NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
NOTE
1 – BASIS OF OPERATIONS
The
unaudited financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (“SEC”). The financial statements and notes are presented as permitted on Form
10-Q and do not contain certain information included in the Company’s annual statements and notes. Certain information and
footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements
be read in conjunction with the March 31, 2017 Form 10-K filed with the SEC, including the audited financial statements and the
accompanying notes thereto. While management believes the procedures followed in preparing these financial statements are reasonable,
the accuracy of the amounts is in some respects dependent upon the facts that will exist, and procedures that will be accomplished
by the Company later in the year.
These
unaudited financial statements reflect all adjustments, including normal recurring adjustments which, in the opinion of management,
are necessary to present fairly the operations and cash flows for the periods presented.
Nature
of Business
The
Company, prior to December 12, 2011, was involved in the business of exploiting new technologies for the production of clean energy.
The Company was then moving in the direction of a diversified biotechnology company. The mission of the Company is to evaluate
potential acquisition candidates operating in the life sciences technology space. The Company last recognized revenue in fiscal
year 2016 generated from its natural wellness cannabis complement line launched in August 2014.
The
Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding,
success in developing and marketing its products and the level of competition.
Honeywood
On March
10, 2014, the Company entered into a definitive agreement to acquire California based Honeywood LLC, developer of a
topical medicinal cannabis product, that, at the time. sold in numerous dispensaries across the state of California. This definitive
agreement was valid for a period of 120 days and Tauriga advanced to Honeywood $217,000 to be applied towards the final
closing requisite cash total and incurred $178,000 in legal fees as of March 31, 2014 in connection with the acquisition.
On September
24, 2014 (the “Unwinding Date”), the Company, Honeywood and each of the Honeywood Principals
entered into a Termination Agreement (the “Termination Agreement”) to unwind the effects of the Merger (the “Unwinding
Transaction”). In accordance with the Termination Agreement, Honeywood agreed to repay to the Company substantially
all of the advances made by the Company to Honeywood prior to and after the Merger by delivering to the Company on the
Unwinding Date a Secured Promissory Note in the principal amount of $170,000 (the “Note”). The Note bears interest
at 6% per annum and is repayable in six quarterly installments on the last day of each calendar quarter starting on March 31,
2015 and ending on June 30, 2016. The Note is secured by a blanket security interest in Honeywood’s assets pursuant
to a Security Agreement entered into on the Unwinding Date between Honeywood and the Company. As of June 30, 2017, Honeywood has
made no payments under the Note and the Company does not expect to receive any payments pursuant to the Note. As a result, the
Company has fully reserved this amount and does not reflect it as a receivable on its financial statements. The Company is in
negotiations to settle the outstanding receivable in exchange for an equity stake in Honeywood.
Pilus
Energy
On
November 25, 2013, the Company executed a definitive agreement to acquire Pilus Energy, LLC (“Pilus”), an Ohio limited
liability company and a developer of alternative cleantech energy platforms using proprietary microbial solutions that creates
electricity while consuming polluting molecules from wastewater. Pilus is converging digester, fermenter, scrubber, and other
proven technologies into a scalable Electrogenic Bioreactor (“EBR”) platform. This technology is the basis of the
Pilus Cell™. The EBR harnesses genetically enhanced bacteria, also known as bacterial robots, or BactoBots™, that
remediate water, harvest direct current (“DC”) electricity, and produce economically important gases. The EBR accomplishes
this through bacterial metabolism, specifically cellular respiration of nearly four hundred carbon and nitrogen molecules. Pilus’
highly metabolic bacteria are non-pathogenic. Because of the mediated biofilm formation, these wastewater-to-value BactoBots resist
heavy metal poisoning, swings of pH, and survive in a 4-to-45-degree Celsius temperature range. Additionally, the BactoBots are
anaerobically and aerobically active, even with low BOD/COD.
On
January 28, 2014, the Company acquired patents from Pilus. As a condition of the acquisition, Pilus was supposed to get one seat
on the board of directors, and the shareholders of Pilus received a warrant to purchase 100,000,000 shares of common stock of
the Company, which represented a fair market value of approximately $2,000,000. In addition, the Company paid Bacterial Robotics,
LLC (“BRLLC”), formerly the parent company of Pilus, $50,000 on signing the memorandum of understanding and $50,000
at the time of closing. The only asset Pilus had on its balance sheet at the time of the acquisition was a patent. The Company
determined that the value of the acquisition on January 28, 2014 would be equal to the value of cash paid to Pilus plus the value
of the 100,000,000 warrants they issued to acquire Pilus. Through March 31, 2014, the Company amortized the patent over its estimated
useful life, then on March 31, 2014, the Company conducted its annual impairment test and determined that the entire unamortized
balance should be impaired as the necessary funding to further develop the patent was not available at that time.
On
December 22, 2016, the Company, entered in a membership interest transfer agreement with Open Therapeutics, LLC, an Ohio limited
liability company (“Open Therapeutics” formerly Bacterial Robotics LLC and Microbial Robotics, LLC), whereby the Company
sold 80% of its membership interest in Pilus which included the patents. Open Therapeutics agreed to terminate and cancel 80%
of the unexercised portion of the warrant to purchase 28,917,647 shares (or 23,134,118 warrants) of the Company’s common
stock (issued on January 28, 2014). Open Therapeutics will pay 20% of the net profit generated, to the Company from the previous
year’s earnings after the initial $75,000 of profit (reflected as a contingent liability on the consolidated balance sheet).
The Company further agreed it would vote its 20% membership interest in Pilus Energy in the same manner that Open Therapeutics
votes its membership interest on all matters for which a member vote is required. Through June 30, 2017, there has been no activity
recorded by Open Therapeutics, LLC with respect to these patents, thus the $75,000 remains contingently owed to them.
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
ColluMauxil
On
November 15, 2016, the Company announced that it will form a new wholly owned subsidiary focused on the development, marketing
and distribution of products that target muscle tension. The subsidiary will be called ColluMauxil Therapeutics LLC (“ColluMauxil”),
which is based on the Latin terms for neck relief - “collum” and “auxilium.” The Company has filed for
trademarks in association with the business with the United States Patent and Trademark Office. The Company plans to develop,
market, distribute and potentially license a broad array of products and technologies that may help individuals who are affected
by muscle tension. The Company has already identified potential products and technologies of interest and is actively working
towards the goal of creating an innovative product line to launch the business activities of ColluMauxil. The Company believes
that one of its most important strengths is its access to and relationships with potentially substantial distribution systems
and networks. The Company intends to capitalize on distribution opportunities and will continually update shareholders on such
developments. The Company intends on developing a product that specifically targets muscle tension in the neck, shoulder, and
upper back. The Company envisions that this product will incorporate a roll-on delivery system (“Roll-On Product”)
which is easier to apply to a specific area on the body. The Company also plans to develop a Roll-On Product that incorporates
CBD Oil (“Cannabis Oil”), which is a legal alternative to THC oil, and it is available for sale in all states as well
as around the world. Cannabis Oil is widely believed to provide relief to individuals who suffer from muscle tension, tenderness,
and pain. Both contemplated Roll-On Products will be branded under the ColluMauxil.
Cupuacu
Butter Lip Balm
On
December 23, 2016, the Company, entered into a non-exclusive, 12 month, license agreement (the “License Agreement”)
with Cleveland, Ohio based cosmetics products firm Ice + Jam LLC (“Ice + Jam”). Under terms of the License Agreement,
the Company will market Ice + Jam’s proprietary Cupuacu Butter lip balm, sold under the trademark HERMAN and the two companies
will evenly share (“50% / 50%”) any profits through the Company’s marketing, sales, and distribution efforts.
The Company will pay the production costs for all product it sells to retail customers or distributors. The Company paid a one-time
upfront non-refundable license fee of $9,810 in cash and agreed to an additional payment of common shares of Company stock. The
Company agreed to issue and did issue 5,000,000 common shares which had a value of $27,500, based on the closing price of the
stock on the day the Company entered into the agreement ($0.005 per share). The cost of the shares will be prorated over the life
of the license. The Company further paid $2,190 as a prepaid deposit on future inventory for the purchase of 1,500 units at unit
cost of $1.46. As of June 30, 2017, none of the units have been completed therefore the Company has recorded the payment as a
prepaid asset. The agreement may be extended for an additional 12 months based on mutual agreement. The two companies reserve
the right to request amendment of the License Agreement at any point during the effective duration.
On June 27, 2017, the
Company wired $20,000 to Ice + Jam as an advanced payment on initial inventory base of 10,000-15,000 units with completed
display cases and promotional literature for the contemplated launch as well as marketing and consulting services. The
Company has focused its efforts on securing potential distribution channels to the retail marketplace, as well as the
improvement of the HERMAN product; inclusive of the label and graphics. The Company plans a mid to late autumn 2017 launch
period to capitalize on the potential market demand associated with seasonality.
Certain
additional risk factors relating to the new business line are further described in Part I, Item 1A “Risk Factors”
above in this Annual Report on Form 10-K.
Going
Concern
As
indicated in the accompanying condensed consolidated financial statements, the Company has incurred net losses of $624,472 and
$795,957 for the three months ended June 30, 2017 and 2016, respectively. Management’s plans include the raising of capital
through equity markets to fund future operations and cultivating new license agreements or acquiring ownership in technology companies.
Failure to raise adequate capital and generate adequate sales revenues could result in the Company having to curtail or cease
operations. Additionally, even if the Company does raise sufficient capital to support its operating expenses, acquire new license
agreements or ownership interests in life science companies and generate adequate revenues, or the agreements entered into recently
are unsuccessful, there can be no assurances that the revenues will be sufficient to enable it to develop business to a level
where it will generate profits and cash flows from operations. The Company has used $259,185 and $284,474 of cash in operating
activities for the three months ended June 30, 2017 and 2016, respectively which is substantially lower than the net loss for
these respective years. The Company has continued to use their common stock when able to continue operating. These matters raise
substantial doubt about the Company’s ability to continue as a going concern. However, the accompanying condensed consolidated
financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction
of liabilities in the normal course of business. These condensed consolidated financial statements do not include any adjustments
relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company
be unable to continue as a going concern.
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Condensed
Consolidated Financial Statements
The
condensed consolidated financial statements include the accounts and activities of Tauriga Sciences, Inc. and its wholly-owned
Canadian subsidiary, Tauriga Canada, Inc. All inter-company transactions have been eliminated in consolidation.
Revenue
Recognition
Revenue
is recognized when realized or realizable, and when the earnings process is complete, which is generally upon the shipment of
products.
