NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
1 – BASIS OF OPERATIONS AND GOING CONCERN
NATURE
OF BUSINESS
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, 2021 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
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.
Tauriga
Sciences, Inc. (the “Company”) is a Florida corporation, with its principal place of business located at 4 Nancy Court, Suite
4, Wappingers Falls, NY 12590. The Company has, over time, moved into a diversified life sciences technology and consumer products company,
with its mission to operate a revenue generating business, while continuing to evaluate potential acquisition candidates operating in
the life sciences technology and consumer products spaces.
Tauriga
Pharma Corp.
On
January 4, 2018, the Company announced the formation of a wholly owned subsidiary in Delaware, now known as Tauriga Pharma Corp. This
subsidiary’s focus is on the development of a pharmaceutical product line that is synergistic with the Company’s primary
CBD product line. Currently, the plan is to initially create a pharmaceutical line of products to address nausea symptoms related to
chemotherapy treatment in patients, which we will submit for clinical trials and to regulatory agencies for approval.
On
March 18, 2020, the Company filed a Provisional U.S. Patent Application covering its pharmaceutical grade version of Tauri-Gum™.
This patent application, filed with the United States Patent & Trademark Office (“U.S.P.T.O.”), titled: “MEDICATED
CBD COMPOSITIONS, METHODS OF MANUFACTURING, AND METHODS OF TREATMENT.” The Company’s proposed pharmaceutical grade version
of Tauri-Gum™ is being developed for nausea regulation, intended specifically to target patients subjected to ongoing chemotherapy
treatment(s) (the “Indication”). The delivery system for this pharmaceutical product is an improved version of the existing
“Tauri-Gum™” chewing gum formulation based on continued research and development. The Company converted this provisional
patent application into a U.S. Non-Provisional Patent Application March 17, 2021.
On
March 17, 2021, the Company converted its U.S. Provisional Patent Application (filed on March 17, 2020) to a U.S. Non-Provisional Patent
Application. This non-provisional patent application relates to the Company’s proposed pharmaceutical cannabinoid chewing gum delivery
system for treatment of nausea derived from active chemotherapy treatment.
Also
on March 17, 2021, the Company filed an additional U.S. Provisional Patent Application relating to alternative pharmaceutical cannabinoid
delivery systems.
On
March 17, 2021, the Company filed an International Patent Application under the Patent Cooperation Treaty (“PCT”), a cooperative
agreement entered into by more than 130 countries with the purpose of bringing international conformity to the filing and preliminary
evaluation of patent applications. This application relates to the Company’s proposed pharmaceutical cannabinoid chewing gum delivery
system being developed to treat nausea derived from active chemotherapy treatment.
The
PCT application is published by the International Bureau at the World Intellectual Property Organization (“WIPO”), based
in Geneva, Switzerland, in one of the ten “languages of publication”: Arabic, Chinese, English, French, German, Japanese,
Korean, Portuguese, Russian, and Spanish.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
1 – BASIS OF OPERATIONS AND GOING CONCERN (CONTINUED)
NATURE
OF BUSINESS (CONTINUED)
Tauriga
Pharma Corp. (Continued)
Currently,
the pharmaceutical grade version of Tauri-GumTM is in the pre-IND stage of development. The development team is working on
several parallel workstreams, including:
● |
formulation
development; |
|
|
● |
non-clinical
in vivo and in vitro studies to inform the effective clinical dose and safety margin; |
|
|
● |
regulatory
strategy and regulatory documentation preparation; |
|
|
● |
confirmation
of the active pharmaceutical ingredient (API); and |
|
|
● |
Identifying
pharma-grade API suppliers. |
Chief
Medical Officer
On
July 15, 2020, the Company appointed Dr. Keith Aqua (“Dr. Aqua”) as an independent contractor to the position of Chief Medical
Officer (“CMO”) and entered into a consulting agreement with Dr. Aqua carrying a term of 12 months from inception, expiring
on July 15, 2021. In his CMO capacity, Dr. Aqua assisted the Company in the development of the Company’s proposed pharmaceutical
grade version of Tauri-Gum™. In addition, Dr. Aqua helped to establish a distribution network for the Company to market its Tauri-Gum™
brand to a variety of physicians and medical practices in southern Florida. In consideration of the services provided by Dr. Aqua, and
pursuant to the terms of the Agreement, the Company issued Dr. Aqua (i) upon entry into the Agreement 750,000 shares of restricted common
stock, (ii) 750,000 shares of restricted common stock which were issued in equal monthly instalments of 62,500 shares beginning August
15, 2020 thru the expiration date, and (iii) agreed to $4,000 cash per quarter during the term of the Agreement, payable following the
completion of each such quarter. As of December 31, 2021, the Company issued 1,500,000 restricted shares of its common stock to Dr. Aqua
valued at $59,250 ($0.0395 per share). As of this report date, the Company is negotiating the renewal of this agreement.
NFTauriga
Corp.
Effective
April 14, 2021, the Company formed NFTauriga Corp. in the State of Delaware, as a wholly owned subsidiary. The Company is the sole holder
of total authorized 100 shares having a par value of $0.00001. The Company’s Chief Executive Officer, Seth M. Shaw is the initial
sole member of the board of directors, to serve until a qualified successor is duly elected. Mr. Shaw will also serve as the Chief Executive
Officer and Secretary. The registered office of NFTauriga Corp. in the State of Delaware shall be at 1013 Centre Road, Suite 403-B, Wilmington,
DE 19805 in the County of New Castle. The name of its registered agent at such address is Vcorp Services, LLC. NFTauriga Corp. will have
the same fiscal year and principal executive office and the Company.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
1 – BASIS OF OPERATIONS AND GOING CONCERN (CONTINUED)
Master
Services Agreement
On
December 16, 2020, the Company entered into a Master Services Agreement with North Carolina based Clinical Strategies & Tactics,
Inc. (“CSTI”) to resume the clinical development of its proposed anti-nausea pharmaceutical grade version of Tauri-Gum™.
CSTI will primarily focus its efforts on (i) Pharmaceutical Development Strategy, (ii) Commercialization Strategy, and (iii) Funding
Strategy. The Company will with work with CSTI’s founder and chief executive officer, JoAnn C. Giannone. Ms. Giannone has over
25 years’ experience effectively leading companies through the drug and medical device development process. On December 23, 2020,
the Company funded the initial consulting fees associated with this Agreement, in the amount of $67,500, exclusive of out-of-pocket reimbursable
expenses. The Company has paid additional fees, effected through change orders to the original contract, in the amount of $85,000. These
additional fees were for pharmaceutical testing and market research. Under the terms of the Agreement and related statement of work,
CTSI will provide a high-level assessment and documentation of the development efforts required to commercialize the proposed pharmaceutical
product globally, a commercial assessment, and a review of potential funding strategies and funding sources and potential business partners.
The delivery system for this proposed pharmaceutical version is a modified version (with higher concentration of CBD) of the existing
Tauri-Gum™” chewing gum formulation based on continued research and development. As of December 31, 2021, all contract payments
were fully expensed.
COMPANY
PRODUCTS
Tauri-GumTM
In
late December 2018, the Company entered into a “Manufacturing Agreement” with Maryland based chewing gum manufacturer, Per
Os Biosciences LLC (“Per Os Bio”) to launch a white label line of CBD infused chewing gum under the brand name Tauri-GumTM.
The
Manufacturing Agreement with Per Os Bio to produce Tauri-GumTM initially consisted of 10mg of CBD isolate for its inaugural
mint flavor. This proprietary CBD Gum will be manufactured under U.S. Patent # 9,744,128 (“Method for manufacturing medicated chewing
gum without cooling”). Each production batch is tested by a 3rd Party for CBD label content, THC content (0%), and clear for microbiology.
The retail packaging consists of an 8-piece blister card labeled with lot number and expiration date.
In
October 2019, we also filed trademark applications for the above-referenced marks in each of the European Union and Canada. The Company
received notice of allowance from the European Union Intellectual Property Office granting the Company its trademark registration for
Tauri-Gum™ (E.U. Trademark # 018138334) on February 18, 2020.
During
fiscal year 2020, the Company commenced development of a cannabigerol “CBG” isolate infused version of Tauri-Gum™ introducing
Peach-Lemon flavor (containing 10mg CBG per piece) and Black Currant Flavor (containing 15mg of CBG per piece).
During
fiscal year 2021, the Company developed an Immune Booster version of Tauri-Gum™ chewing gum. This product contains 60mg of Vitamin
C and 10mg of Elemental Zinc per piece. This product does not contain any phytocannabinoids (i.e., CBD or CBG).
During
late fiscal year 2021, the Company enhanced its original Tauri-Gum™ formulation by increasing the infusion concentrations of both
its Cannabidiol (“CBD”) and Cannabigerol (“CBG”) Tauri-Gum™ products to 25mg per piece of chewing gum (previous
concentration was 10mg for the Pomegranate, Blood Orange, Mint, and Peach-Lemon flavors and 15mg for the Black Currant flavor). Additionally,
the Company increased its Tauri-Gum™ product offerings to 9 SKUs. The new offerings being introduced are Cherry-Lime Rickey flavored
Caffeine infused chewing gum, an 8-piece blister pack of containing 50mg of caffeine per piece and Golden Raspberry flavored Vitamin
D3 infused chewing gum, containing 2,000 IU (50 micrograms) of Vitamin D3 per piece. Through its October 2020 partnership with Think
Big LLC (the Company founded by the son of late iconic U.S. rap artist, NOTORIOUS BIG aka “Frank White”), the Company is
also offering 2 limited edition Licensed Tauri-Gum™/Frank White products: Honey-Lemon flavored chewing gum (containing: 15mg CBD,
15mg CBG, 5mg Vitamin C, 10mg Zinc per piece) and Mint flavor (25mg CBD per piece).
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
1 – BASIS OF OPERATIONS AND GOING CONCERN (CONTINUED)
COMPANY
PRODUCTS (CONTINUED)
Delta
8 Version of Tauri-Gum™
During
March 2021, the Company developed a Delta-8-Tetrahydrocannabinol (“Delta-8-THC” or “Delta-8”) infused version
of Tauri-Gum™. The Company is focused on expanding both its product offerings and revenue opportunities, in a manner that is ethical,
innovative, and fully compliant with Federal laws & regulations. Due to strong indications of demand, the Company has completed a
double production run of its Evergreen Mint flavor, Delta 8 THC infused (10mg per piece of chewing gum), Version of Tauri-Gum™.
All
of the CBD/CBG Tauri-GumTM products are made in the USA, formulations are allergen free, gluten free, vegan, kosher
certified (K-Star), Halal certified (Etimad), non-GMO, vegan incorporated by a proprietary lab-tested manufacturing process.
Tauri-Gummies™
On
November 25, 2019, the Company announced that it has finalized the formulation for its Vegan 25 mg CBD (Isolate) Infused Gummies product
to be branded Tauri-Gummies™ for which a trademark was filed in Switzerland and the European Union. The company has received a
Notice of Allowance from the European Union Intellectual Property Office (“E.U.I.P.O.”) granting the Company its trademark
Registration for: Tauri-Gummies™ (E.U. Trademark # 018138348), effective June 24, 2020. This Notice of Allowance extends our protective
period for this mark until October 2029 and may be extended thereafter for ten-year intervals.
This
gelatin free, plant-based, Vegan and Kosher certified formulation contains 24 gummies per jar, 6 of each flavor (cherry, orange, lemon
and lime). Each gummy contains 25mg of CBD isolate (600 mg of CBD isolate per jar). These gum drops have been manufactured in the “Nostalgic”
1950s confectionary style. The Company commenced sales of Tauri-Gummies™ in January 2020.
Other
Products
The
Company, from time to time, will offer various formats of CBD product through its e-commerce website. As of this report date the Company
is currently offering a 70% dark chocolate 30mg CBD non-GMO dietary supplement and 100mg CBD scented bath bombs (Mint, Pomegranate, Blood
Orange, Black Currant). The Company also offers 100mg CDG infused Peach/Lemon bath bombs as well as a D3 infused Golden Raspberry and
Cherry Lime Rickey caffeine infused bath bombs. The Company’s current offering includes a line of skin care products sold on its
ecommerce website under the product line name of Uncle Bud’s. The skin care products include three different 4.2mg CBD facemasks
(collagen, detoxifying and tightening masks), 100mg CBD daily moisturizer, 30mg CBD anti-wrinkle dream, hand and foot cream with hemp
seed oil, 120mg CBD massage and body oil, 240mg CBD body revive roll-on, 35mg CBD transdermal patch and 120mg CBD body spray. The Company
also offers Tauri-Pet dog food in three flavors (peanut butter, butternut squash and crispy apple.
On
July 12, 2021, the Company announced two new topical products; CBD infused Sunscreen Spray and Acai Fragrance Moisturizing Lip Balm.
These two products will be manufactured, under Tauri-Sun™ brand name. Tauri-Sun™ Sunscreen Spray has a 30 SPF (sun protection
factor) and is infused 200mg of CBD isolate per 3-ounce container. The easy to use “Spray On” delivery system is hypoallergenic
and environmentally responsible (Reef Friendly). The Tauri-Sun™ Acai Fragrance Moisturizing Lip Balm has a 30 Sun Protection Factor
(“SPF”) is dermatologist tested and CBD infused.
On
January 3, 2022, we filed Trademark applications in the United States and the European Union for marks for each of TAURI-PET and TAURI-SUN.
A notice of Allowance was granted by the European Union Intellectual Property Office for the use of TAURI-SUN on January 25, 2022, registration
Serial No. 018567792.
We
await a further Notice of Allowance or comment upon TAURI-PET and TAURI-SUN from each of the United States Patent and Trademark Office
and the European Union Intellectual Property Office (other than the granted EU registration for TAURI-SUN noted above).
For
a full list of our currently available products please visit our e-Commerce website at https://taurigum.com/.
See
our “Risk Factors” contained in our Annual Report dated March 31, 2021 filed with the Securities and Exchange Commission
on June 29, 2021, as amended August 16, 2021, including with respect, but not limited, to Federal laws and regulations that govern CBD
and cannabis, which Risk Factors are updated by our periodic reports.
