any time at the option of the holder, into an aggregate of 2,750,000 shares of
the Company’s common stock. The Warrants shall be exercisable for a period of five years at an exercise price of $0.15 per
share.

 

 

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

The Company recognized the value attributable
to the conversion feature of the issued warrants of $226,833 as a charge against additional paid in capital. The Company valued
the warrants using the Black-Scholes pricing model as described in Note 6.

 

Common Stock

 

On January 10, 2019, the Company issued
1,000,000 shares of its common stock in exchange for consulting services amounting to $22,900 pursuant to a consulting agreement
entered into and approved by the Board of Directors on November 23, 2018.

 

Common Stock Warrants

 

The Company accounts for warrants as either
equity instruments or liabilities depending on the specific terms of the warrant agreement. As of September 30, 2020, the Company
had 38,208,320 warrants outstanding which are all classified as equity instruments and are fully exercisable.

 

The following tables summarize the Company’s
common stock warrants activity for the nine months ended September 30, 2020 and 2019:

 

      Warrants     Weighted
Average
Exercise
Price
    Aggregate
Intrinsic
Value
 
Outstanding as of December 31, 2019       38,458,320     $ 0.16     $  
Granted                    
Exercised                    
Forfeited/Canceled       (250,000 )     0.10        
Outstanding as of September 30, 2020       38,208,320     $ 0.16     $  

 

 

      Warrants     Weighted
Average
Exercise
Price
    Aggregate
Intrinsic
Value
 
Outstanding as of December 31, 2018       38,999,990     $ 0.17     $  
Granted                    
Exercised                    
Forfeited/Canceled       (541,670 )     0.91        
Outstanding as of September 30, 2019       38,458,320     $ 0.16     $  

  

 

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

The aggregate intrinsic value represents
the pretax intrinsic value, based on the warrants with an exercise price less than the Company’s stock price of $0.01 as
of September 30, 2020, which would have been received by the warrant holders had those warrant holders exercised their warrants
as of that date.

 

10. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION

 

During the year ended December 31, 2010,
the Company adopted a stock option plan entitled “The 2010 Stock Plan” (2010 Plan) under which the Company may grant
options to purchase up to 5,000,000 shares of common stock. On September 7, 2013, the 2010 plan was amended to increase the number
of shares of common stock issuable under the 2010 Plan to 7,500,000. As of September 30, 2020, and December 31, 2019, there were
250,000 and 250,000 options outstanding under the 2010 Plan, respectively.

 

During the year ended December 31, 2011,
the Company adopted a non-qualified stock option plan entitled “2011 Non-Qualified Stock Plan” (2011 Plan) under which
the Company may grant options to purchase 2,100,000 shares of common stock. In December 2012, the 2011 Plan was amended to increase
the number of shares of common stock issuable under the 2011 Plan to 12,000,000 shares. During the period ended March 31, 2013,
the 2011 Plan was amended to increase the number of shares of common stock issuable under the 2011 Plan to 17,500,000. As of September
30, 2020 and December 31, 2019, there were 8,934,000 and 8,934,000 options outstanding under the 2011 Plan.

 

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 typically expire in five to ten years.

 

On March 1, 2018 the Board of Directors
approved a reduction in the exercise price of 6,000,000 stock options issued to the Company’s CEO on August 22, 2016. The
First tranche of 2,000,000 will be exercisable at $0.10 per share and the second and third tranches of 2,000,000 will be exercisable
at $0.15 per share. The remainder of the terms remain unchanged. On August 22, 2016, the Company granted 6,000,000 options to purchase
its common shares to its new CEO as a part of his employment agreement. The options consist of 3 separate tranches with different
exercise prices and vest upon reaching certain milestones. All 6 million options have a five year life. The first 2,000,000 shares
have an exercise price of $0.20 per share and vest upon the Company raising at least $1 million in financing. The second 2,000,000
shares carry an exercise price of $0.40 per share and vest upon the Company raising $5 million in financing. The third 2,000,000
shares carry an exercise price of $0.60 per share and vest upon the Company entering into a significant corporate alliance for
substantial marketing and selling of the Company’s product portfolio.

 

In addition, the Company amended 1,500,000
stock options previously granted to the new CEO to extend the expiration date to August 22, 2026. These options were all previously
vested.

 

No stock options were issued under either
plan during the three or nine months ended September 30, 2020 or 2019.

 

The Company recorded $0 stock-based compensation
expense for the three and nine months ended September 30, 2020, in connection with share-based payment awards. For the three and
nine months ended September 30, 2019, the Company recorded stock-based compensation expense of $13,593 and $40,779, respectively,
in connection with share-based payment awards. As of September 30, 2020 and 2019, there was $0 and $104,212, respectively of unrecognized
compensation expense related to non-vested stock option awards.

