Quarterly Report (10-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2014

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

For the transition period from ______________ to ______________.

Commission file number: 000-29981

TRISTAR WELLNESS SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Nevada		91-2027724
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

10 Saugatuck Ave.
Westport CT		06880
(Address of principal executive offices)		(Zip Code)

(203) 226-4449

Registrant’s telephone number, including area code

_________________________________

(Former address, if changed since last report)

___________________________________
(Former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x
(Do not check if a smaller reporting company)

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

Applicable only to issuers involved in bankruptcy proceedings during the preceding five years:

Indicate by check mark whether the registrant filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes oNo o

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. As of August 19, 2014, there were 23,041,715 shares of common stock, $0.001 par value, issued and outstanding.

TRISTAR WELLNESS SOLUTIONS, INC.
TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM 1	Financial Statements	3

ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	25

ITEM 4	Controls and Procedures	25

PART II – OTHER INFORMATION

ITEM 1	Legal Proceedings	27

ITEM 1A	Risk Factors	27

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	27

ITEM 3	Defaults Upon Senior Securities	27

ITEM 4	Mine Safety Disclosures	27

ITEM 5	Other Information	27

ITEM 6	Exhibits	28

PART I – FINANCIAL INFORMATION

This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider,” or similar expressions are used.

Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties, and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.

ITEM 1 Consolidated Financial Statements

The unaudited condensed consolidated interim financial statements of registrant for the three and six months ended June 30, 2014 and 2013 are below. The unaudited condensed consolidated interim financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. All such adjustments are of a normal and recurring nature.

TRISTAR WELLNESS SOLUTIONS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(dollars in thousands)

	June 30, 2014			December 31, 2013
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	85		$	193
Accounts receivables, net		502			638
Prepaid expenses and other		154			178
Other receivables		1,500			1,500
Receivable from related party		1			-
Inventories, net		1,114			1,144
Total current assets		3,356			3,653
Non-current assets
Property and equipment, net		890			997
Intangible assets, net		825			867
Other non-current assets		41			41
Total non-current assets		1,756			1,905
TOTAL ASSETS	$	5,112		$	5,558

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued expenses	$	1,607		$	1,321
Accounts payable and accrued expenses due to related parties		1,388			973
Current liabilities related to assets sold		1,500			1,500
Short-term notes (net of debt discount $557 and $497 as of June 30, 2014 and December 31, 2013, respectively)		2,217			714
Short-term notes - related party		3,970			3,970
Convertible notes (net of debt discount $142 and $0 as of June 30, 2014 and December 31, 2013, respectively)		536			356
Convertible notes - related party (net of debt discount $53 and $0 as of June 30, 2014 and December 31, 2013, respectively)		177			-
Deferred revenue		162			306
Derivative liability		1,792			-
Total current liabilities		13,349			9,140
Non-current Liabilities
Deferred revenue, net of current portion		-			48
Total non-current liabilities		-			48
TOTAL LIABILITIES		13,349			9,188

STOCKHOLDERS' DEFICIT
Convertible preferred stock, $0.001 par value; 10,000,000 shares authorized; 5,621,667 and 5,621,667 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively		6			6
Common stock; $0.0001 par value; 50,000,000 shares authorized; 23,041,715 and 22,041,713 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively		2			2
Additional paid-in capital		19,697			18,823
Other comprehensive gain/(loss)		5			(19	)
Accumulated deficit		(27,947	)		(22,442	)
TOTAL STOCKHOLDERS' DEFICIT		(8,237	)		(3,630	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	5,112		$	5,558

See accompanying unaudited notes to the condensed consolidated interim financial statements

TRISTAR WELLNESS SOLUTIONS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (unaudited)

(dollars in thousands)

	For the Three Months Ended						For the six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013

Sales revenue	$	1,224		$	1,287		$	2,527		$	1,293
Cost of Goods Sold		844			912			1,882			956
Gross profit		380			375			645			337

Continuing operations
Operating expenses:
General and administrative		967			987			1,692			2,191
Sales, marketing and development expenses		676			395			1,403			1,316
Amortization on intangible assets		22			-			42			-
Impairment of intangible assets		-			-			-			2
Total operating expenses		1,665			1,382			3,137			3,509

Loss from operations		(1,285	)		(1,007	)		(2,492	)		(3,172	)

Other income and (expenses)
Interest expense		(951	)		(650	)		(1,503	)		(659	)
Change in fair value of derivative liability		289			-			(1,510	)		-
Other		12			(40	)		-			(40	)
Total other expenses		(650	)		(690	)		(3,013	)		(699	)

Net loss		(1,935	)		(1,697	)		(5,505	)		(3,871	)

Other comprehensive gain (loss)
Foreign currency translation gain (loss)		63			(1	)		24			(1	)

Total comprehensive loss	$	(1,872	)	$	(1,698	)	$	(5,481	)	$	(3,872	)

Total
Loss per share	$	(0.08	)	$	(0.04	)	$	(0.24	)	$	(0.11	)
Diluted loss per share	$	(0.08	)	$	(0.04	)	$	(0.24	)	$	(0.11	)

Weighted average common shares outstanding		23,041,715			44,962,000			22,563,814			35,793,000
Diluted weighted average common shares outstanding		23,041,715			44,962,000			22,563,814			35,793,000

See accompanying unaudited notes to the condensed consolidated interim financial statements

TRISTAR WELLNESS SOLUTIONS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (unaudited)

(dollars in thousands)

	Six Months Ended June 30,
	2014			2013
Cash flows from operating activities:
Loss for the period from continuing operations	$	(5,505	)	$	(3,871	)
Adjustments to reconcile net profit/loss from continuing operations to net cash provided by operating activities:
Depreciation expenses		135			72
Change in fair value of derivative liability		1,510			-
Amortization of debt discount		871			546
Issuance of warrants for research and development		-			921
Issuance of warrants for services		-			688
Intangible asset amortization		42			-
Intangible asset impairment		-			2
Imputed interest on note payable		21			16
Accounts receivables		81			(347	)
Inventory		30			10
Prepaid expenses		24			(88	)
Accounts payable and accruals		286			10
Other receivables		54			148
Deferred revenue		(192	)		189
Accounts payable and accrued expenses - related party		415			786
Net cash used in operating activities from continuing operations		(2,228	)		(918	)

Cash flow from investing activities:
Acquisition of HemCon		-			(3,139	)
Purchase of computer equipment		(28	)		-
Net cash used in investing activities		(28	)		(3,139	)

Cash flow from financing activities:
Proceeds from issuance of short-term notes		1,564			536
Proceeds from issuance of short-term convertible notes - related party		230			3,165
Proceeds from issuance of convertible notes		330			50
Proceeds from issuance of common stock		-			227
Proceeds from issuance of Series D convertible preferred stock		-			250
Net cash generated from financing activities from continuing operations		2,124			4,228

Cumulative translation adjustment		24			(1	)
Net change in cash		(108	)		170

Cash and cash equivalent, beginning		193			11
Cash and cash equivalent, ending	$	85		$	181

Supplemental schedule of non-cash activities
Debt discount due to convertible debentures issued with warrants	$	845		$	1,651
Debt discount due to embedded derivative liabilities within convertible debentures issued	$	282		$	-
Conversion of notes payable to preferred stock	$	-		$	225
Conversion of notes payable to common stock	$	8		$	40
Conversion of preferred stock to common stock	$	-		$	2
Acquisition of Beautè de Maman assets	$	-		$	2

See accompanying unaudited notes to the condensed consolidated interim financial statements

TRISTAR WELLNESS SOLUTIONS, INC. AND SUBSIDIARIES

Unaudited Notes to the Condensed Consolidated Financial Statements

(dollars in 000’s except per share)

1. The Company

TriStar Wellness Solutions, Inc. (“the Company”) was incorporated on August 28, 2000 in the state of Nevada under the name “Quadric Acquisitions”. From the date of its incorporation through April 27, 2012, the Company had several name changes and different business plans all under prior management that is no longer with the Company. On April 27, 2012, the Company underwent a change of control transaction and changed its business plan. On January 7, 2013, the Company changed its name from Biopack Environmental Solutions, Inc. to TriStar Wellness Solutions, Inc. with the State of Nevada, and such change was effected with FINRA on January 18, 2013. The Company conducts its current operations under the name TriStar Wellness Solutions, Inc. The vast majority of the Company’s operations are conducted through its wholly-owned subsidiary, HemCon Medical Technologies Inc., an Oregon corporation (“HemCon”), and involve the development, marketing and sale of HemCon’s innovative wound care products.