Use
of Estimates
The
preparation of the condensed consolidated 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 reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Foreign
Currency Translation
Commencing
with the quarter ended June 30, 2012, the Company considers the U.S. dollar to be its functional currency. Prior to March 31,
2012, the Company considered the Canadian dollar to be its functional currency. Assets and liabilities were translated into U.S.
dollars at year-end exchange rates. Statement of operations amounts were translated using the average rate during the year. Gains
and losses resulting from translating foreign currency financial statements were included in accumulated other comprehensive gain
or loss, a separate component of stockholders’ deficit.
Cash
Equivalents
For
purposes of reporting cash flows, cash equivalents include investment instruments purchased with an original maturity of three
months or less. At June 30, 2017, the Company had no cash at any financial institution which exceeded the total FDIC insurance
limit of $250,000. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least
annually the rating of the financial institution in which it holds deposits. The Company had no cash equivalents as of June 30,
2017.
Inventory
Inventory consisted of raw
materials, production in progress and finished goods and is stated at the lower of cost or market determined by the first-in,
first-out method. The Company sold off all of its segments that had inventory during the year ended March 31, 2016. As of June
30, 2017, the Company has prepaid $22,190 for inventory, product design, set-up, consulting and packaging for product which
has not been delivered. It is reflected in prepaid expenses on the Condensed Consolidated Balance Sheet.
Property
and Equipment
Property
and equipment is stated at cost and is depreciated using the straight-line method over the estimated useful lives of the respective
assets. Routine maintenance, repairs and replacement costs are expensed as incurred and improvements that extend the useful life
of the assets are capitalized. When property and equipment is sold or otherwise disposed of, the cost and related accumulated
depreciation are eliminated from the accounts and any resulting gain or loss is recognized in operations.
Intangible
Assets
Intangible
assets consisted of licensing fees and a patent prior to being impaired which were stated at cost. Licenses were amortized over
the life of the agreement and patents were amortized over the remaining life of the patent at the date of acquisition.
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Net
Loss Per Common Share
The
Company computes per share amounts in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) Topic 260 Earnings per Share (“EPS”) which requires presentation of basic and diluted
EPS. Basic EPS is computed by dividing the income (loss) available to Common Stockholders by the weighted-average number of common
shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of Common Stock and Common Stock
equivalents outstanding during the periods; however, potential common shares are excluded for period in which the Company incurs
losses, as their effect is anti-dilutive. For the three months ended June 30, 2017 and 2016 the basic and fully diluted earnings
per share were the same as the Company had a loss in each of these periods.
Stock-Based
Compensation
The
Company accounts for Stock-Based Compensation under ASC 718 “Compensation-Stock Compensation”, which addresses the
accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on
transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 requires measurement
of cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the
award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant
date must be recognized.
The
Company accounts for stock-based compensation awards to non-employees in accordance with ASC 505-50, Equity-Based Payments to
Non-Employees. Under ASC 505-50, the Company determines the fair value of the warrants or stock-based compensation awards granted
on the grant date as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever
is more reliably measurable. Any stock options or warrants issued to non-employees are recorded in expense and an offset to additional
paid-in capital in stockholders’ equity/(deficit) over the applicable service periods using variable accounting through
the vesting dates based on the fair value of the options or warrants at the end of each period.
The
Company issues stock to consultants for various services. The costs for these transactions are measured at the fair value on the
grant date of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.
The Company recognized consulting expense and a corresponding increase to additional paid-in-capital related to stock issued for
services over the term of the related services.
Comprehensive
Income (Loss)
The
Company has adopted ASC 220 effective January 1, 2012 which requires entities to report comprehensive income (loss) within a continuous
statement of comprehensive income.
Comprehensive
income (loss) is a more inclusive financial reporting methodology that includes disclosure of information that historically has
not been recognized in the calculation of net income (loss).
Reclassifications
Certain
prior year amounts have been reclassified to conform to the current period presentation. The reclassifications had no effect on
the net loss or cash flows of the Company.
Impairment
of Long-Lived Assets
Long-lived
assets, primarily fixed assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of the assets might not be recoverable. The Company will perform a periodic assessment of assets for impairment in the
absence of such information or indicators. Conditions that would necessitate an impairment assessment include a significant decline
in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or a significant
adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. For long-lived
assets to be held and used, the Company would recognize an impairment loss only if its carrying amount is not recoverable through
its undiscounted cash flows and measures the impairment loss based on the difference between the carrying amount and estimated
fair value.
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Research
and Development
The Company expenses research and development
costs as incurred. Research and development costs were $2,000 and $0 for the three months ended June 30, 2017 and 2016. The Company
is continually evaluating products and technologies in the natural wellness space, including its focus on muscle tension and its
Cupuacu butter lip balm. As the Company investigates and develops relationships in these areas resultant expenses for trademark
filings, license agreements, product development and design materials will be expensed as research and development. Some costs
will be accumulated for subsidiaries prior to formation of entities.
Fair
Value Measurements
ASC
820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in generally accepted accounting
principles, and expands disclosure about fair value measurements.
The
following provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped
into Levels 1 to 3 based on the degree to which fair value is observable:
Level
1- fair value measurements are those derived from quoted prices (unadjusted in active markets for identical assets or liabilities);
Level
2- fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level
3- fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are
not based on observable market data (unobservable inputs).
Financial
instruments classified as Level 1 - quoted prices in active markets include cash.
These
condensed consolidated financial instruments are measured using management’s best estimate of fair value, where the inputs
into the determination of fair value require significant management judgment to estimation. Valuations based on unobservable inputs
are highly subjective and require significant judgments. Changes in such judgments could have a material impact on fair value
estimates. In addition, since estimates are as of a specific point in time, they are susceptible to material near-term changes.
Changes in economic conditions may also dramatically affect the estimated fair values.
Fair
value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as
of June 30, 2017 and 2016. The respective carrying value of certain financial instruments approximated their fair values due to
the short-term nature of these instruments. These financial instruments include cash, accounts payable and accrued expenses.
Derivative
Financial Instruments
Derivatives
are recorded on the condensed consolidated balance sheet at fair value. The conversion features of the convertible debentures
are embedded derivatives and are separately valued and accounted for on the condensed consolidated balance sheet with changes
in fair value recognized during the period of change as a separate component of other income/expense. Fair values for exchange-traded
securities and derivatives are based on quoted market prices. The pricing model we use for determining the fair value of our derivatives
are binomial pricing models. Valuations derived from this model are subject to ongoing internal and external verification and
review. The model uses market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involves
management’s judgment and may impact net income (loss).
With
the issuance of the July 2017 FASB ASU 2017-11,
“Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity
(Topic 480) Derivatives and Hedging (Topic 815),”
which addresses the complexity of accounting for certain financial
instruments with down round features, the Company has chosen the early adopt retroactively the amendments in Part I of the standard
whereby fair value derivative liabilities previously recognized were derecognized in the current and comparative periods. Under
the amendments included in this update, the Company is no longer required to record changes in fair value during the period of
change as a separate component of other income (expense) in the Condensed Consolidated Statements of Operations.
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Derivative
Financial Instruments (Continued)
The
amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded
features) with down round features. When determining whether certain financial instruments should be classified as liabilities
or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is
indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments.
As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for
as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified
financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize
the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available
to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are
now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with
Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize
the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a
scope exception. Those amendments do not have an accounting effect.
Under
current GAAP, an equity-linked financial instrument with a down round feature that otherwise is not required to be classified
as a liability under the guidance in Topic 480 is evaluated under the guidance in Topic 815, Derivatives and Hedging, to determine
whether it meets the definition of a derivative. If it meets that definition, the instrument (or embedded feature) is evaluated
to determine whether it is indexed to an entity’s own stock as part of the analysis of whether it qualifies for a scope
exception from derivative accounting. Generally, for warrants and conversion options embedded in financial instruments that are
deemed to have a debt host (assuming the underlying shares are readily convertible to cash or the contract provides for net settlement
such that the embedded conversion option meets the definition of a derivative), the existence of a down round feature results
in an instrument not being considered indexed to an entity’s own stock. This results in a reporting entity being required
to classify the freestanding financial instrument or the bifurcated conversion option as a liability, which the entity must measure
at fair value initially and at each subsequent reporting date.
The
amendments in this Update revise the guidance for instruments with down round features in Subtopic 815-40, Derivatives and Hedging—Contracts
in Entity’s Own Equity, which is considered in determining whether an equity-linked financial instrument qualifies for a
scope exception from derivative accounting. An entity still is required to determine whether instruments would be classified in
equity under the guidance in Subtopic 815-40 in determining whether they qualify for that scope exception. If they do qualify,
freestanding instruments with down round features are no longer classified as liabilities and embedded conversion options with
down round features are no longer bifurcated.
For
entities that present EPS in accordance with Topic 260, and when the down round feature is included in an equity-classified freestanding
financial instrument, the value of the effect of the down round feature is treated as a dividend when it is triggered and as a
numerator adjustment in the basic EPS calculation. This reflects the occurrence of an economic transfer of value to the holder
of the instrument, while alleviating the complexity and income statement volatility associated with fair value measurement on
an ongoing basis. Convertible instruments are unaffected by the Topic 260 amendments in this Update.
Those
amendments in Part 1 of this Update are a cost savings relative to current GAAP. This is because, assuming the required criteria
for equity classification in Subtopic 815-40 are met, an entity that issued such an instrument no longer measures the instrument
at fair value at each reporting period (in the case of warrants) or separately accounts for a bifurcated derivative (in the case
of convertible instruments) on the basis of the existence of a down round feature. For convertible instruments with embedded conversion
options that have down round features, applying specialized guidance such as the model for contingent beneficial conversion features
rather than bifurcating an embedded derivative also reduces cost and complexity. Under that specialized guidance, the issuer recognizes
the intrinsic value of the feature only when the feature becomes beneficial instead of bifurcating the conversion option and measuring
it at fair value each reporting period.
The
amendments in Part II of this Update replace the indefinite deferral of certain guidance in Topic 480 with a scope exception.
This has the benefit of improving the readability of the Codification and reducing the complexity associated with navigating the
guidance in Topic 480.
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
For
public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this Update are effective
for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.
Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments
in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.
The amendments in Part 1 of this Update should be applied in either of the following ways: 1. Retrospectively to outstanding financial
instruments with a down round feature by means of a cumulative-effect adjustment to the statement of financial position as of
the beginning of the first fiscal year and interim period(s) in which the pending content that links to this paragraph is effective;
or 2. Retrospectively to outstanding financial instruments with a down round feature for each prior reporting period presented
in accordance with the guidance on accounting changes in paragraphs 250-10-45-5 through 45-10.
