NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
1 – BASIS OF OPERATIONS
Nature
of Business
Tauriga
Sciences, Inc. (the “Company”) is a Florida corporation. Prior to December 12, 2011, the Company was involved in the
business of exploiting new technologies for the production of clean energy. 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”)
|
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 $6.99 per unit.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
Nature
of Business (Continued)
TAURI-GUM
TM
(Continued)
The
Company is also working on developing CBD Gum-Infused Lollipops and gummi products.
Subsequent
to our fiscal year end of March 31, 2019, the Company entered into several agreements with distributors to arrange for the distribution
of this product line, as described below.
E&M
Distribution Agreement
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 New York City Metropolitan area marketplace (the “E&M Distribution Agreement”).
Under terms of this Agreement, E&M will distribute Tauri-Gum
TM
to hundreds of NYC based retail store locations
by summer 2019, with the goal of exceeding 1,000 locations by the end of fiscal 2020. As of May 31, 2019, the Company is in at
least 287 locations. The Company has supported the NYC Tauri-Gum
TM
commercial launch with substantial levels of both
financial resources and marketing support. The Company has made the strategic decision to initially largely focus its commercialization
efforts on the New York City retail marketplace due to excellent NYC distribution relationships and the Company believes that
it can launch its Tauri-Gum
TM
brand in NYC in an efficient and cost-effective manner. Also, the Company has both received
payment for and delivered the product for its previously announced $54,000 Tauri-Gum
TM
purchase order during March
2019. 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 will be 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.
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 Sai Krishna within ten (10) business days
of April 30, 2019, and the additional issuance of (b) 250,000 of such shares shall be issued to Sai Krishna within ten (10) business
days of 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
will be 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.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
Nature
of Business (Continued)
TAURI-GUM
TM
(Continued)
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.
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 comes 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 has 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.
2018
Reverse Stock Split
On
March 12, 2018, the Company held a meeting of its board of directors. The matters voted on and approved at the meeting included
an amendment to the Company’s Articles of Incorporation to decrease the number of authorized shares of the Company’s
common stock, $0.00001 par value per share from 7,500,000,000 to 100,000,000 shares and to affect a reverse stock split of the
Company’s Common Stock at a ratio of 1-for-75 (the “Reverse Stock Split”).
On
June 8, 2018, the Company filed an Articles of Amendment to its Articles of Incorporation (the “Amendment”) with the
Secretary of State of the State of Florida, for the aforementioned decrease in the number of authorized shares and to affect a
1-for-75 reverse stock split of the Company’s common stock. The Reverse Stock Split became effective at 12:01 a.m. on July
9, 2018.
The
Reverse Stock Split affected all issued and outstanding shares of common stock, as well as common stock underlying stock options,
warrants and other convertible securities outstanding immediately prior to the effectiveness of the Reverse Stock Split. The Reverse
Stock Split has reduced the number of outstanding shares of the common stock outstanding prior to the Reverse Stock Split from
4,078,179,672 shares to 54,380,230 shares immediately following the Reverse Stock Split. No fractional shares were issued as a
result of the Reverse Stock Split, and any such stockholders whose number of post-split shares would have resulted in a fractional
number had his/her/its shares rounded up to the next number of shares. On July 30, 2018, the Company’s stock began trading
on the OTC:QB.
All
references set forth in this annual report to number of shares or per share data have been presented on a post reverse stock-split
basis.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
Nature
of Business (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®.
The two companies
were to evenly share on a 50/50 basis any profits generated through the Company’s marketing, sales and distribution efforts.
The Company had agreed to pay the production, marketing and start-up costs for all product it sells to retail customers or distributors.
As part of the License Agreement, the Company issued 66,667 restricted common shares which had a value of $27,500, based on the
closing price of the stock on the day the Company entered into the agreement ($0.4125 per share). The cost of the shares were
prorated over the term of the initial license.
During
the quarter ended December 31, 2017, the Company launched this lip balm product. On November 27, 2017, the Company announced a
2-year extension to the existing non-exclusive License Agreement, extending the life of the License Agreement through December
23, 2019, at which time, if mutually agreed upon. the companies reserve the option to extend for an additional 2 years (if exercised
at that time, this License Agreement would be extended through December 23, 2021). The two companies reserve the right to request
amendment of the License Agreement at any point during the effective term of the agreement. In February of 2018, the Company’s
strategy with respect to the
HerMan®
product was negatively impacted by a series
of product defects relating to the twisting mechanism of the lip balm tube. The Company was unable to rectify the manufacturing
issue and decided to discontinue operations as of March 31, 2019.
The
Company had no sales of the
HerMan®
product during the year ended March 31,
2019 compared to $1,188 of sale during the year ended March 31, 2018, as reflected in discontinued operations. The Company has
removed the product from the website. The remaining inventory of $16,897 was written off as of the previous year ended March 31,
2018 as it determined that the units were not usable.
Honeywood
On
March 10, 2014, the Company entered into a definitive agreement to acquire California-based Honeywood LLC (“Honeywood”),
developer of a topical medicinal cannabis product, that, at the time, sold in numerous dispensaries across the state of California.
This definitive agreement was valid for a period of 120 days and the Company advanced to Honeywood $217,000 to be applied towards
the final closing requisite cash total and incurred $178,000 in legal fees as of March 31, 2014 in connection with the acquisition.
On
September 24, 2014 (the “Unwinding Date”), the Company, Honeywood and each of Honeywood’s principals entered
into a termination agreement to unwind the effects of the merger. In accordance with the termination agreement, Honeywood agreed
to repay to the Company substantially all of the advances made by the Company to Honeywood prior to and after the merger by delivering
to the Company, on the Unwinding Date, a secured promissory note in the principal amount of $170,000. The note bore interest at
6% per annum and was repayable in six quarterly installments on the last day of each calendar quarter starting on March 31, 2015
and ending on June 30, 2016. The note was secured by a blanket security interest in Honeywood’s assets pursuant to a security
agreement entered into on the Unwinding Date between Honeywood and the Company. Honeywood never made any payments under the Note
prior to the Honeywood Conversion Agreement (as defined below). As a result, the Company had fully reserved this amount and it
was not reflected as a receivable on its financial statements.
Effective
August 1, 2017, the Company entered into a Debt Conversion Agreement, whereby the Company agreed to convert the entire principal
and accrued but unpaid interest due into a 5% membership interest in Honeywood (the “Honeywood Conversion Agreement”).
