NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS
The
unaudited condensed consolidated financial statements included herein have been prepared, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission (“SEC”). The condensed consolidated financial statements
and notes are presented as permitted on Form 10-Q and do not contain certain information included in the Company’s annual
statements and notes. Certain information and footnote disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.
It is suggested that these condensed consolidated financial statements be read in conjunction with the March 31, 2019 Form 10-K
filed with the SEC, including the audited consolidated financial statements and the accompanying notes thereto. While management
believes the procedures followed in preparing these condensed consolidated financial statements are reasonable, the accuracy of
the amounts is in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company
later in the year.
These
unaudited condensed consolidated financial statements reflect all adjustments, including normal recurring adjustments which, in
the opinion of management, are necessary to present fairly the operations and cash flows for the periods presented.
Nature
of Business
Tauriga
Sciences, Inc. (the “Company”) is a Florida corporation. The Company has, over time, moved into that of a diversified
life sciences technology company, with its mission to operate a revenue generating business, while continuing to evaluate potential
acquisition candidates operating in the life sciences technology space.
TAURI-GUM
TM
In
October 2018, the Company’s management, along with its board of directors, began to explore the possibility of launching
a cannabidiol (“CBD”) infused gum product line into the commercial marketplace. After several weeks of diligence,
discussions with various parties and exploratory meetings, the Company made the determination to move forward with this business
opportunity.
To
begin this process, during the quarter ended December 31, 2018, the Company began discussions with a Maryland based chewing gum
manufacturer - Per Os Biosciences LLC (“Per Os Bio”), which consummated in a manufacturing agreement in late December
2018 to launch and bring to market a white label line of CBD infused chewing gum under the brand name Tauri-Gum™. We have
filed for trademark protection with the United States Patent and Trademark Office for our CBD infused chewing product line, including
applications filed in April 2019 for TAURI-GUMMI
TM
and TAURI-GUMMIES
TM
.
Under
the terms of the agreement, Per Os Bio has committed to produce the Tauri-Gum
TM
based on the following criteria:
|
A.
|
By
composition, the CBD Gum will contain 10 mg of CBD Isolate
|
|
B.
|
The
initial production run will be mint flavor exclusively
|
|
C.
|
This
proprietary CBD Gum will be manufactured under U.S. Patent # 9,744,128 (“Method for manufacturing medicated chewing
gum without cooling”)
|
|
D.
|
Each
Production Batch, including the initial production run, is estimated to yield 70,000 gum tablets or 8,700 Units (each Unit
contains 8 gum tablets).
|
|
E.
|
Integrated
Quality Control Procedures: Each production batch will be tested by a 3
rd
Party for CBD label content, THC content
(0%), and clear for microbiology.
|
|
F.
|
The
packaging, for retail marketplace, will consist of 8 count (gum tablet count) blister card labeled (the “Pack(s)”)
with Lot # as well as Expiration Date.
|
|
G.
|
Outer
sleeve in the Company’s artwork and graphic design(s) and label copy
|
|
H.
|
Shipping
System: Bulk packed 266 Packs per master case (“Palletized”)
|
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
Nature
of Business (Continued)
TAURI-GUM
TM
(Continued)
Under
terms of the Agreement, the Company has committed to provide the following to Per Os Bio:
|
A.
|
Each
product order will consist of exactly 8,700 Packs (unless otherwise agreed upon by both parties).
|
|
B.
|
½
of initial production invoice due within 3 days of execution of Manufacturing Agreement (this has already been paid by the
Company).
|
|
C.
|
Provide
graphic design artwork, logo, and label design to Per Os Bio.
|
|
D.
|
Trademark
has been successfully filed with U.S.P.T.O.
|
|
E.
|
To
implement Kosher Certification Process
|
|
F.
|
Procure
appropriate Product & Liability insurance policy
|
|
G.
|
Acquire
legal opinion with respect to the confirmation of the legality to sell this CBD Gum – on the Federal Statute Level.
|
The
Company gum formulation includes distinctive features: allergen free, gluten free, vegan, kosher (K-Star certification), and incorporates
a proprietary manufacturing process. See our “Risk Factors” contained in this Annual Report, including with respect,
but not limited, to Federal laws and regulations that govern CBD and cannabis.
The
Company E-commerce website is www.taurigum.com. The Company has also secured storage space near its New York City headquarters.
During
the first quarter of fiscal year 2020, the Company began production of Blood Orange flavor of Tauri-Gum
TM
. The Company
plans to offer Pomegranate flavored Tauri-Gum
TM
in the near term, which will be in addition to their mint and blood
orange flavored products.
On
April 9, 2019, the Company announced that it is developing a special miniaturized version of Tauri-Gum
TM
for sale at
airport retail stores. The Company envisions this Airport version consisting of a miniaturized blister pack (containing three
pieces of its CBD Infused gum), with an anticipated retail price of $6.99 per unit.
The
Company is also working on developing CBD Gum-Infused Lollipops and gummi products.
Tauri-Gum
TM
Distribution Agreements
E&M
Ice Cream Company
On
April 1, 2019, the Company entered into a comprehensive distribution agreement with E&M Ice Cream Company (“E&M”)
to establish Tauri-Gum
TM
in the marketplace (the “E&M Distribution Agreement”). The Company has supported
the Tauri-Gum
TM
commercial launch with substantial levels of both financial resources and marketing support. The Company
had both received payment for and delivered the product for its previously announced $54,000 Tauri-Gum
TM
purchase order
during March 2019, and re-orders in the first quarter of fiscal 2020. The Company has agreed to issue a one-time issuance of 1,000,000
restricted shares of the Company’s common stock, and to tender a one-time cash payment of $125,000 to E&M. This $125,000
cash component was paid in full to E&M on April 1, 2019, and the value of the shares is reflected in stock-based compensation
based on the grant date of April 1, 2019. The Company is awaiting issuance instructions from E&M to issue the shares
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
Tauri-Gum
TM
Distribution Agreements (Continued)
South
Florida Region Distribution Agreement
On
April 8, 2019, the Company entered into a non-exclusive distribution agreement with IRM Management Corporation (“IRM”),
an established medical practice management firm (the “IRM Distribution Agreement”). The purpose of the IRM Distribution
Agreement is to target our Tauri-Gum™ product to the South Florida based medical market, including chiropractors, orthopedists,
as well as prospective retail customers in this geographic area.
Under
terms of this IRM Distribution Agreement, the Company will work closely with IRM to promote Tauri-Gum™. In connection with
this IRM Distribution Agreement, the Company has also agreed to a one-time issuance of 450,000 shares of the Company’s restricted
common stock and a cash stipend of $10,000 to IRM. As of the date of this report, only $2,000 of the $10,000 cash stipend has
been paid. The value of the shares will be reflected in stock-based compensation based on the grant date of April 8, 2019.
North
Eastern United States Distribution Agreement
On
April 30, 2019, the Company, entered into a non-exclusive comprehensive distribution agreement with Sai Krishna LLC (“SKL”),
a New Jersey based distributor, with relationships in the Northeast region of the United States and Asia, with the intention of
increasing and accelerating market penetration of the Company’s Tauri-Gum
TM
product line in the applicable regions.
In
connection with the SKL Agreement, the Company has agreed to issue a one-time issuance of an aggregate of 1,000,000 restricted
common shares the Company’s stock, which are subject to the customary resale and transfer restrictions imposed under the
rules and regulations of the Securities and Exchange Commission. The restricted equity issuance to SKL was issued in accordance
with the following schedule: (i) to Mr. Mahesh Lekkala, 500,000 restricted shares the Company’s common stock within ten
(10) business days of April 30, 2019; and (ii) to SKL, 500,000, which were permitted to be immediately allocated by SKL to persons
within its organization and, as such, (a) 250,000 of such shares shall be issued to SKL within ten (10) business days of April
30, 2019, and the additional issuance of (b) 250,000 of such shares shall be issued to SKL within ten (10) business days of August
1, 2019, which shares were issued on August 1, 2019. Other than the payment terms for Tauri-Gum
TM
product purchased
and distributed under the terms of the Agreement, there is no additional cash payment currently due or owing by the Company thereunder.
The value of the shares is reflected as stock-based compensation with a grant date of April 30, 2019. All but 250,000 shares are
expensed on this date, with those 250,000 shares valued over the term of the one-year agreement.
On
May 11, 2019, the Company entered into a sub-agreement pursuant to the SKL distribution agreement whereby Ms. Neelima Lekkala
was appointed Vice President of Distribution & Marketing. This contract has a one-year term and is and may be extended based
upon mutual agreement. Ms. Lekkala shall focus her efforts on the expansion of Tauri-Gum
TM
as well as revenue growth,
acquisition of new customers, establishment of professional marketing materials & protocols, logistics improvement(s) and
fulfillment services. Ms. Lekkala is deeded a non-affiliate and does not carry any type of fiduciary liability. Ms. Lekkala’s
compensation includes 250,000 shares of the Company’s restricted common stock deemed fully earned and vested upon the execution
of her consulting agreement. These shares were issued May 20, 2019, having a value of $18,275 based on the closing price of the
Company’s stock on that day ($0.0731 per share). Additionally, Ms. Lekkala will receive a 30% commission on total gross
sales through the sale of the Tauri-Gum
TM
product line which can be paid in either stock or cash at the election of
Ms. Lekkala.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
Tauri-Gum
TM
Distribution Agreements (Continued)
Windmill
Health Distribution Agreement
On
June 28, 2019, the Company entered into a distribution agreement with Windmill Health Products, LLC (“Windmill Health”),
a New Jersey based distributor, with the intention of increasing and accelerating market penetration of the Company’s Tauri-Gum
TM
product line. Simultaneous with the Company’s entry into the Windmill Health agreement, Windmill Health placed an
initial purchase order with us totaling $46,848, split evenly between packages of the Mint flavored and Blood-Orange flavored
chewing gum product lines. The Company did not contribute any capital or issue any equity to Windmill Health in connection with
the Windmill Health distribution agreement
Food
and Drug Administration
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 then extended by two weeks
following July 2
nd
.
2019
Increase in Authorized Shares
On
July 26, 2019, the Company held a meeting of its board of directors. The matters voted on and approved at the meeting included
an amendment to the Company’s Articles of Incorporation to increase the number of authorized shares of the Company’s
common stock, $0.00001 par value per share from 100,000,000 to 400,000,000 shares (the “Authorized Shares Increase”).
In this regard, a Preliminary Proxy Statement which was filed with the Securities and Exchange Commission on July 29, 2019.
