NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS
The
unaudited condensed consolidated financial statements included herein have been prepared, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission (“SEC”). The condensed consolidated 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 condensed consolidated financial statements be read in conjunction with the March 31,
2018 Form 10-K filed with the SEC, including the audited consolidated financial statements and the accompanying notes thereto.
While management believes the procedures followed in preparing these condensed consolidated 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 condensed consolidated 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
Tauriga
Sciences, Inc. (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.
During
the quarter ended December 31, 2017, the Company launched a lip balm product (branded as
HerMan®
)
during December 2017. The Company is hopeful that this product can provide the Company with sustainable revenue at margins that
will justify the initial expense and effort. The Company believes that the initial high cost per unit of this lip balm product
was largely attributable to formulation issues that have since been addressed and resolved, packing issues, fulfillment issues
and shipping costs. The packing issues are still in process of being resolved. Upon successful resolution of these issues, the
Company anticipates ramping up marketing and sales efforts. The Company believes that future inventory costs, if there is sufficient
demand will be substantially lower than the first batch on a per unit basis. The Company is exercising caution and performing
due diligence to ensure that any potential opportunities in this area are appropriately evaluated.
2018
Reverse Stock Split
On
March 12, 2018, the Company held a meeting of its board of directors. The matters voted on and approved at the meeting included
an amendment to the Company’s Articles of Incorporation to decrease the number of authorized shares of the Company’s
common stock, $0.00001 par value per share from 7,500,000,000 to 100,000,000 shares and to affect a reverse stock split of the
Company’s Common Stock at a ratio of 1-for-75 (the “Reverse Stock Split”).
On
June 8, 2018, the Company filed an Articles of Amendment to its Articles of Incorporation (the “Amendment”) with the
Secretary of State of the State of Florida, for the aforementioned decrease in the number of authorized shares and to affect a
1-for-75 reverse stock split of the Company’s common stock. The Reverse Stock Split became effective at 12:01 a.m. on July
9, 2018.
As
a result of the Reverse Stock Split, each seventy-five (75) shares of the Company’s issued and outstanding common stock
has been automatically combined and converted into one (1) issued and outstanding share of common stock. The Reverse Stock Split
has affected all issued and outstanding shares of common stock, as well as common stock underlying stock options, warrants and
other convertible securities outstanding immediately prior to the effectiveness of the Reverse Stock Split. The Reverse Stock
Split has reduced the number of outstanding shares of the common stock outstanding prior to the Reverse Stock Split from 4,078,179,672
shares to 54,380,230 shares following the Reverse Stock Split.
No
fractional shares will be issued as a result of the Reverse Stock Split, and any such stockholders whose number of post-split
shares would result in a fractional number will have his/her/its shares rounded up to the next number of shares.
Pursuant
to SAB Topic 14C of the Securities Exchange Act of 1934, as amended, the holders of common stock, par value $0.00001 per share,
were notified via Current Report Form 8K (filed on July 9, 2018) that on March 12, 2018, the Company received a unanimous written
consent in lieu of a meeting of the holders of the common stock that the common stock of the Company 1 for 75 reverse split was
effective.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
Nature
of Business (Continued)
Reverse
Stock Split (Continued)
All
references set forth in this quarterly report to number of shares or per share data have been presented retroactively on
a post reverse stock-split basis
,
including
any stock options, restricted stock, notes, convertible or exercisable securities and warrants, have been retroactively adjusted
in these condensed consolidated financial statements for all periods presented to reflect the 1-for-75 Reverse Stock Split.
Cupuaçu
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 cupuaçu butter lip balm, sold under the trademark
HerMan®
and the two companies will evenly share on a 50/50 basis any profits generated through the Company’s marketing, sales
and distribution efforts. The Company had agreed to pay the production, marketing and start-up costs for all product it sells
to retail customers or distributors. As part of the License Agreement, the Company issued 66,667 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 ($0.38 per share). The cost
of the shares will be prorated over the life of the license.
On
November 27, 2017, the Company announced a 2-year extension to the existing non-exclusive License Agreement, extending the life
of the License Agreement through December 23, 2019, at which time, if mutually agreed upon. the companies reserve the option to
extend for an additional 2 years (if exercised at that time, this License Agreement would be extended through December 23, 2021).
The two companies reserve the right to request amendment of the License Agreement at any point during the effective term of the
agreement.
As
noted above, during the quarter ended December 31, 2017, the Company launched this lip balm product (branded as HERMAN®).
During
February of 2018, the Company’s strategy with respect to the
HerMan®
product
was negatively impacted by a series of product defects relating to the twisting mechanism of the lip balm tube. The Company immediately
made the decision to work with the manufacturer to permanently address and fix this defect issue (which the Company believes has
affected approximately 30% of the initial product batch. This issue significantly increases the risk associated with this business
opportunity and there can be no guarantee that this will be satisfactorily solved.
The
Company had no sales of the
HerMan®
product during the three months ended June
30, 2018 and 2017. The Company has removed the product from the website and is working with the manufacturer to resolve product
quality issues. As a result of the quality control issues regarding the packaging, the Company has written off the remaining inventory
of $16,897 as of March 31, 2018 as they complete the re-design of the packaging of this product as they have determined that the
units are not usable. The Company is still in the process of trying to resolve the packaging issue and cannot determine the
impact that it will have on future revenue.
Honeywood
On
March 10, 2014, the Company entered into a definitive agreement to acquire California-based Honeywood LLC (“Honeywood”),
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 the Company advanced to Honeywood $217,000 to be applied towards
the final closing requisite cash total and incurred $178,000 in legal fees as of March 31, 2014 in connection with the acquisition.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
Nature
of Business (Continued)
Honeywood
(Continued)
On
September 24, 2014 (the “Unwinding Date”), the Company, Honeywood and each of Honeywood’s 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 bore interest at 6% per annum
and was 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 was 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. Honeywood never made any payments under the Note prior to
the Honeywood Conversion Agreement (as defined below). As a result, the Company had fully reserved this amount and it was not
reflected as a receivable on its financial statements.
Effective
August 1, 2017, the Company entered into a Debt Conversion Agreement, whereby the Company agreed to convert the entire principal
and accrued but unpaid interest due into a 5% membership interest in Honeywood (the “Honeywood Conversion Agreement”).
The
Company made an assessment for impairment of its investment in Honeywood at the entity level. During the relationship between
the Company and Honeywood, Honeywood had a working capital deficiency and had a history of operating losses. In accordance with
Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”)
320-10-35-28, “
Investments—Debt
and Equity Securities
”, a Company may not record an impairment loss on the investment but shall continue to evaluate
whether the investment is impaired (that is, shall estimate the fair value of the investment) in each subsequent reporting period
until either of the following occurs: a) the investment experiences a recovery of fair value up to (or beyond) its cost; or b)
the entity recognizes an other-than-temporary impairment loss.
At the time of the Honeywood Conversion Agreement, the receivable
balance under the Note of $199,119 had been fully written off by the Company in a prior period. As a result of the Honeywood Conversion
Agreement, the Company deemed the investment to still have no current value. The Company recorded this investment at $0. Thus,
no recovery of bad debt and no impairment will be recognized in this period.