The
Company made an assessment for impairment of its investment in Honeywood at the entity level. During the relationship between
the Company and Honeywood, Honeywood had a working capital deficiency and had a history of operating losses. In accordance with
Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”)
320-10-35-28, “
Investments—Debt
and Equity Securities
”, a Company may not record an impairment loss on the investment but shall continue to evaluate
whether the investment is impaired (that is, shall estimate the fair value of the investment) in each subsequent reporting period
until either of the following occurs: a) the investment experiences a recovery of fair value up to (or beyond) its cost; or b)
the entity recognizes an other-than-temporary impairment loss.
At the time of the Honeywood Conversion Agreement, the receivable
balance under the note of $199,119 had been fully written off by the Company in a prior period. As a result of the Honeywood Conversion
Agreement, the Company deemed the investment to still have no current value. The Company recorded this investment at $0. Thus,
no recovery of bad debt and no impairment will be recognized in this period.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
Nature
of Business (Continued)
Pilus
Energy
On
November 25, 2013, the Company executed a definitive merger agreement to acquire Pilus Energy, LLC (“Pilus”), an Ohio
limited liability company and a developer of alternative cleantech energy platforms using proprietary microbial solutions that
create electricity while consuming polluting molecules from wastewater. On January 28, 2014, the Company completed its acquisition
of Pilus. As a condition of the acquisition, the shareholders of Pilus received a warrant to purchase 1,333,334 shares of common
stock of the Company, which represented a fair market value of approximately $2,000,000, and, based upon whether the Warrants
issued to Pilus represented at least 5% the then outstanding and fully diluted capitalization of the Company. In addition, the
Company paid Open Therapeutics, LLC (f/k/a Bacterial Robotics, LLC and Microbial Robots, LLC) (“Open Therapeutics”),
formerly the parent company of Pilus, $50,000 on signing the merger agreement and $50,000 at the time of closing. Pilus’
principal asset on its balance sheet at the time of the acquisition was its US patent relating to its clean water technology.
The Company determined that the value of the acquisition on January 28, 2014 would be equal to the value of cash paid to Pilus
plus the value of the 1,333,334 warrants the Company issued to acquire Pilus. Through March 31, 2014, the Company amortized the
patent over its estimated useful life, then on March 31, 2014, the Company conducted its annual impairment test and determined
that the entire unamortized balance should be impaired as the necessary funding to further develop the patent was not available
at that time.
On
December 22, 2016, the Company entered in a membership interest transfer agreement with Open Therapeutics whereby the Company
sold 80% of its membership interest in Pilus back to Open Therapeutics. Open Therapeutics agreed to terminate and cancel 80% of
the unexercised portion of the warrant to purchase 385,569 shares (or 308,455 warrants) of the Company’s common stock. Open
Therapeutics agreed to pay to the Company 20% of the net profit generated Pilus Energy from its previous year’s earnings,
if any. The first $75,000 of such payments was 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 March 31, 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 the above described $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.
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 March 31, 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, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. 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. As of May 31, 2019, the Company has
placed its product in at least 287 retail locations in the greater NYC Metro area. Although the Company’s working capital
surplus of $367,760 at March 31, 2018 increased to $490,436 at March 31, 2019, the Company still believes that there is
uncertainty with respect to continuing as a going concern.
During
the year ended March 31, 2019, the Company discontinued its joint venture product HERMAN ® after nominal sales and prolonged
issues with the manufacture. As a result, the entire inventory balance has been written off.
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 sale of its remaining marketable securities which had a market value of $350,400 at March 31, 2019. In the event the Company
does need to raise additional capital to fund and expand operations, failure to raise adequate capital and generate adequate sales
revenues 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 certificate of incorporation and may initiate
the process of increasing the authorized stock. To amend the Company’s certificate of incorporation, including any increase
in the number of shares the Company is authorized to issue, will require shareholder approval. If and when the Company initiates
this process, the Company will file a proxy statement with the Securities and Exchange Commission and will provide shareholders
with a physical or electronic copy, as permissible. Relevant information relating to this process will be included in such proxy
statement. There is no guarantee that the Company will be able to obtain this shareholder approval to effectuate such charter
amendment.
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. Though management believes that the Company is in the strongest position it has been in in several years there is
still no guarantee the that profitable operations with sufficient cashflow to sustain operations can 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. As a result of some investments made with proceeds from the Cowan lawsuit, the
Company was able to recognize other income of $99,823, that partially offset their operating losses, resulting in a net loss in
the amount of $1,097,439 for the year ended March 31, 2019 compared to a net loss of $74,801 during the prior year as a
result of the lawsuit settlement. The Company has, however, needed to take on more debt leading up to the launch of Tauri-Gum
TM
.
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 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 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.
Consolidated
Financial Statements
The
consolidated financial statements include the accounts and activities of Tauriga Sciences, Inc., its wholly-owned Canadian subsidiary,
Tauriga Canada, Inc., its controlling interest in a joint venture with Ice + Jam LLC and its wholly-owned subsidiary Tauriga BDC.
All intercompany transactions have been eliminated in consolidation. As of March 31, 2019, there is no activity in any of the
Company’s subsidiaries other than Tauriga BDC holding the electric car chargers.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Non-controlling
Interests
On
December 23, 2016, the Company entered into a non-exclusive, one-year license agreement (subsequently extended by an additional
two-years) with Ice + Jam LLC. Under terms of the License Agreement, the Company marketed Ice + Jam’s proprietary cupuaçu
butter lip balm, sold under the trademark
HerMan®.
To effectuate this arrangement,
the Company and Ice + Jam formed a new company. Through this new company the two parties were to share on a 50/50 basis any profits
generated through the Company’s marketing, sales and distribution efforts. All revenue and expense from these efforts are
fully consolidated in the Company’s consolidated financial statements, with the minority interest designated as noncontrolling
interest to derive a net loss attributable to common shareholders. The non-controlling interest at March 31, 2019 and March 31,
2018 is $0 and $2,196, respectively. There was neither a net loss or gain attributable to noncontrolling interest for the year
ended March 31, 2019 and 2018. As of March 31, 2019, the Company exchanged its 50% ownership in Ice+Jam for the non-controlling
interest that remained. As a result, there is no non-controlling interest in this arrangement moving forward and there will be
no future obligations associated with this entity.