2018
Reverse Stock Split
On
July 8, 2018, the Company implemented a Reverse Stock Split with a ratio of 1-for-75 (which became effective July 9, 2018). The
par value and other terms of the common stock were not affected by the Reverse Stock Split. In addition, the amendment to the
Company’s articles of incorporation that effected the Reverse Stock Split simultaneously reduced the number of authorized
shares of Common Stock from 7,500,000,000 to 100,000,000.
The
Reverse Stock Split affected all issued and outstanding shares of common stock, as well as common stock underlying stock options,
warrants and other convertible securities outstanding immediately prior to the effectiveness of the Reverse Stock Split. The Reverse
Stock Split has reduced the number of outstanding shares of the common stock outstanding prior to the Reverse Stock Split from
4,078,179,672 shares to 54,380,230 shares immediately following the Reverse Stock Split. No fractional shares were issued as a
result of the Reverse Stock Split, and any such stockholders whose number of post-split shares would have resulted in a fractional
number had his/her/its shares rounded up to the next number of shares. On July 30, 2018, the Company’s stock began trading
on the OTC:QB.
All
references set forth in this annual report to number of shares or per share data have been presented on a post reverse stock-split
basis.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
Cupuaçu
Butter Lip Balm
On
December 23, 2016, the Company entered into a non-exclusive, 12-month license agreement (the “License Agreement”)
with Cleveland, Ohio based cosmetics products company Ice + Jam LLC (“Ice + Jam”) to market Ice + Jam’s proprietary
cupuaçu butter lip balm, sold under the trademark
HerMan®
which launched
during the quarter ended December 31, 2017.During February of 2018, the Company’s strategy with respect to the
HerMan®
product was negatively impacted by a series of product defects relating to the twisting mechanism of the lip balm tube.
As a result of this and the concomitant halting of selling efforts, the Company had no sales of the
HerMan®
product during the three months ended June 30, 2019 or the year ended March 31, 2019. The Company has removed the product
from the website and the remaining inventory was written off as it was determined that the units were not usable. The Company
has discontinued this operation as of March 31, 2019. On April 1, 2019, the Company recognized a gain on the disposal of
discontinued operations in the amount of $4,941.
Honeywood
Following
the termination of a proposed 2014 merger between the Company and California-based Honeywood LLC (“Honeywood”), a
developer of a topical medicinal cannabis product, on August 1, 2017, the Company entered into a Debt Conversion Agreement, whereby
the Company agreed to convert an $170,000 note receivable due from Honeywood, including accrued interest into a 5% membership
interest in Honeywood.
The
Company made an assessment for impairment of its investment in Honeywood at the entity level. During the relationship between
the Company and Honeywood, Honeywood had a working capital deficiency and had a history of operating losses. In accordance with
Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”)
320-10-35-28, “
Investments—Debt
and Equity Securities
”, a Company may not record an impairment loss on the investment but shall continue to evaluate
whether the investment is impaired (that is, shall estimate the fair value of the investment) in each subsequent reporting period
until either of the following occurs: a) the investment experiences a recovery of fair value up to (or beyond) its cost; or b)
the entity recognizes an other-than-temporary impairment loss.
At the time of the Honeywood Conversion Agreement, the receivable
balance under the note of $199,119 had been fully written off by the Company in a prior period. As a result of the Honeywood Conversion
Agreement, the Company deemed the investment to still have no current value. The Company recorded this investment at $0. Thus,
no recovery of bad debt and no impairment will be recognized in this period.
Pilus
Energy
On
January 28, 2014, the Company acquired Pilus Energy, LLC (“Pilus”), an Ohio limited liability company and a developer
of alternative cleantech energy platforms using proprietary microbial solutions that create electricity while consuming polluting
molecules from wastewater.
On
December 22, 2016, the Company entered in a membership interest transfer agreement with Open Therapeutics whereby the Company
sold 80% of its membership interest in Pilus back to Open Therapeutics for consideration of the termination of 80% of the unexercised
portion of the warrants to purchase the Company’s common stock. Open Therapeutics agreed to pay to the Company 20% of the
net profit generated Pilus Energy from its previous year’s earnings, if any. Through June 30, 2019, there has been no activity
recorded by Open Therapeutics with respect to Pilus Energy.
On
January 12, 2019, the Company and Open Therapeutics agreed to extinguish a $75,000 contingent liability, whereby Open Therapeutics
was to receive the first $75,000 of net profit earned from the operations of Pilus Energy in exchange for a one-time issuance
of 500,000 restricted shares of Company’s common stock. The shares were recorded at a value of $24,750 ($0.0495 per share).
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
Tauriga
Biz Dev Corp
On
January 4, 2018, the Company announced that its Board of Directors unanimously approved the formation a wholly-owned subsidiary
focused on acquiring interest(s) in patents and other intellectual property. This subsidiary, incorporated in Delaware, was named
Tauriga IP Acquisition Corp. On March 25, 2018, the Company changed the name to Tauriga Biz Dev Corp. (“Tauriga BDC”).
On
March 29, 2018 the Company, through Tauriga BDC, entered into an independent sales representative agreement with Blink Charging
Co. (“Blink”) (Nasdaq: BLNK) to be a non-exclusive independent sales representative. Under the terms of this agreement
with Blink, the Company is permitted to solicit orders from potential customers for electric vehicle (“EV”) charging
station placement. Tauriga BDC will be compensated upon contracting for so long as the Company’s acquired prospect remains
under contract. This sales agreement is a three-tier model based on whether Tauriga BDC contracts the new customer to purchase
equipment outright from Blink or enter into one of two revenue-sharing agreements. In the case Tauriga BDC effectuates a sale
of Blink equipment it will receive a one-time sales commission based on the sales price of the equipment sale. In the case where
Tauriga BDC secures a revenue sharing agreement with a customer where Blink remains the owner, Tauriga BDC will be paid an on-going
commission based off of gross charger revenue, subject to which party paid for the installation. Commission payments under the
revenue sharing agreement are subject to minimum revenue generation hurdles.
On
June 29, 2018, the Company purchased four Blink Level 2 - 40” pedestal chargers for permanent placement in a retail location
or locations whereby the Company will pay a variable annual fee based on 7% of total revenue per charging unit. The rest of the
proceeds will be split 80/20 between the Company and the host location owner or its assignee. The host location owner to will
pay for the cost of providing power to these unit as well as installation costs.
As
of June 30, 2019, Tauriga BDC has not installed any of these machines in any locations and no revenue has been generated through
the Blink contract.
Tauriga
Sciences Limited
On
June 10, 2019, the Company formed a wholly owned subsidiary, Tauriga Sciences Limited, with the registrar of Companies for Northern
Ireland. Tauriga Sciences Limited is a private limited Company. The entity was established in conjunction with online merchant
services. In conjunction to this new entity the Company entered into a two-year lease commencing on June 11, 2019 and expiring
on June 30, 2021. The office is located at Regus World Trade Centre Muelle de Barcelona, edif. Sur, 2a Planta Barcelona Cataluña
08039 Spain. Monthly rent payments will be approximately $201 per month (based on the contractual rate of €178 multiplied
by the exchange rate of 1.13 on the day the lease agreement was entered into).
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-Gum
TM
product. During the three months ended March 31, 2019, the Company recognized sales of $57,134 and recognized a gross profit
of $20,006, which has continued into the first fiscal quarter ended June 30, 2019 where the Company recognized revenue of $44,377
and a gross profit of $14,959. During the first quarter of fiscal year 2020, the Company has entered into multiple distribution
agreements and has engaged an independent contractor to act as Vice President of Distribution and Marketing. Although the Company’s
working capital surplus of $499,657 at June 30, 2019, has remained constant in the past year, the Company still believes that
there is uncertainty with respect to continuing as a going concern.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
Going
Concern (Continued)
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 updated New York City Health Code now includes an embargoing of CBD-infused Edible(s) Products
(including packaged products). The Company is hopeful that the FDA as well as the New York City Council will implement regulations
surrounding the CBD industry in a logical and prompt manner. The FDA’s uncertainty surrounding CBD was the initial cause
of the New York City ban, and we believe further clarification from the FDA supporting its safety and regulating its labeling
will also offer a clearer pathway to the New York City CBD market. The Company is very well positioned in this argument 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 and that it contains
0% THC content. The Company remains confident that this embargo on CBD Edible(s) products will be lifted and/or clarified. As
a result of this embargo, the Company has taken the necessary steps to ensure that their marketing efforts are focused on areas
outside of New York City, while still maintaining their New York City (the 5 Boroughs) presence.
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 $444,785 at June 30, 2019. 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, it could result in the Company having to curtail or cease operations.
Currently,
the Company has a limited amount of shares of common stock available to issue under its articles of incorporation and has initiated
the process of increasing the authorized stock.
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 is in a stronger position it has been in in several years, 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 more than nominal sales and 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 unsuccessful, there can be no assurances that the revenues will be sufficient to enable it
to develop business to a level where it will generate profits and cash flows from operations. These matters raise substantial
doubt about the Company’s ability to continue as a going concern as determined by management. However, the accompanying
condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of
assets and satisfaction of liabilities in the normal course of business. These condensed consolidated financial statements do
not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might
be necessary should the Company be unable to continue as a going concern.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Condensed
Consolidated Financial Statements
The
condensed consolidated financial statements include the accounts and activities of Tauriga Sciences, Inc., its wholly-owned Canadian
subsidiary, its wholly-owned subsidiary Tauriga BDC and Tauriga Sciences Limited. All intercompany transactions have been eliminated
in consolidation. As of June 30, 2019, there is no activity in any of the Company’s subsidiaries other than Tauriga BDC
holding the electric car chargers and the leasehold interest in Tauriga Sciences Limited.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue
Recognition
In
May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This standard provides a single
set of guidelines for revenue recognition to be used across all industries and requires additional disclosures. The updated guidance
introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or
services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. The Company adopted the updated guidance effective October 1, 2017 as the Company commenced sales of
HerMan®
using the full retrospective method. The new standard did not have a
material impact on its financial position and results of operations, as it did not change the manner or timing of recognizing
revenue.
Under
ASC 606, in order to recognize revenue, the Company is required to identify an approved contract with commitments to preform respective
obligations, identify rights of each party in the transaction regarding goods to be transferred, identify the payment terms for
the goods transferred, verify that the contract has commercial substance and verify that collection of substantially all consideration
is probable. The adoption of ASC 606 did not have an impact on the Company’s operations or cash flows.
On
March 29, 2018 the Company, through Tauriga 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. Tauriga BDC will be compensated upon contracting for so long as the Company’s
acquired prospect remains under contract. This sales agreement is a three-tier model based on whether Tauriga BDC contracts the
new customer to purchase equipment outright from Blink or enter into one of two revenue-sharing agreements. In the case Tauriga
BDC effectuates a sale of Blink equipment it will receive a one-time sales commission based on the sales price of the equipment
sale. In the case where Tauriga BDC secures a revenue sharing agreement with a customer where Blink remains the owner, Tauriga
BDC will be paid an on-going commission based off of gross charger revenue, subject to which party paid for the installation.