 

 

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

The following table summarizes the Company’s
stock option activity for the nine months ended September 30, 2020:

 

    Shares     Exercise
Price per
Share
    Weighted
Average
Exercise Price
per Share
 
Outstanding as of December 31, 2019     9,184,000     $ 0.10 – 1.21     $ 0.36  
Granted                  
Exercised                
Options forfeited/cancelled                  
Outstanding as of September 30, 2020     9,184,000     $ 0.10 – 1.21     $ 0.36  

 

The following table summarizes the Company’s
stock option activity for the nine months ended September 30, 2019:

 

    Shares     Exercise
Price per
Share
    Weighted
Average
Exercise Price
per Share
 
Outstanding as of December 31, 2018     9,594,000     $ 0.10 – 1.21     $ 0.20  
Granted                  
Exercised                  
Options forfeited/cancelled     100,000       0.10       0.10  
Outstanding as of September 30, 2019     9,494,000     $ 0.10 – 1.21     $ 0.20  

 

The following table summarizes information
about stock options that are vested or expected to vest at September 30, 2020:

 

            Options Outstanding                       Exercisable Options  

Exercise

Price

    Number of Options    

Weighted Average

Exercise
Price

Per Share

    Weighted Average Remaining Contractual Life (Years)    

Aggregate
Intrinsic

Value

    Number of Options     Weighted Average Exercise Price Per Share     Weighted Average Remaining Contractual Life (Years)     Aggregate
Intrinsic Value
 
$ 0.10       3,500,000     $ 0.10       3.04     $       3,500,000     $ 0.10       3.04     $  
  0.15       4,000,000       0.15       0.90                   0.15                
  0.18       934,000       0.18       2.73             934,000       0.18       2.73        
  0.20       150,000       0.20       4.49             150,000       0.20       4.49        
  0.37       58,000       0.37       1.93             58,000       0.37       1.93        
  0.42       63,000       0.42       0.25             63,000       0.42       0.25        
  0.69       100,000       0.69       3.45             100,000       0.69       3.45        
  1.21       379,000       1.21       3.28             379,000       1.21       3.28        
$ 0.10-1.21       9,184,000     $ 0.29       2.85     $       5,184,000     $ 0.27       2.85     $  

  

 

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

The following table sets forth the status
of the Company’s non-vested stock options as of September 30, 2020 and December 31, 2019:

 

      Number of
Options
    Weighted-
Average
Grant-Date
Fair Value
 
Non-vested as of December 31, 2019       4,000,000     $ 0.50  
Granted              
Forfeited              
Vested              
Non-vested as of September 30, 2020       4,000,000     $ 0.50  

 

The weighted-average remaining contractual
life for options exercisable at September 30, 2020 is 2.85 years. At September 30, 2020 the Company has 8,566,000 and 7,250,000
options available for grant under the 2011 Plan and 2010 Plan, respectively.

 

The aggregate intrinsic value for fully
vested, exercisable options was $0 at September 30, 2020. The aggregate intrinsic value of options exercised during the nine months
ended September 30, 2020 was $0 as no options were exercised. The actual tax benefit realized from stock option exercises during
the nine months ended September 30, 2019 was $0 as no options were exercised.

 

11. RELATED PARTY TRANSACTIONS

 

Through December 31, 2011, a founder of
the company and significant shareholder, Dr. David Platt advanced $257,820 to the Company to fund start-up costs and operations.
Advances by Dr. Platt carry an interest rate of 6.5{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} and were due on June 29, 2013. On May 7, 2012, Dr. Platt and the Company’s
former President and also a significant shareholder entered into promissory notes to advance to the Company an aggregate of $40,000.
The notes accrue interest at 6.5{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} per year and were due June 30, 2013. The outstanding notes of $297,820 were amended each year
to extend the maturity dates. Effective June 30, 2015, the outstanding notes for Dr. Platt were amended to extend the maturity
dates to June 30, 2017. During 2017, the Company made principal payments totaling $20,000 to the former President of the Company,
reducing the total balance of the outstanding notes to $277,820. As of September 30, 2020 and December 31, 2019, the remaining
notes to Dr. Platt are in default and are classified as current liabilities.

 

On June 24, 2011, the Company entered into
a definitive Licensing and Manufacturing Agreement (the “Agreement”) with Advance Pharmaceutical Company Ltd. (“Advance
Pharmaceutical”), a Hong Kong-based privately-held company. Under terms of the Agreement, the Company manufactures and supplies
product in bulk for Advance Pharmaceutical. Advance Pharmaceutical is responsible for the packaging, marketing and distribution
of SUGARDOWN® in certain territories within Asia. In addition, APC is able to purchase the SUGARDOWN product directly from
the US manufacturer and sell it within APC’s distribution area. In these situations, the Company is entitled to royalty payments
from APC of 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} of the total sales price paid upon shipment of the product. Advance Pharmaceutical, through a wholly owned subsidiary,
has purchased an aggregate 1,799,800 shares of the Company’s common stock in conjunction with the Company’s private
placement offerings during the years ended December 31, 2012 and 2011. The shares were purchased on the same terms as the other
participants acquiring shares in the respective offerings. Conroy Chi-Heng Cheng is a director of Advance Pharmaceutical and joined
the Company’s Board in December 2013. No revenue was generated pursuant to the Agreement for the three or nine months ended
September 30, 2020 or 2019.