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 March 31, 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.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue
Recognition (Continued)
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 $57,134
during the three months ended (as well as year ended) March 31, 2019. All revenue is from the sale of the Company’s Tauri-Gum
TM
product line and there are no accounts receivable currently outstanding for these sales.
The
Company recognized $1,118 of revenue from discontinued operations during the year ended March 31, 2018 which was related to the
sales of the HERMAN® lip balm product.
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 March 31, 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 March 31, 2019, the Company’s cash on deposit with financial institutions exceeded the total FDIC insurance
limit of $250,000. At March 31, 2019 and 2018, the Company had a cash balance of $385,943 and $12,291, respectively.
Although the Company’s cash balance did exceed the total FDIC insurance limit of $250,000, the Company anticipated using
cash in excess of insurance in the very short-term. To reduce its risk associated with the failure of such financial institution,
the Company holds its cash deposits in more than one financial institution and evaluates at least annually the rating of the financial
institution in which it holds its deposits. The Company had no cash equivalents as of March 31, 2019 and 2018.
Investment
in Trading Securities
Investment
in trading securities consist of investments in shares of common stock of companies traded on public markets as well as publicly
traded warrants of these companies should there be a market for them. These securities are carried on the Company’s balance
sheet at fair value based on the closing price of the shares owned on the last trading day before the balance sheet date of this
report. Fluctuations in the underlying bid price of the stocks result in unrealized gains or losses. The Company recognizes these
fluctuations in value as other income or loss.
For
investments sold, the Company recognizes the gains and losses attributable to these investments as realized gains or losses in
other income or loss.
Investment
– Cost Method
Investment
in other companies that are not currently trading, are valued based on the cost method as the Company holds less than 20% ownership
in these companies and has no influence over operational and financial decisions of the companies. The Company will evaluate,
at least annually, whether impairment of these investments is necessary under ASC 320. As of March 31, 2019, the Company has not
impaired any of their cost method investments.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Inventory
Inventory
consists of finished goods in salable condition and is stated at the lower of cost or market determined by the first-in, first-out
method. The inventory consists of packaged, labeled salable inventory. Shipping of product to finished good inventory fulfillment
center is also included in the total inventory cost. Shipping of product upon sale for online sales is paid by the customer upon
ordering for orders of single packs of Tauri-Gum
TM
. For wholesale product orders shipping cost is paid by the Company.
As of March 31, 2019, the Company’s inventory on hand had a value of $10,872. The Company has also paid deposits of $105,000
paid towards orders not received as of March 31, 2019 reflected on the balance sheet as prepaid
expenses and other current assets. As of March 31, 2018, as a result of the quality control issues regarding the packaging,
the Company had written off the remaining inventory of their lip balm, since part of discontinued operations, in the amount of
$16,897 as the units then on hand were not usable. Deposits paid to Per Os Bio for the manufacturing costs of the Tauri-Gum
TM
have been classified as a deposit (other current asset) on the Company’s consolidated balance sheet as the goods are
not yet available for sale. The Company has not established any inventory reserve on the Tauri-Gum
TM
as of March 31,
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 years ended March 31, 2019
and 2018, basic and fully diluted earnings per share were the same as the Company had losses in these periods.
Stock-Based
Compensation
The
Company accounts for Stock-Based Compensation under ASC 718 “
Compensation-Stock Compensation
,” which addresses
the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus
on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 requires measurement
of cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the
award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant
date must be recognized.
The
Company accounts for stock-based compensation awards to non-employees in accordance with ASC 505-50, “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.
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.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reclassifications
Certain
prior year amounts have been reclassified to conform to the current period presentation. The reclassifications had no effect on
the net loss or cash flows of the Company.
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 $13,924 for the year ended March
31, 2019 compared to $10,068 for 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.
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.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Derivative
Financial Instruments
Derivatives
are recorded on the consolidated balance sheet at fair value. The conversion features of the convertible debentures are embedded
derivatives and are separately valued and accounted for on the consolidated Balance Sheets with changes in fair value recognized
during the period of change as a separate component of other income/expense. Fair values for exchange-traded securities and derivatives
are based on quoted market prices. The pricing model we use for determining the fair value of our derivatives are binomial pricing
models. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses
market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involves management’s
judgment and may impact net income (loss).
With
the issuance of the July 2017 FASB ASU 2017-11,
“Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity
(Topic 480) Derivatives and Hedging (Topic 815),”
which addresses the complexity of accounting for certain financial
instruments with down round features, the Company has chosen the early adopt retroactively the amendments in Part I of the standard
whereby fair value derivative liabilities previously recognized were derecognized in the current and comparative periods. Under
the amendments included in this update, the Company is no longer required to record changes in fair value during the period of
change as a separate component of other income (expense) in the consolidated Statements of Operations.
The
amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded
features) with down round features. When determining whether certain financial instruments should be classified as liabilities
or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is
indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments.
As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for
as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified
financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize
the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available
to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are
now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, “
Debt—Debt
with Conversion and Other Options
”), including related EPS guidance (in Topic 260). The amendments in Part II of this
Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in
the Codification, to a scope exception. Those amendments do not have an accounting effect.
Under
current GAAP, an equity-linked financial instrument with a down round feature that otherwise is not required to be classified
as a liability under the guidance in Topic 480 is evaluated under the guidance in Topic 815, “
Derivatives and Hedging
,”
to determine whether it meets the definition of a derivative. If it meets that definition, the instrument (or embedded feature)
is evaluated to determine whether it is indexed to an entity’s own stock as part of the analysis of whether it qualifies
for a scope exception from derivative accounting. Generally, for warrants and conversion options embedded in financial instruments
that are deemed to have a debt host (assuming the underlying shares are readily convertible to cash or the contract provides for
net settlement such that the embedded conversion option meets the definition of a derivative), the existence of a down round feature
results in an instrument not being considered indexed to an entity’s own stock. This results in a reporting entity being
required to classify the freestanding financial instrument or the bifurcated conversion option as a liability, which the entity
must measure at fair value initially and at each subsequent reporting date.