Overall, the Company is focused on bringing new technologies to consumers and patients that address underserved therapeutic healthcare opportunities based on a combination of superior science, product development and market positioning worldwide. Each of the Company’s products is designed to improve health advocacy and medical outcomes through superior and proven technologies. The Company’s innovative products and technologies focus in three categories:

Wound Care products focused on superior hemostasis and infection control through the exploitation of proprietary and in licensed technologies targeting a wide range of professional medical (e.g., surgery, dialysis, post-procedure recovery), trauma, military and consumer OTC (over the counter) applications reducing the total cost of care. The Company has developed FDA-approved products targeted to specific procedures within the broad professional care medical market as well as innovative products targeted to the global OTC (consumer self-care) wound care market which have received FDA clearance, CE approval and other international approvals.

Women’s Health products initially focused on the unique needs during pregnancy and nursing. Longer-term the Company plans to expand the TWSI portfolio to address broader, under-met needs in women’s health. The Company markets to the maternity segment under the Beaute de Maman™ brand sold via traditional retailers and internet portals.

Therapeutic Skin Care products leveraging a proprietary delivery system enabling superior dosing and consumer therapeutic benefits related to several OTC skin care needs. These technology applications are being developed for potential third party licensing or internal brand expansion.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013. The year-end balance sheet data was derived from audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). All normal recurring adjustments which are necessary for the fair presentation of the results for the interim periods are reflected herein. Operating results for the three and six month periods ended June 30, 2014 and 2013 are not necessarily indicative of results to be expected for a full year.

Use of Estimates

In preparing financial statements in conformity with U.S. GAAP, management is required 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, as well as the reported amounts of expenses during the reporting period. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. On an ongoing basis, the Company evaluates its estimates and assumptions. These estimates and assumptions include valuing equity securities in share-based payment arrangements, estimating the fair value of equity instruments upon issuance, estimate the fair value of any derivative liabilities, and estimating the useful lives of depreciable assets and whether impairment charges may apply.

Reclassification

Certain reclassifications have been made to conform to prior year information to the 2014 classifications for comparative purposes.

Stock-Based Compensation

Compensation expense for all stock-based awards is measured on the grant date based on the fair value of the award and is recognized as an expense, on a straight-line basis, over the employee's requisite service period (generally the vesting period of the equity award). The fair value of each option award is estimated on the grant date using a Black-Scholes option valuation model. Stock-based compensation expense is recognized only for those awards that are expected to vest using an estimated forfeiture rate. We estimate pre-vesting option forfeitures at the time of grant and reflect the impact of estimated pre-vesting option forfeitures in compensation expense recognized. For options and warrants issued to non-employees, the Company recognizes stock compensation costs utilizing the fair value methodology over the related period of benefit.

Accounting for Derivative Liabilities – Conversion Option

The fair value of the conversion option was valued using the binomial lattice options pricing model, a “Level 3” input, based on the quoted price of common stock, volatility based on the Company’s peer group, the expected life based on the remaining contractual term of the conversion option and the risk free interest rate based on the implied yield available on U.S. Treasury Securities with a maturity equivalent to the conversion options’ contractual life.

Income Taxes

The Company accounts for derivative instruments in accordance with ASC 815 “Derivatives and Hedging” (“ASC 815”), which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts. The Company also considers ASC 815, which provides criteria for determining whether freestanding contracts that are settled in a company’s own stock, including common stock warrants, should be designated as either an equity instrument, an asset or as a liability under ASC 815.

Additionally, the Company evaluated the conversion feature embedded in its convertible promissory notes based on the criteria of ASC 815 to determine whether the conversion feature would be required to be bifurcated from the promissory note and accounted for separately as a derivative. Based on management’s evaluation, the embedded conversion feature meets the requirements of derivative accounting under ASC 815. The Company recorded this conversion feature at its fair value in accordance with ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”). The embedded conversion feature was valued using the binomial option pricing model. Increases or decreases in the fair value of the conversion feature are included as a component of other income (expense) in the accompanying condensed consolidated statements of operations for the respective period.

3. Liquidity and Going Concern

The Company's unaudited condensed consolidated interim financial statements are prepared using accounting principles generally accepted in the United States of America (GAAP) applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. In addition, as of June 30, 2014, the Company had an accumulated deficit of $27.9 million, and had incurred a net loss for the three months ended June 30, 2014 of $1.9 million and had negative working capital of $10.0 million. Funding has been provided by related parties as well as new investors committed to make it possible to maintain, expand, and ensure the advancement of the TriStar Wellness products.

The consolidated financial statements for the fiscal year ended December 31, 2013 states that because the Company has suffered recurring operating losses from operations, there is substantial doubt about the Company’s ability to continue as a going concern. A “going concern” opinion indicates that the consolidated financial statements have been prepared assuming the Company will continue as a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty

4. Business Combinations

On May 6, 2013, the Company closed the acquisition of HemCon, an Oregon corporation (“HemCon”), pursuant to the terms of an Agreement for Purchase and Sale of Stock entered into by and between us and HemCon (the “Agreement”). The Agreement was entered into as part of HemCon’s Fifth Amended Plan of Reorganization in its bankruptcy proceeding (United States Bankruptcy Court, District of Oregon, Case No. 12-32652-elp11) and was approved by the Court as part of HemCon’s approved Plan of Reorganization. Under the Agreement, the Company purchased 100 shares of HemCon’s common stock, representing 100% of HemCon’s then-outstanding voting securities, in exchange for approximately $3.1 million (the “Purchase Price”). The Purchase Price was paid to the Court and the Trustee of the bankruptcy proceeding to be distributed to HemCon’s creditors in accordance with the Plan of Reorganization.

The acquisition has been accounted for under the acquisition method of accounting. Accordingly, the assets and liabilities of the acquired entity were recorded at their estimated fair values at the date of the acquisition. The operating results for HemCon have been included in the Company's consolidated financial statements since the acquisition date.

The purchase price allocation is based on estimates of fair value as follows (in thousands):

Accounts receivables	$	653
Other receivables		1,500
Inventory		1,410
Other current assets		23
Prepaid expenses		156
Fixed assets		1,193
Accounts payable and accrued expenses		(341)
Current liabilities related to assets held for sale		(1,500)
Deferred revenue		(882)
Patents		336
Customer list		198
Trade name		266
Non-compete agreement		127
Total acquisition cost allocated	$	3,139

Management assigned fair values to the identifiable intangible assets through a combination of the relief from royalty method and the multi-period excess earnings method.