 

 

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

In December 2013, the Board of Directors
agreed to indemnify Dr. Platt for legal costs incurred in connection with an arbitration (now concluded) initiated before the American
Arbitration Association by Galectin Therapeutics, Inc. (formerly named Pro-Pharmaceuticals, Inc.) for which Dr. Platt previously
served as CEO and Chairman. Galectin sought to rescind or reform the Separation Agreement entered into with Dr. Platt upon his
resignation from Galectin to remove a $1.0 million milestone payment which Dr. Platt asserted he was entitled to receive and to
be repaid all separation benefits paid to Dr. Platt. The Company initially capped the amount for which it would indemnify Dr. Platt
at $150,000 in December 2013 and Dr. Platt agreed to reimburse the indemnification amounts paid by the Company should he prevail
in the arbitration. The Board decided to indemnify Dr. Platt after considering a number of factors, including the scope of the
Company’s existing indemnification obligations to officers and directors and the potential impact of the arbitration on the
Company. In May 2014, the Board approved a $50,000 increase in indemnification support, solely for the payment of outside legal
expenses. The Company recorded a total of $182,697 in costs associated with Dr. Platt’s indemnification, of which $119,401
was expensed in the year ended December 31, 2013 and of which $63,296 was expensed in the year ended December 31, 2014. In July
2014, the arbitration was concluded in favor of Dr. Platt, confirming the effectiveness of the separation agreement and payment
was made to Dr. Platt in July 2014.

 

On March 2, 2015, the Board of Directors
voted to reduce the amount that Dr. Platt was required to reimburse the Company to $82,355 and to offset this amount against interest
accrued in respect of the outstanding note payable to Dr. Platt. In addition, the Board determined that Dr. Platt would be charged
interest related to the $182,697 indemnification payment since funds were received by Dr. Platt in July 2014. The Board of Directors
concluded the foregoing constituted complete satisfaction of Dr. Platt’s indemnification by the Company. Accordingly, the
Company recorded the reduction in accrued interest through equity during the year ended December 31, 2015. As of September 30,
2020 and December 31, 2019, $96,595 and $80,815, respectively, of accrued interest in connection with the related party promissory
notes, is included in accrued expenses and other current liabilities on the accompanying balance sheet.

 

During September 2015, the Company entered
into a securities purchase agreement with CJY. Pursuant to this agreement, the Company issued to CJY a convertible promissory note
in the principal amount of $750,000. The Note was amended during the fourth quarter of 2015 to $1,200,000. During 2016, the Note
was amended to $1,752,000. This Note provided necessary bridge financing to the Company prior to a financing of $1,600,000 completed
in the third quarter of 2016. Interest accrues at the rate of 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} per annum and is due upon maturity of the note in August 2018.
The Company may prepay this Note and any accrued interest at any time. At any time amounts outstanding under the CJY Note are convertible
into the Company’s common stock, in whole or in part, at the option of the lender, at a conversion price of $0.05 per share.
A beneficial conversion feature of $1,642,000 was calculated and capped at the value of the note pursuant to ASC 470 – 20. The
beneficial conversion feature was fully amortized during 2018. No amortization was recorded during the three or nine months ended
September 30, 2020 and 2019, respectively.

 

On October 6, 2017, in accordance with
the terms of the Securities Purchase Agreement, CJY Holdings converted $500,000 of Notes in exchange for 10,000,000 shares of the
Company’s common stock. The cost basis for the shares issued was $0.05. Upon conversion, a loss on extinguishment of $15,354
was charged to additional paid in capital.

 

On October 16, 2017, CJY holdings converted
an additional $50,000 of the Notes along with $150,000 of accrued interest into 4,000,000 shares of the Company’s common
stock. The cost basis for the shares issued was $0.05. Upon conversion, a loss on extinguishment of $155,459 was charged to additional
paid in capital.

 

The CJY Holdings Notes are currently in
default and are classified as current liabilities.

 

 

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

On April 26, 2017, Boston Therapeutics,
Inc. (the “Company”) entered into Securities Purchase Agreement with CJY Holdings Limited (“CJY”) providing
for the sale by the Company to CJY of 6{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} Subordinated Convertible Debenture in an amount of up to $1,000,000 (the “Debentures”).
In addition to the Debentures, CJY will also receive stock purchase warrants (the “Warrants”) to acquire 500,000 shares
of common stock of the Company for every $50,000 in Debentures purchased. The Warrants are exercisable for five years at an exercise
price of $0.10 and may be exercised on a cashless basis. The Company may only use the proceeds for the payment of services or materials
associated with clinical trials. The Company closed on $200,000 in financing and issued the related Debentures and Warrants under
this agreement on April 26, 2017.

 

The Debentures bear interest at 6{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} per
annum and mature two years from issuance. CJY may elect to convert all or part of the Debentures, plus accrued interest, at any
time into shares of common stock of the Company at a conversion price of $0.10 per share. Interest on the Debentures is payable
in cash or shares of common stock at $0.10 per share quarterly commencing June 30, 2017. The conversion price is subject to adjustment
for stock dividends and stock splits. In addition, if after the original issue date of the Debentures, either (i) the volume weighted
average price equals or exceeds $0.50 for 10 consecutive trading days or (ii) the Company elects to list a class of securities
on a national securities exchange, the Company may cause CJY to convert all or part of the then outstanding principal amount of
the Debentures plus, accrued but unpaid interest, liquidated damages and other amounts owed.

 

CJY agreed to restrict its ability to convert
the Debentures and exercise the Warrants and receive shares of common stock such that the number of shares of common stock held
by CJY after such conversion or exercise does not exceed 4.99{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} of the then issued and outstanding shares of common stock.