DISTRIBUTION
OF THE COMPANY’S PRODUCTS
Think
BIG, LLC License Agreement
On
September 24, 2020, we entered into (i) a License Agreement (“License”) with Think BIG, LLC, a Los Angeles based company
(“Think BIG”), (ii) a Professional Services Agreement (the “PSA”) with Willie C. Mack, Jr., CEO of Think BIG
and (iii) a Professional Services Agreement (“PSA 2”) with Christopher J. Wallace, a co-founder of Think BIG (each of Willie
C. Mack, Jr. and Christopher J. Wallace referred to herein as a “Brand Ambassador”), with the collective intent to enhance
sales and marketing of the Company’s product lines, including its proprietary Rainbow Deluxe Sampler Pack (“Rainbow Pack”),
and any co-branded products created by the parties to the License and each of the PSAs (the “Co-Branded Products”).
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
1 – BASIS OF OPERATIONS AND GOING CONCERN (CONTINUED)
DISTRIBUTION
OF THE COMPANY’S PRODUCTS (CONTINUED)
Think
BIG, LLC License Agreement (Continued)
The
term of this license is for a period of two years from September 24, 2020 (the “Effective Date”), unless earlier terminated
by either party pursuant to the terms thereunder. The term of each of the PSA and the PSA 2 shall commence on the Effective Date and
end on the earlier of (i) the two-year anniversary thereof; (ii) the termination for any reason of the License; or (iii) the earlier
termination of the PSA Agreement pursuant to the terms thereunder.
The
licensing arrangement permits for cross licensing, brand building, e-commerce customer acquisition efforts, retail customer acquisition
efforts, enhanced social media presence, public relations & visibility strategies, as well as potential outreach to celebrities,
and various other types of in-kind services in order to increase both Company revenue and customer acquisition efforts. The License will
also allow for future joint development projects that will leverage the iconic “Frank White” brand and likeness/intellectual
property (to which Think Big has the intellectual property rights). The Companies further agreed to a 50/50 gross profit split on sales
of specially branded product, payable on or before the 15th day of each calendar month for the immediately preceding calendar month.
In addition, the Company originally agreed to pay Think BIG, via a quarterly marketing fee for a period of twelve months in the amount
$15,000 per quarter (for an aggregate total of $60,000), the first payment of which was paid by the Company within 10 days of the entry
into the License. Subsequently, the parties agreed that the remaining payments would no longer be paid to Think BIG in exchange for the
Company funding specially branded inventory printing and product as well as other marketing initiatives.
Under
each of the PSA and the PSA 2, each Brand Ambassador shall provide promotional and marketing services (“Services”) to the
Company during the term of the respective PSAs, subject to the terms and conditions set forth therein, in connection with the Co-Branded
Products and any co-developed products; and perform their individual marketing and promotional services set forth under the PSA and the
PSA 2, respectively, and each of the exhibits annexed thereto.
As
consideration for each Brand Ambassador’s Services set forth under their respective PSAs, the Company agreed to issue each Brand
Ambassador 1,500,000
restricted
shares of the Company’s common stock, upon execution of the PSA and PSA 2. These shares were issued on December 17,2020. Under
the PSA’s, the Company had initially agreed, following the one-year anniversary of the Effective Date, an additional 1,500,000
restricted
shares of Company’s common stock could be issued to each Brand Ambassador, subject to the satisfaction of the terms of such additional
services and/or criteria to be mutually agreed upon by the parties to the PSA and/or the PSA 2. The Company has determined that these
additional shares will not be paid. The value of all shares issued and to be issued had a value of $183,600
that
will be recognized over the term of the contract. This agreement is still in effect as the Company is still selling this co-branded
product. Through December 31, 2021, the Company has recognized approximately $1,122 of sales of co-branded product.
Stock
Up Express Agreement
Effective
February 1, 2021, the Company entered into a distribution agreement with Connecticut based Stock Up Express, a division of Bozzuto’s
Inc., a distributor that generates more than $3 Billion in annual sales. The agreement shall remain in effect for a period of two (2)
years, with automatic renewal for additional successive one (1) year terms. Under terms of this distribution agreement, Stock Up Express
will market and resell the Company’s flagship brand, Tauri-Gum™, to its customer base of wholesale and retail
customers in the mainland United States. The two companies will jointly market Tauri-Gum™ to Stock Up Express’ customer base.
The Agreement allows for modification of product offerings, and the Company expects to offer additional product items over the course
of calendar year 2021. Either party may terminate this Agreement for convenience by giving a sixty (60) day written notice to the other
party or either party has the right to terminate this agreement if the other party breaches or is in default of any obligation hereunder,
including the failure to make any payment when due, which default is incapable of cure or which, being capable of cure, has not been
cured within thirty (30) days after receipt of written notice from the non-defaulting party or within such additional cure period as
the non-defaulting party may authorize in writing. As of December 31, 2021, the Company has recognized no sales under this agreement.
The Company has entered into multiple other arrangements
that are more fully described and annexed thereto in our annual report, and such other subsequent periodic and current reports that we
have filed with the Securities and Exchange Commission, which agreements are filed to such reports and incorporated by reference hereto
and thereto.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
REGULATORY
MATTERS
Food
and Drug Administration (“FDA”)
On
May 31, 2019, the U. S. Food and Drug Administration (“FDA”) held public hearings to obtain scientific data and information
about the safety, manufacturing, product quality, marketing, labeling, and sale of products containing cannabis or cannabis-derived compounds,
including CBD. The hearing came approximately five months after the Agricultural Improvement Act of 2018 (more commonly known as the
Farm Bill), went into effect and removed industrial hemp from the Schedule I prohibition under the Controlled Substances Act (CSA) (industrial
hemp means cannabis plants and derivatives that contain no more than 0.3 percent tetrahydrocannabinol, or THC, on a dry weight basis).
Though
the Farm Bill removed industrial hemp from the Schedule I list, the Farm Bill preserved the regulatory authority of the FDA over cannabis
and cannabis-derived compounds used in food and pharmaceutical products under the Federal Food, Drug, and Cosmetic Act (FD&C Act)
and section 351 of the Public Health Service Act. The FDA has been clear that it intends to use this authority to regulate cannabis and
cannabis-derived products, including CBD, in the same manner as any other food or drug ingredient. In addition to holding the hearing,
the agency had requested comments by July 2, 2019 regarding any health and safety risks of CBD use, and how products containing CBD are
currently produced and marketed, which comment period was concluded on July 16, 2019. As of the date hereof, the FDA has taken the position
that it is unlawful to put into interstate commerce food products containing hemp derived CBD, or to market CBD as, or in, a dietary
supplement. Furthermore, since the closure of the FDA hearings on this issue, some state and local agencies have issued a ban on the
sale of any food or beverages containing CBD. There have been legislative efforts at the federal level, which seek to provide clear guidance
to industry stakeholders regarding how to comply with applicable FDA law with respect to CBD and other hemp derived cannabinoids. However,
such legislative efforts have been limited and as of this date, these legislative efforts require extensive further approvals, including
approval from both houses of Congress and the President of the United States, before being enacted into law, if at all.
FDA
Clinical Trial Process – United States Drug Development
Furthermore,
with respect to Company’s developing CBG and additional cannabinoid product lines, the FDA has provided no guidance as to how cannabinoids
other than CBD (such as CBG) shall be regulated under the FD&C Act, and it is unclear at this time how such potential regulation
could affect the results of the operations or prospects of the Company or this product line.
In
the United States, the FDA regulates drugs, medical devices and combinations of drugs and devices, or combination products, under the
FDCA and its implementing regulations. Drugs are also subject to other federal, state and local statutes and regulations. The process
of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations
requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any
time during the product development process, approval process or after approval, may subject an applicant to administrative or judicial
sanctions. These sanctions could include, among other actions, the FDA’s refusal to approve pending applications, withdrawal of
an approval, a clinical hold, untitled or warning letters, requests for voluntary product recalls or withdrawals from the market, product
seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts, restitution,
disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.
The
process required by the FDA before a drug may be marketed in the United States generally involves the following:
●
completion of extensive pre-clinical in vitro and animal studies to evaluate safety and pharmacodynamic effects, formulation development,
analytical method development, and manufacturing of the active pharmaceutical ingredient (API) and drug product for clinical trials in
accordance with applicable regulations, including the FDA’s Current Good Laboratory Practice (cGLP) regulations and Current Good
Manufacturing Practice (cGMP) regulations;
●
submission to the FDA of an Investigational New Drug (IND) application, which must become effective before human clinical trials may
begin;
●
performance of adequate and well-controlled human clinical trials in accordance with an applicable IND and other clinical study related
regulations, sometimes referred to as Current Good Clinical Practice (cGCPs), to establish the safety and efficacy of the proposed drug
for its proposed indication, and API and drug product scale-up for registration batch production and stability;
●
submission to the FDA of a New Drug Application (NDA);
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
1 – BASIS OF OPERATIONS AND GOING CONCERN (CONTINUED)
REGULATORY
MATTERS (CONTINUED)
FDA
Clinical Trial Process – United States Drug Development (Continued)
●
satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the product, or components
thereof, are produced to assess compliance with the FDA’s cGMP requirements;
●
potential FDA audit of the clinical trial sites that generated the data in support of the NDA; and
●
FDA review and approval of the NDA prior to any commercial marketing or sale.
Once
a pharmaceutical product candidate is identified for development, it enters the pre-clinical testing stage. Pre-clinical tests include
laboratory evaluations of product characterization, drug product formulation development and stability, as well as pharmacology and toxicology
animal studies. An IND Sponsor must submit the results of the pre-clinical tests, together with manufacturing information, analytical
data and any available clinical data or literature, to the FDA as part of the IND. The sponsor must also include a protocol detailing,
among other things, the objectives of the initial clinical trial, the parameters to be used in monitoring safety and the effectiveness
criteria to be evaluated if the initial clinical trial lends itself to an efficacy evaluation. Some pre-clinical testing may continue
even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns
or questions related to a proposed clinical trial and places the trial on a clinical hold within that 30-day period. In such a case,
the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Clinical holds also may be imposed
by the FDA at any time before or during clinical trials due to safety concerns or non-compliance and may be imposed on all drug products
within a certain class of drugs. The FDA also can impose partial clinical holds, for example, prohibiting the initiation of clinical
trials of a certain duration or for a certain dose.
All
clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. These
regulations include the requirement that all research subjects provide informed consent in writing before their participation in any
clinical trial. Further, an IRB must review and approve the plan for any clinical trial before it commences at any institution, and the
IRB must conduct continuing review and reapprove the study at least annually. An IRB considers, among other things, whether the risks
to individuals participating in the clinical trial are minimized and are reasonable in relation to anticipated benefits. The IRB also
approves the information regarding the clinical trial and the consent form that must be provided to each clinical trial subject or his
or her legal Representative and must monitor the clinical trial until completed.
Each
new clinical protocol and any amendments to the protocol must be submitted for FDA review, and to the IRBs for approval. Protocols detail,
among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters
to be used to monitor subject safety.
Human
clinical trials are typically conducted in three sequential phases that may overlap or be combined. The phases are described below. For
the TAUG Pharma product, however, the safety profile of the API is known, and a Phase 1 program is not expected. Therefore, it is anticipated
that that the first-time-in-human (FTIH) study will be a Phase 2 study.
●
Phase 1. The product is initially introduced into a small number of healthy human subjects or patients and tested for safety, dosage
tolerance, absorption, metabolism, distribution and excretion and, if possible, to gain early evidence on effectiveness. In the case
of some products for severe or life-threatening diseases, especially when the product is suspected or known to be unavoidably toxic,
the initial human testing may be conducted in patients.
●
Phase 2. Involves clinical trials in a limited patient population to identify possible adverse effects and safety risks, to preliminarily
evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage and schedule.
●
Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at
geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit relationship
of the product and provide an adequate basis for product labeling.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
1 – BASIS OF OPERATIONS AND GOING CONCERN (CONTINUED)
REGULATORY
MATTERS (CONTINUED)
Post-approval
trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These studies are used to
gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate
the performance of Phase 4 trials. Companies that conduct certain clinical trials also are required to register them and post the results
of completed clinical trials on a government-sponsored database, such as ClinicalTrials.gov in the United States, within certain timeframes.
Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.
Progress
reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA, and written
IND safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events, findings from other
studies that suggest a significant risk to humans exposed to the product, findings from animal or in vitro testing that suggest a significant
risk to human subjects, and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in
the protocol or Investigator Brochure. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified
period, if at all. The FDA or the clinical trial Sponsor may suspend or terminate a clinical trial at any time on various grounds, including
a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate
approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements
or if the product has been associated with unexpected serious harm to patients. Additionally, some clinical trials are overseen by an
independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee.
This group provides authorization for whether a trial may move forward at designated check points based on access to certain data from
the study. The clinical trial Sponsor may also suspend or terminate a clinical trial based on evolving business objectives and/or competitive
climate.
The
manufacturing process must be capable of consistently producing quality batches of the product candidate and among other things, the
manufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate
packaging must be selected and tested. Stability studies must be conducted to demonstrate that the product candidate does not undergo
unacceptable deterioration over its shelf life.
NDA
and FDA Review Process
The
results of product development, pre-clinical studies and clinical trials, along with descriptions of the manufacturing process, analytical
tests conducted on the drug, proposed labeling and other relevant information, are submitted to the FDA as part of an NDA for a new drug,
requesting approval to market the product. The submission of an NDA is subject to the payment of a substantial user fee, and the sponsor
of an approved NDA is also subject to an annual program user fee; although a waiver of such fee may be obtained under certain limited
circumstances. For example, the agency will waive the application fee for the first human drug application that a small business or its
affiliate submits for review.
The
FDA reviews all NDAs submitted before it accepts them for filing and may request additional information rather than accepting an NDA
for filing. The FDA typically decides on accepting an NDA for filing within 60 days of receipt. The decision to accept the NDA for filing
means that the FDA has made a threshold determination that the application is sufficiently complete to permit a substantive review. Under
the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act (“PDUFA”), the FDA’s goal to complete
its substantive review of a standard NDA and respond to the applicant is ten months from the receipt of the NDA. The FDA does not always
meet its PDUFA goal dates, and the review process is often significantly extended by FDA requests for additional information or clarification
and may go through multiple review cycles.