The useful lives of the acquired intangibles are as follows:

	Useful
	Lives
Patents		12
Customer lists		14
Non-compete arrangements		4
Trade name		16

Intangible asset amortization expense for the three and six months ended June 30, 2014 and June 30, 2013 was $22, $42 and $0, $0 respectively.

The following unaudited pro forma financial information presents results as if the acquisition of HemCon had occurred on January 1, 2014 and January 1, 2013 (in thousands):

	Six Months Ended June 30,
	2014			2013
	(Unaudited)
Total revenue	$	2,527		$	2,933
Net loss from continuing operations	$	(5,505	)	$	(3,064	)

5. Inventories

Inventories, net consist of the following at June 30, 2014 and December 31, 2013 (in thousands):

	June 30,		December 31,
	2014		2013
Raw materials	$	342	$	318
Work in Progress		172		251
Finished Goods		600		575
	$	1,114	$	1,144

Reserve for obsolescence was approximately $267 as of June 30, 2014.

6. Property and Equipment

Property and equipment consist of the following at June 30, 2014 and December 31, 2013 (in thousands):

	Estimates Useful life	June 30,			December 31,
	(Years)	2014			2013
Manufacturing Equipment	7-10	$	622		$	623
Leasehold Improvements	7		535			520
Office Furniture and Equipment	3-7		32			32
Computer Equipment and Software	1-5		26			12
Construction in Progress			6			6
			1,221			1,193
Less: Accumulated Depreciation, amortization and impairments			(331	)		(196	)
		$	890		$	997

Depreciation expense was approximately $135 for the six months ended June 30, 2014 and $0 for the six months ended June 30, 2103.

7. Loans Payable

	June 30, 2014		December 31, 2013

Short-term notes (net of debt discount $557 and $497 as of June 30, 2014 and December 31, 2013, respectively)	$	2,217	$	714
Short-term notes - related party		3,970		3,970
	$	6,187	$	4,685

Convertible notes (net of debt discount $142 and $0 as of June 30, 2014 and December 31, 2013, respectively)	$	536	$	356
Convertible notes - related party (net of debt discount $53 and $0 as of June 30, 2014 and December 31, 2013, respectively)		177		-
	$	713	$	356

Promissory Notes

First Quarter 2014 Activities

On January 15, 2014, the Company issued a convertible promissory note (“Note”) to a third party, in the principal amount of $100. The note has an interest rate of 24% per annum, simple interest and is due on or before July 15, 2014. In connection with this promissory note, the Company issued warrants to purchase 1,000,000 shares of our common stock at an exercise price $1.32 per share, which was the fair market value of our common stock on the date of issuance. The fair value of the warrants was determined using the Black-Scholes model with the following assumptions: risk free interest rate – 1.68%, volatility – 111.11%, expected term – 5 years, expected dividends– N/A. The debt discounts related to the warrants are being amortized over a 0.5 year period (through maturity) on a straight-line basis. The Company recorded a debt discount related to the warrants of $91 by crediting additional paid in capital. Amortization expense on the debt discount was $41. At any time after February 1, 2014, or in the event of default, the holder may choose to convert the balance due from this Note into sufficient number of common shares of the Company, to constitute 1% of the total number of fully diluted and, by doing so, accept the payment of shares as payment in full for the outstanding balance. The Note contains an embedded conversion feature that the Company has determined is a derivative requiring bifurcation in accordance with the provisions of ASC 815. The embedded conversion feature of the Notes was valued at approximately $2,386 using the binomial option pricing model at January 15, 2014. The fair value of the conversion feature was determined using the binomial option pricing model with the following assumptions: risk free interest rate – 0.06%, volatility – 111.11%, expected term – 0.5 years, expected dividends– N/A.

During the first quarter of 2014 the Company issued a promissory note to a third party, in the principal amount of $740. The note has an interest rate of 21% per annum, simple interest and is due on or before November 30, 2014. In connection with this promissory note, the Company issued warrants to purchase 850,000 shares of our common stock at an exercise price between $0.75 and $1.32 per share, which was the fair market value of our common stock on the date of issuance. The relative fair value of the warrants compared to the debt was recorded as a component of stockholders’ equity with the offset recorded as a discount on the promissory notes and included as a component of promissory notes in the accompanying consolidated balance sheet as of March 31, 2014. The fair value of the warrants was determined using the Black-Scholes model with the following assumptions: risk free interest rate – 1.56%, volatility – 100.10%, expected term – 4 years, expected dividends– N/A. The debt discounts related to the warrants are being amortized over a 0.8 year period (through maturity) on a straight-line basis. The Company recorded a debt discount related to the warrants of $298 by crediting additional paid in capital. Amortization expense on the debt discount was $176 for the three months ended March 31, 2014.

During the first quarter of 2014 the Company issued convertible promissory notes (“Notes”) to DayStar Funding, LP, a Texas limited partnership and a party controlled by Frederick A. Voight one of our officers and directors, in the principal amount of $230. The note has an interest rate of 24% per annum, simple interest and is due on or before August 11, 2014. No warrants were issued in connection with the promissory note. The Notes contain an embedded conversion feature that the Company has determined is a derivative requiring bifurcation in accordance with the provisions of ASC 815. At any time after February 1, 2014, or in the event of default, the holder may choose to convert the balance due from this Note into sufficient number of common shares of the Company, to constitute 1% of the total number of fully diluted and, by doing so, accept the payment of shares as payment in full for the outstanding balance. The embedded conversion feature of the Notes was valued at approximately $1,483 using the binomial option pricing model at February 11, 2014. The fair value of the conversion feature was determined using the binomial option pricing model with the following assumptions: risk free interest rate – 0.10%, volatility – 92%, expected term – 0.5 years, expected dividends– N/A. Amortization expense on the debt discount was $61 for the three months ended March 31, 2014.

During the first quarter of 2014, two third parties partially converted their notes payable, in accordance with the original terms of the notes, with an aggregate principal amount of $8,000 into 1,000,000 common shares.

The Company recorded imputed interest on convertible debentures and interest expense of $7 and $9 for the three months ended March 31, 2014 and 2013 respectively, based upon a market interest rate of 8% and accrued interest based on the stated rate of 0.5%.

Second Quarter 2014 Activities

On April 1, 2014, the Company issued a convertible promissory note (“Note”) to a third party, in the principal amount of $230. The note has an interest rate of 24% per annum, simple interest and is due on or before November 1, 2014. In connection with this promissory note, the Company issued warrants to purchase 2,300,000 shares of our common stock at an exercise price $0.59 per share, which was the fair market value of our common stock on the date of issuance. The fair value of the warrants was determined using the Black-Scholes model with the following assumptions: risk free interest rate – 1.73%, volatility – 101.53%, expected term – 4 years, expected dividends– N/A. The debt discounts related to the warrants are being amortized over a 0.6 year period (through maturity) on a straight-line basis. The Company recorded a debt discount related to the warrants of $187 by crediting additional paid in capital. Amortization expense on the debt discount was $97. At any time after April 1, 2014, or in the event of default, the holder may choose to convert the balance due from this Note into sufficient number of common shares of the Company, to constitute 1% of the total number of fully diluted and, by doing so, accept the payment of shares as payment in full for the outstanding balance. The Note contains an embedded conversion feature that the Company has determined is a derivative requiring bifurcation in accordance with the provisions of ASC 815. The embedded conversion feature of the Notes was valued at approximately $926 using the binomial option pricing model at April 1, 2014. The fair value of the conversion feature was determined using the binomial option pricing model with the following assumptions: risk free interest rate – 1.73%, volatility – 101.5%, expected term – 0.5 years, expected dividends– N/A.