Pilus
Energy
On
November 25, 2013, the Company executed a definitive merger 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
create electricity while consuming polluting molecules from wastewater. On January 28, 2014, the Company completed its acquisition
of Pilus. As a condition of the acquisition, the shareholders of Pilus received a warrant to purchase 1,333,334 shares of common
stock of the Company, which represented a fair market value of approximately $2,000,000, and, based upon whether the Warrants
issued to Pilus represented at least 5% the then outstanding and fully diluted capitalization of the Company, Pilus had been granted
an option to appoint a member to the Company’s board of directors. No board member had been appointed by Pilus to the Company’s
board. In addition, the Company paid Open Therapeutics, LLC (f/k/a Bacterial Robotics, LLC and Microbial Robots, LLC) (“Open
Therapeutics”), formerly the parent company of Pilus, $50,000 on signing the merger agreement and $50,000 at the time of
closing. Pilus’ principal asset on its balance sheet at the time of the acquisition was its US patent relating to its clean
water technology. The Company determined that the value of the acquisition on January 28, 2014 would be equal to the value of
cash paid to Pilus plus the value of the 1,333,334 warrants the Company issued to acquire Pilus. Through March 31, 2014, the Company
amortized the patent over its estimated useful life, then on March 31, 2014, the Company conducted its annual impairment test
and determined that the entire unamortized balance should be impaired as the necessary funding to further develop the patent was
not available at that time.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
Nature
of Business (Continued)
Pilus
Energy
On
December 22, 2016, the Company entered in a membership interest transfer agreement with Open Therapeutics whereby the Company
sold 80% of its membership interest in Pilus back to Open Therapeutics. Open Therapeutics agreed to terminate and cancel 80% of
the unexercised portion of the warrant to purchase 385,569 shares (or 308,455 warrants) of the Company’s common stock. Open
Therapeutics agreed to pay to the Company 20% of the net profit generated Pilus Energy from its previous year’s earnings,
if any. The first $75,000 of such payments would be retained by Pilus Energy as additional consideration for the sale, which is
reflected as a contingent liability on the Company’s condensed 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, 2018, there has been no activity recorded by Open Therapeutics
with respect to Pilus Energy, and thus the $75,000 remains contingently owed to them. No activity is expected to occur prior to
the Company’s third fiscal quarter, and possibly later.
Tauriga
Biz Dev Corp
On
January 4, 2018, the Company announced that its Board of Directors unanimously approved the formation a wholly-owned subsidiary
focused on acquiring interest(s) in patents and other intellectual property. This subsidiary, incorporated in Delaware, was named
Tauriga IP Acquisition Corp. On March 25, 2018, the Company changed the name to Tauriga Biz Dev Corp.
On
March 29, 2018 the Company, through Tauriga Biz Dev Corp., entered into an independent sales representative agreement with Blink
Charging Company (NASDAQ: BLNK) (“BLINK”). Under this agreement the Company will be a non-exclusive independent sales
representative. The Company will act on behalf of BLINK to solicit orders from potential customers for EV (“Electric Vehicle”)
Stations placement. Tauriga Biz Dev Corp will be compensated upon contracting and as long as the Company’s acquired prospect
remains under contract. This arrangement has the potential to earn both short term as well as long term recurring revenue by helping
BLINK expand its national electric vehicle charging infrastructure and network. This sales agreement is a three-tier model based
on whether Tauriga Biz Dev Corp. contracts the new customer to purchase equipment outright from BLINK or enter into one
of two revenue-sharing agreements. In the case Tauriga Biz Dev Corp. effectuates a sale of BLINK equipment it will receive
a one-time sales commission based on the sales price of the equipment sale. In the case where Tauriga Biz Dev Corp. secures
a revenue sharing agreement with a customer where BLINK remains the owner, Tauriga Biz Dev Corp. will be paid an on-going
commission based off of gross charger revenue, subject to which party paid for the installation. Commission payments under the
revenue sharing agreement are subject to minimum revenue generation hurdles.
On
June 29, 2018, the Company purchased four BLINK Level 2 - 40” pedestal chargers for permanent placement in a retail location
or locations whereby the Company will pay a variable annual fee based on 7% of total revenue per charging unit. The rest of the
proceeds will be split 80/20 between the Company and the host location owner or its assignee. The host location owner to will
pay for the cost of providing power to these unit as well as installation costs. The Company has not yet secured the location
for installation of these units.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going
Concern
In
the year ended March 31, 2018, the Company had two substantial events occur. The Company launched its joint venture product as
noted above. This resulted in operations that the Company recognized its initial sales orders from. Operations from this joint
venture are currently on hold while the Company works out quality control issues regarding the packaging of the individual units.
As a result, the entire inventory balance has been written off. Additionally, the Company settled the case entitled Tauriga Sciences,
Inc. v. Cowan, Gunteski & Co., P.A., et al. that was ongoing for over one year. Due to the settlement of the lawsuit, the
Company was able to record $2,050,000 in other income in the year ended March 31, 2018. With the collection of proceeds from the
lawsuit, the Company was able to settle long outstanding payables and pay convertible notes payable, as well as invest in trading
securities to leverage its operating business. As a result of these two events Company has been able to rely much less on third-party
borrowing while we continued to develop their business. The Company invested a portion of its available cash in trading securities.
As a result of some of these investments in trading securities, the Company was able to recognize a net profit in the amount of
$166,788 for the three months ended June 30, 2018 compared to a net loss of $624,472 for the same period in the prior
year. Also, as a result of this activity the Company had a working capital surplus of $625,281 at June 30, 2018 compared to $367,760
at March 31, 2018. The Company believes that there is uncertainty with respect to continuing as a going concern until the operating
business can achieve more than nominal sales and profitable operations and sustain cash flow to operate the Company for a period
of twelve months. Management’s plans with respect to this include raising capital through equity markets to fund future
operations and cultivating new license agreements or acquiring ownership in technology or other operating companies or formulating
relationships such as the one with BLINK. The Company, after the reverse stock split became effective, has up-listed as OTCQB:TAUGD
effective July 30, 2018 to have easier access to capital through larger investors. In connection with our recent 1:75 reverse
stock split, the Company’s stock symbol was designated the letter “D” at the end of our stock symbol (TAUG),
as is customary to alert shareholders that a stock split has occurred. This letter “D” designation is for a 20-day
trading period that will end on August 5, 2018, at which time the Company’s stock symbol will revert to TAUG. The Company
intends to continue funding its operations either through cash-on-hand or through financing alternatives. In the event the Company
does need to raise additional capital to fund operations or engage in a transaction, 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. These matters raise substantial doubt about the Company’s ability to continue as a going concern as determined
by management. 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.
Condensed
Consolidated Financial Statements
The
condensed consolidated financial statements include the accounts and activities of Tauriga Sciences, Inc., its wholly-owned Canadian
subsidiary, Tauriga Canada, Inc., its controlling interest in a joint venture with Ice + Jam LLC and its wholly-owned subsidiary
Tauriga Biz Dev Corp. All intercompany transactions have been eliminated in consolidation.
Non-controlling
Interests
On
December 23, 2016, the Company entered into a non-exclusive, one-year license agreement (subsequently extended by an additional
two-years) with Ice + Jam LLC. Under terms of the License Agreement, the Company will market Ice + Jam’s proprietary cupuaçu
butter lip balm, sold under the trademark
HerMan®.
To effectuate this arrangement,
the Company and Ice + Jam formed a new company. Through this new company the two parties will evenly share on a 50/50 basis any
profits generated through the Company’s marketing, sales and distribution efforts. All revenue and expense from these efforts
are fully consolidated in the Company’s condensed consolidated financial statements and then the minority interest is designated
as noncontrolling interest to derive at net loss attributable to common shareholders. The non-controlling interest at June 30,
2018 and March 31, 2018 is $2,196 and $2,196, respectively. There was neither a net loss or gain attributable to noncontrolling
interest for the three months ended June 30, 2018 and 2017.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue
Recognition
In
May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This standard provides a single
set of guidelines for revenue recognition to be used across all industries and requires additional disclosures. The updated guidance
introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or
services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. The Company adopted the updated guidance effective October 1, 2017 as the Company commenced sales of
HerMan®
using the full retrospective method. The new standard did not have a
material impact on its financial position and results of operations, as it did not change the manner or timing of recognizing
revenue.