Commission payments under the revenue sharing agreement are subject to minimum revenue generation hurdles.
On
June 29, 2018, the Company purchased four Blink Level 2 - 40” pedestal chargers for permanent placement in a retail location
or locations whereby the Company will pay a variable annual fee based on 7% of total revenue per charging unit. The remainder
of the proceeds will be split 80/20 between the Company and the host location owner or its assignee. The host location owner to
will pay for the cost of providing power to these unit as well as installation costs.
As
of June 30, 2019, the Tauriga BDC has not installed any of these machines in any locations, and no revenue has been generated
through the Blink contract.
During
the three months ended March 31, 2019, the Company recognized its first sales of Tauri-Gum
TM
, primarily vis-à-vis
its entry in the E&M Distribution Agreement.
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 revenue from operations in the amount of $44,377 during the three months ended
June 30, 2019 compared to no revenue for the same period in the prior year. All revenue is from the sale of the Company’s
Tauri-Gum
TM
product line and there were accounts receivable of $28,028 currently outstanding for these sales.
The
Company recognized no revenue from discontinued operations during the three months ended June 30, 2018 which was related to the
sales of the HERMAN® lip balm product.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
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-Gum
TM
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 June 30, 2019 however will monitor the refunds to estimate whether a reserve will be required.
Use
of Estimates
The
preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Cash
Equivalents
For
purposes of reporting cash flows, cash equivalents include investment instruments purchased with an original maturity of three
months or less. At June 30, 2019, the Company’s cash on deposit with financial institutions did not exceed the total FDIC
insurance limit of $250,000. At June 30, 2019 and March 31, 2019, the Company had a cash balance of $15,247 and $385,943, respectively.
The Company’s does not expect, in the near term, for its cash balance to exceed the total FDIC insurance limit of $250,000
for other than very short periods of time where the Company would use such cash in excess of insurance in the very short-term
in operating activities. To reduce its risk associated with the failure of such financial institution, the Company holds its cash
deposits in more than one financial institution and evaluates at least annually the rating of the financial institution in which
it holds its deposits. The Company had no cash equivalents as of June 30, 2019 and March 31, 2019.
Investment
in Trading Securities
Investment
in trading securities consist of investments in shares of common stock of companies traded on public markets as well as publicly
traded warrants of these companies should there be a market for them. These securities are carried on the Company’s balance
sheet at fair value based on the closing price of the shares owned on the last trading day before the balance sheet date of this
report. Fluctuations in the underlying bid price of the stocks result in unrealized gains or losses. The Company recognizes these
fluctuations in value as other income or loss.
For
investments sold, the Company recognizes the gains and losses attributable to these investments as realized gains or losses in
other income or loss.
Investment
– Cost Method
Investment
in other companies that are not currently trading, are valued based on the cost method as the Company holds less than 20% ownership
in these companies and has no influence over operational and financial decisions of the companies. The Company will evaluate,
at least annually, whether impairment of these investments is necessary under ASC 320. As of June 30, 2019, the Company has not
impaired any of their cost method investments.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 fulfillment center
is also included in the total inventory cost. Shipping of product upon sale for online sales is paid by the customer upon ordering
for orders of single packs of Tauri-Gum
TM
. For multiple pack or wholesale product orders shipping cost is paid by the
Company. As of June 30, 2019, the Company’s inventory on hand had a value of $138,606. The Company also has paid deposits
in the amount of $52,500 to the manufacturer, Per Os Bio, towards orders not received as of June 30, 2019. Amounts paid to Per
Os Bio for Tauri-Gum
TM
are classified as deposits (other current asset) on the Company’s condensed consolidated
balance sheet until the goods are available for sale. The Company has not established any inventory reserve on the Tauri-Gum
TM
as of June 30, 2019.
Property
and Equipment
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.
Intangible
Assets
Intangible
assets consisted of licensing fees and a patent prior to being impaired which were stated at cost. Licenses were amortized over
the life of the agreement and patents were amortized over the remaining life of the patent at the date of acquisition.
Net
Income (Loss) Per Common Share
The
Company computes per share amounts in accordance with FASB ASC Topic 260 “
Earnings per Share
” (“EPS”),
which requires presentation of basic and diluted EPS. Basic EPS is computed by dividing the income (loss) available to common
stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average
number of shares of common stock and common stock equivalents outstanding during the periods; however, potential common shares
are excluded for period in which the Company incurs losses, as their effect is anti-dilutive. For the three months ended June
30, 2019, 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, “E
quity-Based Payments
to Non-Employees
.” Under ASC 505-50, the Company determines the fair value of the warrants or stock-based compensation
awards granted on the grant date as either the fair value of the consideration received, or the fair value of the equity instruments
issued, whichever is more reliably measurable. Any stock options or warrants issued to non-employees are recorded in expense and
an offset to additional paid-in capital in stockholders’ equity over the applicable service periods using variable accounting
through the vesting dates based on the fair value of the options or warrants at the end of each period.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-Based
Compensation (Continued)
The
Company issues stock to consultants for various services. The costs for these transactions are measured at the fair value on the
grant date of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.
The Company recognized consulting expense and a corresponding increase to additional paid-in-capital related to stock issued for
services over the term of the related services.
Reclassifications
Certain
prior year amounts have been reclassified to conform to the current period presentation. The reclassifications had no effect on
the net loss or cash flows of the Company.
Impairment
of Long-Lived Assets
Long-lived
assets, primarily fixed assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of the assets might not be recoverable. The Company will perform a periodic assessment of assets for impairment in the
absence of such information or indicators. Conditions that would necessitate an impairment assessment include a significant decline
in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or a significant
adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. For long-lived
assets to be held and used, the Company would recognize an impairment loss only if it’s 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 $3,852 for the three months ended
June 30, 2019 compared to no expense during the same period in the prior year. The Company is continually evaluating products
and technologies in the natural wellness space, including its Tauri-Gum
TM
product including new flavor formulations
and other CBD delivery products, as well as any intellectual property or other related technologies. As the Company investigates
and develops relationships in these areas, resultant expenses for trademark filings, license agreements, website and product development
and design materials will be expensed as research and development. Some costs will be accumulated for subsidiaries prior to formation
of any new entities.
Fair
Value Measurements
ASC
820 “
Fair Value Measurements
” defines fair value, establishes a framework for measuring fair value in generally
accepted accounting principles and expands disclosure about fair value measurements.
The
following provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped
into Levels 1 to 3 based on the degree to which fair value is observable:
Level
1- fair value measurements are those derived from quoted prices (unadjusted in active markets for identical assets or liabilities);
Level
2- fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level
3- fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are
not based on observable market data (unobservable inputs).
Financial
instruments classified as Level 1 – quoted prices in active markets include cash.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair
Value Measurements (Continued)
These
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.
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.
The
Company has multiple notes that contain discount provisions whereby the holder can exercise conversion rights at a discount to
the market price for a 15-day trailing period based on the market volume average weighted price. ASC 470-20 defines this as a
beneficial conversion feature which that shall be recognized separately at issuance by allocating a portion of the proceeds equal
to the intrinsic value, not to exceed the face value of the note, to additional paid in capital. This segmented value, is to be
amortized using the effective interest method over the term of the note.
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.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income
Taxes (Continued)
Future
tax assets and liabilities are measured using enacted or substantially enacted income tax rates expected to apply when the asset
is realized, or the liability settled. The effect of a change in income tax rates on future income tax liabilities and assets
is recognized in income in the period that the change occurs. Future income tax assets are recognized to the extent that they
are considered more likely than not to be realized.
ASC
740 “
Income Taxes
” clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s
financial statements. This standard requires a company to determine whether it is more likely than not that a tax position will
be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a
company must measure the tax position to determine the amount to recognize in the financial statements.
As
a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with
recognition and measurement standards established by ASC 740 and concluded that the tax position of the Company does not meet
the more-likely-than-not threshold as of June 30, 2019.
Recent
Accounting Pronouncements
In
June 2018, the FASB issued ASU No. 2018-07,
“Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee
Share-Based Payment Accounting”
which addresses accounting for issuance of all share-based payments on the same accounting
model. Previously, accounting for share-based payments to employees was covered by ASC Topic 718 while accounting for such payments
to non-employees was covered by ASC Subtopic 505-50. As it considered recently issued updates to ASC 718, the FASB, as part of
its simplification initiatives, decided to replace ASC Subtopic 505-50 with Topic 718 as the guidance for non-employee share based
awards. Under this new guidance, both sets of awards, for employees and non-employees, will essentially follow the same model,
with small variations related to determining the term assumption when valuing a non-employee award as well as a different expense
attribution model for non-employee awards as opposed to employee awards. The ASU is effective for public business entities beginning
in 2019 calendar years and one year later for non-public business entities. The Company has determined that there is not a material
impact on their 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. Early adoption is permitted. The Company has adopted this standard as of April
1, 2019 (See Note 6).
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 consolidated financial position or operating results.
Subsequent
Events
In
accordance with ASC 855 “
Subsequent Events
” the Company evaluated subsequent events after the balance sheet
date through the date of issuance.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
3– INVENTORY
Inventory
from continuing operations
Inventory
value by product as of:
|
|
June 30, 2019 (unaudited)
|
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
Tauri-Gum
TM
|
|
$
|
138,606
|
|
|
$
|
10,872
|
|
|
|
|
|
|
|
|
|
|
Total Inventory
|
|
$
|
138,606
|
|
|
$
|
10,872
|
|
At
June 30, 2019, deposits to Per Os Bio in the amount of $52,500 for the manufacturing costs of Tauri-Gum
TM
have been
classified as a deposit (prepaid expenses other current assets) on the Company’s condensed consolidated balance sheet, as
the goods are not yet available for sale.
At
March 31, 2019, the Company had deposits to Per Os Bio in the amount of $105,000 for the manufacturing costs of Tauri-Gum
TM
for goods not yet available for sale.
NOTE
4– DISCONTINUED OPERATIONS
On
March 31, 2019, the Company decided to discontinue operations relative to its HERMAN© Lip balm product line. After much effort
the Company was unable to resolve manufacturing issues as it related to it its lip balm tube mechanism. The Company did not believe
that these issues will be resolvable without a substantial investment of time and money. Therefore, the Company exchanged its
50% ownership in Ice+Jam, LLC for the balance of the non-controlling interest as of March 31, 2019. On April 1, 2019, the Company
recognized a gain on the disposal of discontinued operations in the amount of $4,941.