The
amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting
effect.
The
Company has identified that instruments previously carried as derivative liabilities were deemed to be such on the basis of embedded
features containing down round provisions, resulting in the strike price being reduced on the basis of the pricing of future equity
offerings. In accordance with the adoption of ASU 2017-11, the Company recorded a gain on derivative liability in the amount of
$271,280 and $439,067 for the three months ended June 30, 2017 and 2016, respectively as well as corresponding loss on extinguishment
of debt in the amount of $271,280 and $439,067 for the three months ended June 30, 2017 and 2016, respectively. Along with this
transaction, the Company recorded a deemed dividend to shareholders in the amount of $271,280 and $439,067 for the three months
ended June 30, 2017 and 2016, respectively.
The
three instruments affected by this adoption were the May 28, 2015, 7% Convertible Redeemable Note with a principal amount of $104,000
with a maturity date of May 28, 2016 with Union Capital, LLC which contains an anti-ratchet clause; the July 14, 2015, 12% convertible
redeemable note with Group 10 Holdings, LLC having a principal amount of $96,000 issued with an original issue discount of $16,000
and the November 7, 2016, 12% convertible redeemable note with Group 10 Holdings, LLC having a principal amount of $45,000 issued
with an original issue discount of $7,000. The two Group 10 Holdings, LLC notes contain a most favored nations clause, allowing
the note holder to adopt any term of future convertible redeemable notes which would be beneficial to them.
Income
Taxes
Income
taxes are accounted for under the liability method of accounting for income taxes. Under the liability method, future tax liabilities
and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in
the financial statement carrying amounts of assets and liabilities and their respective tax bases.
Future
tax assets and liabilities are measured using enacted or substantially enacted income tax rates expected to apply when the asset
is realized or the liability settled. The effect of a change in income tax rates on future income tax liabilities and assets is
recognized in income in the period that the change occurs. Future income tax assets are recognized to the extent that they are
considered more likely than not to be realized.
ASC
740 “Income Taxes” clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial
statements. This standard requires a company to determine whether it is more likely than not that a tax position will be sustained
upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must
measure the tax position to determine the amount to recognize in the financial statements.
As
a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with
recognition and measurement standards established by ASC 740 and concluded that the tax position of the Company does not meet
the more-likely-than-not threshold as of June 30, 2017.
Recent
Accounting Pronouncements
In
July 2017, the FASB issued ASU 2017-11,
“Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic
480) Derivatives and Hedging (Topic 815),”
which addresses the complexity of accounting for certain financial instruments
with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result
in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates
cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round
features that require fair value measurement of the entire instrument or conversion option. For public business entities, the
amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning after
December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Company had chosen to early
adopt this standard as of this reporting period with retro-active restatement of comparative periods.
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent
Accounting Pronouncements (Continued)
In
January 2017, the FASB issued Accounting Standard Update (“ASU”) 2017-04
Intangibles – Goodwill and Other
(Topic 350), Simplifying the Test for Goodwill Impairment.
The amendments in this update are required for public business
entities that have goodwill reported in their financial statements and have not elected the private company alternative for the
subsequent measurement of goodwill. The update is intended to simplify the annual or interim goodwill impairment test. A public
business entity that is a U.S. SEC filer should adopt the amendments in this update for its annual or interim goodwill impairment
tests in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is assessing the impact, if
any, of implementing this guidance on its financial position and results of operations.
In
January 2017, the FASB issued ASU 2017-01
Business Combinations (Topic 805), Clarifying the Definition of a Business.
The
amendments in this update are required for public business entities that have goodwill reported in their financial statements
and have not elected the private company alternative for the subsequent measurement of goodwill. The update is intended to clarify
the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should
be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting
including acquisitions, disposals, goodwill, and consolidation. Public business entities should apply the amendments in this update
to annual periods beginning after December 15, 2017. Early application is permitted under certain conditions. The Company is assessing
the impact, if any, of implementing this guidance on its financial position and results of operations.
In
August 2016, the FASB issued ASU No. 2016-15, “
Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts
and Cash Payments”
. The amendments in this update provided guidance on eight specific cash flow issues. This update
is to provide specific guidance on each of the eight issues, thereby reducing the diversity in practice in how certain transactions
are classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years and interim periods beginning after December
31, 2017. Early adoption is permitted. The Company is assessing the impact, if any, of implementing this guidance on its financial
position, results of operations and liquidity.
In
February 2016, FASB issued ASU 2016-02, Leases (Topic 842). The new standard requires lessees to apply a dual approach, classifying
leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase
by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or
on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability
for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less
will be accounted for similar to existing guidance for operating leases. The new guidance will be effective for annual reporting
periods beginning after December 15, 2018, including interim periods within that reporting period and is applied retrospectively.
Early adoption is permitted. We are currently in the process of assessing the impact the adoption of this guidance will have on
the Company’s condensed consolidated financial statements.
In
May 2014, August 2015 and May 2016, the FASB issued ASU 2014-09,
“Revenue from Contracts with Customers”
, ASU
2015-14,
“Revenue from Contracts with Customers, Deferral of the Effective Date”
, and ASU 2016-12,
“Revenue
from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients”
, respectively, which implement ASC
Topic 606. ASC Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts
with customers and supersedes most current revenue recognition guidance under US GAAP, including industry-specific guidance. It
also requires entities to disclose both quantitative and qualitative information that enable financial statements users to understand
the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in
these ASUs are effective for annual periods beginning after December 15, 2017, and interim periods therein. Early adoption is
permitted for annual periods beginning after December 15, 2016. These ASUs may be applied retrospectively with a cumulative adjustment
to retained earnings in the year of adoption. The Company s assessing the impact, if any, of implementing this guidance on its
financial position, results of operations and liquidity.
There
are several other new accounting pronouncements issued or proposed by the FASB. Each of these pronouncements, as applicable, has
been or will be adopted by the Company. Management does not believe any of these accounting pronouncements has had or will have
a material impact on the Company’s condensed consolidated financial position or operating results.
Subsequent
Events
In
accordance with ASC 855 “Subsequent Events” the Company evaluated subsequent events after the balance sheet date through
the date of issuance.
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
NOTE
3– PROPERTY AND EQUIPMENT
The
Company’s property and equipment is as follows:
|
|
June
30, 2017
|
|
|
March
31, 2017
|
|
|
Estimated
Life
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Computers,
office furniture and equipment
|
|
$
|
58,656
|
|
|
$
|
57,023
|
|
|
3-5
years
|
|
|
|
|
|
|
|
|
|
|
|
Less:
accumulated depreciation
|
|
|
(56,197
|
)
|
|
|
(56,062
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
2,459
|
|
|
$
|
961
|
|
|
|
Depreciation
expense for the three months ended June 30, 2017 and 2016 was $135 and $6,914, respectively.
NOTE
4 – COMMITMENT
On
December 23, 2016, the Company, entered into a non-exclusive, 12 months, license agreement with Cleveland, Ohio based cosmetics
products firm Ice + Jam LLC (“Ice + Jam”). The Company will market Ice + Jam’s proprietary Cupuacu Butter lip
balm, sold under the trademark HERMAN. The Company will pay the production costs for all products it sells to retail customers
or distributors. The Company further paid $2,190 as a prepaid deposit on future inventory for the purchase of 1,500 units at unit
cost of $1.46. As of June 30, 2017, none of the units have been completed therefore the Company has recorded the payment as a
prepaid expense.
On June 27, 2017, the Company wired $20,000
to Ice + Jam as an advanced payment on initial inventory base of 10,000-15,000 units with completed display cases and promotional
literature for the contemplated launch as well as marketing and consulting services. The Company has focused its efforts
on securing potential distribution channels to the retail marketplace, as well as the improvement of the HERMAN product; inclusive
of the label and graphics. The Company plans a mid to late autumn 2017 launch period to capitalize on the potential market
demand associated with seasonality.
NOTE
5 – INTANGIBLE ASSETS
Patents:
Pilus
Energy, LLC
The
Company, through the acquisition of Pilus Energy on January 28, 2014, acquired a patent to develop cleantech energy using proprietary
microbiological solution that creates electricity while consuming polluting molecules from wastewater.
On December 22, 2016, the
Company, entered in a membership interest transfer agreement with Open Therapeutics, LLC, an Ohio limited liability company (“Open
Therapeutics” which was formerly known as Bacterial Robotics LLC and Microbial Robotics, LLC), whereby the
Company sold 80% of its membership interest in Pilus which included the patents. Open Therapeutics agreed to terminate and cancel
80% of the unexercised portion of the warrant to purchase 28,917,647 shares (or 23,134,118 warrants) of the Company’s common
stock (issued on January 28, 2014). Open Therapeutics will pay 20% of the net profit generated, to the Company from the previous
year’s earnings after the initial $75,000 of profit (reflected as a contingent liability on the consolidated balance sheet).
The Company further agreed it would vote its 20% membership interest in Pilus Energy in the same manner that Open Therapeutics
votes its membership interest on all matters for which a member vote is required. Through June 30, 2017, there has been no activity
recorded by Open Therapeutics, LLC with respect to these patents, thus the $75,000 remains contingently owed to them.
The
Company had fully impaired the value of the patents prior to the sale, and the warrants canceled as a result of this transaction
was valueless as there is no intrinsic value to them. The Company recorded no gain or loss. Upon Open Therapeutics profitability
with respect to this technology, the Company will be the beneficiary of a profit split as noted in the agreement, and will recognize
revenue from that in the future.
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
NOTE
6 – DERIVATIVE LIABILITIES EMBEDDED IN CONVERTIBLE NOTES
The
Company entered into several financial instruments, which consist of notes payable, containing various conversion features. Generally,
the financial instruments are convertible into shares of the Company’s common stock; at prices that are either marked to
the volume weighted average price of the Company’s intended publicly traded stock or a static price determinative from the
financial instrument agreements. These prices may be at a significant discount to market determined by the volume weighted average
price once the Company completes its reverse acquisition with the intended publicly traded company. The Company for all intent
and purposes considers this discount to be fair market value as would be determined in an arm’s length transaction with
a willing buyer.
The
Company accounts for the fair value of the conversion feature in accordance with ASC 815-15, Derivatives and Hedging; Embedded
Derivatives, which requires the Company to bifurcate and separately account for the conversion features as an embedded derivative
contained in the Company’s convertible debt and original issue discount notes payable. The Company is required to carry
the embedded derivative on its balance sheet at fair value and account for any unrealized change in fair value as a component
in its results of operations. The Company valued the embedded derivatives using eight steps to determine fair value under ASC
820. (1) Identify the item to be valued and the unit of account. (2) Determine the principal or most advantageous market and the
relevant market participants. (3) Select the valuation premise to be used for asset measurements. (4) Consider the risk assumptions
applicable to liability measurements. (5) Identify available inputs. (6) Select the appropriate valuation technique(s). (7) Make
the measurement. (8) Determine amounts to be recognized and information to be disclosed.