After
the NDA submission is accepted for filing, the FDA reviews the NDA to determine, among other things, whether the proposed product is
safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMPs to assure and preserve
the product’s identity, strength, quality and purity. The FDA may refer applications for novel drug products or drug products which
present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts,
for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not
bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. The FDA
will likely re-analyze the clinical trial data, which could result in extensive discussions between the FDA and us during the review
process. The review and evaluation of an NDA by the FDA is extensive and time consuming and may take longer than originally planned to
complete, and we may not receive a timely approval, if at all.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
1 – BASIS OF OPERATIONS AND GOING CONCERN (CONTINUED)
REGULATORY
MATTERS (CONTINUED)
Before
approving an NDA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether
they comply with cGMPs. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are
in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. In addition,
before approving an NDA, the FDA may also audit data from clinical trials to ensure compliance with GCP requirements. After the FDA evaluates
the application, manufacturing process and manufacturing facilities, it may issue an approval letter or a Complete Response Letter. An
approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A Complete
Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present
form. A Complete Response Letter usually describes all the specific deficiencies in the NDA identified by the FDA. The Complete Response
Letter may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant and time-consuming
requirements related to clinical trials, nonclinical studies or manufacturing. If a Complete Response Letter is issued, the applicant
may either resubmit the NDA, addressing all the deficiencies identified in the letter, or withdraw the application. Even if such data
and information are submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from
clinical trials are not always conclusive, and the FDA may interpret data differently than the Sponsor interprets the same data.
New
York State Department of Health
The
New York State Department of Health (NYDPH) has begun implementing regulations concerning the processing and retail sale of hemp derived
cannabinoids. Under the regulations, “cannabinoid” is broadly defined as “any phytocannabinoid found in hemp, including
but not limited to, Tetrahydrocannabinol (THC), tetrahydrocannabinolic acid (THCA), cannabidiol (CBD), cannabidiolic acid (CBDA), cannabinol
(CBN), cannabigerol (CBG), cannabichromene (CBC), cannabicyclol (CBL), cannabivarin (CBV), tetrahydrocannabivarin (THCV), cannabidivarin
(CBDV), cannabichromevarin (CBCV), cannabigerovarin (CBGV), cannabigerol monomethyl ether (CBGM), cannabielsoin (CBE), cannabicitran
(CBT).
These
regulations came into effect on January 1, 2021, and all “cannabinoid hemp processors” and “cannabinoid hemp retailers”
operating within the state of New York must be licensed by the NYDPH. The regulations expressly allow for food and beverages to contain
“cannabinoids”, so long as such products meet certain requirements. To this end, the Company has submitted its license application
with the NYDPH in compliance with this legislation. These regulations are evolving and the NYDPH recently issued a set of regulations
to address the use of industrial hemp derived Δ8- Tetrahydrocannabinol (Δ8 THC) and Δ10- Tetrahydrocannabinol (Δ10
THC) in cannabinoid hemp products manufactured and sold in New York.
The
product requirements under the current regulations, include but are not limited to: the product must not contain more than 0.3% total
Δ9- Tetrahydrocannabinol concentration; the product must not contain tobacco or alcohol; the product must not be in the form of
an injectable, transdermal patch, inhaler, suppository, flower product including cigarette, cigar or pre-roll, or any other disallowed
form as determined by the NYDPH; if the product is sold as a food or beverage product, it must not have more than 25mg of cannabinoids
per product; and if sold as an inhalable cannabinoid hemp product, the product will be subject to a number of additional safety measures.
Furthermore,
all cannabinoid products sold at retail are subject to a series of labeling requirements. All such products must be labeled with the
amount of cannabinoids in the product and the amount of milligrams per serving. If the product contains THC, the amount of THC in the
product needs to be stated on the label in milligrams on a per serving and per package basis. In addition, all products are required
to have a scannable bar code or QR code which links to a certificate of analysis and the packaging is prohibited from being attractive
to consumers under 18 years of age. Products are also required to list appropriate warnings for consumer awareness. The Company’s
entire product line will comply with the above standards.
See
our Risk Factors and going concern opinion in this report for more information about these items, as well as certain related disclosures
included our Results of Operations under the heading “Going Concern”.
The
Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding, success
in developing and marketing its products and the level of competition and potential regulatory enforcement actions. These risks and others
are described in greater detail in the Risk Factors set forth in this periodic report and our annual reports that we have filed and will
also file in the future.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
1 – BASIS OF OPERATIONS AND GOING CONCERN (CONTINUED)
OTHER
BUSINESS ITEMS
Nausea
Derived from Active Chemotherapy Treatment
The
Company announced that it has progressed development efforts on its ongoing pharmaceutical development project to deliver an Rx
product (TAU 413) to treat Nausea Derived from Active Chemotherapy Treatment. The Company plans to perform in vitro studies with TAU
413 during the next quarter. In vivo testing and product formulation development will follow. If these efforts are successful, and funding
is secured, the company intends to submit an IND during the 2022.
On
October 6, 2021, the Company announced that it has received notification from the Patent
Cooperation Treaty (“PCT”) that its International Patent Application (App No.
PCT/US21/22668) was Published (Publication No. WO2021/188612) on September 23, 2021. This
International Patent Application was filed by the Company on March 17, 2021 as is Titled:
MEDICATED CANNABINOID COMPOSITIONS, METHODS OF MANUFACTURING, AND METHODS OF TREATMENT. This
International Patent Application relates to the Company’s proposed Pharmaceutical,
Cannabinoid based, Chewing Gum product (Sublingual Absorption - Delivery System) under development
for the treatment of: Nausea Derived from Active Chemotherapy Treatment.
On
November 1, 2021 the Company received Notice of Publication from U.S. Patent and Trademark Office (“USPTO”), for its U.S.
Patent Application No. 17/204,106. The Company filed this U.S. Patent Application on March 17, 2021 and its related to its ongoing pharmaceutical
development efforts.
Strategic
Marketing and Consulting Agreement with Mayer & Associates
On
June 14, 2021, the Company entered into a 12-month Strategic Marketing and Consulting Agreement with Mayer & Associates. Under this
agreement the Company paid $150,000 as well as the issuance of 3,500,000 shares of restricted common shares of Company stock. Half of
the cash payment ($75,000) was paid upon execution of this agreement and the other half was paid approximately 90 days thereafter. Upon
execution, the Company issued 2,200,000 of the above-mentioned shares. The remaining 1,300,000 above-mentioned shares were issued approximately
90 days after this contract was executed. Mayer and Associates will provide the Company with opportunities relating to the world of professional
sports, with respect to its products and product lines. This includes, but is not limited to, introductions to professional sports leagues,
celebrity (professional athletes) influencers/brand ambassadors/brand liaison(s), research and development opportunities, hosting of
small periodic events for the Company and a diversified group of high-profile contacts and relationships, use social media exposure,
podcasts backing of various elements from professional sports as well as assist the Company in advising of potential merger partners
and developing corporate partnering relationships. The Company, at the sole discretion of its board, may pay an additional payment of
$75,000 as permitted under this agreement based on performance. This additional payment will be recorded as a contingent liability on
the Company condensed consolidated balance sheet until formally authorized by the Company’s board of directors. This agreement
is terminable after six months. As of the date of this quarterly report date, the aforementioned shares have been issued.
Corporate
Advisory Board Appointment
On
December 1, 2021, the Company, appointed Mr. Matthew A. Shaw to its corporate advisory board. Currently, Matthew A. Shaw serves as Head
of Mergers & Acquisitions/Tax for the U.S. businesses of Nestlé, the world’s largest food and beverage company. In joining
Tauriga’s Corporate Advisory Board, his main focus will be to help the Company in a general strategic advisory role in evaluating
opportunities to grow revenue and expand market opportunities. Mr. Matthew A. Shaw is the brother of our Company’s CEO, whose valuable
business acumen should serve the Company well in his capacity as an advisor. Matthew A. Shaw, J.D., LL.M., draws upon nearly fifteen
years of experience providing strategic solutions to multi-billion-dollar corporate tax issues for Fortune 100 companies. Mr. Shaw obtained
his Bachelor of Science degree from Cornell University, and law degree from William and Mary School of Law, where he served on the editorial
board of the William & Mary Law Review. Thereafter he graduated, with distinction, from The Georgetown University Law Center, earning
a Master of Laws in Taxation. Mr. Shaw served as an advisor in the M&A Tax group of KPMG’s Washington National Tax Office for
over a decade, where his practice focused on acquisitions and divestitures, including many multi-billion-dollar public spin-off transactions,
internal restructuring transactions, debt and equity offerings, loss monetization transactions, and consolidated return matters. Mr.
Shaw left KPMG as a Managing Director in 2018 to join Nestlé USA, where he currently serves as Head of M&A Tax and Assistant
General Tax Counsel. While at Nestlé, he has overseen the tax aspects of more than $30 billion of acquisitions and divestitures,
including due diligence, structuring, funding, legal documents, and integration. He speaks in professional forums such as the D.C. Bar
and Tax Executives Institute, and has published several articles, including in The Journal of Corporate Taxation, and in the BNA Daily
Tax Report. Outside of professional activities, Matt is an avid chess fan and carries a master level rating (albeit provisional) at the
USCF.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
1 – BASIS OF OPERATIONS AND GOING CONCERN (CONTINUED)
GOING
CONCERN
During
the fourth quarter of the year ended March 31, 2019, the Company began sales and marketing efforts for its Mint flavored Tauri-GumTM
product. During the year ended March 31, 2021, the Company recognized net sales of $285,319
and a gross profit of $122,692.
During the nine months ended December 31, 2021, the Company recognized net sales of $243,293
and a gross profit of $118,294.
At December 31, 2021, the Company had a working
capital deficit of $711,126 compared
to $1,229,211 for
the year ended March 31, 2021. The current lower surplus is largely resultant from increased debt levels. Although the Company has a
working capital surplus, there is no guarantee that this will continue therefore it still believes that there is uncertainty with respect
to continuing as a going concern.
On
July 1, 2019, months after the NYC Department of Heath announced a ban on cannabidiol in foods and beverages (mainly focused on restaurants
and baked goods), the result of which was that the updated New York City Health Code now includes an embargoing of CBD-infused Edible(s)
Products (including packaged products). The Company is hopeful that due to the recent regulatory regime for cannabinoid products implemented
by the NYDPH, the New York City Council will remove the current CBD ban and implement regulations surrounding CBD products in a logical
and prompt manner. The Company believes it is well positioned under the current regulatory structure, and has taken a conservative approach
towards its products, including, for example, ensuring that its product manufacturer periodically tests for compliance with the Agricultural
Improvement Act of 2018, such as utilizing CBD oils from hemp plants which contain 0.3% or less THC content. Subsequent to the balance
sheet date, the State of New York has determined that it is allowable to sell CBD Infused Edible products in the forms of both food and
drink (inclusive of chewing gum). It was also determined that no time can CBD be sold in products that contain either alcohol or tobacco.
Additionally, the State of New York also said that NO CBD product may be sold if it contains more than 0.3% (1/333rd by Composition)
THC. No Individual food or beverage product may contain more than 25mg of Hemp-Extracted Cannabinoids (“CBD” or “CBG”)
per serving. Food and drink infused with CBD and Other Hemp Extracts must be packaged by the manufacturer and extracts cannot be added
at the retail level. The Company’s entire product line will comply with these standards.
The
Company, in the short term, intends to continue funding its operations either through cash-on-hand or through financing alternatives.
Management’s plans with respect to this include raising capital through equity markets to fund future operations as well as the
possible sale of its remaining marketable securities which had a market value of $1,035,511 at December 31, 2021. In the event the Company
cannot raise additional capital to fund and/or expand operations or fails to raise adequate capital and generate adequate sales revenue,
or if the regulatory landscape were to become more difficult or result in regulatory enforcement, it 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 and generate adequate revenues in the short term,
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 to achieve profitability thereby eliminating its reliance on alternative sources of funding. Although
management believes that the Company continues to strengthen its financial position over time, there is still no guarantee that profitable
operations with sufficient cashflow to sustain operations can or will be achieved without the need of alternative financing, which is
limited. These matters still raise significant doubt about the Company’s ability to continue as a going concern as determined by
management. The Company believes that there is uncertainty with respect to continuing as a going concern until the operating business
can achieve sufficient sales to maintain profitable operations and sustain cash flow to operate the Company for a period of twelve months.
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.
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 successful, 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.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
These
condensed consolidated financial statements include the accounts and activities of Tauriga Sciences, Inc., its wholly-owned Canadian
subsidiary, its wholly-owned subsidiary Tauriga Pharma Corp. (f/k/a Tauriga Biz Dev Corp – or “Tauriga BDC” and referenced
herein as Tauriga BDC for contextual purposes only in describing the Blink contractual arrangement), NFTauriga Corp. and Tauriga Sciences
Limited. All intercompany transactions have been eliminated in consolidation. As of December 31, 2021, there is no activity in any of
the Company’s subsidiaries other than Tauriga Pharma Corp.
SEGMENT
INFORMATION
The
Company has adopted provisions of ASC 280-10 Segment Reporting for the three and nine months ended December 31, 2021 and 2020.
This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in
making internal operating decisions. The Company and its Chief Operating Decision Makers determined that the Company’s operations
consist of two segments: (i) The first division consists of all retail, wholesale and e-commerce product sales of CBD/CBG Tauri-GumTM,
Tauri-GummiesTM, and other CBD/CBG products, and (ii) the second segment will be a research and development division that
consist of liabilities and results from any activity relative to the progress in the development of the Company’s FDA IND application
for Phase II Trial of its proposed pharmaceutical grade version of Tauri-Gum™. The cost basis investment in Aegea has been treated
as a non-operating asset and will therefore not be reported as a part of the research and development division.