On April 1, 2014, the Company issued a promissory note to a third party, in the principal amount of $824. The note has an interest rate of 21% per annum, simple interest and is due on or before November 30, 2014. In connection with this promissory note, the Company issued warrants to purchase 824,000 shares of our common stock at an exercise price $0.35 per share, which was the fair market value of our common stock on the date of issuance. The relative fair value of the warrants compared to the debt was recorded as a component of stockholders’ equity with the offset recorded as a discount on the promissory notes and included as a component of promissory notes in the accompanying consolidated balance sheet as of June 30, 2014. The fair value of the warrants was determined using the Black-Scholes model with the following assumptions: risk free interest rate – 1.73%, volatility – 101.53%, expected term – 4 years, expected dividends– N/A. The debt discounts related to the warrants are being amortized over a 0.7 year period (through maturity) on a straight-line basis. The Company recorded a debt discount related to the warrants of $269 by crediting additional paid in capital. Amortization expense on the debt discount was $100 for the three months ended June 30, 2014.

8. Stockholders’ Equity

Diluted Shares

There were 405,000 shares of Series A, 1,000,000 shares of Series B and no shares of Series C outstanding as of June 30, 2014. Each share of Preferred D is convertible into twenty five shares of common stock. Convertible preferred stock was considered anti-dilutive for the six months ended June 30, 2014 and 2013, due to net losses. As of June 30, 2014, there are 4,216,667 Series D Convertible Preferred Shares which are convertible into 105,416,675 of common shares. All Series D Convertible Preferred Stock voting rights are on an “as converted to common stock” basis. Dividends are not mandatory. If declared by the Board Series D Preferred Stock shall have preference over common stock and equal to other series of preferred stock. As of June 30, 2014, there are 11,306,600 warrants which are convertible into one share of common stock with a weighted average exercise price of $1.32. In addition, convertible debt of $713 as of June 30, 2014 is convertible into 49,204,451 shares of the Company’s common stock.

The Company has determined that common stock equivalents in excess of available authorized common shares are not derivative instruments due to the fact that an increase in authorized shares is within the Company’s control.

Note Conversions

All note conversions were within the original conversion terms and therefore no gain or loss was recorded on these conversions.

There is no conversions occurred during the three months ended June 30, 2014.

Detachable Warrants

During the first quarter of 2014, the Company issued Promissory Notes containing 1,850,000 detachable Warrants. The relative fair value of the detachable Warrants compared to the debt of approximately $389 was recorded as a component of stockholders’ equity with the offset recorded as a discount on the promissory notes and included as a component of promissory notes in the accompanying condensed consolidated balance sheet as of March 31, 2014. The fair value of the warrants was determined using the Black-Scholes model with the following assumptions: risk free interest rate – 1.46% - 1.68%, volatility – 99.58 – 111.11%, expected term – 4 to 5 years, expected dividends– N/A. The debt discount related to the warrants is being amortized over a six to ten month period (through maturity) on a straight-line basis.

During the second quarter of 2014, the Company issued Promissory Notes containing 3,124,000 detachable Warrants. The relative fair value of the detachable Warrants compared to the debt of approximately $456 was recorded as a component of stockholders’ equity with the offset recorded as a discount on the promissory notes and included as a component of promissory notes in the accompanying condensed consolidated balance sheet as of June 30, 2014. The fair value of the warrants was determined using the Black-Scholes model with the following assumptions: risk free interest rate – 1.73%, volatility –101.53%, expected term – 4 years, expected dividends– N/A. The debt discount related to the warrants is being amortized over a seven to eight month period (through maturity) on a straight-line basis.

9. Related Party Transactions

Consulting Agreements

On January 6, 2014 the Company entered into a revised consulting agreement with Chord Advisors, LLC ("Chord"). David Horin, the Company's Chief Financial Officer has a significant equity partnership stake in Chord. Currently the agreement is on a month to month basis. The Company has agreed to pay Chord a monthly consulting fee of approximately $13 for Mr. Horin's services and services of his firm and 50,000 warrants upon the consummation of a financing transaction in excess of $2 million with an exercise price equal to the exercise price of such warrants in a financing transaction. The Company incurred $75 and $75 for the six months ended June 30, 2014 and 2013, respectively, and has an account payable balance related to this agreement of $118 as of June 30, 2014.

Accounts Payable and Accrued Expenses

As of June 30, 2014 the Company owed Daystar $50, James Barickman $3, John Linderman 16, Ingber $6, Northstar $318 and Rivercoach $72.

Related Party Notes

During the first quarter of 2014 the Company issued convertible promissory notes (“Notes”) to DayStar Funding, LP, a Texas limited partnership and a party controlled by Frederick A. Voight one of our officers and directors, in the principal amount of $230. The note has an interest rate of 24% per annum, simple interest and is due on or before August 11, 2014. No warrants were issued in connection with the promissory note. The Notes contain an embedded conversion feature that the Company has determined is a derivative requiring bifurcation in accordance with the provisions of ASC 815. The embedded conversion feature of the Notes was valued at approximately $1,483 using the binomial option pricing model at February 11, 2014. The fair value of the conversion feature was determined using the binomial option pricing model with the following assumptions: risk free interest rate – 0.10%, volatility – 92%, expected term – .05 years, expected dividends– N/A. Amortization expense on the debt discount was $177 for the six months ended June 30, 2014.

As of June 30, 2014, the Company owed to Daystar Funding, LP $3,970 and accrued interest of $796.

As of June 30, 2014, the Company owed John Linderman and James Barickman $6 and $2 of accrued interest, respectively.

10. Intangible Assets, Net

On May 6, 2013, the Company closed the acquisition of HemCon Medical Technologies Inc., an Oregon corporation (“HemCon”), pursuant to the terms of an Agreement for Purchase and Sale of Stock entered into by and between us and HemCon (the “Agreement”). The Agreement was entered into as part of HemCon’s Fifth Amended Plan of Reorganization in its bankruptcy proceeding (United States Bankruptcy Court, District of Oregon, Case No. 12-32652-elp11) and was approved by the Court as part of HemCon’s approved Plan of Reorganization. Under the Agreement, the Company purchased 100 shares of HemCon’s common stock, representing 100% of HemCon’s then-outstanding voting securities, in exchange for $3,139 in cash (the “Purchase Price”). The Purchase Price was paid to the Court and the Trustee of the bankruptcy proceeding to be distributed to HemCon’s creditors in accordance with the Plan of Reorganization.

For the six months ended June 30, 2014, intangible assets consisted primarily of patents, customer lists, non-compete arrangements and a trade name. Patents, customer lists, non-compete arrangements and a trade name acquired in business combinations under the purchase method of accounting are recorded at fair value net of accumulated amortization since the acquisition date. The intangible assets are amortized over their estimated useful life which is 4 to 16 years.

The amortization expense for the three and six months ended June 30, 2014 and June 30, 2013 was $$22, $42 and $0, $0, respectively.

Description	life in Years	Price		Amortized as of June 30, 2014		Balance as of June 30, 2014
Patents	12	$	336		32	$	304
Customer list	14		198		16	$	182
Trade name	16		266		17	$	249
Non-compete agreement	4		127		37	$	90
		$	927		102	$	825

11. Fair Value Measurements

The Company has adopted the provisions of ASC 820 which defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP, and expands disclosures about fair value measurements. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820 provides guidance on how to measure certain financial assets and financial liabilities at fair value. The requirement to measure an asset as liability at fair value is determined under the U.S. GAAP.

Certain of the Company’s assets and liabilities are considered to be financial instruments and are required to be measured at fair value in the consolidated balance sheets. Certain of these financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, short-term debt and deferred revenue are measured at cost, which approximates fair value due to the short-term maturity of these instruments. Derivative liabilities are measured at fair value.