With
the issuance of the July 2017 FASB ASU 2017-11,
“Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity
(Topic 480) Derivatives and Hedging (Topic 815),”
which addresses the complexity of accounting for certain financial
instruments with down round features, the Company has chosen the early adopt retroactively the amendments in Part I of the standard
whereby fair value derivative liabilities previously recognized were derecognized in the current and comparative periods. Under
the amendments included in this update, the Company is no longer required to record changes in fair value during the period of
change as a separate component of other income (expense) in the Condensed Consolidated Statements of Operations.
The
amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded
features) with down round features. When determining whether certain financial instruments should be classified as liabilities
or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is
indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments.
As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for
as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified
financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize
the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available
to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are
now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with
Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize
the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a
scope exception. Those amendments do not have an accounting effect.
Under
current GAAP, an equity-linked financial instrument with a down round feature that otherwise is not required to be classified
as a liability under the guidance in Topic 480 is evaluated under the guidance in Topic 815, Derivatives and Hedging, to determine
whether it meets the definition of a derivative. If it meets that definition, the instrument (or embedded feature) is evaluated
to determine whether it is indexed to an entity’s own stock as part of the analysis of whether it qualifies for a scope
exception from derivative accounting. Generally, for warrants and conversion options embedded in financial instruments that are
deemed to have a debt host (assuming the underlying shares are readily convertible to cash or the contract provides for net settlement
such that the embedded conversion option meets the definition of a derivative), the existence of a down round feature results
in an instrument not being considered indexed to an entity’s own stock. This results in a reporting entity being required
to classify the freestanding financial instrument or the bifurcated conversion option as a liability, which the entity must measure
at fair value initially and at each subsequent reporting date.
The
amendments in this Update revise the guidance for instruments with down round features in Subtopic 815-40, Derivatives and Hedging—Contracts
in Entity’s Own Equity, which is considered in determining whether an equity-linked financial instrument qualifies for a
scope exception from derivative accounting. An entity still is required to determine whether instruments would be classified in
equity under the guidance in Subtopic 815-40 in determining whether they qualify for that scope exception. If they do qualify,
freestanding instruments with down round features are no longer classified as liabilities and embedded conversion options with
down round features are no longer bifurcated.
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
For
entities that present EPS in accordance with Topic 260, and when the down round feature is included in an equity-classified freestanding
financial instrument, the value of the effect of the down round feature is treated as a dividend when it is triggered and as a
numerator adjustment in the basic EPS calculation. This reflects the occurrence of an economic transfer of value to the holder
of the instrument, while alleviating the complexity and income statement volatility associated with fair value measurement on
an ongoing basis. Convertible instruments are unaffected by the Topic 260 amendments in this Update.
Those
amendments in Part 1 of this Update are a cost savings relative to current GAAP. This is because, assuming the required criteria
for equity classification in Subtopic 815-40 are met, an entity that issued such an instrument no longer measures the instrument
at fair value at each reporting period (in the case of warrants) or separately accounts for a bifurcated derivative (in the case
of convertible instruments) on the basis of the existence of a down round feature. For convertible instruments with embedded conversion
options that have down round features, applying specialized guidance such as the model for contingent beneficial conversion features
rather than bifurcating an embedded derivative also reduces cost and complexity. Under that specialized guidance, the issuer recognizes
the intrinsic value of the feature only when the feature becomes beneficial instead of bifurcating the conversion option and measuring
it at fair value each reporting period.
The
amendments in Part II of this Update replace the indefinite deferral of certain guidance in Topic 480 with a scope exception.
This has the benefit of improving the readability of the Codification and reducing the complexity associated with navigating the
guidance in Topic 480.
For
public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this Update are effective
for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.
Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments
in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.
The amendments in Part 1 of this Update should be applied in either of the following ways: 1. Retrospectively to outstanding financial
instruments with a down round feature by means of a cumulative-effect adjustment to the statement of financial position as of
the beginning of the first fiscal year and interim period(s) in which the pending content that links to this paragraph is effective;
or 2. Retrospectively to outstanding financial instruments with a down round feature for each prior reporting period presented
in accordance with the guidance on accounting changes in paragraphs 250-10-45-5 through 45-10.
The
amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting
effect.
The
Company has identified that instruments previously carried as derivative liabilities were deemed to be such on the basis of embedded
features containing down round provisions, resulting in the strike price being reduced on the basis of the pricing of future equity
offerings. In accordance with the adoption of ASU 2017-11, the Company recorded a gain on derivative liability in the amount of
$271,280 and $439,067 for the three months ended June 30, 2017 and 2016, respectively as well as corresponding loss on extinguishment
of debt in the amount of $271,280 and $439,067 for the three months ended June 30, 2017 and 2016, respectively. Along with this
transaction, the Company recorded a deemed dividend to shareholders in the amount of $271,280 and $439,067 for the three months
ended June 30, 2017 and 2016, respectively.
The
three instruments affected by this adoption were the May 28, 2015, 7% Convertible Redeemable Note with a principal amount of $104,000
with a maturity date of May 28, 2016 with Union Capital, LLC which contains an anti-ratchet clause; the July 14, 2015, 12% convertible
redeemable note with Group 10 Holdings, LLC having a principal amount of $96,000 issued with an original issue discount of $16,000
and the November 7, 2016, 12% convertible redeemable note with Group 10 Holdings, LLC having a principal amount of $45,000 issued
with an original issue discount of $7,000. The two Group 10 Holdings, LLC notes contain a most favored nations clause, allowing
the note holder to adopt any term of future convertible redeemable notes which would be beneficial to them.
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
NOTE
7 – NOTES PAYABLE TO INDIVIDUALS AND COMPANIES
Notes
payable to individuals and companies consisted of the following as of:
|
|
|
|
|
June
30, 2017 (Unaudited)
|
|
|
March
31, 2017
|
|
Convertible note payable – Union Capital –
(May 15)
|
|
|
(a)
|
|
|
$
|
57,450
|
|
|
$
|
121,800
|
|
Convertible note payable - Group 10 - (Jul 15)
|
|
|
(b)
|
|
|
|
45,780
|
|
|
|
113,280
|
|
Convertible note payable - Group 10 - (Aug 16)
|
|
|
(c)
|
|
|
|
-
|
|
|
|
-
|
|
Convertible note payable - Group 10 - (Nov 16)
|
|
|
(d)
|
|
|
|
45,000
|
|
|
|
45,000
|
|
Convertible note payable - Group 10 - (Mar 17)
|
|
|
(e)
|
|
|
|
-
|
|
|
|
-
|
|
Alternative Strategy Partners PTE Ltd.
|
|
|
(f)
|
|
|
|
90,000
|
|
|
|
90,000
|
|
ADAR Bays -Dec 2016
|
|
|
(g)
|
|
|
|
39,245
|
|
|
|
67,045
|
|
ADAR Bays -Feb 2017
|
|
|
(h)
|
|
|
|
27,500
|
|
|
|
27,500
|
|
Eagle Equities, LLC - Jan 2017
|
|
|
(i)
|
|
|
|
18,000
|
|
|
|
18,000
|
|
Eagle Equities, LLC - Mar 2017
|
|
|
(j)
|
|
|
|
35,000
|
|
|
|
35,000
|
|
Eagle Equities, LLC - Jun 2017
|
|
|
(k)
|
|
|
|
35,000
|
|
|
|
-
|
|
GS Capital Partners LLC - Apr 2017
|
|
|
(l)
|
|
|
|
45,000
|
|
|
|
-
|
|
GS Capital Partners LLC - May 2017
|
|
|
(m)
|
|
|
|
45,000
|
|
|
|
-
|
|
GS Capital Partners LLC - Jun 2017
|
|
|
(n)
|
|
|
|
80,000
|
|
|
|
-
|
|
Individuals – June 2015
|
|
|
(o)
|
|
|
|
20,000
|
|
|
|
20,000
|
|
Individuals – Feb to April 2013
|
|
|
(p)
|
|
|
|
48,775
|
|
|
|
48,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total notes payable and convertible notes
|
|
|
|
|
|
|
631,750
|
|
|
|
586,400
|
|
Less – discounts
|
|
|
|
|
|
|
(16,590
|
)
|
|
|
(6,482
|
)
|
Less - current portion of these notes
|
|
|
|
|
|
|
(615,160
|
)
|
|
|
(579,918
|
)
|
Total notes payable and convertible notes, net discounts
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
(a)
|
Twelve-month
$104,000 convertible note, dated May 28, 2015 bearing interest at the rate of 7% per annum, and having a default rate of 24%.
The note matured in May 2016. The Company granted noteholder 12,500,000 shares of Company common stock for a commitment fee
in consideration of the note. Under the note, the Company entered into default on July 15, 2015 with the delisting from the
OTCQB Exchange resulting from failure to timely file the Company’s annual report with the Securities and Exchange Commission
(“SEC”) violating Regulation SX, Rule 2-01 as a direct result of the Company not being able to obtain properly
audited financial statements. Due to the breach of delisting the outstanding principal due under this note was increased by
50% to $156,000, then increased again another 10% to $171,600. Pursuant to the terms of the Union Note, at any time Union
may convert any principal and interest due to it at a 20% discount to the lowest closing bid price of Company common stock
for the five trading days prior to the conversion notice. Additionally, the discount will be adjusted on a ratchet basis in
the event the Company offers a more favorable discount rate or look-back period to a third party during the term of the Union.
As of June 30, 2017, Union has converted $114,115 of principal and $45,521 of interest of this note. As of June 30, 2017,
this note had accrued interest of $76,386. Subsequent to June 30, 2017, the noteholder was issued 26,851,689 common shares
at $0.00072 per share, retiring $13,200 of principal and $6,133 of interest.
|
|
|
(b)
|
Twelve-month
$96,000 convertible note, bearing 20% OID, dated July 14, 2015 bearing interest at the
rate of 12% per annum, and having a default rate of 18%. The note matured in May 2016.
The Company granted the noteholder 15,000,000 shares of Company common stock for
a commitment fee in consideration of the note. Under the note, the Company entered into
default on July 15, 2015 with the delisting from the OTCQB Exchange resulting from failure
to timely file the Company’s annual report with the Securities and Exchange Commission
(“SEC”) violating Regulation SX, Rule 2-01 as a direct result of the Company
not being able to obtain properly audited financial statements. Due to the breach of
delisting the outstanding principal due under this note was increased by 18% to $113,280.