Results for the three and nine months ended December 31,
SCHEDULE
OF SEGMENT INFORMATION
| |
2021 | | |
2020 | | |
2021 | | |
2020 | |
| |
Three months ended December 31, | | |
Nine months ended December 31, | |
| |
2021 | | |
2020 | | |
2021 | | |
2020 | |
Revenue, net: | |
| | | |
| | | |
| | | |
| | |
Tauri-gum | |
$ | 102,580 | | |
$ | 74,949 | | |
$ | 243,293 | | |
$ | 215,113 | |
Pharma | |
| - | | |
| - | | |
| - | | |
| - | |
Adjustments, eliminations and unallocated items | |
| - | | |
| - | | |
| - | | |
| - | |
Total revenue, net | |
$ | 102,580 | | |
$ | 74,949 | | |
$ | 243,293 | | |
$ | 215,113 | |
| |
| | | |
| | | |
| | | |
| | |
Cost of Sales | |
| | | |
| | | |
| | | |
| - | |
Tauri-gum | |
| (46,499 | ) | |
| (34,348 | ) | |
| (124,999 | ) | |
| (133,391 | ) |
Pharma | |
| - | | |
| - | | |
| - | | |
| - | |
Adjustments, eliminations and unallocated items | |
| - | | |
| - | | |
| - | | |
| - | |
Total cost of sales | |
$ | (46,499 | ) | |
$ | (34,348 | ) | |
$ | (124,999 | ) | |
$ | (133,391 | ) |
| |
| | | |
| | | |
| | | |
| | |
General and Administrative expense | |
| | | |
| | | |
| | | |
| | |
Tauri-gum | |
$ | 107,114 | | |
$ | - | | |
$ | 684,084 | | |
$ | 106,600 | |
Pharma | |
| 6,992 | | |
| 10,000 | | |
| 19,832 | | |
| 10,000 | |
Adjustments, eliminations and unallocated items | |
| 1,112,390 | | |
| 426,097 | | |
| 2,183,198 | | |
| 1,212,186 | |
Total General and Administrative expense | |
$ | 1,226,496 | | |
$ | 436,097 | | |
$ | 2,887,114 | | |
$ | 1,328,786 | |
| |
| - | | |
| | | |
| - | | |
| | |
Research and development | |
| | | |
| | | |
| | | |
| | |
Tauri-gum | |
$ | 8,046 | | |
$ | 7,173 | | |
$ | 36,082 | | |
$ | 34,478 | |
Pharma | |
| 735 | | |
| - | | |
| 80,762 | | |
| - | |
Adjustments, eliminations and unallocated items | |
| - | | |
| - | | |
| - | | |
| - | |
Total Research and Development | |
$ | 8,781 | | |
$ | 7,173 | | |
$ | 116,844 | | |
$ | 34,478 | |
| |
| | | |
| - | | |
| | | |
| | |
Marketing and fulfillment expense | |
| | | |
| | | |
| | | |
| | |
Tauri-gum | |
$ | 158,701 | | |
$ | 131,099 | | |
$ | 625,954 | | |
$ | 245,001 | |
Pharma | |
| - | | |
| - | | |
| - | | |
| - | |
Adjustments, eliminations and unallocated items | |
| - | | |
| - | | |
| - | | |
| - | |
Total Marketing and fulfillment expense | |
$ | 158,701 | | |
$ | 131,099 | | |
$ | 625,954 | | |
$ | 245,001 | |
| |
| | | |
| | | |
| | | |
| | |
Depreciation expense | |
| | | |
| | | |
| | | |
| | |
Tauri-gum | |
$ | 1,326 | | |
$ | 218 | | |
$ | 3,897 | | |
$ | 653 | |
Pharma | |
| - | | |
| - | | |
| - | | |
| - | |
Adjustments, eliminations and unallocated items | |
| - | | |
| - | | |
| - | | |
| - | |
Total depreciation expense | |
$ | 1,326 | | |
$ | 218 | | |
$ | 3,897 | | |
$ | 653 | |
| |
| | | |
| | | |
| | | |
| | |
Operating Loss | |
| | | |
| | | |
| | | |
| | |
Tauri-gum | |
$ | (223,179 | ) | |
$ | (109,919 | ) | |
$ | (1,231,723 | ) | |
$ | (305,010 | ) |
Pharma | |
| (7,727 | ) | |
| (10,000 | ) | |
| (100,594 | ) | |
| (10,000 | ) |
Adjustments, eliminations and unallocated items | |
| (1,112,390 | ) | |
| (414,067 | ) | |
| (2,183,198 | ) | |
| (1,212,186 | ) |
Total operating loss | |
$ | (1,339,223 | ) | |
$ | (533,986 | ) | |
$ | (3,515,515 | ) | |
$ | (1,527,196 | ) |
| |
December 31, 2021 | | |
March 31, 2021 | |
Total Assets | |
| | | |
| | |
Tauri-gum | |
$ | 491,380 | | |
$ | 736,044 | |
Pharma | |
| 152,726 | | |
| 200,440 | |
Unallocated | |
| 972,555 | | |
| 1,552,219 | |
Total Assets | |
$ | 1,616,661 | | |
$ | 2,488,703 | |
| |
| | | |
| | |
Total Liabilities | |
| | | |
| | |
Tauri-gum | |
$ | 184,415 | | |
$ | 186,568 | |
Pharma | |
| 18,735 | | |
| 188,210 | |
Unallocated | |
| 2,159,245 | | |
| 842,678 | |
Total liabilities | |
$ | 2,362,395 | | |
$ | 1,217,456 | |
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
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 principle 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, 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 BDC, entered into an independent sales representative agreement with Blink to be a non-exclusive
independent sales representative. Under the agreement with Blink, the Company may solicit orders from potential customers for EV charging
station placement. 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
remainder of the proceeds will be split 80/20 between the Company and the host location owner or its assignee. The host location owner
will pay for the cost of providing power to these unit as well as installation costs. As of December 31, 2021, we have not installed
any of these machines in any locations, and no revenue has been generated through the Blink contract. The Company has decided to abandon
this business line, and therefore, we have reclassified these assets as held for sale.
The
Company recognizes revenue upon the satisfaction of the performance obligation. The Company considers the performance obligation met
upon shipment of the product or delivery of the product. For ecommerce orders, the Company’s products are shipped by a fulfillment
company and payment is made in advance of shipment either through credit card or PayPal. The Company also delivers the product to its
customers that they market to in the metropolitan New York Tri-State area that are not covered under any existing distribution agreements.
The Company generally collects payment within 30 to 60 days of completion of its performance obligation, and the Company has no agency
relationships. The Company recognized net revenue from operations in the amount of $243,293 during the nine months ended December 31,
2021 and $285,319 during the year ended March 31, 2021. All revenue is from the sale of the Company’s Tauri-GumTM product
line and there were trade receivables, net of allowance for doubtful accounts in the amount of $6,900 outstanding for these sales, as
of December 31, 2021.
ALLOWANCE
FOR DOUBTFUL ACCOUNTS
The
Company maintains an allowance for doubtful accounts, which includes sales returns, sales allowances and bad debts. The allowance adjusts
the carrying value of trade receivables for the estimate of accounts that will ultimately not be collected. An allowance for doubtful
accounts is generally established as trade receivables age beyond their due dates, whether as bad debts or as sales returns and allowances.
As past due balances age, higher valuation allowances are established, thereby lowering the net carrying value of receivables. The amount
of valuation allowance established for each past-due period reflects the Company’s historical collections experience, including
that related to sales returns and allowances, as well as current economic conditions and trends. The Company also qualitatively establishes
valuation allowances for specific problem accounts and bankruptcies, and other accounts that the Company deems relevant for specifically
identified allowances. The amounts ultimately collected on past-due trade receivables are subject to numerous factors including general
economic conditions, the financial condition of individual customers and the terms of reorganization for accounts exiting bankruptcy.
Changes in these conditions impact the Company’s collection experience and may result in the recognition of higher or lower valuation
allowances. At December 31, 2021, the Company has established an allowance for doubtful accounts in the amount of $99,401.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SALES
REFUNDS
The
Company’s refund policy allows customers to return product for any reason except where the customer does not like the taste of
the product. The customer has 30 days from the date of purchase to initiate the process. Returns are limited to one return or exchange
per customer. Only purchases up to $100 qualify for a refund. Approved return/refund requests are typically processed within 1-2 business
days. For product purchases made through a Tauri-GumTM distributor or retailer, the customer is required to work with original
purchase location for any return or exchange. The Company has not established a reserve for returns as of December 31, 2021 however will
monitor the refunds to estimate whether a reserve will be required.
USE
OF ESTIMATES
The
preparation of these 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 December 31, 2021, the Company’s cash on deposit with financial institutions did not exceed the total FDIC insurance
limit of $250,000. At December 31, 2021 and March 31, 2021, the Company had a cash balance of $6,799 and $49,826, respectively. The Company’s
does not expect, in the near term, for its cash balance to exceed the total FDIC insurance limit of $250,000 for other than very short
periods of time where the Company would use such cash in excess of insurance in the very short-term in operating activities. 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 evaluates at least annually the rating of the financial institution in which it holds its deposits. The Company had no cash equivalents
as of December 31, 2021 and March 31, 2021.
INVESTMENT
IN TRADING SECURITIES
Investment
in trading securities consist of investments in shares of common stock of companies traded on public markets as well as publicly traded
warrants of these companies should there be a market for them. 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 income or loss. For investments sold, the Company recognizes the gains and losses attributable to these investments as realized
gains or losses in other income or loss.
INVESTMENT
– COST METHOD
Investment
in other companies that are not currently trading, are valued based on the cost method as the Company holds less than 20% ownership in
these companies and has no influence over operational and financial decisions of the companies. The Company will evaluate, at least annually,
whether impairment of these investments is necessary under ASC 320. During the year ended March 31, 2021, the Company has recorded a
loss on the impairment on two of its cost method investments in the amount of $24,406. The Company did not record a loss on the impairment
on investments for the nine months ended December 31, 2021.
INVENTORY
Inventory
consists of finished goods in salable condition stated at the lower of cost or market determined by the first-in, first-out method. The
inventory consists of packaged and labeled salable inventory. Shipping of product to finished good inventory fulfilment center is also
included in the total inventory cost. Shipping of product upon sale for e-commerce sales is paid by the customer upon ordering for orders
of single packs of Tauri-GumTM. For multiple pack or wholesale product orders shipping cost is paid by the Company. As of
December 31, 2021, the Company’s inventory on hand had a value of $351,657
compared to $201,372
at March 31, 2021. As of December 31, 2021, the
Company wrote down all CBD infused chewing gum to a value of zero. During the nine months ended December 31, 2021, the Company recorded
a one-time charge of $123,826 as
a write down of 10mg CBD infused chewing gum inventory. The Company does not intend or expect to sell this inventory and will use as
marketing samples and other promotions.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SHIPPING
AND HANDLING COSTS
The
Company’s fulfillment handling costs are provided by independent contractors through fixed fee arrangements which may also include
incentives. These fees also contain a large degree of consultative, administrative and warehousing services as part of the fixed fee.
Management believes that due to these factors it is more representative to include these amounts as general and administrative costs
instead of cost of goods sold. For the three and nine months ended December 31, 2021 the Company incurred fulfillment costs in the amount
of $23,988 and $84,505, respectively compared to $25,200 and $64,200 for the same periods in the prior year.
Shipping
cost for the Company consists of product movement to and from trade shows, between office locations, mailing of samples and product shipments.
The cost of shipping is typically not charged to the customer when they order more than one product from on the website. Customer shipping
of large customers wholesale orders are done on a reimbursement basis therefore any shipping revenue and shipping expense are largely
recorded as offsetting gross revenues and cost of goods sold.
The
Company had net shipping expense:
SCHEDULE
OF SHIPPING EXPENSES
| |
| | |
| | |
| | |
| |
| |
Three Months Ended December 31, | | |
Nine months ended December 31, | |
| |
2021 | | |
2020 | | |
2021 | | |
2020 | |
Shipping revenue | |
$ | 2,558 | | |
$ | 2,622 | | |
$ | 5,296 | | |
$ | 4,453 | |
Shipping expense | |
| (10,003 | ) | |
| (5,732 | ) | |
| (21,786 | ) | |
| (17,762 | ) |
Net shipping expense | |
$ | (7,445 | ) | |
$ | (4,429 | ) | |
$ | (16,490 | ) | |
$ | (13,309 | ) |
Property
and equipment are 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.
NET
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 and nine months ended December 31, 2021 and 2020,
basic and fully diluted earnings per share were the same as the Company had losses 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, “Equity-Based Payments
to Non-Employees.” Under ASC 505-50, the Company determines the fair value of the warrants or stock-based compensation awards
granted on the grant date as either the fair value of the consideration received, or the fair value of the equity instruments issued,
whichever is more reliably measurable. Any stock options or warrants issued to non-employees are recorded in expense and an offset to
additional paid-in capital in stockholders’ equity 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 AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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.
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 $8,781 and $116,844 for the three and
nine months ended December 31, 2021, respectively compared to $7,173 and $34,478. The Company is continually evaluating products and
technologies, and incurs expenses relative to these evaluations, including in the natural wellness space, such as Tauri-Gum™ product
development of new flavor formulations and other CBD delivery products, as well as development of a Cannabigerol (“CBG”)
Isolate Infused version of its Tauri-Gum™ brand. We also incur expenses relative to collaboration agreements and any activity relative
to the progress in the development of the Company’s FDA IND application for Phase II Trial of its proposed pharmaceutical grade
version of Tauri-Gum™, as well as intellectual property or other related technologies. As the Company investigates and develops
relationships in these areas, resultant expenses for trademark filings, license agreements, website and 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.
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.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
SHARE
SETTLED DEBT
The
general measurement guidance in ASC 480 requires obligations that can be settled in shares with a fixed monetary value at settlement
to be carried at fair value unless other accounting guidance specifies another measurement attribute. The Company has determined that
ASC 835-30 is the appropriate accounting guidance for the share-settled debt, which is what was done by setting up the debt discount
which is to be amortized to interest expense over the term of the instrument. Amortization of discounts are to be amortized using the
effective interest method over the term of the note.
ASC
480-10-25-14 requires liability accounting for (1) any financial instrument that embodies and unconditional obligation to transfer a
variable number of shares or (2) a financial instrument other than an outstanding share that embodies a conditional obligation to transfer
a variable number of shares, provided that the monetary value of the obligation is based solely or predominantly on any of the following:
1. A fixed monetary amount known at inception (e.g. stock settled debt); 2. Variations in something other than the fair value of the
issuer’s equity shares (e.g. a preferred share that will be settled in a variable number of common shares with tits monetary value
tied to a commodity price); and 3. Variations in the fair value of the issuer’s equity shares, but the monetary value to the counterparty
moves inversely to the value of the issuer’s shares (e.g. net share settled written put options, net share settled forward purchase
contracts).
Notwithstanding
the fact that the above instruments can be settled in shares, FASB concluded that equity classification is not appropriate because instruments
with those characteristics do not expose the counterparty to risks and rewards similar to those of an owner and therefore do not create
a shareholder relationship. The issuer is instead using its shares as the currency to settle its obligation.
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 December 31, 2021.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT
ACCOUNTING PRONOUNCEMENTS
In
August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.