The Company measures fair value basis based on the following key objectives:

•	Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date;

•	A three-level hierarchy (“Valuation Hierarchy”) which prioritizes the use of observable pricing data (Level 1 and Level 2 inputs as defined below) over unobservable pricing data (Level 3 inputs as defined below) is used in measuring value; and

•	The Company’s creditworthiness is considered when measuring the fair value of liabilities.

The valuation hierarchy used in measuring fair value is defined as follows:

•	Level 1 inputs are observed inputs such as quoted prices for identical instruments inactive markets;

•	Level 2 inputs are inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments inactive markets or quoted prices for identical or similar instruments in markets that are not active; and

•

Level 3 inputs are unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs are unobservable. Level 3 requires significant management judgment or estimation.

All items measures at fair value are required to be classified and disclosed as a Level 1, 2 or 3 asset or liability based on the inputs used to measure for value of an asset or liability in its entirety. An asset or liability classified as Level 1 is measured by quoted prices in active markets for identical instruments. An asset or liability classified as Level 2 is measured using significant observable inputs and an asset or liability classified as Level 3 is measured using significant unobservable inputs.

The following table classifies the Company’s liabilities measured at fair value on a recurring basis (primarily reflecting an increase in stock price per share) into the fair value as of June 30, 2014 and December 31, 2013 (in thousands):

Description	Level 1		Level 2		Level 3

Derivative liability-conversion options	$	-	$	-	$	1,792

The following table represents our assets and liabilities by level measured at fair value on a recurring basis at December 31, 2013.

Description

Level 1

Level 2

Level 3

None

There were no transfers between Level 1, 2 or 3 during the three months ended June 30, 2014.

The following table presents changes in Level 3 liabilities measured at fair value from the period ended December 31, 2013 through June 30, 2014. Both observable and unobservable inputs are used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.

Balance as of December 31, 2013	$	-
Discount related to embedded conversion feature *		239
Change in fair value of derivative liability - conversion option		1,799
Balance - March 31, 2014		2,038
Discount related to embedded conversion feature *		43
Change in fair value of derivative liability - conversion option		(289	)
Balance -June 30, 2014	$	1,792

* The Notes contain an embedded conversion feature that the Company has determined is a derivative requiring bifurcation in accordance with the provisions of ASC 81.

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q of TriStar Wellness Solutions, Inc. for the period ended June 30, 2014 contains forward-looking statements, principally in this Section and “Business.” Generally, you can identify these statements because they use words like “anticipates,” “believes,” “expects,” “future,” “intends,” “plans,” and similar terms. These statements reflect only our current expectations. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy and actual results may differ materially from those we anticipated due to a number of uncertainties, many of which are unforeseen, including, among others, the risks we face as described in this filing. You should not place undue reliance on these forward-looking statements which apply only as of the date of this annual report. To the extent that such statements are not recitations of historical fact, such statements constitute forward-looking statements that, by definition, involve risks and uncertainties. In any forward-looking statement where we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation of belief will be accomplished.

We believe it is important to communicate our expectations to our investors. There may be events in the future; however, that we are unable to predict accurately or over which we have no control. The risk factors listed in this filing, as well as any cautionary language in this annual report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Factors that could cause actual results or events to differ materially from those anticipated, include, but are not limited to: our ability to successfully obtain financing for product acquisition; changes in product strategies; general economic, financial and business conditions; changes in and compliance with governmental regulations; changes in various tax laws; and the availability of key management and other personnel.

Overview

We were incorporated on August 28, 2000 in the state of Nevada under the name “Quadric Acquisitions”. From the date of our incorporation through April 27, 2012, we had several name changes and different business plans all under prior management that is no longer with the company. On April 27, 2012, we underwent a change of control transaction and changed our business plan. On January 7, 2013, we changed our name from Biopack Environmental Solutions, Inc. to TriStar Wellness Solutions, Inc. with the State of Nevada, and such change was effected with FINRA on January 18, 2013. We conduct our current operations under the name TriStar Wellness Solutions, Inc. The vast majority of our operations are conducted through our wholly-owned subsidiary, HemCon Medical Technologies Inc., an Oregon corporation (“HemCon”), and involve the development, marketing and sale of HemCon’s innovative wound care products.

Overall, we are a company focused on bringing new technologies to consumers and patients that address underserved therapeutic healthcare opportunities based on a combination of superior science, product development and market positioning worldwide. Each of our products is designed to improve health advocacy and medical outcomes through superior and proven technologies. Our innovative products and technologies focus in three categories:

Wound Care products focused on superior hemostasis and infection control through the exploitation of proprietary and in licensed technologies targeting a wide range of professional medical (e.g., surgery, dialysis, post-procedure recovery), trauma, military and consumer OTC (over the counter) applications reducing the total cost of care. We have developed FDA-approved products targeted to specific procedures within the broad professional care medical market as well as innovative products targeted to the global OTC (consumer self-care) wound care market which have received FDA clearance, CE approval and other international approvals. The superiority of the hemostasis properties of the product is demonstrated through its inclusion in the U.S. Department of Defense’s Committee on Tactical Combat Casualty Care guidelines.

Women’s Health products initially focused on the unique needs during pregnancy and nursing. Longer-term we plan to expand the TWSI portfolio to address broader, under-met needs in women’s health. We market to the maternity segment under the Beaute de Maman™ brand sold via traditional retailers and internet portals. The women’s healthcare market is projected to achieve 5.9% compounded annual growth rate from 2010 to 2016.1 Our management believes the incremental pace of market expansion within this category, combined with the traditional role for women as the household-family health decision maker, supports the company’s commercial initiative. By introducing our brands to this critical wellness consumer we believe we are building a positive relationship for our future brands and product solutions.

·	Therapeutic Skin Care products leveraging a proprietary delivery system enabling superior dosing and consumer therapeutic benefits related to several OTC skin care needs. These technology applications are being developed for potential third party licensing or internal brand expansion.

______________

1 Euromonitor Research & ACNielson Market Projects Expecting Mothers and Women’s Health-GAGR: Trade Sources & National Statistics: Copyright June 2012.

Results of Operations for the Three Months Ended June 30, 2014 and June 30, 2013

Summary of Results of Operations (in thousands)

	For the Three Months Ended June 30,
	2014			2013

Sales revenue	$	1,224		$	1,287
Cost of Goods Sold		844			912
Gross profit		380			375
Continuing operations
Operating expenses:
General and administrative		967			987
Sales, marketing and development expenses		676			395
Amortization on intangible assets		22			-
Impairment of intangible assets		-			-
Total operating expenses		1,665			1,382
Loss from operations		(1,285	)		(1,007	)
Other income and (expenses)
Interest expense		(951	)		(650	)
Change in fair value of derivative liability		289			-
Other		12			(40	)
Total other expenses		(650	)		(690	)
Net loss		(1,935	)		(1,697	)
Other comprehensive gain (loss)
Foreign currency translation gain (loss)		63			(1	)
Total comprehensive loss	$	(1,872	)	$	(1,698	)

Operating Loss

We had an operating loss of approximately $1,285,000 for the three months ended June 30, 2014, compared to an operating loss of approximately $1,007,000 for the three months ended June 30, 2013. This difference was largely attributable to an increase in our sales, marketing and development expenses of approximately $280,000, which was largely a result of the expansion of the Hemcon platform and increased sales force. Other than our increase in our sales, marketing and development expenses, our revenue, cost of goods sold, and operating expenses were substantially the same for the three month period in 2014 compared to 2013.