The
Company had no revenue or expenses from discontinued operations during the three months ended June 30, 2018.
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
BALANCE
SHEETS FROM DISCONTINUED OPERATIONS
|
|
June 30, 2019 (unaudited)
|
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
Assets from discontinued operations
|
|
$
|
-
|
|
|
$
|
581
|
|
|
|
|
|
|
|
|
|
|
Liabilities from discontinued operations
|
|
$
|
-
|
|
|
$
|
5,522
|
|
NOTE
5– PROPERTY AND EQUIPMENT
The
Company’s property and equipment is as follows:
|
|
June 30, 2019 (unaudited)
|
|
|
March 31, 2019
|
|
|
Estimated Life
|
|
|
|
|
|
|
|
|
|
Computers, office furniture and other equipment
|
|
$
|
69,808
|
|
|
$
|
69,808
|
|
|
3-5 years
|
|
|
|
|
|
|
|
|
|
|
|
Less: accumulated depreciation
|
|
|
(57,030
|
)
|
|
|
(56,798
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
12,778
|
|
|
|
13,010
|
|
|
|
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
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 will share revenue from these electric car vehicle charging units with such location
owner. No depreciation expense has been recorded for the charging units as of June 30, 2019 due to the fact that they have not
been placed in service.
Depreciation
expense for the three months ended June 30, 2019 and 2018 was $232 and $259, respectively.
During
the year ended March 31, 2019 the Company disposed of computer equipment valued at $1,632 recognizing a loss on disposal of $907.
NOTE
6 – OPERATING LEASE
The
Company has adopted ASU No. 2016-02,
Leases (Topic 842)
, as of April 1, 2019 and will account for the new lease 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 April 1, 2019, the Company will record additional net lease right of use asset
and a lease liability at present value of approximately $7,492 and $7,895, respectively, as of April 1, 2019. The
Company is recording these at present value, in accordance with the standard, using a discount rate of 8% which is
representative of the last borrowing rates for notes issued to a non-related party. The right of use asset is composed of the
sum of all lease payments, at present value, and is amortized straight line over the life of the expected lease term. For the
expected term of the lease the Company will use the initial term of the two-year lease. If the Company does elect to exercise
its option 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.
The
Company has chosen to implement this standard using the modified retrospective model approach with a cumulative-effect adjustment,
which does not require the Company to adjust the comparative periods presented when transitioning to the new guidance on April
1, 2019. The Company has also elected to utilize the transition related practical expedients permitted by the new standard. The
modified retrospective approach provides a method for recording existing leases at adoption and in comparative periods that approximates
the results of a modified retrospective approach. Adoption of the new standard resulted in the recording of additional net lease
assets and lease liabilities of approximately $7,492 and $7,895 as of April 1, 2019, respectively. The difference between the
additional lease assets and lease liabilities, net of the deferred tax impact, will be recorded as an adjustment to retained earnings.
The standard is not expected to materially impact our consolidated net earnings and had no impact on cash flows.
Corporate
office – New York
On
December 1, 2017, the Company relocated its corporate headquarters from Danbury, Connecticut to New York, New York. The Company
has entered into a two-year lease at $1,010 per month for the term of the lease. The lease right of use asset for this lease at
adoption was $7,492 and will be amortized on a straight-line basis over the remaining term of the lease. For the three months
ended June 30, 2019 the Company recorded a lease expense of $2,810. As of June 30, 2019, the value of the unamortized lease right
of use asset is $4,683. As of June 30, 2019, the Company’s lease liability was $4,984.
Barcelona
office
On
June 11, 2019 the Company entered into a two-year lease, expiring on June 30, 2021. The office is located at Regus World Trade
Centre Muelle de Barcelona, edif. Sur, 2a Planta Barcelona Cataluña 08039 Spain. Monthly rent payments will be approximately
$201 per month (based on the contractual rate of €178 multiplied by the exchange rate of 1.13 on the day the lease agreement
was entered into). In accordance with ASC 842 - Leases, effective June 11, 2019, the Company will record additional net
lease right of use asset and a lease liability at present value of approximately $4,574, respectively as a result of this lease.
The lease will be initially recorded using an exchange rate of 1.13. Any fluctuations in the currency rate will be recorded as
gain or loss on currency translation.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
6 – OPERATING LEASE (CONTINUED)
The
lease right of use asset, at inception, of $27,050 amortized on a straight-line basis over the term of the lease.
The present value of the New York corporate office lease had an initial present value of $22,476 at December 1, 2017. The Barcelona
office lease value had an initial present value of $4,573. For the three months ended June 30, 2019 the Company recorded a
lease expense of $3,149. As of June 30, 2019, the value of the unamortized lease right of use asset is $9,071. As of June
30, 2019, the Company’s lease liability was $9,471.
Maturity of Operating Lease Liability for fiscal year ended June 30,
|
2020
|
|
$
|
6,665
|
|
2021
|
|
$
|
2,288
|
|
2022
|
|
$
|
518
|
|
|
|
|
|
|
Total lease payments
|
|
$
|
9,471
|
|
The
following chart shows the Company’s operating lease cost at June 30, 2019 and 2018:
|
|
For the three months ended
|
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
Amortization of right of lease asset
|
|
$
|
2,996
|
|
|
$
|
-
|
|
Lease interest cost
|
|
|
153
|
|
|
|
-
|
|
Total Lease cost
|
|
$
|
3,149
|
|
|
$
|
-
|
|
The
following chart shows the Company’s operating lease liability at June 30, 2019.
Discounted Operating Lease liability at inception - December 1, 2017
|
|
$
|
27,050
|
|
Financing cost
|
|
|
1,055
|
|
Less lease payments made
|
|
|
(18,204
|
)
|
Cumulative effect of adoption of ASC 842
|
|
|
(430
|
)
|
Operating lease liability at June 30, 2019
|
|
|
9,471
|
|
Less Lease Liability current portion
|
|
|
(7,300
|
)
|
Lease Liability at June 30, 2019 – long-term
|
|
$
|
2,171
|
|
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
7 – INTANGIBLE ASSETS
Patents:
Pilus
Energy, LLC
The
Company, through the acquisition of Pilus Energy on January 28, 2014, acquired a patent to develop cleantech energy using proprietary
microbiological solution that creates electricity while consuming polluting molecules from wastewater.
On
December 22, 2016, the Company entered in a membership interest transfer agreement with Open Therapeutics whereby the Company
sold 80% of its membership interest in Pilus to Open Therapeutics. Open Therapeutics agreed to terminate and cancel 80% of the
unexercised portion of Open Therapeutics agreed to pay to the Company 20% of the net profit generated by Pilus Energy from
its previous year’s earnings, if any. The first $75,000 of such payments were to be retained by Pilus Energy as additional
consideration for the sale, which was reflected as a contingent liability on the Company’s consolidated balance sheet. The
Company further agreed it would vote its 20% membership interest in Pilus Energy in the same manner that Open Therapeutics votes
its membership interest on all matters for which a member vote is required. Through June 30, 2019, there has been no activity
recorded by Open Therapeutics with respect to Pilus Energy.
The
Company had fully impaired the value of the patents prior to the sale, and the warrants canceled as a result of this transaction
was valueless as there is no intrinsic value to them. The Company recorded no gain or loss. Upon Open Therapeutics achieving profitability
with respect to this technology, the Company will be the beneficiary of a profit split as noted in the agreement and will recognize
revenue from that in the future.
On
January 12, 2019, the Company and Open Therapeutics agreed to extinguish the $75,000 contingent liability in exchange for a one-time
issuance of 500,000 restricted shares of Company’s common stock. The shares were recorded at a value of $24,750 ($0.0495
per share) as a loss on settlement in the Company’s consolidated financial statements.
NOTE
8 – NOTES PAYABLE
Notes
payable and convertible notes consisted of the following as of:
|
|
|
|
June 30, 2019
|
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
Alternative Strategy Partners PTE Ltd.
|
|
(a)
|
|
$
|
-
|
|
|
$
|
90,000
|
|
GS Capital Partners LLC - Oct 2018
|
|
(b)
|
|
|
140,000
|
|
|
|
180,000
|
|
GS Capital Partners LLC - Mar 2019
|
|
(c)
|
|
|
300,000
|
|
|
|
300,000
|
|
GS Capital Partners LLC - May 2019
|
|
(d)
|
|
|
60,000
|
|
|
|
-
|
|
GS Capital Partners LLC - Jun 2019
|
|
(e)
|
|
|
60,000
|
|
|
|
-
|
|
Total notes payable and convertible notes
|
|
|
|
$
|
560,000
|
|
|
$
|
570,000
|
|
Less - note discounts
|
|
|
|
|
(324,580
|
)
|
|
|
(356,125
|
)
|
Less - current portion of these notes
|
|
|
|
|
(235,420
|
)
|
|
|
(213,875
|
)
|
Total notes payable and convertible notes, net discounts – long-term
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
8 – NOTES PAYABLE (CONTINUED)
(a)
|
Three-month
$180,000 non-convertible debenture dated September 23, 2015 bearing and interest rate of 11.50% per annum. The note matured
in December 2015. The Company received cash of $90,000 ($75,000 wired directly to the Company and $15,000 wired directly from
Alternative Strategy Partners PTE Ltd. (“ASP”) to compensate a consultant. The balance of this note ($90,000)
was to be wired directly to a Japanese based consumer product firm called Eishin, Inc. (“Eishin”), but the holder
never provided any documentation evidencing that $90,000 was paid to Eishin. The Company is in dispute with the noteholder,
and the Company has not recorded this liability as of December 31, 2018 or March 31, 2018. If the proper documentation is
provided to the Company, the Company will record the liability at that time. The Company has not received any type of default
notice with respect to this $180,000 non-convertible note. Additionally, the Company has not received any shares in Eishin
up to this point. The Company did follow up with Eishin in March 2017, and it was noted that Eishin did not reflect the Company
as having this ownership. As a result, the additional $90,000 has not been recognized as outstanding. Upon settlement, this
note had accrued interest of $23,468. As a result, the Company and ASP, on May 29, 2019, agreed and acknowledged that they
shall have no debt, liability or any obligation between them and that the ASP Loan Agreement is immediately retired (except
with respect to the assignment and transfer of the Eishin shares noted above). Since the Eishen rights were not valued on
the Company’s balance sheet, the $113,468 liability has been removed from the Company’s balance sheet, as is reflected
in the Company’s financial statement as a gain on extinguishment of debt in the amount of $113,467 during the
three months ended June 30, 2019.