The
amendments in this Update revise the guidance for instruments with down round features in Subtopic 815-40, “
Derivatives
and Hedging—Contracts in Entity’s Own Equity
,” which is considered in determining whether an equity-linked
financial instrument qualifies for a scope exception from derivative accounting. An entity still is required to determine whether
instruments would be classified in equity under the guidance in Subtopic 815-40 in determining whether they qualify for that scope
exception. If they do qualify, freestanding instruments with down round features are no longer classified as liabilities and embedded
conversion options with down round features are no longer bifurcated.
For
entities that present EPS in accordance with Topic 260, and when the down round feature is included in an equity-classified freestanding
financial instrument, the value of the effect of the down round feature is treated as a dividend when it is triggered and as a
numerator adjustment in the basic EPS calculation. This reflects the occurrence of an economic transfer of value to the holder
of the instrument, while alleviating the complexity and income statement volatility associated with fair value measurement on
an ongoing basis. Convertible instruments are unaffected by the Topic 260 amendments in this Update.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Derivative
Financial Instruments (Continued)
Those
amendments in Part I of this Update are a cost savings relative to current GAAP. This is because, assuming the required criteria
for equity classification in Subtopic 815-40 are met, an entity that issued such an instrument no longer measures the instrument
at fair value at each reporting period (in the case of warrants) or separately accounts for a bifurcated derivative (in the case
of convertible instruments) on the basis of the existence of a down round feature. For convertible instruments with embedded conversion
options that have down round features, applying specialized guidance such as the model for contingent beneficial conversion features
rather than bifurcating an embedded derivative also reduces cost and complexity. Under that specialized guidance, the issuer recognizes
the intrinsic value of the feature only when the feature becomes beneficial instead of bifurcating the conversion option and measuring
it at fair value each reporting period.
The
amendments in Part II of this Update replace the indefinite deferral of certain guidance in Topic 480 with a scope exception.
This has the benefit of improving the readability of the Codification and reducing the complexity associated with navigating the
guidance in Topic 480.
For
public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim
period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning
of the fiscal year that includes that interim period. The amendments in Part 1 of this Update should be applied in either of the
following ways:
|
1.
|
retrospectively
to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the statement
of financial position as of the beginning of the first fiscal year and interim period(s) in which the pending content that
links to this paragraph is effective; or
|
|
|
|
|
2.
|
retrospectively
to outstanding financial instruments with a down round feature for each prior reporting period presented in accordance with
the guidance on accounting changes in paragraphs 250-10-45-5 through 45-10.
|
The
amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting
effect.
The
Company has identified that instruments previously carried as derivative liabilities were deemed to be such on the basis of embedded
features containing down round provisions, resulting in the strike price being reduced on the basis of the pricing of future equity
offerings. In accordance with the adoption of ASU 2017-11, the Company recorded a gain on derivative liability in the amount of
$271,280 for the year ended March 31, 2018. This adoption of this accounting pronouncement had no effect on the year ended March
31, 2019 as there were no instruments that would have caused this presentation. The Company also recorded a corresponding loss
on extinguishment of debt in the amount of $271,280 for the year ended March 31, 2018, with no effect on the year ended March
31, 2019. Along with this transaction, the Company recorded a deemed dividend to shareholders in the amount of $271,280 for the
year ended March 31, 2018 and no deemed dividend for the year ended March 31, 2019.
The
three instruments affected by this adoption were (i) the June 1, 2015, 7% Convertible Redeemable Note with a principal amount
of $104,000 with a maturity date of June 1, 2016 with Union Capital, LLC which contains an anti-ratchet clause; (ii) the July
14, 2015, 12% convertible redeemable note with Group 10 Holdings, LLC having a principal amount of $96,000 issued with an original
issue discount of $16,000; and (iii) the November 7, 2016, 12% convertible redeemable note with Group 10 Holdings, LLC having
a principal amount of $45,000 issued with an original issue discount of $7,000. The two Group 10 Holdings, LLC notes contain a
most favored nations clause, allowing the note holder to adopt any term of future convertible redeemable notes which would be
beneficial to them. All of these instruments noted herein have been fully repaid or converted as of October 10, 2017.
Share
settled debt
The
general measurement guidance in ASC 480 requires obligations that can be settled in shares with a fixed monetary value at settlement
to be carried at fair value unless other accounting guidance specifies another measurement attribute. The Company has determined
that ASC 835-30 is the appropriate accounting guidance for the share-settled debt, which is what was done by setting up the debt
discount which is to be amortized to interest expense over the term of the instrument. Amortization of discounts are to be amortized
using the effective interest method over the term of the note.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Share
Settled Debt (Continued)
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.
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 March 31, 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 does not believe there is 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.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent
Accounting Pronouncements (Continued)
The
new guidance will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within
that reporting period and is applied retrospectively. Early adoption is permitted. The Company has adopted this standard as of
April 1, 2019 and does not believe there will be a material impact on the adoption of this guidance on their consolidated financial
statements (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.
NOTE
3– INVENTORY
Inventory
from continuing operations
Inventory
value by product as of:
|
|
March
31, 2019
|
|
|
March
31, 2018
|
|
|
|
|
|
|
|
|
Tauri-Gum
TM
|
|
$
|
10,872
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
Inventory
|
|
$
|
10,872
|
|
|
$
|
-
|
|
Deposits
to Per Os Bio in the amount of $105,000 for the manufacturing costs of Tauri-Gum
TM
has been classified as a deposit
(prepaid expenses other current assets) on the Company’s consolidated balance sheet as of March 31, 2019 as
the goods are not yet available for sale.
Inventory
from discontinued operations
As
a result of the quality control issues regarding the packaging of the lip balm, the Company had written off the remaining inventory
of $16,897 as of March 31, 2018 while it attempted to complete the re-design of the packaging of this product, since
it had been determined that the initial units were not usable.
The
Company had removed the product from its website and attempted to work with the manufacturer to resolve these issues;
however, the Company and the manufacturer were unable to resolve the packaging issues, and, as a result, discontinued
the operations of this subsidiary. Subsequently, the Company exchanged its 50% ownership in Ice+Jam, LLC for the
balance of the non-controlling interest as of March 31, 2019.