Revenue

Our revenue from the three months ended June 30, 2014 was $1,224,000 compared to $1,287,000 for the three months ended June 30, 2013. Our revenue was primarily derived from the operations of our subsidiary, HemCon. Revenue from HemCon amounted to approximately $1,214,000 for the three months ended June 30, 2014. This revenue was the result of sales of bleeding and wound management products for surgical, health care, consumer and military markets.

Cost of Goods Sold

Our cost of goods sold for the three months ended June 30, 2014 were $844,000, compared to $912,000 for the same period in 2013. The cost of goods sold for the three months ended June 30, 2014 primarily related to the revenues generated from HemCon. HemCon’s cost of goods sold amounted to approximately $820,000 or approximately 67.5% of HemCon’s revenue for the three months ended June 30, 2014.

General and Administrative Expenses

General and administrative expenses were $967,000 for the three months ended June 30, 2014, compared to $987,000 for the three months ended June 30, 2013. Our primary general and administrative expenses for the period in 2014 were $73,200 from accrued but not paid executive salaries, $325,000 from professional fees related to TriStar such as audit, marketing and legal fees, and $490,000 related to salaries, occupancy cost, utilities, etc. attributable to Hemcon.

Sales, Marketing and Development Expenses

Our expenses related to sales, marketing and development were $676,000 for the three months ended June 30, 2014, compared to $395,000 for the three months ended June 30, 2013. The significant increase was attributable to expenses related to general and administrative expenses from Hemcon’s operations during the three months ended June 30, 2014.

Amortization of Intangible Assets

During the three months ended June 30, 2014, we had $22,000 in amortization of intangible assets primary related to patents, non-compete agreements and customer lists acquired in the Hemcon acquisition. We did not have any comparable expense in the three months ended June 30, 2013.

Interest Expense

We had interest expense $951,000 for the three months ended June 30, 2014, compared to $650,000 for the three months ended June 30, 2013. During the three months ended June 30, 2014 interest expense primarily related to the amortization of debt discount on promissory notes and warrants issued in connection with the acquisition of HemCon.

Change in fair value of derivatives

During the three months ended June 30, 2014 and June 30, 2013 we recognized a non-cash gain on derivative liabilities of $289,000 and $0, respectively, due primarily to the change in fair value of the conversion option on convertible debt which was recorded as a derivative liability.

Results of Operations for the Six Months Ended June 30, 2014 and June 30, 2013

Summary of Results of Operations (in thousands)

	For the six Months Ended June 30,
	2014			2013

Sales revenue	$	2,527		$	1,293
Cost of Goods Sold		1,882			956
Gross profit		645			337
Continuing operations
Operating expenses:
General and administrative		1,692			2,191
Sales, marketing and development expenses		1,403			1,316
Amortization on intangible assets		42			-
Impairment of intangible assets		-			2
Total operating expenses		3,137			3,509
Loss from operations		(2,492	)		(3,172	)
Other income and (expenses)
Interest expense		(1,503	)		(659	)
Change in fair value of derivative liability		(1,510	)
Other		-			(40	)
Total other expenses		(3,013	)		(699	)
Net loss		(5,505	)		(3,871	)
Other comprehensive gain (loss)
Foreign currency translation gain (loss)		24			(1	)
Total comprehensive loss	$	(5,481	)	$	(3,872	)

Operating Loss

We had an operating loss of approximately $2,492,000 for the six months ended June 30, 2014, compared to an operating loss of approximately $3,172,000 for the six months ended June 30, 2013. The decrease in operating loss was primarily attributable to a higher gross profit based on higher revenues and a decrease in general and administrative expenses related to a decrease in executive salaries and benefits.

Revenue

Our revenue from the six months ended June 30, 2014 was $2,527,000 compared to $1,293,000 for the six months ended June 30, 2013. Our revenue was primarily derived from the operations of our subsidiary, HemCon. Revenue from HemCon amounted to approximately $2,509,000 for the six months ended June 30, 2014. This revenue was the result of sales of bleeding and wound management products for surgical, health care, consumer and military markets.

Cost of Goods Sold

Our cost of goods sold for the six months ended June 30, 2014 were $1,882,000, compared to $956,000 for the same period in 2013. The cost of goods sold for the six months ended June 30, 2014 primarily related to the revenues generated from HemCon. HemCon’s cost of goods sold amounted to approximately $1,828,000 or approximately 72.9% of HemCon’s revenue for the six months ended June 30, 2014.

General and Administrative Expenses

General and administrative expenses were $1,692,000 for the six months ended June 30, 2014, compared to $2,191,000 for the six months ended June 30, 2013. Our primary general and administrative expenses for the period in 2014 were $163,500 from accrued but not paid executive salaries, $460,000 from professional fees related to TriStar such as audit, marketing and legal fees, and $947,500 related to salaries, occupancy cost, utilities, etc. attributable to Hemcon.

Sales, Marketing and Development Expenses

Our expenses related to sales, marketing and development were $1,403,000 for the six months ended June 30, 2014, compared to $1,316,000 for the six months ended June 30, 2013. We expect our sales, marketing and development expenses to be similar in the next few six-month periods.

Amortization of Intangible Assets

During the six months ended June 30, 2014, we had $42,000 in amortization of intangible assets primary related to patents, non-compete agreements and customer lists acquired in the Hemcon acquisition. We did not have any comparable expense in the six months ended June 30, 2013.

Interest Expense

We had interest expense $1,503,000 for the six months ended June 30, 2014, compared to $659,000 for the six months ended June 30, 2013. During the six months ended June 30, 2014 interest expense primarily related to the amortization of debt discount on promissory notes and warrants issued in connection with the acquisition of HemCon.

Change in fair value of derivatives

During the six months ended June 30, 2014 and June 30, 2013 we recognized a non-cash loss on derivative liabilities of $1,510,000 and $0, respectively, due primarily to the change in fair value of the conversion option on convertible debt which was recorded as a derivative liability.

Liquidity and Capital Resources for Six Months Ended June 30, 2014 and 2013

Introduction

During the six months ended June 30, 2014 and 2013, because of our operating losses, we did not generate positive operating cash flows. Our cash and cash equivalents as of June 30, 2014 was $85,000. Due to our monthly cash burn rate we have significant short term cash needs. These needs are being satisfied through proceeds from the sales of our securities and the issuance of convertible notes. We currently do not believe we will be able to satisfy our cash needs from our revenues for some time.

Our cash, current assets, total assets, current liabilities, and total liabilities as of June 30, 2014 compared to December 31, 2013, respectively, are as follows (in thousands):

	June 30, 2014		December 31, 2013		Change
Cash and Cash Equivalents	$	85	$	193	$	(108	)
Total Current Assets		3,356		3,653		(297	)
Total Assets		5,112		5,558		(446	)
Total Current Liabilities		13,349		9,140		4,209
Total Liabilities	$	13,349	$	9,188	$	4,161

Our total assets decreased by $446,000 as of June 30, 2014 compared to December 31, 2013. The decrease in total assets was primarily attributed to decreases in our cash and cash equivalents, in our prepaid expenses, and in our accounts receivable, net.

Our current liabilities increased by $4,209,000, as of June 30, 2014 as compared to December 31, 2013. A large portion of this increase was due to significant increases in our short terms notes, our accounts payable and accrued expenses, derivative liability, and our accounts payable and accrued expenses due to related parties.

In order to repay our obligations in full or in part when due, we will be required to raise significant capital from other sources. There is no assurance, however, that we will be successful in these efforts.