|
|
|
(b)
|
On
October 25, 2018, the Company entered into a one-year $180,000 convertible note bearing 8% interest with GS Capital Partners,
LLC. The note has an original issue discount of $11,750. A portion of the proceeds will be used to retire the two remaining
convertible notes on the books of the Company as of December 31, 2018 with GS Capital Partners, LLC. The face value of this
note plus accrued interest under the note are convertible into shares of the Company’s common stock at a price for each
share of common stock equal to 70% of the lowest daily VWAP of the common stock as reported on the National Quotations Bureau
OTC Markets market on which the Company’s shares are traded or any exchange upon which the common stock may be traded
in the future, for the 15 prior trading days including the day upon which a notice of conversion is received by the Company
or its transfer agent. In the event the Company experiences a DTC “chill” on its shares, the conversion price
shall be decreased to 60% instead of 70% while that “chill” is in effect. Due to the discount to market conversion,
a beneficial conversion feature was recorded on this note as a discount to the note in the amount of the $108,111 which will
be amortized over the life of the note. This amortization will be reflected as interest cost ratably over the term of the
note. Upon an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally,
upon an event of default, notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest
permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions. This note contains
a provision where if the Company shall have defaulted on or breached any term of any other note of similar debt instrument
into which the Company has entered and failed to cure such default within the appropriate grace period they would be considered
in default of this note. During the first six months this note is in effect, the Company may redeem by paying to GS Capital
Partners, LLC an amount as follows: (i) if the redemption is within the first 90 days either note is in effect, then for an
amount equal to 120% of the unpaid principal amount of either note along with any interest that has accrued during that period,
and (ii) if the redemption is after the 91st day the either note is in effect, but less than the 180th day, then for an amount
equal to 133% of the unpaid principal amount of either note along with any accrued interest. On June 7, 2019, GS Capital Partners,
LLC converted $40,000 of principal and $1,973 of accrued interest into 888,308 shares of common stock. Accrued interest as
of June 30, 2019 was $8,227.
|
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
8 – NOTES PAYABLE (CONTINUED)
(c)
|
On
March 14, 2019, the Company entered into a 12-month $300,000 principal face value 8.0% convertible debenture with GS Capital
Partners, LLC, with a maturity date of March 13, 2020. The GS Capital Note carries $20,000 original issue discount (OID) and,
as such, the initial net proceeds to the Company was $280,000. In connection with this agreement, the Company is obligated
to issue 750,000 commitment shares having a value of $142,500 ($0.19 per share) which is reflected as interest expense in
the Company’s consolidated statement of operations during the year ended March 31,2019. These shares were not issued
as of March 31, 2019. The Holder is entitled, at its option, 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 for each share of Common Stock equal
to 68% of the lowest daily VWAP of the Common Stock as reported on the National Quotations Bureau OTC Markets exchange for
the fifteen (15) prior trading days. Due to the discount to market conversion, a beneficial conversion feature was recorded
on this note as a discount to the note in the amount of the full face value of the note which will be amortized over the life
of the note. This amortization will be reflected as interest cost ratably over the term of the note. The GS Capital Note may
be redeemed by the Company during the first six months from execution, as follows: (i) if the redemption is within the first
90 days, then for an amount equal to 120% of the unpaid principal amount, with any accrued interest; (ii) if the redemption
is after the 91st day, but less than the 180th day, then for an amount equal to 133% of the unpaid principal amount, with
any accrued interest. The GS Capital Note may not be redeemed after 180 days from the date of execution. At June 30, 2019,
this note had accrued interest of $8,219. Also, in conjunction with this note, the 213,334 five-year cashless warrants, associated
with the June 27, 2017, $80,000 5% one-year note were fully cancelled.
|
|
|
(d)
|
On
May 24, 2019, the Company entered into a one year 8% $60,000 Convertible Note with GS Capital Partners, LLC pursuant to the
terms of a Securities Purchase Agreement. The GS Capital Note has a maturity date of May 23, 2020 and carried a $5,000 original
issue discount (such that $55,000 was funded to the Company on May 24, 2019. The holder is entitled, at its option, at any
time after cash payment, to convert all or any amount of the principal face amount of the GS Note then outstanding into shares
of the Company’s common stock at a price for each share of common stock equal to 66% of the lowest daily volume weighted
average price (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, for the fifteen (15) prior trading
days including the day upon which a notice of conversion is received by the Company or its transfer agent. Such conversion
shall be effectuated by the Company delivering the shares of common stock to the holder within 3 business days of receipt
by the Company of the notice of conversion. Accrued but unpaid interest shall be subject to conversion. To the extent the
conversion price of the Company’s common stock closes below the par value per share, the Company will take all steps
necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company
agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC “Chill”
on its shares, the conversion price shall be decreased to 56% instead of 66% while that “Chill” is in effect.
In no event shall the holder be allowed to affect a conversion if such conversion, along with all other shares of the Company
common stock beneficially owned by the holder and its affiliates would exceed 9.9% of the outstanding shares of the common
stock of the Company. During the first six months that the GS Capital Note is in effect, the Company may redeem the GS Note
by paying to the holder an amount as follows: (i) if the redemption is within the first 90 days of the issuance date, then
for an amount equal to 120% of the unpaid principal amount of this Note along with any interest that has accrued during that
period, (ii) if the redemption is after the 91st day, but less than the 180th day of the issuance date, then for an amount
equal to 133% of the unpaid principal amount of this Note along with any accrued interest. The GS Note may not be redeemed
after 180 days. The Company may not redeem the GS Capital Note after the 180th day from entering into it. Upon an event of
default, among other default provisions set forth in the GS Capital Note, (i) 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. (ii) if the Company shall fail to deliver to the holder the shares of common stock without restrictive legend (when
permissible in accordance with applicable law) within three (3) business days of its receipt of a notice of conversion, then
the Company shall pay a penalty of $250 per day the shares are not issued beginning on the 4th day after the conversion notice
was delivered to the Company (which shall be increased to $500 per day beginning on the 10th day); (iii) if the Company’s
stock ceases to be listed on an exchange, its stock is suspended from trading for more than 10 consecutive trading days or
the Company ceases to file its reports with the SEC under the Securities Exchange Act of 1934, as amended, then the outstanding
principal due under the GS Capital Note shall increase by 50%; or (iv) if the GS Capital Note is not paid at maturity, the
outstanding principal due under this Note shall increase by 10%.
|
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
8 – NOTES PAYABLE (CONTINUED)
(d)
|
In
connection with the GS Capital Note, the Company issued irrevocable transfer agent instructions reserving 3,327,000 shares
of its Common Stock for conversions under this Note equal to two and a half times the discounted value of the Note (the “Share
Reserve”) within 5 days from the date of execution and shall maintain a 2.5 times reserve for the amount then outstanding.
Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. At June 30, 2019, this note
had accrued interest of $500.
|
|
|
(e)
|
On
June 21, 2019, the Company entered into a one year 8% $60,000 Convertible Note with GS Capital Partners, LLC pursuant to the
terms of a Securities Purchase Agreement. The GS Capital Note has a maturity date of June 21, 2020 and carried a $5,000 original
issue discount (such that $55,000 was funded to the Company on June 21, 2019). The holder is entitled, at its option, at any
time after cash payment, to convert all or any amount of the principal face amount of the GS Note then outstanding into shares
of the Company’s common stock at a price for each share of common stock equal to 66% of the lowest daily volume weighted
average price (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, for the fifteen (15) prior trading
days including the day upon which a notice of conversion is received by the Company or its transfer agent. Such conversion
shall be effectuated by the Company delivering the shares of common stock to the holder within 3 business days of receipt
by the Company of the notice of conversion. Accrued but unpaid interest shall be subject to conversion. To the extent the
conversion price of the Company’s common stock closes below the par value per share, the Company will take all steps
necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company
agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC “Chill”
on its shares, the conversion price shall be decreased to 56% instead of 66% while that “Chill” is in effect.
In no event shall the holder be allowed to affect a conversion if such conversion, along with all other shares of the Company
common stock beneficially owned by the holder and its affiliates would exceed 9.9% of the outstanding shares of the common
stock of the Company. During the first six months that the GS Capital Note is in effect, the Company may redeem the GS Note
by paying to the holder an amount as follows: (i) if the redemption is within the first 90 days of the issuance date, then
for an amount equal to 120% of the unpaid principal amount of this Note along with any interest that has accrued during that
period, (ii) if the redemption is after the 91st day, but less than the 180th day of the issuance date, then for an amount
equal to 133% of the unpaid principal amount of this Note along with any accrued interest. The GS Note may not be redeemed
after 180 days. The Company may not redeem the GS Capital Note after the 180th day from entering into it. Upon an event of
default, among other default provisions set forth in the GS Capital Note, (i) 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. (ii) if the Company shall fail to deliver to the holder the shares of common stock without restrictive legend (when
permissible in accordance with applicable law) within three (3) business days of its receipt of a notice of conversion, then
the Company shall pay a penalty of $250 per day the shares are not issued beginning on the 4th day after the conversion notice
was delivered to the Company (which shall be increased to $500 per day beginning on the 10th day); (iii) if the Company’s
stock ceases to be listed on an exchange, its stock is suspended from trading for more than 10 consecutive trading days or
the Company ceases to file its reports with the SEC under the Securities Exchange Act of 1934, as amended, then the outstanding
principal due under the GS Capital Note shall increase by 50%; or (iv) if the GS Capital Note is not paid at maturity, the
outstanding principal due under this Note shall increase by 10%.
|
|
|
|
In
connection with the GS Capital Note, the Company issued irrevocable transfer agent instructions reserving 2,650,000 shares
of its Common Stock for conversions under this Note equal to two and a half times the discounted value of the Note (the “Share
Reserve”) within 5 days from the date of execution, and shall maintain a 2.5 times reserve for the amount then outstanding.
Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. At June 30, 2019, this note
had accrued interest of $118.
|
|
|
|
During
the year ended March 31, 2019, the Company issued 5,946,516 shares of common stock to holders of convertible notes to retire
$187,000 in principal and $13,718 of accrued interest (at an average conversion price of $0.03375 per share) under the convertible
notes.
|
|
|
|
During
the three months ended June 30, 2019, the Company issued 888,308 shares of common stock to holders of convertible notes to
retire $40,000 and $1,973 of note principal and accrued interest, respectively.
|
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
8 – NOTES PAYABLE (CONTINUED)
|
Interest
expense for the three months ended June 30, 2019 was $121,814 compared to $23,496 for the prior year. Accrued interest at
June 30, 2019 and March 31, 2019 was $16,946 and $30,780, respectively.
|
NOTE
9 – RELATED PARTIES
As
a result of the Company’s joint venture with Ice + Jam, a receivable and a payable was recorded on the Company’s books.