NOTE
4– DISCONTINUED OPERATIONS
On
March 31, 2019, the Company decided to discontinue operations relative to its HERMAN© Lip balm product line. After much effort
the Company was unable to resolve manufacturing issues as it related to it its lip balm tube mechanism. The Company did not believe
that these issues will be resolvable without a substantial investment of time and money. Therefore, the Company exchanged their
50% ownership in Ice+Jam, LLC for the balance of the non-controlling interest as of March 31, 2019.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
4– DISCONTINUED OPERATIONS (CONTINUED)
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
STATEMENTS
OF DISCONTINUED OPERATIONS
|
|
For
the years ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Income
|
|
|
|
|
|
|
|
|
Product
sales
|
|
$
|
-
|
|
|
$
|
1,048
|
|
Shipping
Income
|
|
|
-
|
|
|
|
140
|
|
Total
Income
|
|
|
-
|
|
|
|
1,188
|
|
Cost
of Goods Sold
|
|
|
|
|
|
|
|
|
Cost
of Goods Sold
|
|
|
-
|
|
|
|
609
|
|
Inventory
shrinkage
|
|
|
-
|
|
|
|
19,219
|
|
Shipping
Expense
|
|
|
-
|
|
|
|
106
|
|
Total
Cost of Goods Sold
|
|
|
-
|
|
|
|
19,934
|
|
Gross
Profit
|
|
|
-
|
|
|
|
(18,746
|
)
|
Expenses
|
|
|
|
|
|
|
|
|
Other
|
|
|
2,196
|
|
|
|
-
|
|
Consult
Fees - Other
|
|
|
-
|
|
|
|
40,478
|
|
Marketing
expense
|
|
|
-
|
|
|
|
16,716
|
|
Research
& Development
|
|
|
-
|
|
|
|
1,372
|
|
Total
Expenses
|
|
|
2,196
|
|
|
|
58,567
|
|
Net
Loss
|
|
$
|
(2,196
|
)
|
|
$
|
(77,313
|
)
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
BALANCE
SHEETS FROM DISCONTINUED OPERATIONS
|
|
March
31, 2019
|
|
|
March
31, 2018
|
|
|
|
|
|
|
|
|
Assets
from discontinued operations
|
|
$
|
581
|
|
|
$
|
581
|
|
|
|
|
|
|
|
|
|
|
Liabilities
from discontinued operations
|
|
$
|
5,522
|
|
|
$
|
5,522
|
|
NOTE
5– PROPERTY AND EQUIPMENT
The
Company’s property and equipment is as follows:
|
|
March
31, 2019
|
|
|
March
31, 2018
|
|
|
Estimated
Life
|
|
|
|
|
|
|
|
|
|
Computers,
office furniture and other equipment
|
|
$
|
69,808
|
|
|
$
|
59,051
|
|
|
3-5
years
|
|
|
|
|
|
|
|
|
|
|
|
Less:
accumulated depreciation
|
|
|
(56,798
|
)
|
|
|
(56,560
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
13,010
|
|
|
|
2,491
|
|
|
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(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 March 31, 2019 due to the fact that they have not
been placed in service. The Company has suspended plans to install these units at any location. The Company has decided to focus
all efforts on its Tauri-Gum
TM
product, and thus is intending to sell these units. Depreciation expense for the years
ended March 31, 2019 and 2018 was $964 and $796, respectively.
During
the year ended March 31, 2019 the Company disposed computer equipment valued at $1,632 recognizing a loss on disposal of $907.
NOTE
6 – COMMITMENTS
Ice
+ Jam
On
December 23, 2016, the Company entered into a License Agreement with Ice + Jam, which was further extended to December 23, 2019.
Under terms of the License Agreement, the Company was to market Ice + Jam’s proprietary cupuaçu butter lip balm sold
under the trademark
HerMan®
and the two companies were to share on a 50/50 basis
any profits earned through the Company’s marketing, sales and distribution efforts. The Company decided to discontinue this
line of business and exchanged their 50% ownership in Ice+Jam for the remaining non-controlling interest as of March 31, 2019
and therefore will have no further commitment to Ice + Jam.
Rent
On
December 1, 2017, the Company relocated its corporate headquarters from Danbury, Connecticut to New York, New York. The Company
has entered into a two-year lease at $1,010 per month for the term of the lease. The Company recorded rent expense of $13,404
for the year ended March 31, 2019 compared to $5,794 for the prior year. The remaining lease obligation for fiscal year 2020 is
$8,080.
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 $18,730 and $18,978, 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 $18,730 and $1,978 as of April 1, 2019. Any difference between the additional lease
assets and lease liabilities, net of the deferred tax impact, will be recorded as an adjustment to retained earnings. The standard
is not expected to materially impact our consolidated net earnings and had no impact on cash flows.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
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 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 March 31, 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 – DERIVATIVE LIABILITIES EMBEDDED IN CONVERTIBLE NOTES
The
Company has entered into several financial instruments, which consist of notes payable, containing various conversion features.
Generally, the financial instruments are convertible into shares of the Company’s common stock at prices that are either
marked to the volume weighted average price of the Company’s intended publicly traded stock or a static price determinative
from the financial instrument agreements. These prices may be at a significant discount to market determined by the volume weighted
average price under a 15 day look back period for conversion purposes.
The
Company accounts for the fair value of the conversion feature in accordance with ASC 815-15, “
Derivatives and Hedging;
Embedded Derivatives
,” which requires the Company to bifurcate and separately account for the conversion features as
an embedded derivative contained in the Company’s convertible debt and original issue discount notes payable. The Company
is required to carry the embedded derivative on its consolidated Balance Sheets at fair value and account for any unrealized change
in fair value as a component in its results of operations. The Company valued the embedded derivatives using eight steps to determine
fair value under ASC 820: (1) Identify the item to be valued and the unit of account; (2) Determine the principal or most advantageous
market and the relevant market participants; (3) Select the valuation premise to be used for asset measurements; (4) Consider
the risk assumptions applicable to liability measurements; (5) Identify available inputs; (6) Select the appropriate valuation
techniques; (7) Make the measurement; (8) Determine amounts to be recognized and information to be disclosed.
With
the issuance of the July 2017 FASB ASU 2017-11,
“Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity
(Topic 480) Derivatives and Hedging (Topic 815),”
which addresses the complexity of accounting for certain financial
instruments with down round features, the Company has chosen the early adopt retroactively the amendments in Part I of the standard
whereby fair value derivative liabilities previously recognized were derecognized in the current and comparative periods. Under
the amendments included in this update, the Company is no longer required to record changes in fair value during the period of
change as a separate component of other income (expense) in the consolidated Statements of Operations.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
8 – DERIVATIVE LIABILITIES EMBEDDED IN CONVERTIBLE NOTES (CONTINUED)
The
amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded
features) with down round features. When determining whether certain financial instruments should be classified as liabilities
or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is
indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments.