2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity
(Subtopic 815-40), Accounting for Convertible Instruments and Contract’s in an Entity’s Own Equity. The ASU simplifies accounting
for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments
will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain
settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity
contracts to qualify for it. The ASU simplifies the diluted net income per share calculation in certain areas. The ASU is effective for
annual and interim periods beginning after December 31, 2021, and early adoption is permitted for fiscal years beginning after December
15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the impact that this new guidance will have
on its condensed consolidated financial statements.
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 has determined that there is not a material impact on their condensed consolidated
financial position and results of operations as a result of this standard.
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 is effective for annual reporting periods beginning
after December 15, 2018, including interim periods within that reporting period and is applied retrospectively. The Company has adopted
this standard as of April 1, 2019 (See Note 7).
In
January 2016, the FASB issued ASU 2016-01, “Financial Instruments–Overall (Subtopic 825-10) Recognition and Measurement
of Financial Assets and Financial Liabilities. The ASU provides a limited option to apply the ASU changes early. Except for the limited
early application guidance, early adoption is not permitted. The ASU is applied by means of a cumulative- effect adjustment to the balance
sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair
values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption
of ASU 2016- 01. For public business entities: the amendments in the ASU are effective for fiscal years beginning after December 15,
2017, and interim periods within those annual periods. All other entities, including nonpublic entities, not-for-profit entities and
employee benefit plans on plan accounting: the amendments in the ASU are effective for fiscal years beginning after December 15, 2018,
and interim periods within fiscal years beginning after December 15, 2017.
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 of this report.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
3 - REVENUE
The
Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which the Company adopted
simultaneous with the commencement of sales in March 2019. No cumulative adjustment to accumulated deficit was done, and the adoption
did not have an impact on our condensed consolidated financial statements, as no material arrangements prior to the adoption were impacted
by the new pronouncement.
The
following table disaggregates the Company’s net revenue by sales channel for the three and nine months ended December 31:
SCHEDULE
OF DISAGGREGATION
| |
2021 | | |
2020 | | |
2021 | | |
2020 | |
| |
For the three months ended December 31, | | |
For the nine months ended December 31, | |
| |
2021 | | |
2020 | | |
2021 | | |
2020 | |
Revenue: | |
| | |
| | |
| | |
| |
Distributor | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
E-Commerce | |
| 98,356 | | |
| 72,939 | | |
| 196,818 | | |
| 169,428 | |
Wholesale | |
| 4,224 | | |
| 2,010 | | |
| 46,475 | | |
| 45,685 | |
Net revenue | |
$ | 102,580 | | |
$ | 74,949 | | |
$ | 243,293 | | |
$ | 215,113 | |
Revenues
from the Company’s e-commerce channel represented 95.9% and 80.9% of total net sales for the three and nine months ended December
31, 2021 compared to 97.3% and 78.8% for the same period in the prior year. As of December 31, 2021, the Company’s had an allowance
for doubtful account collectability in the amount of $99,401 which was wholly attributable to the Wholesale channel. There were no significant
contract asset or contract liability balances for periods presented. The Company does not disclose the value of unsatisfied performance
obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue
at the amount to which we have the right to invoice for services performed. Collections of the amounts billed are typically paid by the
customers within 30 to 60 days.
NOTE
4– INVENTORY
The
following chart is the inventory value by product as of:
SCHEDULE
OF INVENTORY
| |
December 31, 2021 | | |
March 31, 2020 | |
CBD/CBG Tauri-GumTM | |
$ | 287,017 | | |
$ | 173,207 | |
Tauri-GummiesTM | |
| 17,216 | | |
| 13,973 | |
Other (1) | |
| 47,424 | | |
| 14,192 | |
Total Inventory | |
$ | 351,657 | | |
$ | 201,372 | |
|
(1) |
Other
inventory consists of holiday pouches sold as a bundled of Tauri-GumTM, chocolate coins, dog treats, other CBD products,
bath bombs, honey, mints and skin care. |
At
December 31, 2021, there were $62,645 of prepayments on deposit with manufactures of Company products.
NOTE
5– PROPERTY AND EQUIPMENT
The
Company’s property and equipment is as follows:
SCHEDULE
OF PROPERTY AND EQUIPMENT
| |
December 31, 2021 | | |
March 31, 2021 | | |
Estimated Life |
| |
December 31, 2021 | | |
March 31, 2021 | | |
Estimated Life |
Computers, office furniture and other equipment | |
$ | 15,651 | | |
$ | 13,705 | | |
3-5 years |
Less: accumulated depreciation | |
| (4,602 | ) | |
| (1,642 | ) | |
|
| |
| | | |
| | | |
|
Net | |
$ | 11,049 | | |
$ | 12,063 | | |
|
During
the year ended March 31, 2021, the Company purchased office furniture in the amount of $8,722 for its new company headquarters in Wappingers
Falls, New York. The furniture will be depreciated over 60 months commencing upon occupation of its new Company headquarters on January
6, 2021.
During
the nine months ended December 31, 2021, the Company purchased computer equipment in the amount of $1,945. This equipment will be depreciated
of 36 months.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
5– PROPERTY AND EQUIPMENT (CONTINUED)
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 would share revenue from these electric car vehicles charging units with such location owner. No depreciation
expense has been recorded for the charging units as of December 31, 2021 due to the fact that they have not been placed in service. As
of April 1, 2020, these charging units were reclassified as assets held for resale.
Depreciation
expense for the nine months ended December 31, 2021 was $1,013 and $2,959, respectively compared to $218 and $653 for the same periods
in the prior year.
NOTE
6 –LEASEHOLD IMPROVEMENTS
Associated
with the Company’s January 6, 2021, relocation of its headquarters to Wappingers Falls the Company implemented certain leasehold
improvements including signage and a sales display buildout at a total cost of $5,000. The Company has entered a two-year lease with
a two-year extension option. The Company expects that it will exercise these two extension options and has chosen to amortize these leasehold
improvements over 48 months.
SCHEDULE
OF LEASEHOLD IMPROVEMENTS
| |
| | | |
| | | |
|
| |
December 31, 2021 | | |
March 31, 2021 | | |
Expected Usage |
Wappingers Falls office signage and sales display | |
$ | 5,000 | | |
$ | 5,000 | | |
48 months |
Less: amortization | |
| (1,250 | ) | |
| (313 | ) | |
|
| |
| | | |
| | | |
|
Net | |
$ | 3,750 | | |
| 4,687 | | |
|
NOTE
7 – OPERATING LEASE
The
Company has adopted ASU No. 2016-02, Leases (Topic 842), as of April 1, 2019 and will account for new leases in terms of the right
of use assets and offsetting lease liability obligations for this new lease under this pronouncement. In accordance with ASC 842 –
Leases, effective January 6, 2021, the Company recorded a net lease right of use asset and a lease liability at present value of approximately
$67,938. The Company recorded these amounts at present value, in accordance with the standard, using a discount rate of 8.32% which is
representative of the average borrowing rates for outstanding notes issued to non-related parties at the time of the entrance into the
lease. The right of use asset is composed of the sum of all lease payments, at present value, and is amortized over the life of the expected
lease term. For the expected term of the lease the Company used the initial term of the two-year lease. Upon the election by the Company
to extend the lease for additional years, that election will be treated as a lease modification and the lease will be reviewed for remeasurement.
This lease will be treated as an operating lease under the new standard.
Wappingers
Falls, New York – Corporate headquarters
Effective
January 6, 2021, the Company moved its corporate headquarters to 4 Nancy Court, Suite 4, Wappingers Falls, New York 12590. The Company’s
telephone number remains the same, phone: 917-796-9926. The Company entered into a two-year
lease, expiring January
31, 2023. The Company will pay $19,200
annually ($1,600
per month) during the term of the lease. The
Company paid $1,600
as a security deposit as part of this lease.
The
Company has the option to one two-year extension.
The Company expects it will exercise this option. Tenant will pay $21,000
annually ($1,750
per month) during the option term, should
we exercise this option.
For
the three and nine months ended December 31, 2021 and 2020, the Company recorded lease expense of $5,025 and $15,075, respectively compared
to $1,261 and $8,998 for the same period in the prior year. As of December 31, 2021, the value of the unamortized lease right of use
asset is $52,927. As of December 31, 2021, the Company’s lease liability was $53,827.
The
following chart shows the Company’s operating lease cost for the three and nine months ended December 31, 2021 and 2020:
SCHEDULE
OF OPERATING LEASE COST
| |
2021 | | |
2020 | | |
2021 | | |
2020 | |
| |
For the three months ended December 31, | | |
For the nine months ended December 31, | |
| |
2021 | | |
2020 | | |
2021 | | |
2020 | |
Amortization of right of lease asset | |
$ | 3,870 | | |
$ | 1,151 | | |
$ | 11,374 | | |
$ | 8,062 | |
Lease interest cost | |
| 1,155 | | |
| 109 | | |
| 3,701 | | |
| 936 | |
Total Lease cost | |
$ | 5,025 | | |
$ | 1,261 | | |
$ | 15,075 | | |
$ | 8,998 | |
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
7 – OPERATING LEASE (CONTINUED)
Maturity
of Operating Lease Liability for fiscal year ended March 31,
SCHEDULE
OF MATURITY OF OPERATING LEASE LIABILITY
| |
| | |
2022 | |
$ | 3,726 | |
2023 | |
| 16,201 | |
2024 | |
| 18,990 | |
2025 | |
| 14,909 | |
Total lease payments | |
$ | 53,827 | |
SCHEDULE
OF RIGHT OF USE ASSET AND OPERATING LEASE LIABILITY
| |
December 31, 2021 | | |
March 31, 2021 | |
Right of Use (ROU) asset | |
$ | 52,927 | | |
$ | 64,301 | |
| |
December 31, 2021 | | |
March 31, 2021 | |
Operating lease liability: | |
| | | |
| | |
Current | |
$ | 15,409 | | |
$ | 14,426 | |
Non-Current | |
| 38,418 | | |
| 50,100 | |
Total | |
$ | 53,827 | | |
$ | 64,526 | |
NOTE
8 – NOTES PAYABLE AND CONVERTIBLE NOTES
SCHEDULE OF NOTES PAYABLE AND CONVERTIBLE NOTES
| |
| |
December 31, 2021 | | |
March 31, 2021 | |
Jefferson Street Capital LLC (Oct-20) | |
(a) | |
$ | - | | |
$ | 135,000 | |
SE Holdings, LLC (Nov-20) | |
(b) | |
| - | | |
| 110,000 | |
GS Capital Holdings, LLC (Mar-21) | |
(c) | |
| 273,000 | | |
| 273,000 | |
GS Capital Holdings, LLC (Apr-21) | |
(d) | |
| 313,000 | | |
| - | |
SE Holdings, LLC (Aug-21) | |
(e) | |
| 115,500 | | |
| - | |
Jefferson Street Capital LLC (Sep-21) | |
(f) | |
| 135,000 | | |
| - | |
GS Capital Holdings, LLC (Aug-21) | |
(g) | |
| 105,000 | | |
| - | |
Tangiers Global, LLC (Apr-21) | |
(h) | |
| 525,000 | | |
| - | |
MBS GLOEQ CORP (Oct-21) | |
(i) | |
| 85,000 | | |
| - | |
Total notes payable and convertible notes | |
| |
$ | 1,551,500 | | |
$ | 518,000 | |
Less note discounts | |
| |
| (92,272 | ) | |
| (13,181 | ) |
Less current portion of these notes | |
| |
| (1,459,228 | ) | |
| (504,819 | ) |
Total notes payable and convertible, net discounts | |
| |
$ | - | | |
$ | - | |
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
8 – NOTES PAYABLE AND CONVERTIBLE NOTES (CONTINUED)
Notes
Payable
|
(a) |
On
October 5, 2020, the Company entered into (i) an Inventory Financing Promissory Note in the aggregate principal amount of $135,000
with Jefferson Street Capital LLC, and (ii)
a Securities Purchase Agreement. The note has a maturity date of October
5, 2021, carries $10,000
original issue discount (and a $3,000
due diligence fee paid to Moody Capital Solutions,
Inc., the placement agent on behalf of Jefferson Street), and carries interest on the unpaid principal balance hereof at the rate
of ten percent (10%)
per annum beginning on the issuance date of October 5, 2020. Any
amount of principal or interest on the note which is not paid when due shall bear interest at the rate of eighteen percent (18%)
per annum from the due date thereof until the same is paid or converted in accordance with the terms of the note.
The
repayment of this note shall be in seven equal cash monthly installments beginning on April 5, 2021 and ending on October 5, 2021,
for an aggregate amount of $148,500
(assuming no defaults). This note may not be converted
by noteholder into shares of our Common Stock unless we default in our monthly repayment obligation pursuant to the cash repayment
schedule noted above. In
the event of a default of the note, noteholder shall have the right to convert all or any part of the outstanding and unpaid amounts
into fully paid and non-assessable shares of Common Stock; provided, however, that in no event shall the holder be entitled to convert
any portion of the note in excess of that portion of the note upon the conversion of which would result in beneficial ownership by
noteholder and its affiliates of more than 4.99% of the outstanding shares of Common Stock (as determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder. The beneficial ownership limitations
noted above may not be waived by noteholder. The conversion price shall equal (subject to customary adjustments for stock splits,
stock dividends or rights offerings, recapitalization, reclassifications, extraordinary distributions and similar events) 75% multiplied
by the market price, which is defined to mean the lowest one-day volume weighted average price of our Common Stock during the ten
(10) trading day period ending on the latest complete trading day prior to the conversion date.