As of December 31, 2018, these amounts represented cash Ice + Jam collected from sales of
HerMan®
through their website in the amount of $581 and a payable in the amount of $5,522 for expenses incurred through the operation
of the business. As of March 31, 2019, these assets and liabilities were reflected in assets and liabilities from discontinued
operations.
In
conjunction with and consideration for a July 22, 2019, 10% convertible note, in the amount of $55,000, under a Securities Purchase
Agreement the Company entered into with Jefferson Street Capital, LLC, the Chief Executive Officer has personally guaranteed the
prompt, full and complete payment of the outstanding principal amount, accrued and unpaid interest, default interest (if any)
and applicable fees (if any), owing by the Company under the note. This personal guaranty will remain in effect until such time
that the Company can reserve at least six times the amount of common shares issuable upon full conversion of the note. The Company
anticipates this to occur upon the effectiveness of the increase in the Company’s authorized shares within the 75 days from
the date of the note as indicated in the agreement.
NOTE
10 – STOCKHOLDERS’ EQUITY (DEFICIT)
Common
Stock
As
of June 30, 2019, the Company is authorized to issue 100,000,000 shares of its common stock. As of June 30, 2019 and August 13,
2019, there were 72,925,920 and 75,895,090 shares, respectively of common stock issued and outstanding which includes all adjustments
for fractional shares.
On
July 26, 2019, the Company’s Board of Directors approved the (i) increase of the authorized common stock of the Company
from 100,000,000 shares to 400,000,000 shares; (ii) the filing of both the preliminary and definitive information statements;
and (iii) approved the record date of July 29, 2019.
Fiscal
Year 2019
During
the year ended March 31, 2019 the Company issued 3,130,000 shares of its restricted common stock to consultants under consulting
agreements.
During
the year ended March 31, 2019, the Company issued 5,946,516 shares of restricted common stock to noteholders for the conversion
of debt and accrued interest having a value of $200,718 (at an average conversion price of $0.03375 per share).
During
the year ended March 31, 2019, the Company issued 5,686,667 shares of common stock ($0.02 to $0.06 per share) for aggregate proceeds
of $301,200.
During
the year ended March 31, 2019, the Company issued 500,000 commitment shares for debt financing ($0.042 per share) valued at $21,000.
During
the year ended March 31, 2019, the Company issued 95,667 shares for the settlement of debt $20,004.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
10 – STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
Common
Stock (Continued)
On
January 12, 2019, the Company and Open Therapeutics agreed to extinguish the $75,000 contingent liability in exchange for a one-time
issuance of 500,000 restricted shares of Company’s common stock. The shares were recorded at a value of $24,750 ($0.0495
per share) as a loss on settlement in the Company’s consolidated financial statements.
Fiscal
Year 2020
During
the three months ended June 30, 2019, the Company issued 1,200,000 shares under distribution agreements.
During
the three months ended June 30, 2019, the Company issued 888,308 shares for conversion of debt in the amount of $40,000 as well
as accrued interest in the amount of $1,964 ($0.04725).
During
the three months ended June 30, 2019, the Company issued 250,000 shares issued to Vice President of Distribution and Marketing.
During
the three months ended June 30, 2019, the Company issued 1,000,000 shares issued for services rendered
During
the three months ended June 30, 2019, the Company issued 750,000 shares for debt commitment in the amount of $142,500 ($0.19 per
share). The shares were recorded as a liability to issue shares at March 31, 2019 on the Company’s balance sheet.
During
the three months ended June 30, 2019, the Company issued 714,286 shares under stock purchase agreements in consideration for $45,000
(average of $0.063 per share) to accredited investors that are unrelated third parties.
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 $375,720 and $43,221 in stock-based
compensation expense related to these agreements in the three months ended June 30, 2019 and 2018.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
10 – STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
Warrants
for Common Stock
The
following table summarizes warrant activity for the three months and year ended June 30, 2019 and March 31, 2019:
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2018
|
|
|
1,433,611
|
|
|
$
|
1.06
|
|
|
3.02 Years
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
Expired
|
|
|
(223,335
|
)
|
|
|
0.2843
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
Canceled
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable March 31, 2019
|
|
|
1,210,276
|
|
|
$
|
1.2
|
|
|
1.28 Years
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
Expired
|
|
|
(389,344
|
)
|
|
|
0.75
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
Canceled
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable June 30, 2019
|
|
|
820,932
|
|
|
$
|
1.41
|
|
|
1.41 Years
|
|
$
|
-
|
|
During
the year ended March 31, 2019, 213,334 warrants expired which were issued in conjunction with a one-year 5% convertible note in
the amount of $80,000 with GS Capital Partners, LLC. The five-year cashless warrants had an exercise price of $0.2625 per share.
These warrants were cancelled as part of the convertible note agreement which the Company entered into with GS Capital Partners,
LLC on March 14, 2019 in the amount of $300,000 (See Note 8 section c).
During
the year ended March 31, 2019, 10,001 three-year warrants expired which were awarded to investors in conjunction with security
purchase agreements. These warrants had a strike price of $0.75.
During
the three months ended June 30, 2019, 389,344 three-year warrants expired which were awarded to investors in conjunction with
security purchase agreements. These warrants had a strike price of $0.75.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
10 – 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 year and three months ended June 30, 2019 and March 31, 2019:
|
|
Shares
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2018
|
|
|
133,334
|
|
|
$
|
7.50
|
|
|
3.85 Years
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2019
|
|
|
133,334
|
|
|
$
|
7.50
|
|
|
2.85 Years
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at June 30, 2019
|
|
|
133,334
|
|
|
$
|
7.50
|
|
|
2.60 Years
|
|
$
|
—
|
|
NOTE
11 – PROVISION FOR INCOME TAXES
Deferred
income taxes are determined using the liability method for the temporary differences between the financial reporting basis and
income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected
to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities
are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts
of assets and liabilities and their respective tax bases.
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 the three months and years ended June 30, 2019 March 31, 2019:
|
|
June 30, 2019
|
|
|
March 31,2019
|
|
Federal income taxes at statutory rate
|
|
|
21.00
|
%
|
|
|
21.00
|
%
|
State income taxes at statutory rate
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Temporary differences
|
|
|
8.99
|
%
|
|
|
1.48
|
%
|
Permanent differences
|
|
|
0.17
|
%
|
|
|
0.24
|
%
|
Impact of Tax Reform Act
|
|
|
0.00
|
%
|
|
|
(167.44
|
)%
|
Change in valuation allowance
|
|
|
(30.16
|
)%
|
|
|
144.72
|
%
|
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 MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
11 – PROVISION FOR INCOME TAXES (CONTINUED)
|
|
As of
|
|
|
As of
|
|
|
|
June 30, 2019
|
|
|
March 31, 2019
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating losses before non-deductible items
|
|
$
|
3,763,732
|
|
|
$
|
3,685,807
|
|
Loss on disposal of fixed assets
|
|
|
355
|
|
|
|
355
|
|
Stock-based compensation
|
|
|
288,492
|
|
|
|
209,591
|
|
Unrealized gains or losses on investments
|
|
|
(24,079
|
)
|
|
|
(4,258
|
)
|
Total deferred tax assets
|
|
|
4,028,500
|
|
|
|
3,891,495
|
|
Less: Valuation allowance
|
|
|
(4,028,500
|
)
|
|
|
(3,891,495
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
At
June 30, 2019, the Company had a U.S. net operating loss carryforward in the approximate amount of $17.9 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 $137,005 in the three months ended June 30, 2019 and decreased by $1,516,710 in the year ended March 31, 2019. The net decreases
were the result of the tax effects of the Tax Cuts and Jobs Act (the “TCJA”) offset by taxable losses net of timing
differences in each of the years.
On
December 22, 2017, Public Law 115-97, informally referred to as the TCJA was enacted into law. The TCJA provides for significant
changes to the U.S. Internal Revenue Code of 1986, as amended, that impact corporate taxation requirements. Effective January
1, 2018, the federal tax rate for corporations was reduced from 35% to 21% for US taxable income and requires one-time re-measurement
of deferred taxes to reflect their value at a lower tax rate of 21%. The effective rate for the year ended March 31, 2018 was
31% as the rate was changed effective January 1, 2018 to the lower rate. Also, mandatory repatriation of untaxed foreign earnings
and profits will be taxed at 15.5% to the extent the underlying assets are liquid and 8% on the remaining balance. There are other
provisions to the TCJA, such as conversion of a worldwide system to a territorial system, limitations on interest expense and
domestic production deductions, which will be effective in fiscal 2019.
Given
the significant complexity of the TCJA and anticipated additional implementation guidance from the Internal Revenue Service, further
implications of the TCJA may be identified in future periods. The Company has adjusted their NOLs and valuation allowances to
account for the changes brought about by the TCJA for the three months and year ended June 30, 2019 and March 31, 2019, respectively.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
12 – INVESTMENTS
Trading
securities
For
investments in securities of other companies that are owned, the Company records them at fair value with unrealized gains and
losses reflected in other operating income or loss. For investments in these securities that are sold by us, the Company recognizes
the gains and losses attributable to these securities investments as realized gains or losses in other operating income or loss
on a first in first out basis.