Under
ASC 606, in order to recognize revenue, the Company is required to identify an approved contract with commitments to preform respective
obligations, identify rights of each party in the transaction regarding goods to be transferred, identify the payment terms for
the goods transferred, verify that the contract has commercial substance and verify that collection of substantially all consideration
is probable. The adoption of ASC 606 did not have an impact on the Company’s operations or cash flows.
On
March 29, 2018 the Company, through Tauriga Biz Dev Corp., entered into an independent sales representative agreement with BLINK.
Under this agreement the Company will be a non-exclusive independent sales representative. The Company will act on behalf of BLINK
to solicit orders from potential customers for EV Stations placement. Tauriga Biz Dev Corp will be compensated upon contracting
and as long as the Company’s acquired prospect remains under contract. This arrangement has the potential to earn both short
term as well as long term recurring revenue by helping BLINK expand its national electric vehicle charging infrastructure and
network. This sales agreement is a three-tier model based on whether Tauriga Biz Dev Corp. contracts the new customer to
purchase equipment outright from BLINK or enter into one of two revenue-sharing agreements. In the case Tauriga Biz Dev Corp.
effectuates a sale of BLINK equipment it will receive a one-time sales commission based on the sales price of the equipment sale.
In the case where Tauriga Biz Dev Corp. secures a revenue sharing agreement with a customer where BLINK remains the owner,
Tauriga Biz Dev Corp. will be paid an on-going commission based off of gross charger revenue, subject to which party paid
for the installation. Commission payments under the revenue sharing agreement are subject to minimum revenue generation hurdles.
Commissions
earned under this contract with Tauriga Biz Dev Corp will be recorded as revenue when earned. Based on a binding agreement in
place between BLINK and the referral provided by the Company, revenue will be recorded based on equipment value purchased or placed
in service as well as the length of the contract. The Company is currently working towards its goal of generating potential revenue
deriving from this Reseller Agreement with BLINK.
On
June 29, 2018, the Company purchased four BLINK Level 2 - 40” pedestal chargers for permanent placement in a retail location
or locations whereby the Company will pay a variable annual fee based on 7% of total revenue per charging unit. The rest of the
proceeds will be split 80/20 between the Company and the host location owner or its assignee. The host location owner to will
pay for the cost of providing power to these unit as well as installation costs. The Company has not yet secured the location
for installation of these units.
The
Company recognized no operating revenue during the three months ended June 30, 2018 and 2017.
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.
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, 2018, the Company’s cash on deposit with financial institutions did not exceed the total FDIC
insurance limit of $250,000. To reduce its risk associated with the failure of such financial institution, the Company holds
its cash deposits in more than one financial institution, and we evaluate at least annually the rating of the financial institution
in which the Company holds deposits. The Company had no cash equivalents as of June 30, 2018.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investment
in Trading Securities
Investment
in trading securities consist of investments in shares of common stock of companies traded on public markets, warrants exercisable
for publicly traded common stock as well as publicly traded warrants of these companies. These securities are carried
on the Company’s balance sheet at fair value based on the closing price of the shares owned on the last trading day before
the balance sheet date of this report. Fluctuations in the underlying bid price of the stocks result in unrealized gains or losses.
The Company recognizes these fluctuations in value as other operating income or loss.
For
investments sold, the Company recognizes the gains and losses attributable to these investments as realized gains or losses in
other operating income or loss.
Inventory
Inventory
consists of finished goods in salable condition and is stated at the lower of cost or market determined by the first-in, first-out
method. The inventory consists of packaged, labeled salable inventory. Shipping of product to finished good inventory fulfillment
center is also included in the total inventory cost. Shipping of product upon sale for online sales is paid by the customer upon
ordering. For wholesale product orders shipping cost is paid by the Company. As of March 31, 2018, as a result of the quality
control issues regarding the packaging, the Company has written off the remaining inventory of $16,897 as the manufacturer
completed the re-design of the packaging of this product as the Company has determined that the units then on hand
were not usable. No other inventory has been purchased for the period ending June 30, 2018.
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.
Net
Earnings (Loss) Per Common Share
The
Company computes per share amounts in accordance with FASB 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, basic and fully diluted earnings per share were the same as the Company had a loss in this period.
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, “E
quity-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 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.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-Based
Compensation (Continued)
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 accounts for comprehensive income (loss) under ASC 220, “Income Statement – Reporting Comprehensive Income,”
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.
Research
and Development
The
Company expenses research and development costs as incurred. Research and development costs were $0 and $2,000 for the three months
ended June 30, 2018 and 2017, respectively. The Company is continually evaluating products and technologies in the natural wellness
space, including its cupuaçu butter lip balm, as well as any intellectual property or other related technologies.
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 any new 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.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair
Value Measurements (Continued)
Fair
value estimates discussed herein are based upon certain market assumptions and pertinent information available to management for
the respective periods. 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, investments, short-term notes payable, accounts
payable and accrued expenses.
Derivative
Financial Instruments
Derivatives
are recorded on the 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 Sheets 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 and Comprehensive
Income (Loss).
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 SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Derivative
Financial Instruments (Continued)
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 I 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. 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 for the year ended June 30, 2017. This adoption of this accounting pronouncement had no effect on the three months ended
June 30, 2018 as there were no instruments that would have caused this presentation. The Company also recorded a corresponding
loss on extinguishment of debt in the amount of $271,280 for the three months ended June 30, 2017, with no effect on the three
months ended June 30, 2018. Along with this transaction, the Company recorded a deemed dividend to shareholders in the amount
of $271,280 for the three months ended June 30, 2017 and no deemed dividend for the three months ended June 30, 2018.
The
three instruments affected by this adoption were (i) the June 1, 2015, 7% Convertible Redeemable Note with a principal
amount of $104,000 with a maturity date of June 1, 2016 with Union Capital, LLC which contains an anti-ratchet clause; (ii)
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 (iii) 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 $7,000. The two Group 10 Holdings,
LLC notes contain a most favored nations clause, allowing the note holder to adopt any term of future convertible redeemable notes
which would be beneficial to them. All of the instruments described in this paragraph have been fully repaid or converted
as of October 10, 2017.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, 2018.
Recent
Accounting Pronouncements
In
June 2018, the FASB issued ASU No. 2018-07,
“Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee
Share-Based Payment Accounting”
which addresses accounting for issuance of all share-based payments on the same accounting
model. Previously, accounting for share-based payments to employees was covered by ASC Topic 718 while accounting for such payments
to non-employees was covered by ASC Subtopic 505-50. As it considered recently issued updates to ASC 718, the FASB, as part of
its simplification initiatives, decided to replace ASC Subtopic 505-50 with Topic 718 as the guidance for non-employee share based
awards. Under this new guidance, both sets of awards, for employees and non-employees, will essentially follow the same model,
with small variations related to determining the term assumption when valuing a non-employee award as well as a different expense
attribution model for non-employee awards as opposed to employee awards. The ASU is effective for public business entities beginning
in 2019 calendar years and one year later for non-public business entities. The Company is assessing the impact, if any, of implementing
this guidance on its financial position and results of operations.
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.
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.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent
Accounting Pronouncements (Continued)
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. The Company is currently in the process of assessing the impact the
adoption of this guidance will have on the Company’s condensed consolidated financial statements.
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.
NOTE
3– INVENTORY
As
a result of the quality control issues regarding the packaging, the Company has written off the remaining inventory of $16,897
as of March 31, 2018 as they complete the re-design of the packaging of this product as they have determined that the units are
not usable.