The note contains a number of default or penalty provisions, including, but not limited to, the following: (a) at
any time after October 5, 2020, if in the case that the Company’s Common Stock is not deliverable by DWAC for any reason, an
additional 10% discount will apply for all future conversions under all notes. If in the case that the Company’s Common Stock
is “chilled” for deposit into the DTC system and only eligible for clearing deposit, an additional 15% discount shall
apply for all future conversions under the Note while the “chill” is in effect; (ii) if both the events noted in (i)
above were to occur, an additional cumulative 25% discount shall apply; (iii) if the Company ceases to be a reporting company pursuant
to the 1934 Act or if the Note cannot be converted
into free trading shares after one hundred eighty-one (181) days from the issuance date, an additional 15% discount will be attributed
to the conversion price; if the Company ceases to be a reporting company under the 1934 Act, (iv) if, at any time the Borrower does
not maintain the Share Reserve (defined below); (v) the Company fails to pay the principal or interest under the Note when due under
the terms thereof (including the five (5) calendar day cure period); (vi) a cross-default by the Company of another of its outstanding
notes; or (vii) the completion of a reverse stock split while this Note is outstanding (and without consent). Subject to certain
exempt issuances by the Company, during the period where any portion of the Note remains outstanding to Jefferson Street, if the
Company engages in any future financing transactions with a third party investor, the Company will provide Jefferson Street with
written notice thereof promptly but in no event less than 10 days prior to closing any financing transactions, and if applicable,
the Company shall adjust the terms of the note to such more favorable terms of a subsequent financing, if any. In connection with
the note, the Company issued irrevocable transfer agent instructions reserving 21,000,000
shares of the Company’s Common Stock
(“Share Reserve”) for the amount then outstanding. On October 22, 2020, the Company issued to Jefferson Street 1,250,000
shares of its restricted common stock as
debt commitment shares valued at $40,000
($0.032
per share). Upon full conversion or repayment
of this note, all shares remaining in the share reserve where cancelled and placed back into the treasury of the Company and available
for issuance at a future date. As of December 31, 2021, all scheduled payments have been made under this note and this was fully
repaid, and any shares remaining in the Share Reserve were restored to the treasury account of the Company. |
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
8 – NOTES PAYABLE AND CONVERTIBLE NOTES (CONTINUED)
Notes
Payable (Continued)
|
(b) |
On
November 18, 2020, we consummated an inventory financing transaction and entered into (i) a Promissory Note in the aggregate principal
amount of $110,000
with SE Holdings, LLC, a Nevada limited liability
company (“SE”), and (ii) a Securities Purchase Agreement (“SPA”). The note has a maturity date of September
11, 2021, and carried $10,000
original issue discount, and guaranteed interest
of 12%.
Any
amount of principal or interest on the note which is not paid when due shall bear interest at the rate of twenty four percent per
annum from the due date thereof until the same is paid or converted in accordance with the terms of the note.
Principal
payments shall be made in five (5) installments, each in the amount of US$22,500
commencing
one the fifth monthly anniversary following the issue date and continuing thereafter each thirty (30) days for five (5) months (assuming
no defaults or partial or complete conversions of our Common Stock as a form of repayment). This note may not be converted by SE
into shares of our Common Stock unless we default in our monthly repayment obligation pursuant to the cash repayment schedule noted
above. In the event of a default of the note, SE shall have the right to convert all or any part of the outstanding and unpaid amount
of the note into fully paid and non-assessable shares of Common Stock at the lowest market price for the preceding five trading days;
provided, however, that in no event shall SE be entitled to convert any portion of the note in excess of that portion of the note
upon the conversion of which would result In beneficial ownership by SE and its affiliates of more than 4.99% of the outstanding
shares of Common Stock (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934,
as amended, and Regulations 13D-G thereunder. The note contains a number of additional covenants and other provisions, including
default or penalty clauses, cross-default, right to proceeds from other financings, reservation of share requirements and other such
provisions, each as set forth in more detail in the note and SPA. At December 31, 2021 the Company has made all scheduled payments
under this note and this note was fully repaid and retired. |
|
|
|
|
(c) |
On
March 5, 2021, the Company entered into a Securities Purchase Agreement and a non-convertible redeemable note with GS Partners Capital,
LLC. The $273,000
aggregate principal note has a maturity date
of December
5, 2021 and carries $5,000
original issue discount with an interest
rate of 6%.
This
note may be prepaid without penalty, provided that an event of default has not occurred. Upon an event of default, interest shall
accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest
rate of interest permitted by law. This note
contains a number of additional covenants and other provisions, including default or penalty clauses, cross-default and other such
provisions, each as set forth in more detail in this Note and SPA. At December 31, 2021, this note had accrued interest
of $13,508
with the full principal balance due. |
|
|
|
|
(d)
|
On
April 30, 2021, the Company entered into a Securities Purchase Agreement and a non-convertible
redeemable note with GS Capital Partners, LLC. The $313,000
aggregate
principal note has a maturity date of June
1, 2022 and
carries $23,000
Original
Issue Discount with an interest rate of 8%.
This
note may be prepaid without penalty, provided that an event of default has not occurred.
Upon an event of default, interest shall accrue at a default interest rate of 24% per annum
or, if such rate is usurious or not permitted by current law, then at the highest rate of
interest permitted by law.
This note contains a number of additional covenants and other provisions, including default
or penalty clauses, cross-default and other such provisions, each as set forth in more detail
in the note and SPA. At December 31, 2021, this note had accrued interest of $16,808
with
the full principal balance due.
|
|
|
|
|
(e) |
On
August 6, 2021, the Company entered into a Security Purchase Agreement and Promissory Note with SE Holdings, LLC, a Nevada limited
liability company, in the amount of $115,500.
This note bears a 12%
interest rate with a maturity date of June
6, 2022. A lump-sum interest payment for
ten (10) months shall be immediately due on the issue date and shall be added to the principal balance and payable on the maturity
date or upon acceleration or by prepayment or otherwise, notwithstanding the number of days which the principal is outstanding. This
note shall contain an original issue discount of $10,500
resulting in a purchase price of $105,000.
Principal
payments shall be made in five (5) installments each
in the amount of $25,872
commencing one the fifth monthly anniversary
following the issue date and continuing thereafter each thirty (30) days for five (5) months. The holder shall have the right from
time to time, and at any time following an event of default, and ending on the date of payment of the default amount shall equal
100% multiplied by the lowest closing price for the common stock during the five-trading day period ending on the latest complete
trading day prior to the conversion date. The Borrower
is required at all times to have authorized and reserved four (4) times the number of shares that is actually issuable upon full
conversion of the Note (based on the Conversion Price of the Notes in effect from time to time). The Company has set up an initial
reserve of 9,625,000
shares.
The Company will also issue 1,000,000
commitment shares as additional consideration
for the purchase of this note. These shares will be valued at $51,000
($0.051
per share) based on the closing price of
the Company’s stock on the day this note was entered into. The note contains a number of additional covenants and other provisions,
including default or penalty clauses, cross-default, right to proceeds from other financings, reservation of share requirements and
other such provisions, each as set forth in more detail in the note and SPA. As of December 31, 2021, this note had accrued
interest of $5,582
with the
full principal due; however, as of the filing date of this periodic report, the Company has made its first installment payment
due under this note. |
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
8 – NOTES PAYABLE AND CONVERTIBLE NOTES (CONTINUED)
Notes
Payable (Continued)
|
(f) |
On
September 20, 2021, the Company entered into (i) an Inventory Financing Promissory Note in the aggregate principal amount of $135,000
with Jefferson Street Capital LLC, and (ii) a Securities Purchase Agreement. The note has a maturity date of September 20, 2022,
carries $10,000 original issue discount (and a $3,000 due diligence fee paid to Moody Capital Solutions, Inc., the placement agent
on behalf of Jefferson Street), and carries interest on the unpaid principal balance hereof at the rate of ten percent (10%) per
annum. Any amount of principal or interest on the note which is not paid when due shall bear interest at the rate of eighteen percent
(18%) per annum from the due date thereof until the same is paid or converted in accordance with the terms of the note. The repayment
of this note shall be in seven equal cash monthly installments beginning on February 19, 2022 and ending on August 19, 2022, for
an aggregate amount of $148,500 (assuming no defaults). This note may not be converted by noteholder into shares of our Common Stock
unless we default in our monthly repayment obligation pursuant to the cash repayment schedule noted above. In the event of a default
of the note, noteholder shall have the right to convert all or any part of the outstanding and unpaid amounts into fully paid and
non-assessable shares of Common Stock; provided, however, that in no event shall the holder be entitled to convert any portion of
the note in excess of that portion of the note upon the conversion of which would result in beneficial ownership by noteholder and
its affiliates of more than 4.99% of the outstanding shares of Common Stock (as determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder. The beneficial ownership limitations noted above may
not be waived by noteholder. The conversion price shall equal (subject to customary adjustments for stock splits, stock dividends
or rights offerings, recapitalization, reclassifications, extraordinary distributions and similar events) 75% multiplied by the market
price, which is defined to mean the lowest one-day volume weighted average price of our Common Stock during the ten (10) trading
day period ending on the latest complete trading day prior to the conversion date. The note contains a number of default or penalty
provisions, including, but not limited to, the following: (a) at any time after September 20, 2021, if in the case that the Company’s
Common Stock is not deliverable by DWAC for any reason, an additional 10% discount will apply for all future conversions under all
notes. If in the case that the Company’s Common Stock is “chilled” for deposit into the DTC system and only eligible
for clearing deposit, an additional 15% discount shall apply for all future conversions under the Note while the “chill”
is in effect; (ii) if both the events noted in (i) above were to occur, an additional cumulative 25% discount shall apply; (iii)
if the Company ceases to be a reporting company pursuant to the 1934 Act or if the Note cannot be converted into free trading shares
after one hundred eighty-one (181) days from the issuance date, an additional 15% discount will be attributed to the conversion price;
if the Company ceases to be a reporting company under the 1934 Act, (iv) if, at any time the Borrower does not maintain the Share
Reserve (defined below); (v) the Company fails to pay the principal or interest under the Note when due under the terms thereof (including
the five (5) calendar day cure period); (vi) a cross-default by the Company of another of its outstanding notes; or (vii) the completion
of a reverse stock split while this Note is outstanding (and without consent). Subject to certain exempt issuances by the Company,
during the period where any portion of the Note remains outstanding to Jefferson Street, if the Company engages in any future financing
transactions with a third party investor, the Company will provide Jefferson Street with written notice thereof promptly but in no
event less than 10 days prior to closing any financing transactions, and if applicable, the Company shall adjust the terms of the
note to such more favorable terms of a subsequent financing, if any. In connection with the note, the Company issued irrevocable
transfer agent instructions reserving 21,000,000 shares of the Company’s Common Stock (“Share Reserve”) for the
amount then outstanding. The Company issued to Jefferson Street 1,250,000 shares of its restricted common stock as debt commitment
shares valued at $56,000 ($0.0448 per share). Upon full conversion or repayment of this note, any shares remaining in such share
reserve shall be cancelled and placed back into the treasury of the Company and available for issuance at a future date. As of December
31, 2021, this note had remaining unpaid principal of $135,000 and accrued interest of $3,772. As of this report date, the Company
has not made any payments under this note. |
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
8 – NOTES PAYABLE AND CONVERTIBLE NOTES (CONTINUED)
Convertible
Notes
|
(g)
|
On
August 25, 2021, the Company entered into a Securities Purchase Agreement and a convertible
redeemable note with GS Capital Partners, LLC. The $105,000
aggregate
principal note has a maturity date of August
25, 2022 and
carries $5,000
Original
Issue Discount with an interest rate of 8%.
During the first six months this Note is in effect, the
Company may redeem this Note by paying to the Holder an amount as follows: (i) if the redemption
is within the first 90 days this Note is in effect, then for an amount equal to 120% of the
unpaid principal amount of this Note along with any interest that has accrued during that
period, (ii) if the redemption is after the 91st day this Note is in effect, but less than
the 180th day this Note is in effect, then for an amount equal to 133% of the unpaid principal
amount of this Note along with any accrued interest. This Note may not be redeemed after
180 days. Upon an event of default, interest shall accrue at a default interest rate of 24%
per annum or, if such rate is usurious or not permitted by current law, then at the highest
rate of interest permitted by law.
This note contains a number of additional covenants and other provisions, including default
or penalty clauses, cross-default and other such provisions, each as set forth in more detail
in the note and SPA. The Holder of this Note is entitled, at its option, at any time after
cash payment, to convert all or any amount of the principal face amount of this Note then
outstanding into shares of the Company’s common stock at a price (“Conversion
Price”) for each share of Common Stock equal to 65% of the lowest daily VWAP of the
Common Stock as reported on the National Quotations Bureau OTC Markets exchange which the
Company’s shares are traded or any exchange upon which the Common Stock may be traded
in the future (“Exchange”), for the twenty prior trading days including the day
upon which a Notice of Conversion is received by the Company or its transfer agent. The Company
recognized a beneficial conversion feature on this note in the amount of $35,000
which
was recorded as debt discount and will be amortized over the life of the note using the effective
interest method. At December 31, 2021, this note had accrued interest of $2,946
with
the full principal balance outstanding. |
|
|
|
|
(h) |
On April 5, 2021, the Company effectuated a $525,000
six-month fixed convertible promissory note with Tangiers Global, LLC containing an original issue discount of $25,000.
This note matures on October
5, 2021 and bears an interest rate of 8%,
guaranteed. This note has a fixed conversion price of $0.075
per share. The Company recognized a beneficial conversion feature (“BCF”) on this note in the amount of $378,000.
This BCF will be recognized as interest expense pro-rata over the life of the note. The
Company may redeem the note by paying to Tangiers an amount as follows: (i) if within the first 90 days of the issuance date, then
for an amount equal to 110% of the unpaid principal amount so paid of this Note along with any interest that has accrued during that
period, and (ii) if after the 91st day, but by the 180th day of the issuance date, then for an amount equal to 120%. After 180 days
from the effective date, the Company may not pay this note in cash, in whole or in part without prior written consent by Holder.
The Company covenants that it will at all times reserve out of its authorized and unissued Common Stock the number of shares of Common
Stock as shall be issuable upon the conversion of this note. Tangiers may not engage in any “shorting” or “hedging”
transaction(s) in the Common Stock of the Company prior to conversion. The note contains a number of additional covenants and other
provisions, including default or penalty clauses, cross-default, restrictions on note proceeds, maintain exchange and SEC requirements,
delivery of shares, reservation of share requirements and other such provisions, each as set forth in more detail in the note and
SPA. If an Event of Default occurs, the outstanding Principal Amount of this Note owing in respect thereof through the date of acceleration,
shall become, at the Tangiers’s election, immediately due and payable in cash at the “Mandatory Default Amount”.
The Mandatory Default Amount means 20% of the outstanding Principal Amount of this Note will be automatically added to the Principal
Sum of the Note and tack back to the Effective Date for purposes of Rule 144 of the Securities Act of 1933, as amended. Commencing
5 days after the occurrence of any Event of Default that results in the eventual acceleration of this Note, this Note shall accrue
additional interest, at a rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law. The
Company issued 1,000,000
of its restricted common debt incentive shares having a value of $129,000
($.129/share).