Cash Requirements

We had cash and cash equivalents available as of June 30, 2014 of $85,000 and $193,000 as of December 31, 2013. We have significant short term cash needs. These needs are being satisfied through proceeds from the sales of our securities and the issuance of convertible notes. We currently do not believe we will be able to satisfy our cash needs from our revenues for some time.

Sources and Uses of Cash

Operations

We had net cash used in operating activities of $2,228,000 for the six months ended June 30, 2014, as compared to $918,000 for the six months ended June 30, 2013. For the six months ended June 30, 2014, the net cash used in operating activities consisted primarily of our net loss of $5,505,000, adjusted primarily by the amortization of debt discount of $871,000, loss on change in fair value of derivative liability of $1,510,000, accounts payable and accrued expenses – related party of $415,000, accounts payable and accruals of $286,000, accounts receivable of $81,000, inventory of $30,000, accounts receivables of $54,000, and prepaid expenses of $24,000, offset by deferred revenue of $192,000.

Investing

We had net cash used in investing activities of $28,000 for the six months ended June 30, 2014, as compared to $3,139,000 for the six months ended June 30, 2013. Our net cash used in investing activities for the six months ended June 30, 2014 related entirely to the purchase of computer equipment, while our net cash used in investing activities for the six months ended June 30, 2013 related entirely to the acquisition of HemCon.

Financing

Our net cash provided by financing activities for the six months ended June 30, 2014 was $2,124,000, compared to $4,228,000 for the six months ended June 30, 2013. For the period in 2014, our financing activities consisted of $1,564,000 from proceeds from issuance of short terms notes, $330,000 from proceeds from issuance of convertible debt, and $230,000 from proceeds from issuances of convertible debt to related party. For the period in 2013, our financing activities consisted of $3,165,000 from proceeds from issuance of short terms notes to a related party, $536,000 from proceeds from issuance of short term notes, $227,000 from the issuance of common stock, $250,000 from the issuance of Series D Convertible Preferred Stock, and $50,000 from proceeds from issuances of convertible debt.

Off Balance Sheet Arrangements

We have no off balance sheet arrangements.

ITEM 3 Quantitative and Qualitative Disclosures about Market Risk

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 4 Controls and Procedures

(a)	Evaluation of Disclosure Controls Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-l5(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2014. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2014, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures were not effective to satisfy the objectives for which they are intended.

(b)	Management’s Report on Internal Controls over Financial Reporting

Our management is responsible for establishing and maintaining effective internal control over financial reporting (as defined in Rule 13a-l5(f) of the Securities Exchange Act). Management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on that assessment, management believes that, as of June 30, 2014, the Company’s internal control over financial reporting was ineffective based on the COSO criteria, due to the following material weaknesses listed below.

Insufficient segregation of duties in our finance and accounting functions due to limited personnel. We internally performed all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statements. Due to the fact these duties were performed by limited personnel, a lack of review was created over the financial reporting process that might result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC.

Insufficient corporate governance policies. Our corporate governance activities and processes are not always formally documented.

These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected.

When we are financially able, we intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies and we intend to consider the results of our remediation efforts and related testing as part of our next assessment of the effectiveness of our internal control over financial reporting.

(c)	Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the period ended June 30, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

(d)	Officer’s Certifications

Appearing as an exhibit to this Quarterly Report on Form 10-Q are “Certifications” of our Chief Executive and Financial Officer. The Certifications are required pursuant to Sections 302 of the Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”). This section of the Quarterly Report on Form 10-Q contains information concerning the Controls Evaluation referred to in the Section 302 Certifications. This information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

PART II – OTHER INFORMATION

ITEM 1 Legal Proceedings

In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.

ITEM 1A Risk Factors

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended June 30, 2014, we issued the following unregistered securities:

In March, 2014, we received a notice of conversion from Kimberly Guenther, notifying us that she wished to convert $4,000 of principal and interest due under that certain TriStar Wellness Solutions, Inc. Convertible Promissory Note dated February 21, 2013 into 500,000 shares of our common stock. The shares were issued on April 2, 2014, without a restrictive legend, since Ms. Guenther paid the consideration for her promissory note more than six months ago and is a non-affiliate. The issuance was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, due to the fact Ms. Guenther has held the promissory note since February 2013, is either an accredited or sophisticated investor and is familiar with our operations.

On April 15, 2014, we issued 194,445 shares of our common stock to an IRA account controlled by Mr. John Linderman, one of our executive officers and directors, pursuant to a securities purchase agreement in exchange for $175,000. The shares were issued with a standard Rule 144 restrictive legend. This issuance was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, based on representations by Mr. Linderman in the securities purchase agreement, due to the fact Mr. Linderman is either an accredited or sophisticated investor, and is familiar with our operations.

In connection with the issuance of a promissory note, we issued warrants to purchase 824,000 shares of our common stock at an exercise price of $0.35 per share, which was the fair market value of our common stock on the date of issuance. This issuance was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, based on representations by the investor, due to the fact the investors were either accredited or sophisticated investors, and the investor is familiar with our operations.

In connection with the issuance of a promissory note, we issued warrants to purchase 2,300,000 shares of our common stock at an exercise price of $0.59 per share, which was the fair market value of our common stock on the date of issuance. This issuance was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, based on representations by the investor, due to the fact the investors were either accredited or sophisticated investors, and the investor is familiar with our operations.

ITEM 3 Defaults Upon Senior Securities

During the period covered by this report there were no events which are required to be reported under this Item.

ITEM 4 Mine Safety Disclosures

During the period covered by this report there were no events which are required to be reported under this Item.

ITEM 5 Other Information

During the period covered by this report there were no events which are required to be reported under this Item.

ITEM 6 Exhibits

Item No.		Description

(3)		Articles of Incorporation and Bylaws
3.1		Articles of Incorporation (incorporated by reference from our Current Report on Form 8-K filed on May 9, 2001)
3.2		Bylaws (incorporated by reference from our Current Report on Form 8-K filed on May 9, 2001)
3.3		Certificate of Amendment of Articles of Incorporation (incorporated by reference from our Current Report on Form 8-K filed on May 9, 2001)
3.4		Articles of Merger (incorporated by reference from our Current Report on Form 8-K filed on May 9, 2001)
3.5		Certificate of Designation (incorporated by reference from our Current Report on Form 8-K filed on May 9, 2001)
3.6		Articles of Merger filed with the Secretary of State of Nevada on November 21, 2006 effective on November 26, 2006 (incorporated by reference from our Current Report on Form 8-K filed on November 28, 2006)
3.7		Articles of Merger filed with the Secretary of State of Nevada on February 21, 2007 effective on February 26, 2007 (incorporated by reference from our Current Report on Form 8-K filed on February 27, 2007)
3.8		Certificate of Correction filed with the Secretary of State of Nevada on June 27, 2007 (incorporated by reference from our Annual Report on Form 10-KSB filed on April 15, 2009)
3.9		Certificate of Designation filed with the Secretary of State of Nevada on July 27, 2007 (incorporated by reference from our Annual Report on Form 10-KSB filed on April 15, 2009)
3.10		Certificate of Change filed with the Secretary of State of Nevada on June 6, 2009 (incorporated by reference from our Current Report on Form 8-K filed on June 11, 2009)
3.11		Certificate of Designation for Series D Convertible Preferred Stock filed with the Secretary of State of Nevada on June 19, 2012 (incorporated by reference from our Annual Report on Form 10-K filed on April 16, 2013)
3.12		Certificate of Amendment to Articles of Incorporation filed with the Secretary of State of Nevada on August 29, 2012 (incorporated by reference from our Annual Report on Form 10-K filed on April 16, 2013)
3.13		Certificate of Amendment to Articles of Incorporation filed with the Secretary of State of Nevada on January 7, 2013 (incorporated by reference from our Annual Report on Form 10-K filed on April 16, 2013)