 

A beneficial conversion feature of $186,939
was calculated and capped at the value of the note pursuant to ASC 470 – 20. The Company recorded amortization of the beneficial
conversion feature as interest expense in the amount of $0 and $0 during the three months ended September 30, 2020 and 2019, respectively.
The Company recorded amortization of the beneficial conversion feature as interest expense in the amount of $0 and $23,094 during
the nine months ended September 30, 2020 and 2019, respectively. In connection with this borrowing, the Company also issued warrants
to purchase 2,000,000 shares of the Company’s common stock at $0.10 per share.

 

Convertible notes payable – related
party consist of the following at September 30, 2020 and December 31, 2019:

 

    2020     2019  
Principal balance   $ 1,402,000     $ 1,402,000  
Debt discount            
Outstanding, net of debt   $ 1,402,000     $ 1,402,000  

 

On June 12, 2018, the Company issued a
note payable for $100,000 to World Technology East II Limited (“WTE2”). WTE2 is a Hong Kong company owned by Carl W.
Rausch, the Company’s former CEO. The WTE2 Note is an unsecured obligation of the Company. Principal and interest under the
WTE2 Note is due and payable June 12, 2019, however, in the event that the Company raises in excess of $1,000,000 in equity financing,
then the Company will use part of its proceeds to pay off the WTE2 Note. During the fourth quarter of 2018, the Company increased
the amount of the note payable to $174,500 with borrowings of $44,500 on October 4, $15,000 on November 5 and $15,000 on December
7. During the first quarter of 2019, the Company increased the amount of the note payable to $224,500 with borrowings of $30,000
on January 17 and $20,000 on February 11. During the second quarter of 2019, the Company increased the amount of the note payable
to $324,500 with borrowings of $50,000 on April 4 and $50,000 on May 31. On July 31, 2019, the Company borrowed $50,000 increasing
the total amount of notes payable to $374,500. On November 18, 2019, the Company borrowed $30,000 increasing the total amount of
notes payable to $404,500 which remain outstanding at September 30, 2020. The notes payable are due on various dates through November
18, 2020 including $374,500 which came due during 2019 and the first nine months of 2020 and are currently in default and are classified
as current liabilities. Interest accrues on the WTE2 Notes at the rate of 10.0{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} per annum. Accrued interest at September 30, 2020
and December 31, 2019 totaled $67,853 and $37,516, respectively.

 

 

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

On September 26, 2018, the Company issued
a note payable for $305,937 to CJY Holdings, Ltd (“CJY”). CJY is a Hong Kong company owned by Conroy Chi- Heng Cheng,
a director of the Company. The CJY Note is an unsecured obligation of the Company. Principal and interest under the CJY Note is
due and payable after one year. During the 2019, the Company increased the amount of the note payable to $1,266,108 with borrowings
of $289,144 on April 12, $157,671 on July 2, $194,356 on July 31 and $319,000 on November 29. The notes are due on various dates
through November 29, 2020 and are currently all in default. During the first quarter of 2020, the Company increased the amount
of the note payable to $1,516,108 with a borrowing of $250,000 on January 3. During the second quarter of 2020, the Company increased
the amount of the note payable to $1,846,108 with borrowings of $200,000 on April 2, $50,000 on May 20, $60,000 on June 10 and
$20,000 on June 30. During the third quarter of 2020, the Company increased the amount of the note payable to $2,076,108 with borrowings
of $80,000 on July 10 and $150,000 on August 4. The notes are due on various dates through August 4, 2021. Interest accrues on
the CJY Note at the rate of 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} per annum. Accrued interest at September 30, 2020 and December 31, 2019 totaled $212,477 and $80,546,
respectively.

 

Notes payable-related party consist of
the following at September 30, 2020 and December 31, 2019:

 

    2020     2019  
Founder   $ 277,821     $ 277,821  
CJY Holdings Ltd     2,076,108       1,266,108  
World Technology East Ltd II     404,500       404,500  
    $ 2,758,429     $ 1,948,429  

 

Included in accounts payable at both September
30, 2020 and December 31, 2019 are amounts due shareholders, officers and directors of the Company in the amounts of $282,302 and
$152,302, respectively.

 

Included in accrued expenses at both September
30, 2020 and December 31, 2019 are amounts due shareholders, officers and directors of the Company in the amounts of $1,181,197
and $1,097,974, respectively.

 

12. COMMITMENTS AND CONTINGENCIES

 

Pending litigation

 

In March 2019, we were served with notification
of complaint filed by CureDM Inc. as agent for the members of CureDM Group Holdings, LLC filed with the Supreme Court of the State
of New York County of New York regarding breach of contract and other matters relating to their desire to unwind the acquisition
of CureDM Group Holdings LLC according to the original Contribution Agreement. The complaint was withdrawn by CureDM, Inc. in December
2019. The Company is continuing to work with the representatives from CureDM Inc. to settle this claim and unwind the Contribution
Agreement.

 

In addition to the above matter, we are
also in a dispute with Level Brands, Inc. regarding a License Agreement dated June 21, 2018 (JAMS Ref. No.: 1220061261). The Company
filed an Answer to Complaint and Counter-complaint on June 25, 2019. Both parties are claiming non-performance under the License
Agreement. The matter was scheduled for arbitration in October 2019. In October 2019, the arbitration was dismissed without prejudice.

 

On October 16, 2019 the Company received
a Summons and Complaint filed by Microcap Headlines Inc. against the Company in the Supreme Court of the United States of New York
County of Suffolk claiming damages of $18,000 and the costs and disbursements of the action. The Company filed an Answer on November
15, 2019. The Company intends to vigorously defend against the claim.