The
Company has removed the product from the website and is working with the manufacturer to resolve these issues. The Company as
a result of this, has no Inventory as of June 30, 2018 and March 31, 2018.
NOTE
4– PROPERTY AND EQUIPMENT
The
Company’s property and equipment is as follows:
|
|
June
30, 2018 (unaudited)
|
|
|
March
31, 2018
|
|
|
Estimated
Life
|
|
|
|
|
|
|
|
|
|
|
|
Computers,
office furniture and other equipment
|
|
$
|
69,137
|
|
|
$
|
59,051
|
|
|
|
3-5
years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
accumulated depreciation
|
|
|
(56,819
|
)
|
|
|
(56,560
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
12,318
|
|
|
|
2,491
|
|
|
|
|
|
On
June 29, 2018, the Company purchased four BLINK Level 2 - 40” pedestal chargers for permanent placement in one or more
retail locations whereby the Company will share revenue from these electric car vehicle charging units with
such location owner. No depreciation expense has been recorded for the charging units due to the fact they have not
been placed in service. Depreciation expenses for the three months ended June 30, 2018 and 2017 was $259 and $135,
respectively.
NOTE
5 – COMMITMENTS
On
December 23, 2016, the Company entered into a non-exclusive, one-year, license agreement (the “License Agreement”)
with Cleveland, Ohio based cosmetics products firm Ice + Jam. Under terms of the License Agreement, the Company will market Ice
+ Jam’s proprietary cupuaçu butter lip balm sold under the trademark
HerMan®
and the two companies will share on a 50/50 basis any profits earned through the Company’s marketing, sales and distribution
efforts.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
5 – COMMITMENTS (CONTINUED)
On
November 27, 2017, the Company announced a 2-year extension to the existing non-exclusive License Agreement, extending the life
of the License Agreement through December 23, 2019. Based on mutual agreement, at that time, the companies reserve the option
to extend for an additional two years (if exercised at that time, this License Agreement would be extended through December 23,
2021).
On
December 1, 2017, the Company relocated its corporate headquarters from Danbury, Connecticut to New York, New York. The Company
has entered into a two-year lease at $1,010 per month for the term of the lease. The Company recorded rent expense of $3,149 for
the three months ended June 30, 2018 compared to no expense for the same period in prior year.
Lease
obligation for Fiscal Year Ended March 31,
|
|
|
2019
|
|
|
|
9,090
|
|
|
2020
|
|
|
|
8,080
|
|
NOTE
6 – 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 whereby the Company
sold 80% of its membership interest in Pilus to Open Therapeutics. Open Therapeutics agreed to terminate and cancel 80% of the
unexercised portion of Open Therapeutics agreed to pay to the Company 20% of the net profit generated Pilus Energy from its previous
year’s earnings, if any. The first $75,000 of such payments would be retained by Pilus Energy as additional consideration
for the sale, which is reflected as a contingent liability on the Company’s condensed 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, 2018, there has been no activity recorded by Open
Therapeutics with respect to Pilus Energy, and thus the $75,000 remains contingently owed to them. No activity is expected to
occur prior to the Company’s third fiscal quarter.
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 achieving
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.
NOTE
7 – DERIVATIVE LIABILITIES EMBEDDED IN CONVERTIBLE NOTES
The
Company has 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
intents 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 condensed consolidated Balance Sheets 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 techniques; (7) Make the measurement; (8) Determine amounts to be recognized and information to be disclosed.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
7 – DERIVATIVE LIABILITIES EMBEDDED IN CONVERTIBLE NOTES (CONTINUED)
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 and Comprehensive
Income (Loss).
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 I 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 SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
7 – DERIVATIVE LIABILITIES EMBEDDED IN CONVERTIBLE NOTES (CONTINUED)
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. 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. The Company was not affected by the adoption of ASU 2017-11 for the three months ended June 30, 2018 as they had no
instruments that would be impacted by this pronouncement, compared to a gain on derivative liability in the amount of $271,280
for the three months ended June 30, 2017. The Company also recorded a corresponding loss on extinguishment of debt in the amount
of $271,280 for the three months ended June 30, 2017.
The
three instruments affected by this adoption were the June 1, 2015, 7% Convertible Redeemable Note with a principal amount of $104,000
with a maturity date of June 1, 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. All of these instruments
have been fully repaid or converted as of October 10, 2017.
NOTE
8 – NOTES PAYABLE AND CONVERTIBLE NOTES
Notes
payable and convertible notes consisted of the following as of:
|
|
|
|
|
June
30, 2018 (unaudited)
|
|
|
March
31, 2018
|
|
Alternative
Strategy Partners PTE Ltd.- Sep 2015
|
|
|
(a)
|
|
|
$
|
90,000
|
|
|
$
|
90,000
|
|
GS
Capital Partners LLC - Oct 2017
|
|
|
(b)
|
|
|
|
50,000
|
|
|
|
105,000
|
|
GS
Capital Partners LLC - March 2018
|
|
|
(c)
|
|
|
|
48,000
|
|
|
|
48,000
|
|
GS
Capital Partners LLC - Nov 2018
|
|
|
(d)
|
|
|
|
28,000
|
|
|
|
-
|
|
Note
to an Individual – Feb 2013
|
|
|
(e)
|
|
|
|
15,000
|
|
|
|
15,000
|
|
Total
notes payable and convertible notes
|
|
|
|
|
|
|
231,000
|
|
|
|
258,000
|
|
Less
- note discounts
|
|
|
|
|
|
|
(2,592
|
)
|
|
|
(3,153
|
)
|
Less
- current portion of these notes
|
|
|
|
|
|
|
(228,408
|
)
|
|
|
(254,847
|
)
|
Total
notes payable and convertible notes, net discounts
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
(a)
|
Three-month
$180,000 non-convertible debenture (“note”) dated September 23, 2015 bearing and interest rate of 11.50% per annum.
The note matured in December 2015. The Company received cash 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 the holder never provided any documentation evidencing that $90,000 was
paid to Eishin. The Company is in dispute with the noteholder, and the Company has not recorded this liability as of June
30, 2018 or March 31, 2018. If the proper documentation is provided to the Company, the Company 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 note.
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, 2018, this note had accrued interest of $23,468.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
8 – NOTES PAYABLE AND CONVERTIBLE NOTES (CONTINUED)
(b)
|
On
October 17, 2017, the Company entered into a stock purchase agreement with GS Capital Partners LLC, whereby the Company issued
two 8% convertible redeemable notes each in the principal amount of $105,000. The first 8% note was funded with gross cash
proceeds of $100,000, after the deduction of $5,000 in legal fees. The second 8% note (the “Back-End Note”) was
initially paid for by an offsetting promissory note issued by GS Capital Partners LLC, to the Company (the “Note Receivable”).
The terms of the Back-End Note require cash funding prior to any conversion thereunder. The Note Receivable is due June 17,
2018, unless certain conditions are not met, in which case both the Back-End Note and the Note Receivable may both be cancelled.
Both the First Note and the Back-End Note have a maturity date one year from the date of issuance upon which any outstanding
principal and interest is due and payable. The amounts cash funded plus accrued interest under both the First Note and the
Back-End Note are convertible into shares of the Company’s common stock at a price per share equal to 70% of the lowest
daily VWAP of the common stock as reported on the National Quotations Bureau OTC Markets market on which the Company’s
shares are traded or any exchange upon which the common stock may be traded in the future, for the 15 prior trading days including
the day upon which a notice of conversion is received by the Company or its transfer agent. 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. Upon an event of default, principal and accrued interest will become immediately due and payable under the notes.