Investment
in Trading Securities:
At March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
|
Beginning
of Period
Cost
|
|
|
Purchases
|
|
|
Sales
Proceeds
|
|
|
End of
Period
Cost
|
|
|
Fair
Value
|
|
|
Realized
Gain (Loss)
|
|
|
Unrealized
Gain (Loss)
|
|
Green Innovations Ltd (GNIN)*
|
|
(a)
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
VistaGen Therapeutics Inc (VTGN)
|
|
(b)
|
|
|
490,117
|
|
|
|
349,498
|
|
|
|
(517,485
|
)
|
|
|
287,500
|
|
|
|
294,400
|
|
|
|
(34,630
|
)
|
|
|
6,900
|
|
Blink Charging Co (BLNK)
|
|
(c)
|
|
|
190,350
|
|
|
|
151,666
|
|
|
|
(367,142
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
25,126
|
|
|
|
-
|
|
Blink Charging Co (BLNKW) (Warrants)
|
|
(c)
|
|
|
900
|
|
|
|
162,215
|
|
|
|
(468,496
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
305,381
|
|
|
|
-
|
|
Aytu BioScience Inc (AYTU)
|
|
(d)
|
|
|
82,270
|
|
|
|
100,030
|
|
|
|
(144,094
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(38,206
|
)
|
|
|
-
|
|
Lightbridge Corp. (LTBR)
|
|
(e)
|
|
|
37,511
|
|
|
|
299,028
|
|
|
|
(276,159
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(60,380
|
)
|
|
|
-
|
|
Pulmatrix Inc. (PULM)
|
|
(f)
|
|
|
-
|
|
|
|
204,802
|
|
|
|
(183,737
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(21,065
|
)
|
|
|
-
|
|
Axovant Sciences Ltd. (AXON)
|
|
(g)
|
|
|
-
|
|
|
|
103,938
|
|
|
|
(98,433
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,505
|
)
|
|
|
-
|
|
Basanite Inc. (BASA)
|
|
(h)
|
|
|
-
|
|
|
|
42,998
|
|
|
|
(10,821
|
)
|
|
|
30,000
|
|
|
|
56,000
|
|
|
|
(2,177
|
)
|
|
|
26,000
|
|
Achieve Life Sciences (ACHV)
|
|
(i)
|
|
|
-
|
|
|
|
177,356
|
|
|
|
(112,221
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(65,135
|
)
|
|
|
-
|
|
Decision Diagnostics (DECN)
|
|
(j)
|
|
|
-
|
|
|
|
20,479
|
|
|
|
(16,893
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,586
|
)
|
|
|
-
|
|
Totals
|
|
|
|
$
|
801,148
|
|
|
$
|
1,612,010
|
|
|
$
|
(2,195,481
|
)
|
|
$
|
317,500
|
|
|
$
|
350,400
|
|
|
$
|
99,823
|
|
|
$
|
32,900
|
*
|
At June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
|
Beginning of Period Cost
|
|
|
Purchases
|
|
|
Sales Proceeds
|
|
|
End of Period Cost
|
|
|
Fair Value
|
|
|
Realized Gain (Loss)
|
|
|
Unrealized Gain (Loss)
|
|
VistaGen Therapeutics Inc (VTGN)
|
|
(b)
|
|
|
287,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
287,500
|
|
|
|
166,865
|
|
|
|
-
|
|
|
|
(120,635
|
)
|
Basanite Inc. (BASA)
|
|
(h)
|
|
|
30,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,000
|
|
|
|
277,920
|
|
|
|
-
|
|
|
|
247,920
|
|
Totals
|
|
|
|
$
|
317,500
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
317,500
|
|
|
$
|
444,785
|
|
|
$
|
-
|
|
|
$
|
127,285
|
**
|
*
Represents the Unrealized Gain (Loss) at March 31, 2019 for securities being held by the Company. For the year ended March 31,
2019, there was a cumulative unrealized gain on trading securities of $223,349 on these investments.
**This
amount represents the cumulative unrealized gain as of June 30, 2019, which includes $94,385 for the three months ended June 30,
2019.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
12 – INVESTMENTS (CONTINUED)
Trading securities (Continued)
|
|
|
(a)
|
During
the year ended March 31, 2018, the Company’s investment in Green Innovations, Ltd. was sold for net proceeds of $6,815
and was previously carried as an investment included within Current Assets. The Company’s investment in Green Innovations,
Ltd. had a cost of $250,000. A loss of $243,185 was recognized on the sale of this security in the year ended March 31, 2018.
For the year ended March 31, 2019, there was a realized gain of $125.
|
|
|
(b)
|
On
December 11, 2017 the Company invested $480,000 in the common stock of VistaGen Therapeutics, Inc. (VTGN). The Company purchased
320,000 common shares along with 320,000 five-year warrants with a strike price of $1.50. On March 26, 2018, the Company purchased
an additional 10,000 common shares. The investment in the common shares is recorded at fair valve with unrealized gains and
losses, reflected in other operating income. The Company’s investment in VTGN has a cost of $490,117, unrealized loss
of $183,910 and a fair value of $306,207 at March 31, 2018. During the year ended March 31, 2019, the Company purchased 59,380
shares of VTGN for $61,998 (average price per share of $1.04 per share) in the open market. The Company sold 389,380 shares
of VTGN for $517,485 ($1.33 per share) for a realized loss of $34,630. The Company also purchased in a direct offering 230,000
restricted common shares directly from VTGN during the year ended March 31, 2019 for a cost of $287,500. As of March 31, 2019,
these shares were not on deposit with the Company’s broker of record. As of June 30, 2019, the Company has an unrealized
loss on these shares in the amount of $120,635, and for the year ended March 31, 2019 has recorded a total realized loss of
$34,630 in VTGN. As June 30, 2019, these shares were not on deposit held with the Company’s broker of record.
|
|
|
(c)
|
The
Company participated in an $18,500,250 underwritten public offering by BLINK, which closed on February 14, 2018. The Company
invested $191,250 of its balance sheet cash and purchased 45,000 registered shares, as well as warrants exercisable immediately
for a period of five (5) years from the date of issuance for up to 90,000 additional shares of common stock of BLINK. The
Warrants carry an exercise price of $4.25 per share, and also trade on the NASDAQ under the ticker symbol: BLNKW. The Company’s
investment in BLINK common stock and warrants had a cost of $191,250, unrealized loss of $35,955 and a fair value of $155,295
at March 31, 2018. During the three months ended June 30, 2018 the Company purchased 41,018 shares of BLINK at a cost of $151,666
(average price per share of $3.69). The Company sold its total holding of 86,018 shares of BLINK for $367,142 (average price
per share of $4.26) realizing a gain of $25,126. During the three months ended June 30, 2018, the Company also purchased 208,800
warrants of BLNKW (average price per warrant of $0.77) and sold its entire position of 298,800 for $468,496 (average price
per warrant of $1.60) realizing a gain of $305,381.
|
|
|
(d)
|
On
March 2 and March 8, 2018, the Company purchased 188,300 common shares of AYTU Bioscience (ATYU). The investment in the common
shares is recorded at fair valve with unrealized gains and losses, reflected in other operating income. The Company’s
investment in ATYU had a cost of $82,270, unrealized gain of $37,677 and a fair value of $119,947 at March 31, 2018. During
the year ended March 31, 2019, the Company purchased 260,000 shares of AYTU for a $100,830 (average price per share $0.38).
During the year ended March 31, 2019, the Company sold all 448,300 shares of AYTU for $144,094 ($0.32 per share). During the
year ended March 31, 2019, the Company had a realized loss of $38,206 on this holding.
|
|
|
(e)
|
On
March 12, 2018, the Company purchased 25,000 common shares of Lightbridge Corp (LTBR). The investment in the common shares
is recorded at fair valve with unrealized gains and losses, reflected in other operating income. The Company’s investment
in LTBR had a cost of $37,511, unrealized loss of $8,261 and a fair value of $29,250 at March 31, 2018. During the year ended
March 31, 2019, the Company purchased 287,405 shares of LTBR for $295,625 (average of $1.03 per share). During the year ended
March 31, 2019, the Company sold 312,405 shares of LTBR for $276,159 (average price per share of $0.884) realizing a loss
of $60,380.
|
|
|
(f)
|
During
the year ended March 31, 2019, the Company purchased 391,514 shares of Pulmatix Inc. (PULM) for $204,802 (average per share
price of $0.52). During the year ended March 31, 2019, the Company sold all 391,514 shares for $183,747 ($0.47 per share).
The Company had a realized loss of $21,065 on this holding.
|
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
12 – INVESTMENTS (CONTINUED)
Trading securities (Continued)
|
|
|
(g)
|
During
the year ended March 31, 2019, the Company purchased 40,000 shares of Axovant Sciences Ltd. (AXON) for $103,938 (average share
price of $2.60). During the year ended March 31, 2019, the Company sold all 40,000 shares for $98,433 ($2.46 per share). The
Company had a realized loss of $5,505 on this holding.
|
|
|
(h)
|
On
July 5, 2018, the Company purchased 100,000 shares of Basanite Industries Inc. (BASA) (formerly Paymeon, Inc. (PAYM)) for
$12,998 ($0.13 per share) in the open market. During July 2018 the Company sold the 100,000 shares for $10,821 ($0.11 per
share) for a realized loss of $2,177. On July 9, 2018, the Company purchased 400,000 restricted common shares directly from
the Company for $30,000 ($0.075 per share). As of June 30, 2019, the Company had an unrealized gain of $247,920. In conjunction
with the investment, the Company agreed to a 12-month resale restriction. BASA is publicly traded on the OTC:Pink. As June
30, 2019, these shares were not on deposit held with the Company’s broker of record.
|
|
|
(i)
|
During
the year ended March 31, 2019, the Company purchased 44,000 common shares of Achieve Life Sciences (ACHV) for $177,355 ($4.03
per share). During the year ended March 31, 2019, the Company sold all 44,000 shares for $112,221 ($2.55 per share) for a
realized loss of $65,135.
|
|
|
(j)
|
During
the year ended March 31, 2019, the Company purchased 450,000 common shares of Decision Diagnostics (DECN) for $20,480 ($0.046
per share). During the year ended March 31, 2019, the Company sold all of its shares for $16,893 ($0.038 per share) for a
realized loss of $3,586.
|
At
June 30, 2019, 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. At
June 30, 2019, these warrants were out of the money by $9.13 per share and are not publicly traded, the Company has not recognized
the value of these warrants as they are not liquid.
At
June 30, 2019, the Company currently holds warrants for VTGN to purchase 320,000 shares of common stock at a strike price of $1.50
per share with an expiration of December 13, 2022 and warrants for VTGN to purchase 230,000 shares of common stock at a strike
price of $1.50 per share with an expiration of February 28, 2022. At June 30, 2019, these warrants were out of the money by $0.25
per share. Since these warrants are not publicly traded, the Company has not recognized the value of these warrants as they are
not liquid.
Digital
Currency
During
the year ended March 31, 2019, the Company purchased. Groestlcoin cryptocurrency (Crypto Currency Code: GRS). The purchase of
this currency cannot be executed directly using $USD. The Company must purchase Bitcoin (BTC) and then purchase the Groestlcoin
cryptocurrency by using BTC. This two-step process triggers the potential recognition of realized gains or losses on the purchase
of Groestlcoin.
On
April 2, 2018, the Company completed a purchase in the Groestlcoin cryptocurrency in the aggregate amount of $8,000 for 11,922.81
units ($0.6569 per unit).
On
July 15, 2018, the Company sold all of its 39,862 units of Groestlcoin cryptocurrency converting it into 4.17 units of BTC having
a value of $32,230. On August 20, 2018, the Company converted its BTC to gold bullion and silver coins at a value of $26,783.
On
August 25, 2018, the Company sold all gold and silver commodities held for a sum of $24,046, recognizing a loss on the transaction
of $2,737.
During
the year ended March 31, 2019, had an unrealized loss on digital currency of $3,143 prior to the conversion to the gold and silver.
During
the three months ended June 30, 2019, the Company had no digital currency activity.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
12 – INVESTMENTS (CONTINUED)
Equity
investments
Honeywood
Effective
August 1, 2017, the Company entered into a Debt Conversion Agreement in respect to a secured promissory note issued following
the unwinding of the Honeywood acquisition (See NOTE 1), whereby the Company agreed to convert the entire principal and accrued
but unpaid interest due under the note into a 5% membership interest in Honeywood.