 

 

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

Leases

 

The Company leased office space at 354
Merrimack Street, Lawrence, MA 01843 on a month to month basis. The Company ended the lease on August 31, 2019. No further obligation
exists. The Company recognized rent expense of $0 and $800 for the three months ended September 30, 2020 and 2019, respectively.
The Company recognized rent expense of $0 and $3,200 for the nine months ended September 30, 2020 and 2019, respectively.

 

Contingent share liability

 

On February 12, 2018, the Company entered
into a Contribution Agreement with the members of CureDM Group Holdings, LLC, a limited liability company, all of which except
five are accredited investors (“CureDM Group Members”) pursuant to which the CureDM Group Members agreed to contribute
100{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} of the outstanding securities of CureDM Group in exchange for an aggregate of 47,741,140 shares of common stock of the Company
(the “BTHE Contribution Shares”) of which 25,000,000 BTHE Contribution Shares were delivered at closing and 22,741,140
BTHE Contribution Shares (the “Milestone BTHE Shares”) shall be delivered in four equal tranches of 5,685,285 BTHE
Contribution Shares each upon the achievement of specific milestones (the “CureDM Group Contribution”). The closing
of the CureDM Group Contribution occurred on February 12, 2018.

 

Under the agreement, BTI was to use its
best efforts to secure a binding commitment to close an equity financing with net proceeds of at least $1,000,000 within 180 days
after the closing date. The use of the equity financing proceeds would be designated as working capital for at least, but not limited
to the synthesis of HIP2B clinical material. In the event the equity financing is not closed by the required date, then, if both
BTI and CureDM, Inc. mutually agree, (i) this Acquisition Agreement will then be null and void and have no further force and effect
and all other rights and liabilities of the parties will terminate without any liability of any party to any other party and (ii)
each party shall have released the other party. Further, if such event occurs, the CureDM Members will return all shares to BTI
for cancellation.

 

Subsequent to June 30, 2018, the 180 day
time period elapsed and the Company did not raise the required funding.

 

The Company believes the milestones noted
above will not be achieved and that the Milestone BTHE Shares will not be issued. Therefore, the Company has not established a
contingent liability to recognize the milestone shares obligations.

 

Employment Agreement

 

The Company entered into an Employment
Agreement with Carl W. Rausch pursuant to which Mr. Rausch was engaged as the Chief Executive Officer of the Company for a period
of three years. Mr. Rausch was initially required to relocate from Hong Kong to the United States. However, due to his continued
efforts in Hong Kong, the Company and Mr. Rausch, in March 2017, have amended the employment agreement to remove the provision
requiring Mr. Rausch to relocate to the United States. Mr. Rausch received a signing bonus of $60,000 and an annual salary of $224,000,
which will be increased to $264,000 upon Mr. Rausch relocating to the United States. Further, upon the Company being listed on
a national exchange, Mr. Rausch’s salary will be increased by $20,000. The Company granted Mr. Rausch a Stock Option (the
“Rausch Option”) to acquire an aggregate of 6,000,000 shares of common stock of the Company, exercisable for five (5)
years, subject to vesting. The Rausch Option shall be earned and vested in three equal tranches of 2,000,000 upon the Company raising
$1,000,000 in financing, the Company raising $5,000,000 in financing and the Company entering into a significant corporate alliance
for substantial marketing and selling of the Company’s product portfolio. The initial tranche shall be exercisable at $0.20
per share, the second tranche will be $0.40 per share and the third tranche shall be $0.60 per share, which such vesting is subject
to Mr. Rausch’s continued employment as an executive with the Company as of the vesting date. In addition, as additional
consideration for Mr. Rausch’s commitment to the Company, the stock options previously granted to Mr. Rausch shall be amended
to extend the expiration date to the ten year anniversary of signing date and such options shall be considered fully vested. Mr. Rausch shall
be entitled to certain raises and milestones subject to the achievement of certain milestones to be agreed upon. In the event the
Employment Agreement is terminated prior to the expiration of the term by the Company without cause or by Mr. Rausch with good
reason, the Company shall pay Mr. Rausch an amount equal to Mr. Rausch’s accrued but unpaid base salary and earned but unpaid
bonus prior to the termination date, reimbursement for any reimbursable business expenses and Mr. Rausch’s salary for a period
of one year. On December 12, 2019, Mr. Rausch resigned as the Chief Executive Officer and Board Chairman. In January 2020, Mr.
Rausch agreed to remain a paid advisor to the Company. Under the agreement, Mr. Rausch’s options were not canceled as a result
of his voluntary termination.

 

 

Boston Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated
Financial Statements

For the Three and Nine Months Ended September
30, 2020 and 2019

 

On March 1, 2018 the Board of Directors
approved a reduction in the exercise price of 6,000,000 stock options issued to the Company’s CEO on August 22, 2016. The
First tranche of 2,000,000 will be exercisable at $0.10 per share and the second and third tranches of 2,000,000 will be exercisable
at $0.15 per share. The remainder of the terms remain unchanged.