As of December 31, 2021, this note had accrued interest of $42,000,
and remains outstanding. The Company is in discussions with the holder as how to settle this note on mutually
agreeable terms. There is no declared or claimed Event of Default as of the date of this report. |
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
8 – NOTES PAYABLE AND CONVERTIBLE NOTES (CONTINUED)
Convertible
Notes
(i) |
On
October 11, 2021, the Company entered into a SPA and a one-year inventory financing promissory note with MBS GLOEQ CORP. in the amount
of $85,000.
The note has a maturity date of October
11, 2022 and an interest rate of 10%
per annum. Any
amount of principal or interest on this note which is not paid when due shall bear an interest at the rate of eighteen percent (18%)
per annum from the due date thereof until the same is paid or converted.
The
holder shall have the right upon any Event of Default, to convert all or any part of the outstanding and unpaid amount of this note
into fully paid and non-assessable shares of common stock, as such common stock exists on the issue date. The variable conversion
price shall mean seventy-five percent (75%) multiplied by the lowest one-day VWAP (representing a discount rate of twenty-five percent
(25%)) during the ten (10) Trading Day period ending on the latest complete trading day prior to the conversion date.
The borrower covenants that during the period the conversion
right exists, the borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive
rights, to provide for the issuance of common stock upon the full conversion of this note. The Company has established an initial
reserve of 13,500,000
shares of our common stock.
The Company shall make six payments in the amount of $15,583,
commencing
on March 11, 2022 and ending on August 11, 2022.
This note contains a number of additional covenants and other provisions, including default or penalty clauses, cross-default, right
to proceeds from other financings, reservation of share requirements and other such provisions, each as set forth in more detail
in the note and SPA. As of December 31, 2021, this note had accrued interest of $1,886
with the full outstanding balance. |
The
Company did not issue any shares to noteholders to convert outstanding notes during the nine months ended December 31, 2021.
During
the year ended March 31, 2021, the Company issued 93,197,109 shares of common stock to holders of convertible notes to retire $1,588,926
in principal and $111,749 of accrued interest (at an average conversion price of $0.01825 per share) under the convertible notes.
Interest
expense for the three and nine months ended December 31, 2021 was $93,258
and
$921,922,
respectively, compared to $289,503
and $901,913
during the prior year. Accrued interest at December
31, 2021 and March 31, 2021 was $86,502
and $14,722,
respectively.
NOTE
9 – STOCKHOLDERS’ EQUITY (DEFICIT)
COMMON
STOCK
As
of December 31, 2021, the Company was authorized to issue up to 400,000,000
shares of its common stock. As of December 31,
2021 and February 14, 2022 there were 290,421,214
and 299,908,214
shares, respectively, of common stock
issued and outstanding.
On
September 19, 2021, the Company’s Board of Directors (“BOD”) approved an amendment to the Company’s Articles
of Incorporation to increase the Company’s authorized common stock from 400,000,000
to 750,000,000
shares, which was subject to shareholder
approval under applicable laws of the Florida Business Corporations Act and the relevant proxy rules under the Securities Exchange
Act of 1934, as amended. To obtain this shareholder approval, the Company filed with the Securities and Exchange Commission a
Preliminary Proxy Statement on Schedule 14A on September 30, 2021, followed by its Definitive Proxy Statement on October 12, 2021,
calling for a special meeting of the stockholders, which was held on November 22, 2021. As previously disclosed on a Current Report
on Form 8-K to report the results of such special meeting, a quorum was present. The matters voted on and results of the special meeting
were as follows:
Proposal
1. The shareholders approved an amendment to our Articles of Incorporation to: (i) allow for consideration of the change of the name
of our Company to Sublingual Technologies Inc.; (ii) to allow, including under the Florida Business Corporations Act Section 607.1002,
action by our Board of Directors to affect a change in the name of our Company without further shareholder approval; and (iii) to increase
the total number of authorized shares of common stock, par value $.00001 per share (“Common Stock”) from 400,000,000 to 750,000,000
shares. The amendment to our articles of Incorporation was accepted for filing on January 3, 2022 and is effective as of this date.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
Fiscal
Year 2021
During
the year ended March 31, 2021, the Company issued 13,910,000
shares pursuant to put notices issued to Tangiers
under the equity line of credit facility that it had previously established with Tangiers Global LLC, with the Company receiving
proceeds in the amount of $369,482
($0.02614
to $0.03344
per share). On January 6, 2021, however, the
Company determined to terminate its equity line of credit agreement, and there has been no reportable activity related thereto since.
During
the year ended March 31, 2021, the Company issued 93,197,109 shares of common stock to holders of convertible notes to retire $1,588,926
in principal and $111,749 of accrued interest (at an average conversion price of $0.01825 per share) under the convertible notes.
During
the year ended March 31, 2021, the Company issued 7,687,500 shares for services rendered ($0.0306 to $0.050 per share).
During
the year ended March 31, 2021, the Company issued 5,740,000 shares for debt commitments valued at $253,869 ($0.028 to $0.092 per share).
During
the year ended March 31, 2021, the Company recognized $208,806 in beneficial conversion feature for convertible notes whereby the holder
can exercise conversion rights at a discount to the market price.
During
the year ended March 31, 2021, the Company issued 40,084,998 shares under stock purchase agreements in consideration for $1,587,214 ($0.024
to $0.09 per share) to accredited investors that are unrelated third parties.
During
the year ended March 31, 2021, the Company issued 2,500,000 shares to two directors at a value of $0.092 per share.
On
July 10, 2020, the Company’s Chief Executive Officer purchased 700,000 shares of the Company’s Common Stock for an aggregate
purchase price of $35,000, at $0.05 per share.
Pursuant
to the April 3, 2020, collaboration agreement the Company entered into with Aegea Biotechnologies Inc. (“Aegea”) the Company
issued to Aegea 5,000,000 unregistered common shares of Tauriga common stock. The shares were valued at $155,000 ($0.031 per share).
Fiscal
Year 2022
During
the nine months ended December 31, 2021, the Company issued 4,000,000 shares under stock purchase agreements in consideration for $242,000
($0.04 to $0.08 per share) to accredited investors that are unrelated third parties.
During
the nine months ended December 31, 2021, the Company issued 12,712,500 shares for services rendered ($0.039. to $0.129 per share).
During
the nine months ended December 31, 2021, the Company issued 4,837,000 shares for debt commitments valued at $339,500 ($0.04 to $0.129
per share).
During
the nine months ended December 31, 2021, the Company received $383,100 for shares to be issued. The Company recorded these funds as a
liability to issue stock as of December 31, 2021.
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 $707,928 and $348,470 in stock-based compensation expense related to
these agreements in the three months ended December 31, 2021 and 2020.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
9 – STOCKHOLDERS’ EQUITY (DEFICIT) (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.
The
following table summarizes option activity for the nine months ended December 31, 2021 and the year ended March 31, 2021:
SCHEDULE
OF STOCK OPTIONS ACTIVITY
| |
| | |
| | |
Weighted | |
| |
| |
| | |
Weighted- | | |
Average | |
| |
| |
| | |
Average | | |
Remaining | |
Aggregate | |
| |
| | |
Exercise | | |
Contractual | |
Intrinsic | |
| |
Shares | | |
Price | | |
Term | |
Value | |
| |
| | |
| | |
| |
| |
Outstanding at March 31, 2020 | |
| 133,334 | | |
$ | 7.50 | | |
1.85 Years | |
$ | — | |
| |
| | | |
| | | |
| |
| | |
Granted | |
| — | | |
| — | | |
| |
| | |
Expired | |
| — | | |
| — | | |
| |
| | |
Exercised | |
| — | | |
| — | | |
| |
| | |
| |
| | | |
| | | |
| |
| | |
Outstanding at March 31, 2021 | |
| 133,334 | | |
$ | 7.50 | | |
0.85 Years | |
$ | — | |
| |
| | | |
| | | |
| |
| | |
Granted | |
| — | | |
| — | | |
| |
| | |
Expired | |
| — | | |
| — | | |
| |
| | |
Exercised | |
| — | | |
| — | | |
| |
| | |
| |
| | | |
| | | |
| |
| | |
Outstanding and exercisable December 31, 2021 | |
| 133,334 | | |
$ | 7.50 | | |
0.15 Years | |
$ | — | |
NOTE
10 – PROVISION FOR INCOME TAXES
Deferred
income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income
tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in
effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized
based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities
and their respective tax bases.
The
following table summarizes the significant differences between the U.S. Federal statutory tax rate and the Company’s effective
tax rate for financial statement purposes for year and three months ended December 31, 2021 and March 31, 2021:
SCHEDULE
OF EFFECTIVE INCOME TAX RATE
| |
December 31, 2021 | | |
March 31,2021 | |
Federal income taxes at statutory rate | |
| 21.00 | % | |
| 21.00 | % |
State income taxes at statutory rate | |
| 0.00 | % | |
| 0.00 | % |
Temporary differences | |
| (0.799 | )% | |
| 11.83 | % |
Permanent differences | |
| 0.00 | % | |
| 0.03 | % |
Impact of Tax Reform Act | |
| 0.00 | % | |
| 0.00 | % |
Change in valuation allowance | |
| (20.201 | )% | |
| (32.86 | )% |
Totals | |
| 0.00 | % | |
| 0.00 | % |
Realization
of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and
carry-forwards are expected to be available to reduce taxable income. As the achievement of required future taxable income is uncertain,
the Company recorded a valuation allowance.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
10 – PROVISION FOR INCOME TAXES (CONTINUED)
SCHEDULE
OF DEFERRED TAX ASSETS
| |
As of | | |
As of | |
| |
December 31, 2021 | | |
March 31, 2021 | |
Deferred tax assets: | |
| | | |
| | |
Net operating losses before non-deductible items | |
$ | 5,409,510 | | |
$ | 4,599,765 | |
Stock-based compensation | |
| 767,237 | | |
| 543,375 | |
Unrealized gains (losses) on investments | |
| (26,660 | ) | |
| 164,666 | |
Total deferred tax assets | |
| 6,150,087 | | |
| 5,307,806 | |
Less: Valuation allowance | |
| (6,150,087 | ) | |
| (5,307,806 | ) |
| |
| | | |
| | |
Net deferred tax assets | |
$ | - | | |
$ | - | |
At
December 31, 2021, the Company had a U.S. net operating loss carry-forward in the approximate amount of $26 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 valuation allowance increased by $842,281 in
the three months ended December 31, 2021 and increased by $690,392 in the year ended March 31, 2021. The net decreases were the result
of the tax effects of the Tax Cuts and Jobs Act (the “TCJA”) offset by taxable losses net of timing differences in each of
the years.
NOTE
11 – 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, 2021
SCHEDULE OF INVESTMENT IN TRADING SECURITIES
Company | |
| |
Beginning of Period Cost | | |
Purchases | | |
Sales Proceeds | | |
End of Period Cost | | |
Fair Value | | |
Realized Gain(Loss) | | |
Unrealized Gain(Loss) | |
VistaGenTherapeutics Inc (VTGN) | |
(a) | |
$ | 287,500 | | |
$ | 277,500 | | |
$ | 302,827 | | |
$ | 408,750 | | |
$ | 1,246,050 | | |
$ | - | | |
$ | 837,300 | |
SciSparc Ltd.(SPRCY) | |
(b) | |
$ | - | | |
$ | 88,375 | | |
$ | - | | |
$ | 88,375 | | |
$ | 88,375 | | |
$ | - | | |
$ | - | |
Totals | |
| |
$ | 287,500 | | |
$ | 365,875 | | |
$ | 302,827 | | |
$ | 497,125 | | |
$ | 1,334,425 | | |
$ | - | | |
$ | 837,300 | |
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
11 – INVESTMENTS (CONTINUED)
TRADING
SECURITIES (CONTINUED)
Investment
in Trading Securities:
At
December 31, 2021
Company | |
| |
Beginning of Period Cost | | |
Purchases | | |
Sales Proceeds | | |
End of Period Cost | | |
Fair Value | | |
Realized Gain (Loss) | | |
Unrealized Gain (Loss) | |
VistaGen Therapeutics Inc (VTGN) | |
(a) | |
| 408,750 | | |
| 480,000 | | |
| 1,941,707 | | |
| 363,000 | | |
| 273,000 | | |
| 1,415,957 | | |
| (927,300 | ) |
SciSparc Ltd. (SPRCY) | |
(b) | |
| 88,375 | | |
| - | | |
| 18,140 | | |
| 60,597 | | |
| 53,397 | | |
| (9,638 | ) | |
| (7,200 | ) |
Neptune Wellness Solutions (NEPT) | |
(c) | |
| - | | |
| 102,201 | | |
| 89,200 | | |
| - | | |
| - | | |
| (13,002 | ) | |
| - | |
BLNK CALLS - 01/21/22 $75 | |
(d) | |
| - | | |
| 31,421 | | |
| - | | |
| 31,421 | | |
| 180 | | |
| - | | |
| (31,241 | ) |
Beyond Meat (BYND) | |
(e) | |
| - | | |
| 60,530 | | |
| 72,749 | | |
| - | | |
| - | | |
| 12,219 | | |
| - | |
BYND CALLS 11/19/21 $150 | |
(f) | |
| - | | |
| 67,182 | | |
| - | | |
| - | | |
| - | | |
| (67,182 | ) | |
| - | |
Jupiter Wellness (JUPW) | |
(g) | |
| - | | |
| 75,701 | | |
| 64,362 | | |
| - | | |
| - | | |
| (11,339 | ) | |
| - | |
Canoo, Inc. (GOEVW) | |
(h) | |
| - | | |
| 237,752 | | |
| 51,945 | | |
| 169,442 | | |
| 165,486 | | |
| (16,365 | ) | |
| (3,956 | ) |
MIND MEDICINE MINDMED INC. (MNMD) | |
(i) | |
| - | | |
| 123,067 | | |
| 110,179 | | |
| - | | |
| - | | |
| (12,887 | ) | |
| - | |
Odyssey Semiconductor Technologies Inc.(ODII) | |
(j) | |
| - | | |
| 40,228 | | |
| 11,740 | | |
| 20,761 | | |
| 9,310 | | |
| (7,727 | ) | |
| (11,451 | ) |
TLRY - CALL 12/17/21 $25 | |
(k) | |
| - | | |
| 71,663 | | |
| - | | |
| - | | |
| - | | |
| (71,663 | ) | |
| - | |
Axsome Therapeutics, Inc. | |
(l) | |
| - | | |
| 173,441 | | |
| 59,413 | | |
| 130,086 | | |
| 226,680 | | |
| 16,058 | | |
| 96,594 | |
Biosig Technologies Inc. | |
(m) | |
| - | | |
| 116,350 | | |
| 24,250 | | |
| 91,195 | | |
| 64,670 | | |
| (905 | ) | |
| (26,525 | ) |
Totals | |
| |
$ | 497,125 | | |
$ | 1,579,536 | | |
$ | 2,443,684 | | |
$ | 866,502 | | |
$ | 792,723 | | |
$ | 1,233,525 | | |
$ | (911,078 | ) |
*This
amount represents the cumulative unrealized loss as of December 31, 2021.