(10)		Material Contracts
10.1		Agreement for the Purchase of Preferred Stock (the “Agreement”) with Rockland Group, LLC dated April 27, 2012 (incorporated by reference from our Current Report on Form 8-K filed on May 11, 2012)
10.2		License and Asset Option Purchase Agreement with NorthStar Consumer Products, LLC dated June 25, 2012 (incorporated by reference from our Current Report on Form 8-K filed on July 2, 2012)
10.3		Agreement for the Purchase of Preferred Stock with Rockland Group, LLC dated June 29, 2012 (incorporated by reference from our Current Report on Form 8-K filed on July 2, 2012)
10.4		Subsidiary Acquisition Option Agreement with Xinghui Ltd. dated April 25, 2012 (incorporated by reference from our Current Report on Form 8-K filed on November 30, 2012)
10.5		Marketing and Development Services Agreement with InterCore Energy, Inc. dated July 11, 2012 (incorporated by reference from our Current Report on Form 8-K filed on November 30, 2012)
10.6		Purchase and Assignment of Rights Agreement with RWIP, LLC dated July 11, 2012 (incorporated by reference from our Current Report on Form 8-K filed on November 30, 2012)
10.8		Asset Purchase Agreement with Northstar Consumer Products, LLC, dated February 4, 2013 (incorporated by reference from our Current Report on Form 8-K filed on February 19, 2013)
10.9		Asset Purchase Agreement with HLBC Distribution Company, Inc., dated February 12, 2013 (incorporated by reference from our Current Report on Form 8-K filed on February 19, 2013)
10.10		Employment Agreement with John R. Linderman dated February 1, 2013 (incorporated by reference from our Current Report on Form 8-K filed on February 19, 2013)
10.11		Employment Agreement with James Barickman dated February 1, 2013 (incorporated by reference from our Current Report on Form 8-K filed on February 19, 2013)
10.12		Employment Agreement with Fredrick A. Voight dated February 1, 2013 (incorporated by reference from our Current Report on Form 8-K filed on February 19, 2013)
10.13		Employment Agreement with Michael S. Wax dated February 1, 2013 (incorporated by reference from our Current Report on Form 8-K filed on February 19, 2013)
10.14		Exclusive Manufacturing, Marketing and Distribution Definitive License Agreement with Argentum Medical, LLC dated March 7, 2013 (incorporated by reference from our Current Report on Form 8-K filed on March 14, 2013)

10.15		Order Confirming Debtor’s Fifth Amended Plan of Reorganization and Plan of Reorganization in In re HemCon Medical Technologies, Inc. filed May 6, 2013 (incorporated by reference from our Current Report on Form 8-K filed on May 13, 2013)
10.16		Agreement for Purchase and Sale of Stock entered into by and between TriStar Wellness Solutions, Inc. and HemCon Medical Services, Inc. dated April 18, 2013 (incorporated by reference from our Current Report on Form 8-K filed on May 13, 2013)
10.17		Employment Agreement with Barry Starkman (incorporated by reference from our Current Report on Form 8-K filed on May 13, 2013)
10.18		Employment Agreement with Simon McCarthy (incorporated by reference from our Current Report on Form 8-K filed on May 13, 2013)
10.19		Promissory Note with DayStar Funding, LP dated May 6, 2013 (incorporated by reference from our Current Report on Form 8-K filed on May 13, 2013)
10.20		Promissory Note with Lawrence K. Ingber Trust, dated June 14, 1980, as amended and restated March 6, 2006, dated May 6, 2013 (incorporated by reference from our Current Report on Form 8-K filed on May 13, 2013)
10.21		Promissory Note with James Barickman dated May 6, 2013 (incorporated by reference from our Current Report on Form 8-K filed on May 13, 2013)
10.22		Promissory Note with John Linderman dated May 6, 2013 (incorporated by reference from our Current Report on Form 8-K filed on May 13, 2013)
10.23		Promissory Note with James Linderman dated May 6, 2013 (incorporated by reference from our Current Report on Form 8-K filed on May 13, 2013)
10.24		Stock Exchange Agreement with M&K Family Limited Partnership dated July 11, 2013 (incorporated by reference from our Current Report on Form 8-K filed on August 1, 2013)
10.25		Stock Exchange Agreement with Northstar Consumer Products, LLC, dated July 11, 2013 (incorporated by reference from our Current Report on Form 8-K filed on August 1, 2013)
10.26		Stock Exchange Agreement with Rivercoach Partners, LP dated July 11, 2013 (incorporated by reference from our Current Report on Form 8-K filed on August 1, 2013)


(31)		Rule 13a-14(a)/15d-14(a) Certifications
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (filed herewith).
31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Accounting Officer (filed herewith).

(32)		Section 1350 Certifications
32.1		Section 1350 Certification of Chief Executive Officer (filed herewith).
32.2		Section 1350 Certification of Chief Accounting Officer (filed herewith).


101.INS **		XBRL Instance Document
101.SCH **		XBRL Taxonomy Extension Schema Document
101.CAL **		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF **		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB **		XBRL Taxonomy Extension Label Linkbase Document
101.PRE **		XBRL Taxonomy Extension Presentation Linkbase Document

________

* Filed herewith.

**XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TriStar Wellness Solutions, Inc. a Nevada corporation

Dated: August 19, 2014	By:	/s/ John Linderman
		John Linderman
	Its:	Chief Executive Officer

EXHIBIT 31.1

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

I, John Linderman, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of TriStar Wellness Solutions, 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;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exhibit 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(s) 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 the 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: August 19, 2014	By:	/s/ John Linderman
		John Linderman
	Its:	Chief Executive Officer

EXHIBIT 31.2

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

I, Dave Horin, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of TriStar Wellness Solutions, 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;

(a)

(b)

(c)

(d)

5.	The registrant’s other certifying officer(s) 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 the registrant’s board of directors (or persons performing the equivalent functions):

(a)

(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: August 19, 2014	By:	/s/ Dave Horin
		Dave Horin
	Its:	Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of TriStar Wellness Solutions, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2014, as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), I, John Linderman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

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

(2)

Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 19, 2014	By:	/s/ John Linderman
		John Linderman
	Its:	Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to TriStar Wellness Solutions, Inc. and will be retained by TriStar Wellness Solutions, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of TriStar Wellness Solutions, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2014, as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), I, Dave Horin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

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

(2)

Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 19, 2014	By:	/s/ Dave Horin
		Dave Horin
	Its:	Chief Financial Officer

Tristar Wellness Solutions (PK) (USOTC:TWSI)
Historical Stock Chart
From Oct 2024 to Nov 2024

Click Here for more Tristar Wellness Solutions (PK) Charts.

Tristar Wellness Solutions (PK) (USOTC:TWSI)
Historical Stock Chart
From Nov 2023 to Nov 2024

Market Data

News

Trading Tools

Markets

Discover

Hot Features

Follow Feed

Options Flow

Monitor

TWSI Tristar Wellness Solutions Inc (PK)

Latest TWSI Messages

Loading Messages....

Tristar Wellness Solutions, Inc. News

Loading Messages....

Your Recent History

Company

Business

Popular

Get The App

Trending Now

Toplists

Market Data

News

Trading Tools

Markets

Discover

Hot Features

Follow Feed

Options Flow

Monitor

TWSI Tristar Wellness Solutions Inc (PK)

Latest TWSI Messages

Loading Messages....

Tristar Wellness Solutions, Inc. News

Loading Messages....

Your Recent History

Company

Business

Popular

Get The App