 

On February 12, 2018, Loraine Upham was
appointed as Chief Operating Officer. The Company and Ms. Upham entered into an Executive Retention Agreement pursuant to which
Ms. Upham was engaged as Chief Operating Officer with an annual salary of $200,000. However, Ms. Upham’s salary shall accrue
until the Company has raised a minimum of $1,250,000. Ms. Upham is eligible for bonuses as determined by the Board of Directors.
These include a bonus of $20,000 is to be paid upon the Company successfully raising $1,250,000 through the sale of equity; an
annual performance bonus based on milestones related to clinical progress, partnering and fund raising success to be established
by the Board of Directors or the Compensation Committee, if in existence on an annual basis. In addition, Ms. Upham received a
stock option to purchase 4,000,000 shares of common stock under the Company’s Amended and Restated 2011 Stock Incentive Plan,
vesting over three (3) years, one third on the first anniversary of the effective date and the balance in equal quarterly installments.
The exercise price of the initial tranche of options (1,333,334 shares) shall be $0.06 per share, the second tranche (1,333,333
shares) shall be $0.10 per share and the final tranche (1,333,333 shares) shall be $0.20 per share. The term of the options is
five years. Ms. Upham resigned from the Company on November 30, 2018. As a result of her resignation all of her stock options were
terminated and returned to the option pool. Her accrued salary and vacation of $188,716 will be paid once the funding is obtained.

 

Consulting Agreement

 

On April 1, 2018, the Company entered into
a Corporate Advisory Agreement with a consultant. Services commenced May 1, 2018 for a term of one year with an option to renew
for an additional six months. Compensation pursuant to the agreement is as follows: (1) a monthly fee of $6,500 paid in cash, and
(2) 3,000,000 shares of restricted common stock of which 1,400,000 shares were deliverable upon execution of the agreement and
the remaining 1,600,000 delivered in monthly installments of 400,000 shares as long as the agreement has not been terminated. Included
in accrued expenses is the monthly fee totaling $110,500 and the fair value of the shares of common stock totaling $211,600, as
the shares have not been issued as of September 30, 2020.

 

13. SUBSEQUENT EVENTS

 

The Company has evaluated events and transactions
that occurred from September 30, 2020 through the date of the filing for possible disclosure and recognition in the financial statements.

 

On December 10, 2020, the Company borrowed
$25,000 from a related party. The Note bears interest at 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} and is due in twelve months. 

 

 

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.

 

Overview

 

Boston Therapeutics, headquartered in Lawrence,
MA, (OTCQB:
BTHE) is a leader in the field of complex carbohydrate chemistry and peptide therapeutic drug discovery and development.
The Company’s initial product pipeline is focused on developing and commercializing therapeutic molecules for sugar control
more specifically prediabetics and diabetes: investigative material BTI-320, a non- systemic, non-toxic, investigative therapeutic
compound designed to reduce post-meal glucose elevation. In addition, under manufacturing control, SUGARDOWN®, a similar
base material to BTI-320 has progressed into market testing as a dietary supplement designed to manage post-meal sugar spikes.
Recently, with the acquisition of CureDM in the first quarter of 2018, a new investigative material BTI-410, an injectable peptide,
may fulfill the medical need to replace injection of insulin by stimulating the beta cell maturation. And the adjunctive therapeutic
material called IPOXYN, is an investigative intravenous fluid therapy for the prevention of necrosis and a treatment for ischemia,
with an initial target indication of lower limb ischemic events often associated with diabetes. This covers a wider combined prevention
and therapeutic option for the growing worldwide epidemic related to metabolic diseases with diabetes being the leader.

 

The Company has incurred recurring operating
losses since inception as it has worked to bring its SUGARDOWN® product to market and develop BTI-320 and IPOXYN. Management
expects such operating losses will continue until such time that substantial revenues are received from SUGARDOWN® or
the regulatory and clinical development of BTI-320 or IPOXYN is completed. The Company has $118,286 cash on hand at September 30,
2020. Management is currently seeking additional capital through private placements and public offerings of its common stock. In
addition, the Company may seek to raise additional capital through public or private debt or equity financings as well as collaboration
activities in order to fund our operations. The Company was advanced $250,000 through the issuance of 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} notes payable to a related
party during the first quarter of 2020. The Company was advanced $330,000 through the issuance of 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} notes payable to a related
party during the second quarter of 2020. The Company was advanced $230,000 through the issuance of 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} notes payable to a related
party during the third quarter of 2020. The Company was advanced $25,000 through the issuance of 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} notes payable to a related
party during the fourth quarter of 2020. Management anticipates that cash resources will be sufficient to fund our planned operations
into the first quarter of 2021. The future of the Company is dependent upon its ability to obtain continued financing and upon
future profitable operations from the partnering, development and clarity of its new business opportunities.

 

There can be no assurance that we will
be successful in accomplishing our objectives. Without such additional capital, we may be required to cease operations. The accompanying
financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.

 

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 operations.

 

 

Results of Operations

 

Three Months Ended September 30, 2020 compared to September
30, 2019

 

Revenue

 

Revenue for the three months ended September
30, 2020 was $2,217, a decrease of $1,441 as compared to revenue of $3,658 for the three months ended September 30, 2019. The decrease
is attributable to the Company’s lack of financial resources to assist with sales and marketing costs.

 

Direct Expenses

 

Direct expenses related to revenue for
the three months ended September 30, 2020 totaled $5,541 as compared to $7,588 for the three months ended September 30, 2019. Costs
for fulfillment were lower in 2020 due to the reduced volume of units sold.