The holder has the right, but not the obligation, to convert all or any portion of the
outstanding principal amount, accrued interest and fees due and payable thereon into
fully paid and non-assessable shares of common stock of borrower at the conversion price,
(the “conversion shares”) which shall mean the lesser of (a) fifty percent
(50%) multiplied by the lowest closing price as of the date a notice of conversion is
given (which represents a discount rate of fifty percent (50%)) or (b) one half penny
($0.005). If the market capitalization of the borrower is less than one million dollars
($1,000,000) on the day immediately prior to the date of the notice of conversion, then
the conversion price shall be twenty-five percent (25%) multiplied by the lowest closing
price as of the date a notice of conversion is given (which represents a discount rate
of seventy-five percent (75%). Additionally, if the closing price of the borrower’s
common stock on the day immediately prior to the date of the notice of conversion is
less than $0.001 then the conversion price shall be twenty-five percent (25%) multiplied
by the lowest closing price as of the date a notice of conversion is given (which represents
a discount rate of seventy-five percent (75%). As of June 30, 2017, this note had accrued
interest of $38,978. On December 6, 2016, Group 10 formally notified the Company of the
amount of the default penalty being charged under their default penalty clause. This
penalty resulted in the amount of $348,000. The current amount as demanded by the note
holder was recorded as interest expense.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
NOTE
7 – NOTES PAYABLE TO INDIVIDUALS AND COMPANIES (CONTINUED)
(c)
|
Twelve-month
$48,000 convertible note, with OID in the amount of $8,000, dated August 3, 2016 bearing interest at the rate of 12% per annum,
and having a default rate of 18%. The note matured in May 2016. The Company granted noteholder 8,000,000 shares of Company
common stock for a commitment fee in consideration of the note. For the period of October 1, 2016 to December 5, 2016, the
Company was not current with its reporting responsibilities under Section 13 of the Exchange Act and failed to timely file,
when due, any SEC reports (10K and 10Q’s) was considered an event of default. Following the occurrence and during the
continuance of an event of default, the Company agreed to pay to the holder in the amount equal to one thousand dollars ($1,000)
per business day commencing the business day following the date of the event of default. The default penalty of $45,000 for
the period of 45 days was settled for 10,000,000 common shares of Company stock ($0.0045 per share). This amount was recorded
as interest expense. On November 7, 2016, the holder converted $50,160 ($0.00114 per share) into 44,000,000 common shares.
The note had a face value of $48,000 with accrued interest of $2,160.
|
(d)
|
Twelve-month
$45,000 convertible note, with OID in the amount of $7,000, dated November 7, 2016 bearing interest at the rate of 12% per
annum, and having a default rate of 18%. The note will mature in November 2017. The Company granted noteholder 8,000,000 shares
of Company common stock for a commitment fee in consideration of the note. If any event of default occurs, the outstanding
principal shall be increased to one hundred eighteen percent (118%) of the outstanding principal. The holder has the right,
but not the obligation, to convert all or any portion of the outstanding principal amount, accrued interest and fees due and
payable thereon into fully paid and non-assessable shares of common stock of borrower at the conversion price, (the “conversion
shares”) which shall mean the lesser of (a) fifty percent (50%) multiplied by the lowest closing price as of the date
a notice of conversion is given (which represents a discount rate of fifty percent (50%)) or (b) three tenths of a penny ($0.003).
If the market capitalization of the borrower is less than one million dollars ($1,000,000) on the day immediately prior to
the date of the notice of conversion, then the conversion price shall be twenty-five percent (25%) multiplied by the lowest
closing price as of the date a notice of conversion is given (which represents a discount rate of seventy-five percent (75%).
Additionally, if the closing price of the borrower’s common stock on the day immediately prior to the date of the notice
of conversion is less than $0.001 then the conversion price shall be twenty-five percent (25%) multiplied by the lowest closing
price as of the date a notice of conversion is given (which represents a discount rate of seventy-five percent (75%). This
note may be prepaid in cash by the Company after 180 days until maturity including a prepayment penalty of) one hundred forty-five
percent (145%) of the prepayment amount. As of June 30, 2017, accrued interest was $2,130.
|
(e)
|
Twelve-month
$40,000 convertible note with OID in the amount of $5,000 dated March 31, 2017. As additional consideration for the purchase
of the note, the Company shall issue 15,000,000 commitment shares. This note bears 12% interest per annum with a default interest
rate of 18%. In the event default occurs, the outstanding principal amount of this debenture shall increase to one hundred
eighteen percent (118%) of the outstanding principal amount of this debenture. The holder shall have the right to convert
any portion of the outstanding principal amount, accrued interest and fees due and payable thereon into fully paid and non-assessable
shares of common stock of borrower at the conversion price, (the “conversion shares”) which shall mean the lesser
of (a) sixty percent (50%) multiplied by the lowest closing price during the thirty-five (35) trading days prior to the notice
of conversion is given (which represents a discount rate of forty percent (50%)) or (b) two-tenths of a penny ($0.002). If
the market capitalization of the borrower is less than 1 million dollars ($1,000,000) or the closing price of the borrower’s
common stock is below one-tenth of a penny ($0.001) on the day immediately prior to the date of the notice of conversion,
then the conversion price shall be twenty-five percent (25%) multiplied by the lowest closing price during the thirty-five
(35) trading days prior to the date a notice of conversion is given (which represents a discount rate of seventy-five percent
(75%)). Borrower may prepay in cash the principal amount of this debenture and accrued interest thereon, with a premium payment
equal to one hundred forty-five percent (145%) of the prepayment amount. Prepayments after one hundred eighty (180) days but
before maturity are subject to the approval of holder. The note was effective as of March 31, 2017 however not funded as of
March 31, 2017. Funding occurred April 3, 2017, therefore this amount is not included in the balance of notes payable and
there was no accrued interest reflected as of March 31, 2017. On June 26, 2017, the Company settled this note in full for
a one-time cash payment in the amount of $59,659. The Company recorded, as interest expense, a prepayment penalty of
$18,594 in addition to the repayment of accrued interest of $1,065.
|
(f)
|
Three-month $180,000 non-convertible note dated September 23, 2015 bearing and interest rate of 11.50% per
annum. The note matured in December 2015. The Company received cash from the note of $90,000 ($75,000 wired directly to the Company
and $15,000 wired directly from ASP to compensate a consultant). The balance of this note ($90,000) was to be wired directly to
a Japanese based consumer product firm called Eishin, Inc., but there was never any documentation provided to support this $90,000.
The Company is in dispute with the noteholder, and has not recorded this liability as of June 30, 2017 or March 31, 2017. If the
proper documentation is provided to the Company, they will record the liability at that time. The Company has not received any
type of default notice with respect to this $180,000 non-convertible debenture. Additionally, the Company has not received any
shares in Eishin Co., Ltd. up to this point. The Company did follow up with Eishin in March 2017, and it was noted that Eishin
did not reflect the Company as having this ownership. As a result, the additional $90,000 has not been recognized as outstanding.
As of June 30, 2017, the Company has accrued interest $18,318.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
NOTE
7 – NOTES PAYABLE TO INDIVIDUALS AND COMPANIES (CONTINUED)
(g)
|
Fifty-eight day $60,950 convertible
note dated December 19, 2016, with OID in the amount of $7,950 bearing an interest rate
of 12% with a default interest rate of 24%. As additional consideration for the purchase
of the note, the Company issued the note holder 5,000,000 common shares as commitment
shares recorded at a value of $32,000 ($0.0065 per share). The holder of this
note is entitled to convert any amount of the principal face amount of this note then
outstanding into shares of the Company’s common stock at a conversion price for
each share of Common Stock equal to 80% of the lowest trading price (20% discount) of
the common stock of the lowest trading price of the common stock for the twenty trading
days immediately preceding the delivery of a notice of conversion. If the note is still
outstanding on the 6-month anniversary, then the conversion discount shall be increased
from 20% to 35% such that the conversion price will be equal to 65%. On February 15,
2017, the note entered into default for failure to timely pay principal and interest
upon maturity. Since this note was not paid at maturity, the outstanding principal due
under this note increased by 10% to $67,045. This note is further guaranteed by Seth
Shaw, Chief Executive Officer of the Company. Mr. Shaw pledged 37,500,000 shares of his
Common Stock as collateral for payment obligation under this note. As of June 30, 2017,
the Company has accrued interest $4,887. On July 11, 2017, the noteholder was issued
28,864,154 common shares under a notice of conversion to convert $15,000 of principal.
|
|
|
(h)
|
Twelve-month
$27,500 convertible note dated February 8, 2017, with 10% OID in the amount of $2,500 bearing an interest rate of 8% with
a default rate of 24%. The holder of this note is entitled to convert any amount of the principal face amount of this note
then outstanding into shares of the Company’s common stock at a conversion price for each share of Common Stock equal
to 60% of the lowest trading price (40% discount) of the common stock of the lowest trading price of the common stock for
the twenty trading days immediately preceding the delivery of a notice of conversion. During the first one hundred eighty
(180) days, borrower may prepay the principal amount of this debenture and accrued interest thereon, with a premium, as set
forth below (“prepayment premium”), such redemption must be closed and funded within three (3) days. The amount
of each prepayment premium shall be as follows: (a) one hundred fifteen percent (115%) for redemptions in the first 30 days
after the note issuance; (b) one hundred twenty percent (120%) of the prepayment amount if such prepayment is made at any
time from thirty-one (31) days after the issuance date until sixty (60) days after the issuance date; (c) one hundred twenty-five
percent (125%) of the prepayment amount if such prepayment is made at any time from sixty-one (61) days after the issuance
date until ninety (90) days after the issuance date made; (d) one hundred thirty percent (130%) of the prepayment amount if
such prepayment is made at any time from ninety-one (91) days after the issuance date until one hundred twenty (120) days
after the issuance date made; and (e) one hundred thirty five percent (135%) of the prepayment amount if such prepayment is
made at any time from one hundred twenty (121) days after the issuance date until one hundred fifty (150) days after the issuance
(f) one hundred forty percent (140%) of the prepayment amount if such prepayment is made at any time from one hundred twenty
(151) days after the issuance date until one hundred eighty (180) days after the issuance date made. This note may not be
prepaid after one hundred (180) eighty days. If this Note is not paid at maturity, the outstanding principal due under this
Note shall increase by 10%. As of June 30, 2017, the Company has accrued interest of $856.