As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for
as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified
financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize
the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available
to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are
now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, “
Debt—Debt
with Conversion and Other Options
”), including related EPS guidance (in Topic 260). The amendments in Part II of this
Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in
the Codification, to a scope exception. Those amendments do not have an accounting effect.
The
three instruments affected by this adoption were (i) the June 1, 2015, 7% Convertible Redeemable Note with a principal amount
of $104,000 with a maturity date of June 1, 2016 with Union Capital, LLC which contains an anti-ratchet clause; (ii) the July
14, 2015, 12% convertible redeemable note with Group 10 Holdings, LLC having a principal amount of $96,000 issued with an original
issue discount of $16,000; and (iii) the November 7, 2016 12% convertible redeemable note with Group 10 Holdings, LLC having a
principal amount of $45,000 issued with an original issue discount of $7,000. The two Group 10 Holdings, LLC notes contain a most
favored nations clause, allowing the note holder to adopt any term of future convertible redeemable notes which would be beneficial
to them. All of these instruments noted herein have been fully repaid or converted as of October 10, 2017.
The
amendments in this Update revise the guidance for instruments with down round features in Subtopic 815-40, “
Derivatives
and Hedging—Contracts in Entity’s Own Equity
,” which is considered in determining whether an equity-linked
financial instrument qualifies for a scope exception from derivative accounting. An entity still is required to determine whether
instruments would be classified in equity under the guidance in Subtopic 815-40 in determining whether they qualify for that scope
exception. If they do qualify, freestanding instruments with down round features are no longer classified as liabilities and embedded
conversion options with down round features are no longer bifurcated.
For
entities that present EPS in accordance with Topic 260, and when the down round feature is included in an equity-classified freestanding
financial instrument, the value of the effect of the down round feature is treated as a dividend when it is triggered and as a
numerator adjustment in the basic EPS calculation. This reflects the occurrence of an economic transfer of value to the holder
of the instrument, while alleviating the complexity and income statement volatility associated with fair value measurement on
an ongoing basis. Convertible instruments are unaffected by the Topic 260 amendments in this Update.
Those
amendments in Part I of this Update are a cost savings relative to current GAAP. This is because, assuming the required criteria
for equity classification in Subtopic 815-40 are met, an entity that issued such an instrument no longer measures the instrument
at fair value at each reporting period (in the case of warrants) or separately accounts for a bifurcated derivative (in the case
of convertible instruments) on the basis of the existence of a down round feature. For convertible instruments with embedded conversion
options that have down round features, applying specialized guidance such as the model for contingent beneficial conversion features
rather than bifurcating an embedded derivative also reduces cost and complexity. Under that specialized guidance, the issuer recognizes
the intrinsic value of the feature only when the feature becomes beneficial instead of bifurcating the conversion option and measuring
it at fair value each reporting period.
The
amendments in Part II of this Update replace the indefinite deferral of certain guidance in Topic 480 with a scope exception.
This has the benefit of improving the readability of the Codification and reducing the complexity associated with navigating the
guidance in Topic 480.
For
public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim
period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning
of the fiscal year that includes that interim period. The amendments in Part 1 of this Update should be applied in either of the
following ways: 1. Retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect
adjustment to the statement of financial position as of the beginning of the first fiscal year and interim period(s) in which
the pending content that links to this paragraph is effective; or 2. Retrospectively to outstanding financial instruments with
a down round feature for each prior reporting period presented in accordance with the guidance on accounting changes in paragraphs
250-10-45-5 through 45-10.
The
amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting
effect.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
8 – DERIVATIVE LIABILITIES EMBEDDED IN CONVERTIBLE NOTES (CONTINUED)
The
Company has identified that instruments previously carried as derivative liabilities were deemed to be such on the basis of embedded
features containing down round provisions, resulting in the strike price being reduced on the basis of the pricing of future equity
offerings. The Company was not affected by the adoption of ASU 2017-11 for the year ended March 31, 2019 as they had no instruments
that would be impacted by this pronouncement, compared to a gain on derivative liability in the amount of $271,280 for the year
ended March 31, 2018. The Company also recorded a corresponding loss on extinguishment of debt in the amount of $271,280 for the
year ended March 31, 2017.
The
three instruments affected by this adoption were (i) the June 1, 2015, 7% Convertible Redeemable Note with a principal amount
of $104,000 with a maturity date of June 1, 2016 with Union Capital, LLC which contains an anti-ratchet clause; (ii) the July
14, 2015, 12% convertible redeemable note with Group 10 Holdings, LLC having a principal amount of $96,000 issued with an original
issue discount of $16,000 and the November 7, 2016; and (iii) the 12% convertible redeemable note with Group 10 Holdings, LLC
having a principal amount of $45,000 issued with an original issue discount of $7,000. The two Group 10 Holdings, LLC notes contain
a most favored nations clause, allowing the note holder to adopt any term of future convertible redeemable notes which would be
beneficial to them. All of these instruments noted herein have been fully repaid or converted as of October 10, 2017.