(a) |
During
the year ended March 31, 2021, the Company had exercised 230,000 warrant shares of VistaGen Therapeutics Inc. (VTGN) with a $0.50
strike acquired as part of a stock purchase agreement in addition to an additional 250,000 warrant shares with a strike price of
$0.50 per share purchased for $0.15 per share. During the year ended March 31, 2021, the Company sold 125,000 shares for proceeds
of $302,827 realizing a gain of $146,577. At March 31, 2021, the Company had 320,000 unexercised warrant shares with a strike price
of $1.50 per share. These shares were in the money $0.63 per share in the money. On May 18, 2021, the Company exercised 180,000 of
its Vistagen Therapeutics, Inc. five-year $1.50 registered warrants for $270,000 cash. On September 3, 2021 the Company exercised
its remaining 140,000 warrants at $1.50 for a cost of $210,000. During the nine months ended December 31, 2021, the Company sold
765,000 shares for proceeds $1,941,707 and a realized gain of $1,415,957. During the nine months ended December 31, 2021, the Company
had an unrealized loss of $927,300 for the shares held. |
|
|
(b) |
On
March 1, 2021, the Company invested $88,375 for 12,500 units of SciSparc Ltd. (formerly known as Therapix Biosciences Ltd.) (OTCQB:
SPRCY), a specialty, clinical-stage pharmaceutical company focusing on the development of cannabinoid-based treatments. The Company’s
investment (acquisition of an equity stake with warrants) into SciSparc Ltd., was pursuant to an $8,150,000 private placement offering,
comprised 1,152,628 Units to certain institutional and accredited investors in a private placement at an offering price of $7.07
per Unit. Each Unit consists of 1 American Depositary Share (“ADS”), 1 Series A Warrant and ½ Series B Warrant.
The Series A Warrants have an exercise price of $7.07, subject to adjustments therein. The Series B Warrants have an exercise price
equal to $10.60, subject to adjustments therein. The Series A Warrants and the Series B Warrants are exercisable six months from
the date of issuance and have a term of exercise equal to five years from the initial exercise date. 278,744 of the Units included
a Pre-Funded Warrant instead of an ADS. The Pre-Funded Warrants have an exercise price of $0.001 per full ADS. During the nine months
ended December 31, 2021, the Company sold 3,929 shares for proceeds of $18,140, realizing a loss of $9,638. During the nine months
ended December 31, 2021, the Company had an unrealized loss of $7,200. |
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
11 – INVESTMENTS (CONTINUED)
TRADING
SECURITIES (CONTINUED)
Investment
in Trading Securities (Continued):
(c) |
During
the nine months ended December 31, 2021, the Company purchased 75,000 shares of Neptune Wellness Solutions (NEPT) at a cost of $102,201
(average of $1.36 per share). During the nine months ended December 31, 2021, the Company sold all 75,000 shares for proceeds of
$89,200 and a realized loss of $13,002 (average $1.19 per share). |
|
|
(d) |
During
the nine months ended December 31, 2021, the Company purchased 180 CALL option contracts of Blink Charging Co with a strike price
of $75 and an expiration of January 21, 2022. These CALL options were purchased for $31,421 ($174.56 per contract). During the nine
months ended December 31, 2021, the Company had an unrealized loss of $31,241. |
|
|
(e) |
During
the nine months ended December 31, 2021, the Company purchased 500 shares of Beyond Meat, Inc. (BYND) at a cost of $60,530 ($121.06
per share). During the nine months ended December 31, 2021, the Company sold all 500 shares for proceeds of $72,749 and a realized
gain of $12,219 (average $121.06 per share). |
|
|
(f) |
During
the nine months ended December 31, 2021, the Company purchased 36 CALL option contracts of Beyond Meat, Inc. with a strike price
of $150 and an expiration of November 19, 2021. These CALL options were purchased for $67,182 ($1,866.18 per contract). During the
nine months ended December 31, 2021, the options expired worthless and the Company recognized a loss of $67,182. |
|
|
(g) |
During
the nine months ended December 31, 2021, the Company purchased 15,000 shares of Jupiter Wellness (JUPW) at a cost of $75,701 ($5.05
per share). During the nine months ended December 31, 2021, the Company sold all 15,000 shares for proceeds of $64,362 and a realized
loss of $11,339 (average $4.29 per share). |
|
|
(h) |
During
the nine months ended December 31, 2021, the Company purchased 103,333 warrants of Canoo, Inc. (GOEVW) at a cost of $237,790 (average
$2.30 per share). During the nine months ended December 31, 2021, the Company sold 23,000 warrants for $51,945 ($2.26 per share).
During the nine months ended December 31, 2021, the Company had an unrealized loss of $3,956 and a realized loss of $16,365). |
|
|
(i) |
During
the nine months ended December 31, 2021, the Company purchased 33,000 shares of Mind Medicine Mindmed Inc. (MNMD) at a cost of $123,222
(average $3.73 per share). During the nine months ended December 31, 2021, the Company sold all 33,000 shares realizing a loss of
$12,887. |
|
|
(j) |
During
the nine months ended December 31, 2021, the Company purchased 9,500 shares of Odyssey Semiconductor Technologies Inc. (ODII) at
a cost of $40,250 (average $4.23 per share). During the nine months ended December 31, 2021, the Company sold 4,600 shares for proceeds
of $11,740 and a realized loss of $7,727. The Company had an unrealized loss of $11,451 during the nine months ended December 31,
2021. |
|
|
(k) |
During
the nine months ended December 31, 2021, the Company purchased 220 CALL option contracts of Tilray, Inc. with a strike price of $25
and an expiration of December 17, 2021. These CALL options were purchased for $71,663 ($325.74 per contract). On December 17, 2021,
these options expired worthless and the Company realized a loss of $71,663. |
|
|
(l) |
During
the nine months ended December 31, 2021, the Company purchased 8,000 shares of Axsome Therapeutics, Inc. (AXSM) for $147,431 (average
$18.43 per share). During the nine months ended December 31, 2021, the Company sold 2,000 shares for proceeds of $59,413, realizing
a gain of $16,058. During the nine months ended December 31, 2021, the Company had an unrealized gain of $96,594. |
|
|
(m)
|
During
the nine months ended December 31, 2021, the Company purchased 36,500 shares of Biosig Technologies Inc. (BSGM) for $116,409 (average
$3.189 per share). During the nine months ended December 31, 2021, the Company sold 7,500 shares for proceeds of $24,250 (average
of $3.24 per share), realizing a loss of $26,525 per share. During the nine months ended December 31, 2021, the Company had an unrealized
loss of $905. |
At
December 31, 2021, the Company held warrants for AYTU to purchase 5,555 common shares at a strike price of $10.80 with an expiration
of March 6, 2023. The strike price and number of shares were adjusted for the August 10, 2018, 1 for 20 reverse stock-split and again
on December 8, 2020, as a result of a 1 for 10 shares held (herein referred to collectively as the “Reverse Stock Split”).
All share and per share amounts in this report have been adjusted to reflect the effect of the Reverse Stock Split. At December 31, 2021,
these warrants were out of the money by $106.65 per share and are not publicly traded, and the Company has not recognized the value of
these warrants as they are not liquid.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
11 – INVESTMENTS (CONTINUED)
At
December 31, 2021, the Company also held Series A Warrants and the Series B Warrants of SciSparc Ltd. (SPRCY). With each of the 12,500
Units, purchased by the Company, consisting of 1 ADS, 1 Series A Warrant and ½ Series B Warrant. The Series A Warrants have an
exercise price of $7.07, subject to adjustments therein. The Series B Warrants have an exercise price equal to $10.60, subject to adjustments
therein. The Series A Warrants and the Series B Warrants are exercisable six months from the date of issuance and have a term of exercise
equal to five years from the initial exercise date. These warrants are not publicly traded, and the Company has not recognized the value
of these warrants as they are not liquid.
COST
BASED INVESTMENTS
Paz
Gum LLC
Effective
February 5, 2021, the Company purchased five percent of the membership units in Paz Gum LLC, a Nevada limited liability company under
the terms of a Membership Unit Purchase Agreement for an aggregate purchase price of $50,000. The Company and Paz will endeavor to cross
market and increase sales of our products, along with such other products that Paz Gum undertakes in their discretion. This investment
was recorded at cost on the Company’s Condensed Consolidated Balance Sheet. The Company will test this investment annually for
impairment.
Aegea
Biotechnologies Inc.
On
April 3, 2020, Tauriga Sciences, Inc. entered into a collaboration agreement (“Collaboration Agreement”) with Aegea Biotechnologies
Inc. (“Aegea”), for the purpose of developing a Rapid, Multiplexed Novel Coronavirus (COVID-19) Point of Care Test with Superior
Sensitivity and Selectivity (the “SARS-Col 2 Test”).
On
January 6, 2021, however, the Company determined to terminate its equity line of credit agreement, which was the primary source of funding
for this collaboration agreement. This effectively eliminated our obligation to any additional funding to Aegea under the Collaboration
Agreement. As of March 31, 2021, the Company had invested $278,212 in Aegea for 69,553 shares, representing an ownership percentage of
1.02%. As of March 31, 2021, resultant delays of project milestones have led the Company to determined that full recovery of its investment
in Aegea is in doubt and has recorded a 50% impairment loss on its Condensed Consolidated Statement of Operations in the amount of $139,106.
Aegea is still moving forward on this project and the Company will continue to monitor the progress. There was no further activity or
investment in Aegea by us in the period ended December 31, 2021.
On
February 26, 2021, as part of a settlement agreement concluding the Collaboration Agreement, the Company acquired an additional 69,552
common shares of Aegea, increasing the Company’s total holdings to 139,104 Aegea shares (representing a 2.01% stake in Aegea as
of December 31, 2021).
Serendipity
On
October 31, 2018, the Company invested $35,000 in Serendipity Brands LLC (dba Serendipity Ice Cream Co.) (“Serendipity”),
a privately held Company. Serendipity is an ice cream distribution company providing wholesale distribution to retail customers. The
investment was recorded at cost and represented 0.24% of the value of Serendipity based on a pre-money valuation of approximately $14
million. The Company tested the investment value in Serendipity as of March 31, 2021 for impairment. It was evidenced that Serendipity
had raised significant capital during the year ended March 31, 2021 utilizing a pre-money valuation of $35 million, far exceeding the
basis of Tauriga’s investment, therefore, the Company did not believe there was any impairment of this investment as of March 31,
2021.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020
(US$)
(UNAUDITED)
NOTE
12 – FAIR VALUE MEASUREMENTS
The
following summarizes the Company’s financial assets and liabilities that are measured at fair value on a recurring basis at December
31, 2021 and March 31, 2021:
SUMMARY
OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON RECURRING BASIS
| |
December 31, 2021 | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Assets | |
| | | |
| | | |
| | | |
| | |
Investment-trading securities | |
$ | 792,723 | | |
$ | - | | |
$ | - | | |
$ | 792,723 | |
Cost method investment – Serendipity Brands | |
| - | | |
| - | | |
| 35,000 | | |
$ | 35,000 | |
Cost method investment - Aegea Biotechnologies, Inc. | |
| - | | |
| - | | |
| 139,106 | | |
$ | 139,106 | |
Cost method investment - Paz Gum LLC | |
| - | | |
| - | | |
| 50,000 | | |
$ | 50,000 | |
| |
March 31, 2021 | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Assets | |
| | |
| | |
| | |
| |
Investment-trading securities | |
$ | 1,334,425 | | |
$ | - | | |
$ | - | | |
$ | 1,334,425 | |
Cost method investment – Serendipity Brands | |
| - | | |
| - | | |
| 35,000 | | |
$ | 35,000 | |
Cost method investment - Aegea Biotechnologies, Inc. | |
| - | | |
| - | | |
| 139,106 | | |
$ | 139,106 | |
Cost method investment - Paz Gum LLC | |
| - | | |
| - | | |
| 50,000 | | |
$ | 50,000 | |
NOTE
13 – CONCENTRATIONS
During
the three months ended December 31, 2021, we had one supplier for our product CBD/CBG Tauri-GumTM. The Tauri-GumTM product
line represents approximately 35.6%
of net sales.
NOTE
14 – SUBSEQUENT EVENTS
On
September 19, 2021, the Company’s Board of Directors (“BOD”) approved an amendment to the Company’s Articles
of Incorporation to increase the Company’s authorized common stock from 400,000,000 to 750,000,000 shares, which was subject to
shareholder approval under applicable laws of the Florida Business Corporations Act and the relevant proxy rules under the Securities
Exchange Act of 1934, as amended. The Company held a special meeting of its stockholders on November 22, 2021, at which all recommended
proposals of the BOD were approved by the shareholders under the applicable rules related thereto, including the increase of our authorized
shares and a possible change of our Company name at a future date. The amendment to our Articles of Incorporation reflecting the result
of our special meeting was submitted to the Florida Secretary of State’s office, division of corporations, and accepted on January
3, 2022, on which date our charter has been amended and became effective.
On
January 3, 2022, we filed Trademark applications in the United States and the European Union for marks for each of TAURI-PET and TAURI-SUN.
A notice of Allowance was granted by the European Union Intellectual Property Office for the use of TAURI-SUN on January 25, 2022, registration
Serial No. 018567792. We await a further Notice of Allowance or comment upon TAURI-PET and TAURI-SUN from each of the United States Patent
and Trademark Office and the European Union Intellectual Property Office (other than the granted EU registration for TAURI-SUN noted
above).
We
have evaluated subsequent events from December 31, 2021 through the date of the filing of this periodic report, and other than as provided
above, no additional events require disclosure under Note 14.