Additionally, upon an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the
highest rate of interest permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
During the first 6 months that the First Note and the Back-End Note are outstanding, the Company may redeem either by paying
to GS Capital Partners LLC an amount as follows: (i) if the redemption is within the first 90 days either note is in effect,
then for an amount equal to 120% of the unpaid principal amount of either note along with any interest that has accrued during
that period, and (ii) if the redemption is after the 91st day the either note is in effect, but less than the 180th day, then
for an amount equal to 133% of the unpaid principal amount of either note along with any accrued interest. Neither note may
be redeemed after 180 days. Additionally, and pursuant to the Purchase Agreement, the Company issued to GS Capital Partners
LLC 306,667 shares of the Company’s common stock valued at $20,700 ($0.0675 per share). At June 30, 2018, the first
note had accrued interest of $2,805. On April 25, 2018, the noteholder, under their rights under the contract, canceled the
back-end note. On May 1, 2018, the noteholder converted $55,000 of principal and accrued interest of $2,339 in exchange for
1,985,754 of the Company’s shares ($0.028888 per share). On July 18, 2018, the Company paid $69,503 to fully retire
the remaining $50,000 principal balance of this note plus $3,503 of accrued interest and a prepayment penalty of $16,500.
At June 30, 2018, this note had accrued interest of $19,503.
|
|
|
(c)
|
On
March 9, 2018, GS Capital Partners, LLC funded the back-end note under the August 31, 2017 Securities Purchase Agreement with
GS Capital Partners, LLC whereby the Company issued two 8% convertible redeemable notes each in the principal amount of $48,000.
This Back-End Note was initially paid for by an offsetting promissory note issued by GS Capital Partners, LLC to the Company
(the “Note Receivable”). This note has a maturity date one year from the date of issuance upon which any outstanding
principal and interest is due and payable. The amounts cash funded plus accrued interest under the note are convertible into
shares of the Company’s common stock at a price for each share of common stock equal to 70% of the lowest daily VWAP
of the common stock as reported on the National Quotations Bureau OTC Markets market on which the Company’s shares are
traded or any exchange upon which the common stock may be traded in the future, for the 15 prior trading days including the
day upon which a notice of conversion is received by the Company or its transfer agent. 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. Upon an event of default, principal and accrued interest will become immediately due and payable under the notes.
Additionally, upon an event of default, notes will accrue interest at a default interest rate of 24% per annum or the highest
rate of interest permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
During the first six months this note is in effect, the Company may redeem by paying to GS Capital Partners, LLC an amount
as follows: (i) if the redemption is within the first 90 days either note is in effect, then for an amount equal to 120% of
the unpaid principal amount of either note along with any interest that has accrued during that period, and (ii) if the redemption
is after the 91st day the either note is in effect, but less than the 180th day, then for an amount equal to 133% of the unpaid
principal amount of either note along with any accrued interest. The note may be redeemed after 180 days. At June 30, 2018,
this note had accrued interest of $1,189.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
8 – NOTES PAYABLE AND CONVERTIBLE NOTES (CONTINUED)
(d)
|
On
May 10, 2018, the Company entered into a securities purchase agreement with GS Capital Partners, LLC. GS Capital Partners,
LLC whereby the Company issued two 8% convertible redeemable notes in the cumulative principal amount of $56,000. The first
8% note for $28,000 was funded with net proceeds of $25,000, after the deduction of $3,000 for OID. The second 8% note (the
“Back-End Note”) is initially paid for by an offsetting promissory note issued by GS Capital Partners, LLC to
the Company (the “Note Receivable”). The terms of the Back-End Note require cash funding prior to any conversion
thereunder. The Note Receivable is due January 10, 2019, unless certain conditions are not met, in which case both the Back-End
Note and the Note Receivable may both be cancelled. Both the First Note and the Back-End Note have a maturity date one year
from the date of issuance upon which any outstanding principal and interest is due and payable. The amounts cash funded plus
accrued interest under both the First Note and the Back-End Note are convertible into shares of the Company’s common
stock at a price for each share of common stock equal to 70% of the lowest daily VWAP of the common stock as reported on the
National Quotations Bureau OTC Markets market on which the Company’s shares are traded or any exchange upon which the
common stock may be traded in the future, for the 15 prior trading days including the day upon which a notice of conversion
is received by the Company or its transfer agent. 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. The Back-End Note
will not be cash funded and such note, along with the Note Receivable, will be immediately cancelled if the shares do not
maintain a minimum trading price during the five days prior to such funding and a certain aggregate dollar trading volume
during such period. Upon an event of default, principal and accrued interest will become immediately due and payable under
the notes. Additionally, upon an event of default, both notes will accrue interest at a default interest rate of 24% per annum
or the highest rate of interest permitted by law. Further, certain events of default may trigger penalty and liquidated damage
provisions. During the first six months First Note is in effect, the Company may redeem either note by paying to GS Capital
Partners, LLC an amount as follows: (i) if the redemption is within the first 90 days either note is in effect, then for an
amount equal to 120% of the unpaid principal amount of either note along with any interest that has accrued during that period,
and (ii) if the redemption is after the 91st day the either note is in effect, but less than the 180th day, then for an amount
equal to 133% of the unpaid principal amount of either note along with any accrued interest. The note may be redeemed after
180 days. The back-end note may not be repaid. The note holder may redeem this note at any time after the first six months.
As of June 30, 2018, this note had accrued interest of $558.
|
|
|
(e)
|
An
individual note was issued on February 22, 2013, in the amount of $15,000, bearing an interest rate of 8%. The note is convertible
into common stock of the Company at $1.875 per share. As of June 30, 2018, this note accrued interest of $6,723.
|
During
the three months ended June 30, 2018, the Company issued 1,985,754 shares of common stock to holders of convertible notes to retire
$55,000 in principal and $2,339 of accrued interest (at $0.02888 per share) under the convertible notes.
During
the year ended March 31, 2018, the Company issued 20,160,661 shares of common stock to holders of convertible notes to retire
$601,749 in principal and $85,055 of accrued interest (at $0.016875 to $0.09 per share) under the convertible notes. During the
year ended March 31, 2018, the Company paid cash of $347,681 to retire convertible note principal and cash of $145,550 to repay
interest and prepayment penalties.
Interest
expense for the three months ended June 30, 2018 and 2017 was $23,496 and $148,448. For the three months ended June 30, 2018 interest
expense consisted of interest on face value of convertible notes in the amount of $3,405, prepayment penalty on convertible notes
in the amount of $16,500 and amortized debt discount of $3,561. Accrued interest at June 30, 2018 and March 31, 2018 was $51,441
and $33,875, respectively.
NOTE
9 – 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 1,013,334 shares of Company common stock at $0.09375 per share. The Company used the proceeds
for general and administrative purposes. The shares were issued on August 1, 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 586,667 shares of Company common stock at $0.09375 per share. The Company used the proceeds
for general and administrative purposes. The shares were issued on August 1, 2017.
On
October 6, 2017, Seth Shaw, Chief Executive Officer made a personal investment into the Company of $137,500. This investment is
structured as an equity private placement of 1,466,667 shares of Company common stock at $0.09375 per share. The Company used
the proceeds for general and administrative purposes. The shares were issued December 19, 2017.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
9 – RELATED PARTIES (CONTINUED)
As
a result of the Company’s joint venture with Ice + Jam, a receivable and a payable was recorded on the Company’s books.
As of June 30, 2018, these amounts represented cash Ice + Jam collected from sales of
HerMan®
through their website in the amount of $581 and a payable in the amount of $5,522 for expenses incurred through the operation
of the business.