NOTE
9 – NOTES PAYABLE TO INDIVIDUALS AND COMPANIES
Notes
payable and convertible notes consisted of the following as of:
|
|
|
|
March
31, 2019
|
|
|
March
31, 2018
|
|
|
|
|
|
|
|
|
|
|
Alternative
Strategy Partners PTE Ltd.- Sep 2015
|
|
(a)
|
|
$
|
90,000
|
|
|
$
|
90,000
|
|
GS
Capital Partners, LLC – Oct 2017
|
|
(b)
|
|
|
-
|
|
|
|
105,000
|
|
GS
Capital Partners, LLC – March 2018
|
|
(c)
|
|
|
-
|
|
|
|
48,000
|
|
GS
Capital Partners LLC – May 2018
|
|
(d)
|
|
|
-
|
|
|
|
-
|
|
GS
Capital Partners, LLC – October 2018
|
|
(e)
|
|
|
180,000
|
|
|
|
-
|
|
Adar
Alef, LLC – December 2018
|
|
(f)
|
|
|
-
|
|
|
|
-
|
|
Eagle
Equities, LLC – January 2019
|
|
(g)
|
|
|
-
|
|
|
|
-
|
|
GS
Capital Partners, LLC – March 2019
|
|
(h)
|
|
|
300,000
|
|
|
|
-
|
|
Note
to an Individual – February 2013
|
|
(i)
|
|
|
-
|
|
|
|
15,000
|
|
Total
notes payable and convertible notes
|
|
|
|
|
570,000
|
|
|
|
258,000
|
|
Less
- note discounts
|
|
|
|
|
(356,125
|
)
|
|
|
(3,153
|
)
|
Less
- current portion of these notes
|
|
|
|
|
(213,875
|
)
|
|
|
(254,847
|
)
|
Total
notes payable and convertible notes, net of discounts
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
(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. As of March 31, 2019,
this note had accrued interest of $23,468. On May 29, 2019, the Company and ASP, entered into an agreement whereby this note
and accrued interest were fully satisfied in exchange for the Company agreeing to transfer and assign to ASP all rights, title
and interest it has or may have in securities of Eishin, and to do all things necessary to effect such transfer. Since these
rights were not valued on the Company’s balance sheet the Company will record a gain on extinguishment of debt in the
amount of $113,468 during the three months ended June 30, 2019.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
9 – NOTES PAYABLE TO INDIVIDUALS AND COMPANIES (CONTINUED)
(b)
|
On
October 17, 2017, the Company entered into a securities purchase agreement with GS Capital Partners, LLC, whereby the Company
issued two 8% convertible redeemable notes each in the principal amount of $105,000. The first 8% note was funded with gross
cash proceeds of $100,000, after the deduction of $5,000 in legal fees. The second 8% note, the back-end note, was initially
paid for by an offsetting note receivable issued by GS Capital Partners, LLC, to the Company. The terms of the back-end note
require cash funding prior to any conversion thereunder. The amounts of cash funded plus accrued interest under both the first
note and the back-end note are convertible into shares of the Company’s common stock at a price per share equal to 70%
of the lowest daily VWAP of the common stock as reported on the National Quotations Bureau OTC Markets market on which the
Company’s shares are traded or any exchange upon which the common stock may be traded in the future, for the 15 prior
trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. In the
event the Company experiences a DTC “chill” on its shares, the conversion price shall be decreased to 60% instead
of 70% while that “chill” is in effect. Upon an event of default, principal and accrued interest will become immediately
due and payable under the notes. Additionally, upon an event of default, both notes will accrue interest at a default interest
rate of 24% per annum or the highest rate of interest permitted by law. Further, certain events of default may trigger penalty
and liquidated damage provisions. During the first 6 months that the first note and the back-end note are outstanding, the
Company may redeem either by paying to GS Capital Partners, LLC an amount as follows: (i) if the redemption is within the
first 90 days either note is in effect, then for an amount equal to 120% of the unpaid principal amount of either note along
with any interest that has accrued during that period, and (ii) if the redemption is after the 91st day the either note is
in effect, but less than the 180th day, then for an amount equal to 133% of the unpaid principal amount of either note along
with any accrued interest. Neither note may be redeemed after 180 days. Additionally, and pursuant to the Purchase Agreement,
the Company issued to GS Capital Partners, LLC 306,667 shares of the Company’s common stock valued at $20,700 ($0.0675
per share). On April 25, 2018, the noteholder, under their rights under the contract, canceled the back-end note. On May 1,
2018, the noteholder converted $55,000 of principal and accrued interest of $2,339 in exchange for 1,985,754 of the Company’s
shares ($0.028888 per share). On July 18, 2018, the Company paid $69,503 to fully retire the remaining $50,000 principal balance
of this note plus $3,503 of accrued interest and a prepayment penalty of $16,500.
|
|
|
(c)
|
On
March 9, 2018, GS Capital Partners, LLC funded the back-end note under the August 31, 2017 Securities Purchase Agreement with
GS Capital Partners, LLC whereby the Company issued two 8% convertible redeemable notes each in the principal amount of $48,000.
This back-end note was initially paid for by an offsetting note receivable issued by GS Capital Partners, LLC to the Company.
This note has a maturity date one year from the date of issuance of the original note under the securities purchase agreement,
upon which any outstanding principal and interest is due and payable. Although the note principal plus interest was not repaid
by the due date, the noteholder waived the default clause. The amounts of cash funded plus accrued interest under the note
are convertible into shares of the Company’s common stock at a price for each share of common stock equal to 70% of
the lowest daily VWAP of the common stock as reported on the National Quotations Bureau OTC Markets market on which the Company’s
shares are traded or any exchange upon which the common stock may be traded in the future, for the 15 prior trading days including
the day upon which a notice of conversion is received by the Company or its transfer agent. In the event the Company experiences
a DTC “chill” on its shares, the conversion price shall be decreased to 60% instead of 70% while that “chill”
is in effect. Upon an event of default, principal and accrued interest will become immediately due and payable under the notes.
Additionally, upon an event of default, notes will accrue interest at a default interest rate of 24% per annum or the highest
rate of interest permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
During the first six months this note is in effect, the Company may redeem by paying to GS Capital Partners, LLC an amount
as follows: (i) if the redemption is within the first 90 days either note is in effect, then for an amount equal to 120% of
the unpaid principal amount of either note along with any interest that has accrued during that period, and (ii) if the redemption
is after the 91st day the either note is in effect, but less than the 180th day, then for an amount equal to 133% of the unpaid
principal amount of either note along with any accrued interest. The note may be redeemed after 180 days. On October 26, 2018,
the Company fully repaid this note in cash using proceeds from a new convertible note. Repayment included $2,430 of accrued
interest and $1,115 of prepayment penalty.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
9 – NOTES PAYABLE TO INDIVIDUALS AND COMPANIES (CONTINUED)
(d)
|
On
May 10, 2018, the Company entered into a securities purchase agreement with GS Capital Partners, LLC. GS Capital Partners,
LLC whereby the Company issued two 8% convertible redeemable notes in the cumulative principal amount of $56,000. The first
8% note for $28,000 was funded with net proceeds of $25,000, after the deduction of $3,000 for OID. The second 8% note, the
back-end note, is initially paid for by an offsetting note receivable issued by GS Capital Partners, LLC to the Company. The
terms of the back-end note require cash funding prior to any conversion thereunder. The note receivable is due January 10,
2019, unless certain conditions are not met, in which case both the back-end note and the note receivable may both be cancelled.