The
Company made an assessment for impairment of its investment in Honeywood at the entity level. During the relationship between
the Company and Honeywood, Honeywood had a working capital deficiency and had a history of operating losses. In accordance with
FASB ASC 320-10-35-28, “
Investments—Debt and Equity Securities,
” a Company may not record an impairment
loss on the investment but shall continue to evaluate whether the investment is impaired (that is, shall estimate the fair value
of the investment) in each subsequent reporting period until either of the following occurs: (a) the investment experiences a
recovery of fair value up to (or beyond) its cost; or (b) the entity recognizes an other-than-temporary impairment loss.
At
the time of the Debt Conversion Agreement the receivable balance of $199,119 had been fully written off by the Company in a prior
period. As a result of this Debt Conversion Agreement, the Company deemed the investment to still have no current value. The Company
recorded this investment at $0. Thus, no recovery of bad debt and no impairment will be recognized in this year.
Cost
investments
Küdzoo,
Inc.
On
September 4, 2018, the Company invested $15,000 in Küdzoo, Inc. (“Küdzoo”), a privately held company. Küdzoo
is the developer of a mobile application that rewards students for their grades and achievements with deals and opportunities.
The investment is recorded at cost and represents 0.2% of the value of Küdzoo based on a pre-money valuation of $7,500,000.
On
March 21, 2019, the Company invested $22,500 in Küdzoo. This investment was recorded at cost and represents 0.22% of the
proportionate interest in the outstanding of the Company after this offering based on a pre-money valuation of $10,200,000. On
April 8, 2019, the Company invested another $20,400, which was recorded at cost representing a 0.42% of the proportionate interest
in the outstanding of the Company after this offering based on a pre-money valuation of $10,200,000.
The
Company tested the investment value for Küdzoo as of March 31, 2019 for impairment. It was noted that the value of the company
has increased based on recent equity raises in which the Company took part in. As a result of the new equity raises, the Company
does not believe there is any impairment of this investment as of June 30, 2019.
On
April 8, 2019, the Company invested $20,400, in Küdzoo, Inc., a private Company in which the Company had previously invested
$37,500. The $20,400 investment was recorded at cost representing a 0.2% of the proportionate interest in the outstanding of the
Company after this offering based on a pre-money valuation of $10,200,000.
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 represents 0.24% of the value of Serendipity based on a pre-money valuation of approximately
$14 million.
The
Company tested the investment value for Serendipity as of March 31, 2019 for impairment. It was noted that the value of the company
has maintained its value through reviews of their financial performance, therefore, the Company does not believe there is any
impairment of this investment as of June 30, 2019.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
13 – FAIR VALUE MEASUREMENTS
The
following summarizes the Company’s financial assets and liabilities that are measured at fair value on a recurring basis
at June 30, 2019 and March 31, 2019:
|
|
June 30, 2019
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment-trading securities
|
|
$
|
444,785
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
444,785
|
|
Cost method investment – Küdzoo
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
57,900
|
|
|
$
|
57,900
|
|
Cost method investment – Serendipity Brands
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
35,000
|
|
|
$
|
35,000
|
|
|
|
March 31, 2019
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment-trading securities
|
|
$
|
350,400
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
350,400
|
|
Cost method investment – Küdzoo
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
37,500
|
|
|
$
|
37,500
|
|
Cost method investment – Serendipity Brands
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
35,000
|
|
|
$
|
35,000
|
|
NOTE
14 – CONCENTRATIONS
During
the three months and year ended June 30, 2019 and March 31, 2019, we have one supplier for 100% of our product who is also the
manufacturer of Tauri-Gum
TM
.
For
the three months ended June 30, 2019, one customer accounted for 23.96% of product sales from continuing operations. For the year
ended March 31, 2019, one customer accounted for 97% of product sales from continuing operations.
NOTE
15 – SUBSEQUENT EVENTS
Subsequent
to June 30, 2019, the Company issued additional shares of common stock as follows; (i) 250,000 shares for commitment shares relative
to convertible note issued; (ii) 250,000 shares under a distribution agreement dated April 30, 2019; and (iii) 2,719,170 shares
in conversion of convertible notes of $75,000 and accrued interest of $4,373.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
15 – SUBSEQUENT EVENTS (CONTINUED)
Convertible
Notes
On
July 22, 2019, the Company and Jefferson Street Capital, LLC (“Jefferson Street”) consummated entry into a Securities
Purchase Agreement where the Company has borrowed $55,000 ($50,000 with original issuance discount reflected) at 10% annual interest
under a term of nine-months in the form of a convertible note. The note is convertible into restricted stock of the Company. In
connection with this agreement, the Company issued 250,000 commitment shares having a value of $10,500 ($0.042 per share, the
closing price of our common stock on the day preceding the note) which will be reflected as interest expense in the Company’s
condensed consolidated statement of operations during the three months ended June 30, 2019. The restricted stock was valued
at the closing price on July 22, 2019. Legal fees of $2,000 were deducted from cash proceeds of the note payable to investor’s
counsel, and a $5,000 original issue discount recognized. The Company received cash proceeds of $48,000 at closing. Under the
Jefferson Street note, the Company is required initially to reserve 1,000,000 shares of its common stock, and thereafter to increase
the reserve up to 15,000,000 shares upon the increase in the Company’s authorized common shares (per a charter amendment
via shareholder meeting and approval as approved by the Board of Directors on July 26, 2019), but up to six times the number of
shares required for a full conversion. The Company has 75 days from the date of this note to have this increased effectuated.
The noteholder may, at any time, at its option, convert all or any amount of the principal face amount of the note then outstanding
into shares of the Company’s common stock at a conversion price for each share of Common Stock equal to 65% of the lowest
volume weighted average price for the Company’s common stock during the previous fifteen trading day period 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, including the day upon which a notice of conversion is received by the Company.
If the Company fails to maintain the share reserve at the required amounts, or to attain shareholder approval within 75 days of
July 22, 2019, this will be considered an Event of Default. This note contains a provision where if the Company shall have defaulted
on or breached any term of any other note of similar debt instrument into which the Company has entered and failed to cure such
default within the appropriate grace period they would be considered in default of this note; however, the Company maintains the
option to repay the note in cash within the first 180 days beginning on July 22, 2019 to avoid such default provision triggering
event, as more fully described below.
During
the first 180 days, the Company may prepay the principal amount of this note and accrued interest thereon, with a premium as follows:
(a) 120% of the prepayment penalty for redemptions in the first 90 days after the note issuance; and (b) 133% of the prepayment
amount if such prepayment was made at any time from (91 days after the issuance date until 180 days after the issuance date).
The note is not able to be prepaid after 180 days after the issuance date.
Upon
an event of default (as defined and described in the note), among other default penalties, the Company shall pay the Default Amount
(as defined in the agreement) as well as incur annual interest at a default interest rate of 24% per annum.
In
consideration of Jefferson Street loaning the Company the proceeds under this note, the Chief Executive Officer has personally
guaranteed the prompt, full and complete payment of the outstanding principal amount, accrued and unpaid interest, default interest
(if any) and applicable fees (if any), owing by the Company under the note. This personal guaranty will remain in effect until
such time that the Company can reserve at least six times the amount of common shares issuable upon full conversion of the note.
The Company anticipates this to occur upon the effectiveness of the increase in the Company’s authorized shares within the
75 days from the date of the note as indicated in the agreement.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND
2018
(UNAUDITED)
(US$)
NOTE
15 – SUBSEQUENT EVENTS (CONTINUED)
Other
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 updated New York City Health Code now includes an embargoing of CBD-infused Edible(s) Products
(including packaged products). The Company is hopeful that the FDA as well as the New York City Council will implement regulations
surrounding the CBD industry in a logical and prompt manner. The FDA’s uncertainty surrounding CBD was the initial cause
of the New York City ban, and we believe further clarification from the FDA supporting its safety and regulating its labeling
will also offer a clearer pathway to the New York City CBD market. The Company is very well positioned in this argument 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 and that it contains
0% THC content. The Company remains confident that this embargo on CBD Edible(s) products will be lifted and/or clarified. As
a result of this embargo, the Company has taken the necessary steps to ensure that their marketing efforts are focused on areas
outside of New York City, while still maintaining their New York City (the 5 Boroughs) presence.
On
July 26, 2019, the Company’s Board of Directors approved the (i) increase of the authorized common stock of the Company
from 100,000,000 shares to 400,000,000 shares; (ii) the filing of both the preliminary and definitive information statements;
and (iii) approved the record date of July 29, 2019.
On August 12, 2019, the Company received
$47,500 net proceeds for the second of two notes (the “Back-End Note”) under a December 20, 2018 security purchase
agreement with Adar Alef, LLC whereby the Company issued two 8% convertible redeemable notes in the cumulative principal amount
of $110,000. Both notes were for $55,000 and had funded with net proceeds of $47,500, after the deduction of $5,000 for OID and
$2,500 in legal fees. The first note was previously funded on December 24, 2018. The Back-End Note was initially paid for by an
offsetting promissory note issued by Adar Alef, LLC to the Company (the “Note Receivable”). The terms of the Back-End
Note required cash funding prior to any conversion thereunder. The Note Receivable was due December 20, 2019, unless certain conditions
were not met, in which case both the Back-End Note and the Note Receivable may both have been cancelled. The Back-End Note has
a maturity date one year from the date of issuance upon which any outstanding principal and interest is due and payable. The face
value amount plus accrued interest under the Back-End Note are convertible into shares of the Company’s common stock at
a price for each share of common stock equal to 60% of the lowest daily VWAP of the common stock as reported on the National Quotations
Bureau OTC Markets market on which the Company’s shares are traded or any exchange upon which the common stock may be traded
in the future, for the 20 prior trading days including the day upon which a notice of conversion is received by the Company or
its transfer agent. In the event the Company experiences a DTC “chill” on its shares, the conversion price shall be
decreased to 50% instead of 60% while that “chill” is in effect. Upon an event of default, principal and accrued interest
will become immediately due and payable under the notes. Additionally, upon an event of default, both notes will accrue interest
at a default interest rate of 24% per annum or the highest rate of interest permitted by law. Further, certain events of default
may trigger penalty and liquidated damage provisions. This note contains a provision where if the Company shall have defaulted
on or breached any term of any other note of similar debt instrument into which the Company has entered and failed to cure such
default within the appropriate grace period they would be considered in default of this note. This Back-End Note may not be repaid.
The note holder may redeem this note at any time after the first six months.