NOTE
10 – STOCKHOLDERS’ EQUITY
Common
Stock
As
of June 30, 2018, the Company is authorized to issue 100,000,000 shares of its common stock. As of June 30, 2018, there were 54,380,230
shares of common stock are outstanding which includes all adjustments for fractional shares.
Fiscal
Year 2018
During
the year ended March 31, 2018, the Company issued 20,160,661 shares of common stock to holders of convertible notes to retire
$601,749 in principal and $85,055 of accrued interest (at $0.016875 to $0.09 per share) under the convertible notes.
During
the year ended March 31, 2018, the Company issued 1,885,715 shares of common stock to a private investor for an aggregate value
of $177,500 (at $0.0975 per share).
During
the year ended March 31, 2018, the Company issued 1,600,000 shares of common stock to Seth Shaw, the Company’s Chief Executive
Officer, for an aggregate value of $150,000 ($0.09375 per share).
During
the year ended March 31, 2018, the Company issued 1,926,667 shares of common stock for services rendered and to be rendered 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, 2018, the Company issued 1,133,334 shares of common stock as commitment fees to noteholders at an aggregate
value of $86,600 ($0.075 per share).
During
the year ended March 31, 2018, the Company issued 1,553,334 shares of common stock for debt and legal settlements at an aggregate
value of $75,050 ($0.045 per share).
During
the year ended March 31, 2018, the Company issued 868,000 shares of common stock to former officers and directors for amounts
previously accrued at an aggregate value of $173,999 ($0.2025 per share).
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
and (b) 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 $43,221 and $209,317 in stock-based
compensation expense related to these agreements in the three months ended June 30, 2018 and 2017.
Fiscal
Year 2019
During
the three months ended June 30, 2018 the Company issued 130,000 shares of its restricted common stock to consultants under
consulting agreements.
During
the three months ended June 30, 2018 the Company issued 1,985,754 shares of restricted common stock to a note holder for
the conversion of debt and accrued interest having a value of $57,339 ($0.028875 per share).
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
10 – STOCKHOLDERS’ EQUITY (CONTINUED)
Warrants
for Common Stock
The
following table summarizes warrant activity for the three months ended June 30, 2018 and year ended March 31, 2018:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2017
|
|
|
1,220,227
|
|
|
$
|
1.50
|
|
|
|
3.16
Years
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
213,334
|
|
|
|
0.2775
|
|
|
|
4.99
Years
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
-
|
|
|
$
|
(1.50
|
)
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2018
|
|
|
1,433,593
|
|
|
$
|
1.50
|
|
|
|
2.47
Years
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
and exercisable at June 30, 2018
|
|
|
1,433,593
|
|
|
$
|
1.50
|
|
|
|
2.22
Years
|
|
|
$
|
-
|
|
The
warrants were valued utilizing the following assumptions employing the Black-Scholes Pricing Model:
|
|
Three
Months Ended
June 30, 2018 (unaudited)
|
|
|
Year
Ended
March 31, 2018
|
|
Volatility
|
|
|
108.6
|
%
|
|
|
108.6
|
%
|
Risk-free
rate
|
|
|
1.24
|
%
|
|
|
1.24
|
%
|
Dividend
|
|
|
-
|
|
|
|
-
|
|
Expected
life of warrants
|
|
|
5.00
|
|
|
|
5.00
|
|
On
December 22, 2016, the Company entered in a membership interest transfer agreement with Open Therapeutics whereby the Company
sold 80% of its membership interest in Pilus to Open Therapeutics. Open Therapeutics agreed to terminate and cancel 80% of the
unexercised portion of Open Therapeutics agreed to pay to the Company 20% of the net profit generated Pilus Energy from its previous
year’s earnings, if any. The first $75,000 of such payments would be retained by Pilus Energy as additional consideration
for the sale, which is reflected as a contingent liability on the Company’s condensed consolidated Balance Sheets. 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, 2018, there has been no activity recorded by Open
Therapeutics with respect to Pilus Energy, and thus the $75,000 remains contingently owed to them.
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 213,334 five-year cashless warrants with an exercise
price of $0.2775 per share. Based on the relative fair value of the warrants, the Company recorded a debt discount of $12,546
on the $80,000 note, which was amortized over a period of one-year.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
10 – STOCKHOLDERS’ EQUITY (CONTINUED)
Stock
Options
On
February 1, 2012, the Company awarded to each of two executives’, one current and one former, options to purchase
66,667 common shares, an aggregate of 133,334 shares. These options vested immediately and were for services performed.
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 ended June 30, 2018 and year ended March 31, 2018:
|
|
Shares
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2017
|
|
|
133,334
|
|
|
$
|
7.50
|
|
|
|
4.85
Years
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2018
|
|
|
133,334
|
|
|
$
|
7.50
|
|
|
|
3.85
Years
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
and exercisable at June 30, 2018
|
|
|
133,334
|
|
|
$
|
7.50
|
|
|
|
3.60
Years
|
|
|
$
|
—
|
|
NOTE
11 – 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, 2018 (unaudited)
|
|
|
March
31, 2018
|
|
Net
operating losses
|
|
|
8,477,000
|
|
|
|
8,514,000
|
|
Effect
of TCJA recalculation
|
|
|
(3,107,000
|
)
|
|
|
(3,107,000
|
)
|
Valuation
allowance
|
|
|
(5,370,000
|
)
|
|
|
(5,407,000
|
)
|
|
|
$
|
-
|
|
|
$
|
-
|
|
At
June 30, 2018, the Company had a U.S. net operating loss carryforward in the approximate amount of $11 million available to offset
future taxable income through 2038. 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. The valuation allowance decreased by $37,000 in the three months ended June 30, 2018
and decreased by $140,000 in the year ended March 31, 2018.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
11 – PROVISION FOR INCOME TAXES (CONTINUED)
On
December 22, 2017, Public Law 115-97, informally referred to as the Tax Cuts and Jobs Act (“the TCJA”) was enacted
into law. The TCJA provides for significant changes to the U.S. Internal Revenue Code of 1986, as amended, that impact corporate
taxation requirements. Effective January 1, 2018, the federal tax rate for corporations was reduced from 35% to 21% for US taxable
income and requires one-time re-measurement of deferred taxes to reflect their value at a lower tax rate of 21%. Also, mandatory
repatriation of untaxed foreign earnings and profits will be taxed at 15.5% to the extent the underlying assets are liquid and
8% on the remaining balance. There are other provisions to the TCJA, such as conversion of a worldwide system to a territorial
system, limitations on interest expense and domestic production deductions, which will be effective in fiscal 2019. The Company
anticipates its effective tax rate to be 28% to 30%, excluding the one-time impact of the TCJA for fiscal 2018 primarily due to
the reduction in the federal tax rate. The Company’s actual effective tax rate for fiscal 2018 may differ from management’s
estimate due to changes in interpretations and assumptions. Due to the timing of enactment and complexity of the TCJA, the Company
is unable to estimate a reasonable range of the one-time impact associated with mandatory repatriation, re-measurement of deferred
taxes and other provisions of the TCJA.
NOTE
12 – INVESTMENTS
Trading
securities
For
investments in securities of other companies that are owned, the Company records them at fair value with unrealized gains and
losses reflected in other operating income or loss. For investments in these securities that are sold by us, the Company recognizes
the gains and losses attributable to these securities investments as realized gains or losses in other operating income or loss
on a first in first out basis.