|
(i)
|
Twelve-month
$18,000 convertible note dated January 27, 2017 bearing an interest rate of 8% with a default interest rate of 24%. The holder
of this note may convert any amount of the principal face amount of this note then outstanding into shares of the Company’s
common stock at a conversion price for each share equal to 75% of the lowest closing bid price as future for the ten (10)
prior trading days. As additional consideration for the purchase of the note, the Company issued note holder 3,500,000 shares
of restricted common stock valued at $15,750 ($0.0045 per share). During the first one hundred eighty (180) days, borrower
may prepay the principal amount of this debenture and accrued interest thereon, with a premium, as set forth below (“prepayment
premium”), such redemption must be closed and funded within three (3) days. The amount of each prepayment premium shall
be as follows: (a) there will be no payment penalty for redemptions in the first 30 days after the note issuance; (b) one
hundred ten percent (110%) of the prepayment amount if such prepayment is made at any time from thirty-one (31) days after
the issuance date until sixty (60) days after the issuance date; (c) one hundred fifteen percent (115%) of the prepayment
amount if such prepayment is made at any time from sixty-one (61) days after the issuance date until ninety (90) days after
the issuance date made; (d) one hundred twenty percent (120%) of the prepayment amount if such prepayment is made at any time
from ninety-one (91) days after the issuance date until one hundred twenty (120) days after the issuance date made; and (e)
one hundred twenty five percent (125%) of the prepayment amount if such prepayment is made at any time from one hundred twenty
(120) days after the issuance date until one hundred eighty (180) days after the issuance date made. This note may not be
prepaid after one hundred (180) eighty days. In the event of default whereby the Company shall have its common stock delisted
from an exchange the outstanding principal due under this note shall increase by 50%. If this note is not paid at maturity,
the outstanding principal due under this note shall increase by 10%. Further, if a breach of Company becoming delinquent in
its periodic report filings with the Securities and Exchange Commission occurs or is continuing after the 6 month anniversary
of the Note, then the Holder shall be entitled to use the lowest closing bid price during the delinquency period as a base
price for the conversion. At June 30, 2017, this note has accrued interest of $608.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
NOTE
7 – NOTES PAYABLE TO INDIVIDUALS AND COMPANIES (CONTINUED)
(j)
|
The
first of two-twelve-month convertible notes as part of a securities purchase agreement, dated March 20, 2017, to sell one
year 8% convertible notes totaling $70,000 ($35,000 each). As additional consideration under this security purchase agreement,
the Company issued note holder 16,000,000 shares of restricted common stock valued at $43,200 ($0.0027 per share). Both notes
mature on March 20, 2018. On March 22, 2017, the noteholder funded the first note through the direct payment of cash to third
parties. The holder of the notes is entitled to convert any amount of the principal face amount of this note then outstanding
into shares of the Company’s common stock at a conversion price for each share equal to 75% of the lowest closing bid
price for the ten (10) prior trading days. During the first one hundred eighty (180) days, borrower may prepay the principal
amount of this debenture and accrued interest thereon, with a premium, as set forth below (“prepayment premium”),
such redemption must be closed and funded within three (3) days. The amount of each prepayment premium shall be as follows:
(a) there will be no payment penalty for redemptions in the first 30 days after the note issuance; (b) one hundred ten percent
(110%) of the prepayment amount if such prepayment is made at any time from thirty-one (31) days after the issuance date until
sixty (60) days after the issuance date; (c) one hundred fifteen percent (115%) of the prepayment amount if such prepayment
is made at any time from sixty-one (61) days after the issuance date until ninety (90) days after the issuance date made;
(d) one hundred twenty percent (120%) of the prepayment amount if such prepayment is made at any time from ninety-one (91)
days after the issuance date until one hundred twenty (120) days after the issuance date made; and (e) one hundred twenty
five percent (125%) of the prepayment amount if such prepayment is made at any time from one hundred twenty (120) days after
the issuance date until one hundred eighty (180) days after the issuance date made. This note may not be prepaid after one
hundred (180) eighty days. If this note is not paid at maturity, the outstanding principal due under this note shall increase
by 10%. On June 8, 2017, the noteholder advanced funds in the amount of $8,623 in the form of a direct payment to a third
party. On June 15, 2017, the Company was advanced $8,000 towards the second note. On June 26, 2017 the note holder fully funded
the second note with a payment to the Company in the amount of $16,377. Legal fees in the amount of $2,000 were deducted from
the proceeds. At June 30, 2017, this note has accrued interest of $783.
|
|
|
(k)
|
The
second of two-twelve-month convertible notes (back-end note) as part of a securities
purchase agreement, dated March 20, 2017, to sell one year 8% convertible notes totaling
$70,000 ($35,000 each). On June 15, 2017, Eagle Equities advanced the Company $8,000
as part of this back-end note. This back-end convertible note will mature in twelve-months.
On June 8, 2017, the noteholder advanced funds in the amount of $8,623 to a third party
for administrative services. The holder of the note is entitled to convert any amount
of the principal face amount of this note then outstanding into shares of the Company’s
common stock at a conversion price for each share equal to 75% of the lowest closing
bid price for the ten (10) prior trading days. During the first one hundred eighty (180)
days, borrower may prepay the principal amount of this debenture and accrued interest
thereon, with a premium, as set forth below (“prepayment premium”), such
redemption must be closed and funded within three (3) days. The amount of each prepayment
premium shall be as follows: (a) there will be no payment penalty for redemptions in
the first 30 days after the note issuance; (b) one hundred ten percent (110%) of the
prepayment amount if such prepayment is made at any time from thirty-one (31) days after
the issuance date until sixty (60) days after the issuance date; (c) one hundred fifteen
percent (115%) of the prepayment amount if such prepayment is made at any time from sixty-one
(61) days after the issuance date until ninety (90) days after the issuance date made;
(d) one hundred twenty percent (120%) of the prepayment amount if such prepayment is
made at any time from ninety-one (91) days after the issuance date until one hundred
twenty (120) days after the issuance date made; and (e) one hundred twenty five percent
(125%) of the prepayment amount if such prepayment is made at any time from one hundred
twenty (120) days after the issuance date until one hundred eighty (180) days after the
issuance date made. This note may not be prepaid after one hundred (180) eighty days.
If this note is not paid at maturity, the outstanding principal due under this note shall
increase by 10%. On June 26, 2017 the note holder fully funded the second note with a
payment to the Company in the amount of $16,377. Legal fees in the amount of $2,000 were
deducted from the proceeds. As of June 30, 2017 this note had accrued interest in the
amount of $84.
|
|
|
(l)
|
One
year 8% $45,000 convertible note dated April 27, 2017. This note was funded May 2, 2017. The GS Note has a maturity date of
April 27, 2018. This note has a default interest rate of 24%. If the GS Note is not paid at maturity, the outstanding principal
due under the GS Note shall increase by 10%. The holder is entitled to convert any amount of the principal and accrued interest
of then outstanding into shares of the Company’s common stock at a price for each share of common stock equal to 70%
of the lowest daily volume weighted average price (VWAP) of the common stock for the fifteen (15) prior trading days. In the
event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 60% instead
of 70% while that “Chill” is in effect. During the first six months the GS Note is in effect, the Company may
redeem the note by paying to the holder an amount as follows: (i) if the redemption is within the first 90 days of the issuance
date, then for an amount equal to 120% of the unpaid principal amount of this Note along with any interest that has accrued
during that period, (ii) if the redemption is after the 91st day, but less than the 180th day of the issuance date, then for
an amount equal to 133% of the unpaid principal amount of the GS Note along with any accrued interest. The GS Note may not
be redeemed after 180 days. At June 30, 2017, this note has accrued interest of $582.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
NOTE
7 – NOTES PAYABLE TO INDIVIDUALS AND COMPANIES (CONTINUED)
(m)
|
On
May 30, 2017, GS Capital Partners, LLC funded a one year 8% $45,000 convertible redeemable note in accordance with a securities
purchase agreement dated May 30, 2017. As additional consideration under this security purchase agreement, the Company issued
note holder 25,000,000 shares of restricted common stock valued at $30,000 ($0.0012 per share). At June 30, 2017, these
shares have not been issued and are reflected as a liability to issue common shares. The GS Note has a maturity date of
May 30, 2018. This note has a default interest rate of 24%. If the GS Note is not paid at maturity, the outstanding principal
due under the GS Note shall increase by 10%. The holder is entitled to convert any amount of the principal and accrued interest
of then outstanding into shares of the Company’s common stock at a price for each share of common stock equal to 70%
of the lowest daily volume weighted average price (VWAP) of the common stock for the fifteen (15) prior trading days. In the
event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 60% instead
of 70% while that “Chill” is in effect. During the first six months the GS Note is in effect, the Company may
redeem the note by paying to the holder an amount as follows: (i) if the redemption is within the first 90 days of the issuance
date, then for an amount equal to 120% of the unpaid principal amount of this Note along with any interest that has accrued
during that period, (ii) if the redemption is after the 91st day, but less than the 180th day of the issuance date, then for
an amount equal to 133% of the unpaid principal amount of the GS Note along with any accrued interest. The GS Note may not
be redeemed after 180 days. At June 30, 2017, this note has accrued interest of $306.
|
|
|
(n)
|
On
June 27, 2017, the Company entered into a one-year 5% convertible note in the amount of $80,000 with GS Capital Partners,
LLC. The noteholder is entitled, at its option, at any time after cash payment, to convert any amount of the principal face
amount of this note then outstanding into shares of the Company’s common stock at a price equal to $0.00125 per share.
Upon an Event of Default, interest shall accrue at a default interest rate of 24% per annum. If this Note is not paid at maturity,
the outstanding principal due under this Note shall increase by 10%. Additionally, the Company will issue the noteholder 5,000,000
restricted shares as additional consideration for the purchase of the note as well as 16,000,000 five-year cashless warrants
with an exercise price of $0.0035 per share. All the terms set forth, including but not limited to interest rate, prepayment
terms, conversion discount or lookback period will be adjusted downward (i.e. for the benefit of the Holder) if the Company
offers a more favorable conversion discount (whether via interest, rate OID or otherwise) or lookback period to another party
or otherwise grants any more favorable terms to any third party than those contained herein while this note is in effect.