 

Research and Development

 

Research and development expense for the
three months ended September 30, 2020 was $55,405, a decrease of $331,310 as compared to $386,715 for the three months ended September
30, 2019. The third quarter of 2020 expenses related to consultants assisting with the clinical trials for Sugardown. All intangible
assets were written off in the fourth quarter of 2019 resulting in no amortization expense in 2020. The third quarter of 2019 expenses
related to the domestic clinical trials being conducted for Sugardown and non cash amortization of patents.

 

Sales and Marketing

 

Sales and marketing expense for the three
months ended September 30, 2020 was $0, a decrease of $30,357 as compared to $30,357 for the three months ended September 30, 2019.
The 2019 expense is related to the marketing agreement entered into with Level Brands, Inc. The Company is currently in arbitration
with Level Brands, Inc., in an effort to end the contract which the Company believes is not beneficial. We wrote off the prepaid
asset during the fourth quarter of 2019 as we no longer expect to use the agreement. There are currently no employees dedicated
to sales and marketing.

 

General and Administrative

 

General and administrative expense for
the three months ended September 30, 2020 was $151,299, a decrease of $75,781 as compared to $227,080 for the three months ended
September 30, 2019. The Company currently has zero employees as all of the general and administrative tasks are performed by outside
consultants. The 2020 expenses related to profession fees including legal, accounting and audit fees, as well as insurance, IT
and other operating expenses.

 

Other (Expenses) Income

 

Total other income was $21,084 for the
three months ended September 30, 2020 compared to total other income $344,645 for the three months ended September 30, 2019. Interest
expense increased by approximately $29,054 for the three months ended September 30, 2020 as compared to the same period in 2019.
This was due to the increase of related party debt during 2019 and into 2020. The Company recognized a gain of $129,255 from the
change in the valuation of its warrant liability for the three months ended September 30, 2020 compared to a gain of $421,476 for
three months ended September 30, 2019. The Company also recognized a gain of $3,124 from the change in the valuation of its derivative
liability for the three months ended September 30, 2020 compared to a gain of approximately $5,410 for the three months ended September
30, 2019.

 

 

Nine Months Ended September 30, 2020 compared to September
30, 2019

 

Revenue

 

Revenue for the nine months ended September
30, 2020 was $8,247, a decrease of $4,867 as compared to revenue of $13,114 for the nine months ended September 30, 2019. The decrease
is attributable to the Company’s lack of financial resources to assist with sales and marketing costs.

 

Direct Expenses

 

Direct expenses related to revenue for
the nine months ended September 30, 2020 totaled $15,327 as compared to $20,395 for the nine months ended September 30, 2019. Costs
for fulfillment were lower in 2020 due to the reduced volume of units sold.

 

Research and Development

 

Research and development expense for the
nine months ended September 30, 2020 was $126,004, a decrease of $1,132,255 as compared to $1,258,259 for the nine months ended
September 30, 2019. The 2020 expenses related to consultants assisting with the clinical trials for Sugardown. All intangible assets
were written off in the fourth quarter of 2019 resulting in no amortization expense in 2020. The 2019 expenses related to the domestic
clinical trials being conducted for Sugardown and non cash amortization of patents.

 

Sales and Marketing

 

Sales and marketing expense for the nine
months ended September 30, 2020 was $844, a decrease of $91,813 as compared to $92,657 for the nine months ended September 30,
2019. The 2019 expense is related to the marketing agreement entered into with Level Brands, Inc. The Company is currently in arbitration
with Level Brands, Inc., in an effort to end the contract which the Company believes is not beneficial. We wrote off the prepaid
asset during the fourth quarter of 2019 as we no longer expect to use the agreement. There are currently no employees dedicated
to sales and marketing.

 

General and Administrative

 

General and administrative expense for
the nine months ended September 30, 2020 was $378,551, a decrease of $258,337 as compared to $636,888 for the nine months ended
September 30, 2019. The Company currently has zero employees as all of the general and administrative tasks are performed by outside
consultants. The 2020 expenses related to profession fees including legal, accounting and audit fees, as well as insurance, IT
and other operating expenses.

 

Other (Expenses) Income

 

Total other expense was ($39,696) for the
nine months ended September 30, 2020 compared to total other income $458,147 for the nine months ended September 30, 2019. Interest
expense increased by $63,216 for the nine months ended September 30, 2020 as compared to the same period in 2019. This was due
to the increase of related party debt during 2019 and into 2020. The Company recognized a gain of $268,636 from the change in the
valuation of its warrant liability for the nine months ended September 30, 2020 compared to a gain of $658,111 for nine months
ended September 30, 2019. The Company also recognized a gain of $6,748 from the change in the valuation of its derivative liability
for the nine months ended September 30, 2020 compared to a gain of $51,900 for the nine months ended September 30, 2019.

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of September 30, 2020

 

As of September 30, 2020, we had cash of
$118,286 and accounts payable and accrued expenses totaling $3,256,137. During the nine months ended September 30, 2020, the Company
used $648,415 of cash in operations.