Investment
in Trading Securities:
At
March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
|
|
Beginning
of Period Cost
|
|
|
Purchases
|
|
|
Sales
Proceeds
|
|
|
End
of Period Cost
|
|
|
Fair
Value
|
|
|
Realized
Gain (Loss)
|
|
|
Unrealized
Gain (Loss)
|
|
Green
Innovations Ltd (GNIN)*
|
|
|
(a)
|
|
|
$
|
250,000
|
|
|
$
|
-
|
|
|
$
|
6,815
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
(243,185
|
)
|
|
$
|
-
|
|
VistaGen
Therapeutics Inc (VTGN)
|
|
|
(b)
|
|
|
|
-
|
|
|
|
490,117
|
|
|
|
-
|
|
|
|
490,117
|
|
|
|
306,207
|
|
|
|
-
|
|
|
|
(183,910
|
)
|
Blink
Charging Co (BLNK)
|
|
|
(c)
|
|
|
|
-
|
|
|
|
190,350
|
|
|
|
-
|
|
|
|
190,350
|
|
|
|
123,750
|
|
|
|
-
|
|
|
|
(66,600
|
)
|
Blink
Charging Co (BLNKW) (Warrants)
|
|
|
(c)
|
|
|
|
-
|
|
|
|
900
|
|
|
|
-
|
|
|
|
900
|
|
|
|
31,545
|
|
|
|
-
|
|
|
|
30,645
|
|
Aytu
BioScience Inc (AYTU)
|
|
|
(d)
|
|
|
|
-
|
|
|
|
82,270
|
|
|
|
-
|
|
|
|
82,270
|
|
|
|
119,947
|
|
|
|
-
|
|
|
|
37,677
|
|
Lightbridge
Corp. (LTBR)
|
|
|
(e)
|
|
|
|
-
|
|
|
|
37,511
|
|
|
|
-
|
|
|
|
37,511
|
|
|
|
29,250
|
|
|
|
-
|
|
|
|
(8,261
|
)
|
Totals
|
|
|
|
|
|
$
|
250,000
|
|
|
$
|
801,148
|
|
|
$
|
6,815
|
|
|
$
|
801,148
|
|
|
$
|
610,699
|
|
|
$
|
(243,185
|
)
|
|
$
|
(190,449
|
)
|
*
During the quarter ended December 31, 2017, this security was reclassified from Available for Sale to Trading Security
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
12 – INVESTMENTS (CONTINUED)
Trading
securities (Continued)
Investment
in Trading Securities:
At
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
|
|
Beginning
of
Period Cost
|
|
|
Purchases
|
|
|
Sales
Proceeds
|
|
|
End
of Period Cost
|
|
|
Fair
Value
|
|
|
Realized
Gain (Loss)
|
|
|
Unrealized
Gain (Loss)
|
|
Green
Innovations Ltd (GNIN)
|
|
|
(a)
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
VistaGen
Therapeutics Inc (VTGN)
|
|
|
(b)
|
|
|
|
490,117
|
|
|
|
62,135
|
|
|
|
(93,885
|
)
|
|
|
443,545
|
|
|
|
434,290
|
|
|
|
(14,686
|
)
|
|
|
174,655
|
|
Blink
Charging Co (BLNK)
|
|
|
(c)
|
|
|
|
190,350
|
|
|
|
151,666
|
|
|
|
(367,142
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
25,126
|
|
|
|
66,600
|
|
Blink
Charging Co (BLNKW) (Warrants)
|
|
|
(c)
|
|
|
|
900
|
|
|
|
162,215
|
|
|
|
(468,496
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
305,381
|
|
|
|
(30,645
|
)
|
Aytu
BioScience Inc (AYTU)
|
|
|
(d)
|
|
|
|
82,270
|
|
|
|
100,030
|
|
|
|
(26,752
|
)
|
|
|
160,565
|
|
|
|
104,960
|
|
|
|
5,017
|
|
|
|
(93,282
|
)
|
Lightbridge
Corp. (LTBR)
|
|
|
(e)
|
|
|
|
37,511
|
|
|
|
162,207
|
|
|
|
(98,141
|
)
|
|
|
120,759
|
|
|
|
112,595
|
|
|
|
19,182
|
|
|
|
97
|
|
Pulmatrix
Inc. (PULM)
|
|
|
(f)
|
|
|
|
-
|
|
|
|
196,980
|
|
|
|
-
|
|
|
|
196,980
|
|
|
|
168,750
|
|
|
|
-
|
|
|
|
(28,230
|
)
|
Axovant
Sciences Ltd. (AXON)
|
|
|
(g)
|
|
|
|
-
|
|
|
|
90,125
|
|
|
|
-
|
|
|
|
90,125
|
|
|
|
79,100
|
|
|
|
-
|
|
|
|
(11,025
|
)
|
Totals
|
|
|
|
|
|
$
|
801,148
|
|
|
$
|
925,358
|
|
|
$
|
(1,054,415
|
)
|
|
$
|
1,011,974
|
|
|
$
|
899,695
|
|
|
$
|
340,021
|
|
|
$
|
78,170
|
|
(a)
|
During
the year ended March 31, 2018, the Company’s investment in Green Innovations, Ltd. was sold for net proceeds of $6,815
and was previously carried as an investment included within Current Assets. The Company’s investment in Green Innovations,
Ltd. had a cost of $250,000. A loss of $243,185 was recognized on the sale of this security in the year ended March 31, 2018.
For the three months ended June 30, 2017, there was a comprehensive gain recorded of $1,250.
|
|
|
(b)
|
On
December 11, 2017 the Company invested $480,000 in the common stock of VistaGen Therapeutics, Inc. (“VTGN”). The
Company purchased 320,000 common shares along with 320,000 five-year warrants with a strike price of $1.50. On March 26, 2018,
the Company purchased an additional 10,000 common shares. The investment in the common shares is recorded at fair valve with
unrealized gains and losses, reflected in other operating income. The Company’s investment in VTGN has a cost of $490,117,
unrealized loss of $183,910 and a fair value of $306,207 at March 31, 2018. During the three months ended June 30, 2018, the
Company purchased 59,380 shares of VTGN for $61,254 (average price per share of $1.03 per share). The Company sold 72,380
shares of VTGN for $99,161 ($1.37 per share) for a realized loss of $14,686. The unrealized loss for the three months ended
June 30, 2018 was $9,255.
|
|
|
(c)
|
The
Company participated in an $18,500,250 underwritten public offering by BLINK, which closed on February 14, 2018. The Company
invested $191,250 of its balance sheet cash and purchased 45,000 registered shares, as well as warrants exercisable immediately
for a period of five (5) years from the date of issuance for up to 90,000 additional shares of common stock of BLINK. The
Warrants carry an exercise price of $4.25 per share, and also trade on the NASDAQ under the ticker symbol: BLNKW. The Company
is in possession of the registered securities as of the closing date. The Company’s investment in BLINK common stock
and warrants had a cost of $191,150, unrealized loss of $35,955 and a fair value of $155,295 at March 31, 2018. During
the three months ended June 30, 2018 the Company purchased 41,018 shares of BLINK at a cost of $149,975 (average price per
share of $3.66). The Company sold its total holding of 86,018 shares of BLINK for $371,986 (average price per share of $4.32)
realizing a gain of $25,126. During the three months ended June 30, 2018, the Company also purchased 208,800 warrants of BLNKW
(average price per warrant of $0.77) and sold its entire position of 298,800 for $476,695 (average price per warrant of $1.60)
realizing a gain of $305,381.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
12 – INVESTMENTS (CONTINUED)
Trading
securities (Continued)
(d)
|
On
March 2 and March 8, 2018, the Company purchased 188,300 common shares of AYTU Bioscience (ATYU). The investment in
the common shares is recorded at fair valve with unrealized gains and losses, reflected in other operating income. The Company’s
investment in ATYU had a cost of $82,270, unrealized loss of $37,677 and a fair value of $119,947 at March 31, 2018. During
the three months ended June 30, 2018, the Company purchased 260,000 shares of AYTU for a $98,830 (average price per share
$0.38). During the three months ended June 30, 2018, the Company sold 48,300 shares of AYTU for $26,752 ($0.55 per share).