During the first six months this Note is in effect, the Company may redeem this note by paying to the holder an amount as
follows: (i) if the redemption is within the first 90 days this note is in effect, then for an amount equal to 120% of the
unpaid principal amount of this note along with any interest that has accrued during that period, (ii) if the redemption is
after the 91st day this note is in effect, but less than the 180th day this note is in effect, then for an amount equal to
133% of the unpaid principal amount of this note along with any accrued interest. This note may not be redeemed after 180
days. This note was funded on June 30, 2017.
|
|
|
(o)
|
On
June 1, 2015, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with various
accredited investors for the sale of certain debentures with aggregate gross proceeds to the Company of $133,000 ($18,000
of which was to a related party). Pursuant to the terms of the agreement, the investors were granted 13,300,000 shares of
Company common stock for a commitment fee. These shares were issued on June 15, 2016. Additionally, the Company was required
to repay the amounts raised under the Purchase Agreement prior to December 1, 2015 except as described below. The Purchase
Agreement provided the Company with the following prepayment options: (i) if prepaid prior to August 31, 2015, the Company
must pay each investor the amount invested plus a 10% premium and (ii) if prepaid after August 31, 2015 but prior to December
1, 2015, the Company must pay each investor the amount invested plus a 20% premium. Because the Company did not repay the
amounts as described above, on December 1, 2015 the Company had the option to convert all amounts raised under the Purchase
Agreements into shares of common stock based on a 20% discount to the Company’s VWAP (as defined in the Purchase Agreement)
for the three Trading Days (as defined in the Purchase Agreement) prior to December 1, 2015, which the Company has done. Excluding
the 13,300,000 commitment shares, in May 2016 the Company agreed to issue 33,900,000 shares of its common stock, which were
issued on June 15, 2016 to settle all obligations under these Purchase Agreements with the exception of one individual note
holder in the amount of $20,000, which remains outstanding as of June 30, 2017. Accrued interest on this note as of June 30,
2017 is $4,166.
|
|
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(p)
|
Individual
notes issued to 6 individuals bearing an interest rate of 8%. These notes were issued from February through April 2013. The
notes are convertible into common stock of the Company at $0.025 per share. During the three months and year ended June 30,
2017 and March 31, 2017 no notes were converted to common stock. Accrued interest on these notes as of June 30, 2017 is $17,999.
On July 19, 2017, the Company paid an individual note holder to retire a note having a principal balance of $1,000 and accrued
interest of $340.
|
Interest
expense for the three months ended June 30, 2017 and 2016 was $159,822 and $22,233. Included in interest expense for these years
are fees related to default fees and value attributable to commitment fees for the various notes. Accrued interest at June 30,
2017 and March 31, 2017 was $166,153 and $126,156, respectively.
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
NOTE
8 – RELATED PARTIES
On
June 15, 2017, Seth Shaw, Chief Executive Officer made a personal investment into the Company of $95,000. This investment is structured
as an equity private placement of 76,000,000 at $0.00125. The Company will utilize this infusion of working capital for general
and administrative purposes. The shares were issued on August 1, 2017 and the investment was recorded as a share liability as
of June 30, 2017.
On
June 21, 2017, Seth Shaw, Chief Executive Officer made a personal investment into the Company of $55,000. This investment is structured
as an equity private placement of 44,000,000 at $0.00125. The Company will utilize this infusion of working capital for general
and administrative purposes. The shares were issued on August 1, 2017 and the investment was recorded as a share liability as
of June 30, 2017.
NOTE
9 – STOCKHOLDERS’ DEFICIT
Common
Stock
As
of June 30, 2017, the Company is authorized to issue 7,500,000,000 shares of its common stock. As of June 30, 2017, 2,072,881,613
shares of common stock are outstanding.
On
April 27, 2017, the Company’s Board of Directors (“BOD”) approved an amendment to the Company’s Articles
of Incorporation to increase the Company’s authorized common stock from 2,500,000,000 to 7,500,000,000 shares and on May
26, 2017, the Company filed Schedule DEF 14A with the Securities and Exchange Commission calling for a special meeting of the
stockholders that was held on June 28, 2017 to approve the amendment. The articles of amendment were filed with the Florida Secretary
of State on June 29, 2017.
Fiscal
Year 2017
During
the year ended March 31, 2017, the Company issued 33,900,000 shares of common stock at a value $135,600 ($0.004 per share) to
convert notes payable in the amount $113,000 (including a related party note in the amount of $18,000) plus a 20% conversion premium
which was recorded as interest expense in the amount $22,600.
During
the year ended March 31, 2017, the Company issued 104,375,000 shares of common stock ($0.004 per share) for proceeds of $428,500.
During
the year ended March 31, 2017, the Company issued 197,000,000 shares of common stock for services rendered and to be rendered
valued at $816,168 ($0.0029 to $0.0088 per share) which is reflected in stock-based compensation. Value represents contracts entered
into with various consultants, with the grant date fair value amortized over the life of the contracts.
During
the year ended March 31, 2017, the Company issued 63,800,000 shares of common stock for commitment shares to note holders at a
value of $378,550 ($0.0027 to $0.01 per share).
During
the year ended March 31, 2017, the Company issued 100,639,501 shares of common stock to convert principal and interest in the
amount of $118,126 ($0.00114 to $0.0012 per share).
On
November 18, 2016, the Company issued 15,384,615 common shares of Company stock to settle an outstanding payable in the amount
of $194,516. The Company recognized a gain on the settlement of this liability in the amount of $94,516, as the shares were valued
at $100,000.
Fiscal
Year 2018
During
the three months ended June 30, 2017, the Company issued 337,961,564 common shares at $0.00035 to $0.0012 to holders of convertible
notes to retire $159,650 in principal and $27,354 of accrued interest.
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
NOTE
9 – STOCKHOLDERS’ DEFICIT (CONTINUED)
Common
Stock (Continued)
In
connection with some of the consulting agreements and board advisory agreements the Company has entered into, as the following
clauses are part of the compensation arrangements: a) the consultant will be reimbursed for all reasonable out of pocket expenses,
b) to the extent the consultant introduces the Company to any sources of equity or debt arrangements, the Company agrees to pay
8% to 10% in cash and 8% to 10% in common stock of the Company of all cash amounts actually received by the Company and 2% for
debt arrangements, and c) the Company, in its sole discretion, may make additional cash payments and/or issue additional shares
of common stock to the consultant based upon the consultant’s performance. The Company recognized $209,317 and $569,023
in stock based compensation expense related to these agreements in the three months ended June 30, 2017 and 2016, respectively.
Warrants
for Common Stock
The
following table summarizes warrant activity for the three months and year ended June 30, 2017 and March 31, 2017:
|
|
|
|
|
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|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2016
|
|
|
77,303,529
|
|
|
$
|
0.0200
|
|
|
|
3.49
Years
|
|
|
$
|
10,050,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
37,350,000
|
|
|
|
0.0100
|
|
|
|
2.44
Years
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
(23,134,118
|
)
|
|
$
|
(0.0200
|
)
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2017
|
|
|
91,519,411
|
|
|
$
|
0.0200
|
|
|
|
3.16
Years
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
16,000,000
|
|
|
|
0.0035
|
|
|
|
4.99
Years
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
and exercisable at June 30, 2017
|
|
|
107,519,411
|
|
|
$
|
0.0180
|
|
|
|
3.22
Years
|
|
|
$
|
-
|
|
The
warrants were valued utilizing the following assumptions employing the Black-Scholes Pricing Model:
|
|
Period
Ended
June 30, 2017
|
|
|
Year
Ended
March 31, 2017
|
|
Volatility
|
|
|
108.6
|
%
|
|
|
203
|
%
|
Risk-free
rate
|
|
|
1.24
|
%
|
|
|
0.66
|
%
|
Dividend
|
|
|
-
|
|
|
|
-
|
|
Expected
life of warrants
|
|
|
5.00
|
|
|
|
2.35
|
|
On
June 27, 2017, the Company entered into a one-year 5% convertible note in the amount of $80,000 with GS Capital Partners, LLC.
As partial consideration for the purchase of the note the Company granted 16,000,000 five-year cashless warrants with an exercise
price of $0.0035 per share. Based on the relative fair value of the warrants, the Company recorded a debt discount of $12,546
on the $80,000 note, which is being amortized over a period of one-year.
During
the year ended March 31, 2017, the Company entered into Stock Purchase agreements (“SPA’s”) with 20 qualified
investors, subsequently issuing 93,375,000 shares of common stock. In accordance with terms of the SPA’s, each investor
was awarded 1 Non-cashless Warrant (with a term of 36 months) for every 2.5 shares of stock purchased. The strike price of these
warrants is 1 cent per share. The total warrants of 37,350,000 are classified as additional paid in capital. The warrants are
classified as equity as they contain no provisions that would enable liability classification.
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
NOTE
9 – STOCKHOLDERS’ DEFICIT (CONTINUED)
On
December 22, 2016, the Company, entered in a membership interest transfer agreement with Open Therapeutics, LLC, an Ohio limited
liability company (“Open Therapeutics” formerly Bacterial Robotics LLC and Microbial Robotics, LLC), whereby the Company
sold 80% of its membership interest in Pilus which included the patents. Open Therapeutics agreed to terminate and cancel 80%
of the unexercised portion of the warrant to purchase 28,917,647 shares (or 23,134,118 warrants) of the Company’s common
stock (issued on January 28, 2014). Open Therapeutics will pay 20% of the net profit generated, to the Company from the previous
year’s earnings after the initial $75,000 of profit (reflected as a contingent liability on the consolidated balance sheet).
The Company further agreed it would vote its 20% membership interest in Pilus Energy in the same manner that Open Therapeutics
votes its membership interest on all matters for which a member vote is required. Through June 30, 2017, there has been no activity
recorded by Open Therapeutics, LLC with respect to these patents, thus the $75,000 remains contingently owed to them.
Stock
Options
On
February 1, 2012, the Company awarded to each of two former executives options to purchase 5,000,000 common shares, an aggregate
of 10,000,000 shares. These options vested immediately and were for services performed. The Company recorded stock-based compensation
expense of $1,400,000 for the issuance of these options. The following weighted average assumptions were used for Black-Scholes
option-pricing model to value these stock options:
Volatility
|
|
|
220
|
%
|
Expected
dividend rate
|
|
|
-
|
|
Expected
life of options in years
|
|
|
10
|
|
Risk-free
rate
|
|
|
1.87
|
%
|
The
following table summarizes option activity for the three months and year ended June 30, 2017 and March 31, 2017:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2016
|
|
|
10,000,000
|
|
|
$
|
0.10
|
|
|
|
5.85
Years
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2017
|
|
|
10,000,000
|
|
|
$
|
0.10
|
|
|
|
4.85
Years
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
and exercisable at June 30, 2017
|
|
|
10,000,000
|
|
|
$
|
0.10
|
|
|
|
4.60
Years
|
|
|
$
|
—
|
|
NOTE
10 – PROVISION FOR INCOME TAXES
Deferred
income taxes are determined using the liability method for the temporary differences between the financial reporting basis and
income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected
to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities
are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts
of assets and liabilities and their respective tax bases.