 

The Company has incurred recurring operating
losses since inception as it has worked to bring its SUGARDOWN® product to market and develop BTI-320 and IPOXYN. Management
expects such operating losses will continue until such time that substantial revenues are received from SUGARDOWN® or
the regulatory and clinical development of BTI-320 or IPOXYN is completed. The Company has $118,286 cash on hand at September 30,
2020. Management is currently seeking additional capital through private placements and public offerings of its common stock. In
addition, the Company may seek to raise additional capital through public or private debt or equity financings as well as collaboration
activities in order to fund our operations. The Company was advanced $250,000 through the issuance of 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} notes payable to a related
party during the first quarter of 2020. The Company was advanced $330,000 through the issuance of 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} notes payable to a related
party during the second quarter of 2020. The Company was advanced $230,000 through the issuance of 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} notes payable to a related
party during the third quarter of 2020. The Company was advanced $25,000 through the issuance of 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} notes payable to a related
party during the fourth quarter of 2020. Management anticipates that cash resources will be sufficient to fund our planned operations
into the first quarter of 2021. The future of the Company is dependent upon its ability to obtain continued financing and upon
future profitable operations from the partnering, development and clarity of its new business opportunities.

 

The Company may seek to raise additional
capital or private debt or public or private equity financings, and partnerships or licensing opportunities in order to fund our
operations. 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.

 

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 2 Summary of Significant Accounting
Policies, of the Notes to Unaudited Condensed Consolidated 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”) 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.

 

As disclosed in our annual report filing
for the year ended December 31, 2019, there was a material weakness in the Company’s internal control over financial reporting
due to the fact that the Company does not have an adequate process established to ensure appropriate levels of review of accounting
and financial reporting matters, which resulted in our closing process not identifying all required adjustments and disclosures
in a timely fashion. The Company’s CEO/CFO has identified control deficiencies regarding the lack of segregation of duties
and the need for a stronger internal control environment. The small size of the Company’s accounting staff may prevent adequate
controls in the future, such as segregation of duties, due to the cost/benefit of such remediation. 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.

 

Through the use of external consultants
and the review process, management believes that the financial statements and other information presented herewith are materially
correct.

 

Changes in Internal Control Over Financial
Reporting

 

There were no changes in the Company’s
internal control over financial reporting (as defined in Rule 13a-15f of the Exchange Act) that occurred during the first nine
months of 2020 that has materially affected, or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.

 

Limitations on Internal Controls

 

In designing and evaluating the disclosure
controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and
procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating
the benefits of possible controls and procedures relative to their costs.

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

In March 2019, we were served with notification
of complaint filed by CureDM Inc. as agent for the members of CureDM Group Holdings, LLC filed with the Supreme Court of the State
of New York County of New York regarding breach of contract and other matters relating to their desire to unwind the acquisition
of CureDM Group Holdings LLC according to the original Contribution Agreement. The complaint was withdrawn by CureDM, Inc. in December
2019. The Company is continuing to work with the representatives from CureDM Inc. to settle this claim and unwind the Contribution
Agreement.

 

In addition to the above matter, we are
also in a dispute with Level Brands, Inc. regarding a License Agreement dated June 21, 2018 (JAMS Ref. No.: 1220061261). The Company
filed an Answer to Complaint and Counter-complaint on June 25, 2019. Both parties are claiming non-performance under the License
Agreement. The matter was scheduled for arbitration in October 2019. In October 2019, the arbitration was dismissed without prejudice.

 

On October 16, 2019 the Company received
a Summons and Complaint filed by Microcap Headlines Inc. against the Company in the Supreme Court of the United States of New York
County of Suffolk claiming damages of $18,000 and the costs and disbursements of the action. The Company filed an Answer on November
15, 2019. The Company intends to vigorously defend against the claim.

 

The Company may become involved in certain
legal proceedings and claims which arise in the normal course of business. The Company is not aware of any other outstanding or
pending litigation.

 

Item 1A. Risk Factors

 

There have not been any material changes
in the risk factors from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.

 

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

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

Item 5. Other Information

 

None.

 

 

Item 6. Exhibits

 

 

* 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: December 24, 2020 By: /s/ Conroy Chi-Heng Cheng
    Conroy Chi-Heng Cheng
    Chief Executive Officer

 

Exhibit
31.1

 

CERTIFICATION
OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER PURSUANT TO RULE 13a-14

 

I,
Conroy Chi-Heng Cheng, certify that:

 

1. I
have reviewed this Quarterly Report on Form 10-Q of Boston Therapeutics, Inc;

 

2. Based
on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this report;

 

3. Based
on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented
in this report;

 

4. The
registrant’s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) designed
such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;

 

b) designed
such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles;

 

c) evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation;
and

 

d) disclosed
in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and

 

5. The
registrant’s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors
and the audit committee of registrant’s board of directors (or persons performing
the equivalent functions):

 

a) all
significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial information;
and

 

b) any
fraud, whether or not material, that involves management or other employees who have
a significant role in the registrant’s internal control over financial reporting.

 

Dated:
December 24, 2020
By: /s/ Conroy Chi-Heng Cheng
    Conroy Chi-Heng Cheng
    Chief Executive Officer
    (Principal Executive, Financial and Accounting Officer)

Exhibit
32.1

 

CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT

TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In
connection with the Quarterly Report on Form 10-Q of Boston Therapeutics, Inc. (the “Company”) for the quarter ending
September 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Conroy
Chi-Heng Cheng, Chief Executive and Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

 

(1) The
report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and

 

(2) The
information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.

 

Dated:
December 24, 2020
By: /s/ Conroy Chi-Heng Cheng
    Conroy Chi-Heng Cheng
    Chief Executive Officer
    (Principal Executive, Financial and Accounting Officer)

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