During the three months ended June 30, 2018, the Company had an unrealized loss of $55,605 on this holding.
|
|
|
(e)
|
On
March 12, 2018, the Company purchased 25,000 common shares of Lightbridge Corp (LTBR). The investment in the common shares
is recorded at fair valve with unrealized gains and losses, reflected in other operating income. The Company’s investment
in LTBR had a cost of $37,511, unrealized loss of $8,261 and a fair value of $29,250 at March 31, 2018. During the three months
ended June 30, 2018, the Company purchased 150,000 shares of LTBR for $160,441 (average of $1.07 per share.) During the three
months ended June 30, 2018, the Company sold 62,405 shares of LTBR for $98,869 (average price per share of $1.58) realizing
a gain of $19,182. During the three months ended June 30, 2018, the Company had an unrealized loss of $8,164 on this holding.
|
|
|
(f)
|
During
the three months ended June 30, 2018, the Company purchased 375,000 shares of Pulmatix
Inc. (PULM) for $194,812 (average per share price of $0.52. During the three months ended
June 30, 2018, the Company had an unrealized loss of $28,230 on this holding.
|
|
|
(g)
|
During
the three months ended June 30, 2018, the Company purchased 35,000 shares of Axovant Sciences Ltd. (AXON) for $89,113 (average
share price of $2.55). During the three months ended June 30, 2018, the Company had an unrealized loss of $11,025 on this
holding.
|
At
June 30, 2018, the Company held warrants for AYTU Bioscience to purchase 111,100 common shares at a strike price of $0.54 with
an expiration of March 6, 2023. At June 30, 2018 these warrants were out of the money by $0.278 per share. Since these shares
are not publicly traded and therefore are not highly liquid the Company has chosen not to recognize the unrealized gain in this
security.
At
June 30, 2018, the Company held warrants for VistaGen Therapeutics, Inc. to purchase 320,000 shares of common stock
at a strike price of $1.50 per share, with an expiration of December 13, 2022. At June 30, 2018 these warrants were
out of the money by $0.13 per share. Since these warrants are not publicly traded and, therefore, are not
highly liquid the Company has chosen not to recognize the unrealized gain or loss in this security.
Digital
Currency
During
the year ended March 31, 2018, the Company completed cumulative purchases in the Groestlcoin cryptocurrency in the aggregate amount
of $35,000 for 27,919.133 units ($0.79 per unit). (Crypto Currency Code: GRS). The purchase of this currency cannot be executed
directly using $USD. The Company must purchase Bitcoin (BTC) and then purchase the Groestlcoin cryptocurrency by using BTC. This
two-step process generated actual losses or gains on the purchase of Groestlcoin. For the year ended March 31, 2018 the Company
realized a loss of $2,859 on exchange from BTC reflected as other operation income. The investment in Groestlecoin has a cost
of $31,481 net of fees, unrealized loss of $9,425 and a fair value of $22,056.
During
the three months ended June 30, 2018, the Company completed a purchase in the Groestlcoin cryptocurrency in the aggregate amount
of $8,000 for 11,922.81 units ($0.65.69 per unit). For the three months ended June 30, 2018 the Company realized a loss of $37
on exchange from BTC reflected as other operation income. The investment in Groestlecoin has a cost of $39,862 net of fees, unrealized
loss of $5,572 and a fair value of $24,316.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
12 – INVESTMENTS (CONTINUED)
Equity
investments
Honeywood
Effective
August 1, 2017, the Company entered into a Debt Conversion Agreement in respect to a secured promissory note issued following
the unwinding of the Honeywood acquisition (See NOTE 1), whereby the Company agreed to convert the entire principal and accrued
but unpaid interest due under the note into a 5% membership interest in Honeywood.
The
Company made an assessment for impairment of its investment in Honeywood at the entity level. During the relationship between
the Company and Honeywood, Honeywood had a working capital deficiency and had a history of operating losses. In accordance with
FASB ASC 320-10-35-28, “
Investments—Debt and Equity Securities,
” a Company may not record an impairment
loss on the investment but shall continue to evaluate whether the investment is impaired (that is, shall estimate the fair value
of the investment) in each subsequent reporting period until either of the following occurs: (a) the investment experiences a
recovery of fair value up to (or beyond) its cost; or (b) the entity recognizes an other-than-temporary impairment loss.
At
the time of the Debt Conversion Agreement the receivable balance of $199,119 had been fully written off by the Company in a prior
period. As a result of this Debt Conversion Agreement, the Company deemed the investment to still have no current value. The Company
recorded this investment at $0. Thus, no recovery of bad debt and no impairment will be recognized in this period.
NOTE
13 –LITIGATION
On
November 9, 2017, the Company entered into a Confidential Settlement Agreement and Release (the “Settlement Agreement”)
in connection with the case entitled Tauriga Sciences, Inc. v. Cowan, Gunteski & Co., P.A., et al.) before the United States
District Court of the District of New Jersey, Civil Action No. 3:16-cv-06285 (the “Action”) to resolve all claims
between the parties in the Action for aggregate consideration to the Company of $2,050,000. Also, as part of the Settlement Agreement,
the defendants agreed to release any and all claims against the Company. Upon receipt of the Settlement Payment, the Company dismissed
the Action with prejudice. The settlement amount was funded in its entirety by professional liability insurance for the defendants.
The Company and the defendants also exchanged general releases of all claims against the other as part of the Settlement Agreement,
including any potential derivative actions, and to avoid any future public comments on the Action, unless required by law.
NOTE
14 – 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, 2018 and March 31, 2018:
|
|
June
30, 2018 (unaudited)
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment-trading
securities
|
|
$
|
899,695
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
899,695
|
|
Investment
in digital currency
|
|
$
|
24,316
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
24,316
|
|
|
|
March
31, 2018
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment-trading
securities
|
|
$
|
610,699
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
610,699
|
|
Investment
in digital currency
|
|
$
|
22,056
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
22,056
|
|
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 and Comprehensive
Income (Loss).
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED)
(US$)
NOTE
15 – SUBSEQUENT EVENTS
Common
Stock
On
July 11, 2018, the Company purchased 400,000 restricted shares of Paymeon Inc. (“PAYM”) for $30,000 ($0.075 per share).
In conjunction with the investment, the Company agreed to a 12-month resale restriction. PAYM is publicly traded as OTC Pink:PAYM
.
These shares will not
be held in trust by a broker with the other trading securities that the Company owns.
Effective
July 19, 2018 the Company effectuated a 1 for 75 reverse stock split of its common stock as previously approved on April 24, 2018
by the Board of Directors. All stock figure herein are reflected on a post-reverse-split basis.
On
July 30, 2018, the Company’s stock began trading on the OTCQB:TAUGD In connection with our recent 1:75 reverse stock
split, the Company’s stock symbol was designated the letter “D” at the end of our stock symbol (TAUG), as is
customary to alert shareholders that a stock split has occurred and a new CUSIP number has been assigned to that public company’s
traded securities. This letter “D” designation is for a 20-day trading period that will end on August 5, 2018, at
which time the Company’s stock symbol will revert to TAUG.
Convertible
Notes
On
July 18, 2018, the Company paid $69,503 to GS Capital to fully retire the October 17, 2018 convertible note having and original
face value of $105,000. This payment retired the remaining $50,000 of principal, $3,503 of accrued interest and a prepayment penalty
of $16,500.