Deferred
tax assets consist of the following:
|
|
June
30, 2017
|
|
|
March
31, 2017
|
|
Net
operating losses
|
|
$
|
7,914,000
|
|
|
$
|
8,479,000
|
|
Valuation
allowance
|
|
|
(7,914,000
|
)
|
|
|
(8,479,000
|
)
|
|
|
$
|
-
|
|
|
$
|
-
|
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
NOTE
10 – PROVISION FOR INCOME TAXES (CONTINUED)
At June
30, 2017, the Company had a U.S. net operating loss carryforward in the approximate amount of $21 million available to offset
future taxable income through 2037. The Company established valuation allowances equal to the full amount of the deferred tax
assets due to the uncertainty of the utilization of the operating losses in future periods. The Company also has a Canadian carry
forward loss which approximates $700,000 and is available to offset future taxable income through 2037. The valuation allowance
increased by $565,000 and $809,000 in the three months ended June 30, 2017 and the year ended March 31, 2017, respectively.
A
reconciliation of the Company’s effective tax rate as a percentage of income before taxes and the federal statutory rate
for the three months ended June 30, 2017 and 2016 is summarized as follows.
|
|
2017
|
|
|
2016
|
|
Federal
statutory rate
|
|
|
(34.0
|
)%
|
|
|
(34.0
|
)%
|
State
income taxes, net of federal benefits
|
|
|
(3.3
|
)
|
|
|
(3.3
|
)
|
Foreign
tax
|
|
|
(0.3
|
)
|
|
|
(0.3
|
)
|
Valuation
allowance
|
|
|
37.6
|
|
|
|
37.6
|
|
|
|
|
0
|
%
|
|
|
0
|
%
|
NOTE
11 – INVESTMENTS - AVAILABLE FOR SALE SECURITIES
The
Company’s investments in Green Innovations, Ltd is included within Current Assets as they are expected to be realized in
cash within one year. The investments are recorded at fair valve with unrealized gains and losses, net of applicable taxes, in
Other Comprehensive Income. The Company’s investment in Green Innovations, Ltd has a cost of $250,000, unrealized loss of
$248,125 and a fair value of $1,875 at June 30, 2017. At March 31, 2017, the unrealized loss was $249,375 and the fair value was
$625, respectively.
NOTE
12 – CURRENT LITIGATION
Lawsuit
Filed Against Cowan Gunteski & Co. PA
On
November 4, 2015, the Company filed a lawsuit against its predecessor audit firm Cowan Gunteski & Co. PA in Federal Court
— Southern District Florida (Miami, Florida) entitled “Tauriga Sciences, Inc. v. Cowan, Gunteski & Co., P.A. et
al”, Case No. 0:15-cv-62334. The case has since been transferred to the United States District Court for the District of
New Jersey. The case alleges, among other things, that Cowan Gunteski committed malpractice with respect to the audit of the Company’s
FY 2014 financial statements (as illustrated in the PCAOB Public Censure of July 23, 2015) and then misrepresented to the Company
with respect about its ability to re-issue an independent opinion for FY 2014 financial statements. On July 31, 2015, the Company
was delisted from the OTCQB Exchange to the OTC Pink Limited Information Tier due to its inability to file its FY 2015 Form 10K.
The lawsuit was expected by the Company and its counsel to take up to 18 months to complete, from the date it was filed (November
4, 2015).
The
Company in its lawsuit is seeking damages against Cowan Gunteski (and its malpractice insurance policy) expected to exceed $4,000,000.
There is no guarantee that the Company will be successful in this lawsuit.
Subsequent
to the filing of the lawsuit, the Company was notified that the lawsuit was temporarily suspended so that the Company and Cowan
can attempt to mediate this case based on the engagement letters between the parties. On December 30, 2015, the Company was notified
that Daniel F. Kolb was appointed as the mediator.
Mediation
commenced on February 3, 2016. During these efforts, the Company had been offered settlement amounts, but none that have been
satisfactory.
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2017
AND 2016
(UNAUDITED)
Lawsuit
Filed Against Cowan Gunteski & Co. PA (Continued)
On
March 22, 2016, the Company decided that its good faith efforts to settle its ongoing litigation with Cowan Gunteski & Co.
P.A. have proven unsuccessful. Therefore, the Board of Directors of the Company unanimously agreed to proceed forward with the
litigation. The Company is continuing to seek the assistance of independent experts, to help ascribe dollar amounts for certain
damages suffered by the Company (“provable damages”). At this point in time, the Company has realized out of pocket
cash losses and liabilities (inclusive of liquidated damages) that exceed $850,000. Additional potential damages include but are
not limited to: inability to properly maintain Pilus Energy’s Intellectual Property (“Pilus IP”), the July 31,
2015 delisting of the Company shares from OTCQB to Pink Sheets, loss of market capitalization (“market cap”), loss
of trading liquidity (“trading volume”), and loss of substantial business opportunities. In aggregate, the
Company intends to seek monetary award(s), during trial, in excess of $4,000,000. That figure is expected to continually increase
as additional time lapses.
On
September 29, 2016, the judge presiding over the case approved the ruled on the two outstanding motions filed on June 13, 2016.
The motion to transfer the case to United States District Court for the District of New Jersey was approved, however the judge
denied the defendants’ motion to dismiss the lawsuit. Depositions have commenced in this case.
On
May 23, 2017, the Company represented in person by Paul K. Silverberg and Seth M. Shaw at the Trenton Courthouse (New Jersey Federal
District Court) sought a trial date and a ruling concerning the Company’s request for assignment of a Jury. On that date,
Judge Sheridan assigned the case a trial date of November 6, 2017, however, has not yet rendered a final ruling with respect to
assignment of a jury to this trial. The case has been focused most recently on completion of the discovery phase and the Company
has been taking numerous depositions and has furnished upon request, the documents requested by plaintiff’s counsel.
On
June 28, 2017, the judge in the case ruled that the Company’s initial disclosures with respect to its computation of damages
claimed are adequate. Pursuant to this ruling the Company produced a sworn statement from an authorized corporate representative
confirming that in response to Defendants’ discovery requests it has conducted a diligent and thorough search and produced
all of the responsive documents that are within its possession, custody or control.
On
July 23, 2017, a judge approved the motion for a jury trial scheduled to begin on November 14, 2017
The
Company has previously disclosed that it is seeking in excess of $4,000,000 in monetary damages at trial. While the specific details
are strictly confidential, the Company has recently held a new round of settlement talks with plaintiff and malpractice insurance
provider. These discussions may continue up till the trial date. The Company cannot predict whether or not the case will settle
prior to trial.
Lawsuit
with Crystal Research Associates
On
December 9, 2015, Crystal Research Associates served the Company with a Lawsuit (filed in Supreme Court of the State of New York
- County of New York) (Index No. 161962/2015), alleging that the Company owed to Crystal Research a total of $48,000. This money
that Crystal Research alleged was owed is related to a March 13, 2014 “Public Relations Services” contract entered
into by the Company’s previous CEO, Dr. Stella M. Sung.
On July
14, 2017 the Company agreed to settle under agreed upon terms whereby the Company agrees to pay to the plaintiff the sum of $31,450
in cash plus 11,000,000 shares of common stock (6 month Restricted Shares) of the Company. Cash payments will be paid as follows:
$8,000 due immediately upon signing of this agreement; thereafter, due on or before August 15, 2017 and on or before the 15th
of each successive month, for the 7 months, the sum of $3,350 per month. It is agreed that no interest shall accrue provided all
payments are made timely. Defendant(s) agrees that upon default of any terms hereof and upon five (5) days written notice to the
defendant’s attorney, judgment may be entered by the clerk of this court, for the relief amount sought in the complaint
of $48,000, minus any payments made pursuant to this stipulation, plus interest from September 13, 2014, attorney’s
fees, costs and disbursements. The shares were issued in July 2017 and the payments are
current.
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
NOTE
13 – FAIR VALUE MEASUREMENTS
The
following summarizes the company’s financial assets and liabilities that are measured at fair value on a recurring basis
at June 30, 2017 and March 31, 2017:
|
|
June
30, 2017 (Unaudited)
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment-available-for-sale
security
|
|
$
|
1,875
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,875
|
|
|
|
March
31, 2017
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment-available-for-sale
security
|
|
$
|
625
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
625
|
|
With
the issuance of the July 2017 FASB ASU 2017-11,
“Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity
(Topic 480) Derivatives and Hedging (Topic 815),”
which addresses the complexity of accounting for certain financial
instruments with down round features, the Company has chosen the early adopt retroactively the amendments in Part I of the standard
whereby fair value derivative liabilities previously recognized were derecognized in the current and comparative periods. Under
the amendments included in this update, the Company is no longer required to record changes in fair value during the period of
change as a separate component of other income/expense in the Condensed Consolidated Statements of Operations.
NOTE
14 – SUBSEQUENT EVENTS
Common
Stock Issuances
Subsequent
to June 30, 2017, the Company issued additional shares of common stock as follows: (i) 130,000,000 shares in connection with the
Company’s stock purchase agreements; (ii) 24,000,000 shares in connection with settlement agreements; (iii) 24,750,000 shares
to consultants; (iv) 20,000,000 shares to the Chief Financial Officer; (v) 45,000,000 shares for commitment shares relative to
convertible note issued; and (vi) 73,005,535 shares to convert convertible note principal and interest.
Convertible
Notes
On
July 19, 2017, the Company paid an individual note holder to retire a note having a principal balance of $1,000 and accrued interest
of $340.
Legal
Matters
Lawsuit
with Crystal Research Associates
On July
14, 2017 the Company agreed to settle under agreed upon terms whereby the Company agrees to pay to the plaintiff the sum of $31,450
in cash plus 11,000,000 shares of common stock (6 month Restricted Shares) of the Company. Cash payments will be paid as follows:
$8,000 due immediately upon signing of this agreement; thereafter, due on or before August 15, 2017 and on or before the 15th
of each successive month, for the 7 months, the sum of $3,350 per month. It is agreed that no interest shall accrue provided all
payments are made timely. Defendant(s) agrees that upon default of any terms hereof and upon five (5) days written notice to the
defendant’s attorney, judgment may be entered by the clerk of this court, for the relief amount sought in the complaint
of $48,000, minus any payments made pursuant to this stipulation, plus interest from September 13, 2014, attorney’s
fees, costs and disbursements. The shares were issued in July 2017 and the payments are
current.
Lawsuit
Filed Against Cowan Gunteski & Co. PA
On
July 23, 2017, a judge approved the motion for a jury trial scheduled to begin on November 14, 2017.