Both the first note and the back-end note have a maturity date one year from the date of issuance upon which any outstanding
principal and interest is due and payable. The amounts of cash funded plus accrued interest under both the first note and
the back-end note are convertible into shares of the Company’s common stock at a price for each share of common stock
equal to 70% of the lowest daily VWAP of the common stock as reported on the National Quotations Bureau OTC Markets market
on which the Company’s shares are traded or any exchange upon which the common stock may be traded in the future, for
the 15 prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent.
In the event the Company experiences a DTC “chill” on its shares, the conversion price shall be decreased to 60%
instead of 70% while that “chill” is in effect. The back-end note will not be cash funded and such note, along
with the note receivable, will be immediately cancelled if the shares do not maintain a minimum trading price during the five
days prior to such funding and a certain aggregate dollar trading volume during such period. Upon an event of default, principal
and accrued interest will become immediately due and payable under the notes. Additionally, upon an event of default, both
notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest permitted by law. Further,
certain events of default may trigger penalty and liquidated damage provisions. 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 first note is in effect, the Company may redeem either note by paying to GS Capital Partners,
LLC an amount as follows: (i) if the redemption is within the first 90 days either note is in effect, then for an amount equal
to 120% of the unpaid principal amount of either note along with any interest that has accrued during that period, and (ii)
if the redemption is after the 91st day the either note is in effect, but less than the 180th day, then for an amount equal
to 133% of the unpaid principal amount of either note along with any accrued interest. The note may be redeemed after 180
days. The back-end note may not be repaid. The note holder may redeem this note at any time after the first six months. The
Company had cancelled all remaining back-end notes during the quarter ended December 31, 2018. On October 26, 2018, the Company
fully repaid this note in cash using proceeds from a new convertible note. Repayment included $1,031 of accrued interest and
$9,240 of prepayment penalty.
|
(e)
|
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. Accrued interest as of March
31, 2019 was $6,194.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
9 – NOTES PAYABLE TO INDIVIDUALS AND COMPANIES (CONTINUED)
(f)
|
On
December 20, 2018, the Company entered into security purchase agreement with Adar Alef, LLC whereby the Company issued two
8% convertible redeemable notes in the cumulative principal amount of $110,000. The first 8% note for $55,000 was funded with
net proceeds of $47,500, after the deduction of $5,000 for OID and $2,500 in legal fees. The second 8% note, the back-end
note, is initially paid for by an offsetting note receivable issued by Adar Alef, LLC to the Company. The terms of the back-end
note require cash funding prior to any conversion thereunder. The note receivable is due December 20, 2019, unless certain
conditions are not met, in which case both the back-end note and the note receivable may both be cancelled. Both the first
note and the back-end note have a maturity date one year from the date of issuance upon which any outstanding principal and
interest is due and payable. The face value amount plus accrued interest under both the first note and the back-end note are
convertible into shares of the Company’s common stock at a price for each share of common stock equal to 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. During the first six months this note is in effect, the Company may redeem this
note by paying to the Holder an amount equal to 140% of the face amount plus any accrued interest. This note may not be prepaid
after the six-month anniversary of the issuance date. The back-end note may not be repaid. The note holder may redeem this
note at any time after the first six months. On March 18, 2019, the note holder converted the full face value of the note
in the amount of $55,000 including accrued interest of $1,039 for 1,569,717 shares ($0.0357 per share)
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
9 – NOTES PAYABLE TO INDIVIDUALS AND COMPANIES (CONTINUED)
|
|
|
(g)
|
On
January 23, 2019, the Company and Eagle Equities, LLC (“Eagle Equities”) consummated entry into a Securities
Purchase Agreement where the Company will borrow $62,000 at 8% annual interest under a one-year term convertible note.
The note is convertible into restricted stock of the Company. In connection with this agreement, the Company issued 500,000
commitment shares having a value of $18,500 ($0.037 per share) which is reflected as interest expense in the Company’s
consolidated statement of operations during the year ended March 31,2019. The restricted stock was valued at the closing
price on January 18, 2019. Legal fees of $2,000 were deducted from cash proceeds of the note payable to investor’s
counsel. Under the note, the Company is required initially to reserve 18,500,000 shares of its common stock, and thereafter
to reserve up to four times the discounted value of the note. 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 Average of the two lowest closing bid prices
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 prior trading days,
including the day upon which a notice of conversion is received by the Company. In the event the Company experiences a
DTC “Chill” on its shares, the conversion price shall be decreased to 55% instead of 35% while that “Chill”
is in effect. If the Company fails to maintain the share reserve at the four times discount of the note sixty days after
the issuance of the note, the conversion discount shall be increased by 10%. 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 180 days, the Company may prepay the principal amount of this note and accrued interest thereon,
with a premium as follows: (a) 115% of the prepayment penalty for redemptions in the first 30 days after the note issuance;
(b) 120% of the prepayment amount if such prepayment was made at any time from (31 days after the issuance date until
60 days after the issuance date); (c) 125% of the prepayment amount if such prepayment was made at any time from 61 days
after the issuance date until 90 days after the issuance date made; (d) 130% of the prepayment amount if such prepayment
was made at any time from 91 days after the issuance date until 120 days after the issuance date made; and (e) 135% of
the prepayment amount if such prepayment was made at any time from 120 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, including daily liquidation damage payments and
the possibility of an increase of the principal by up to 20% or 50%, as the case may be for certain events of default
thereunder, annual interest shall accrue at a default interest rate of 24% per annum. If this note is not paid at maturity,
or within ten (10) days thereof, the outstanding principal due under this Note shall increase by 10%. Further, if the
Company is delinquent on its periodic SEC reports after the six-month anniversary of the note, then the holder shall be
entitled to use the lowest closing bid price during the delinquency period as a base price for the conversion, whereby
if, e.g., the lowest closing bid price during the delinquency period is $0.10 per share and the conversion discount is
50% then the holder may elect to convert future conversions at $0.05 per share. The Company and Eagle Equities entered
into a side letter agreement contemporaneous to the securities purchase agreement and the note. Under the terms of the
side letter, Eagle Equities acknowledges that the Company currently has an insufficient number of authorized shares of
Common Stock available to reserve the required number of shares of Common Stock for conversion of the note. In order to
remedy this share reservation and conversion issue, the Company has agreed that it shall use commercially reasonable efforts
to obtain shareholder approval on or before April 15, 2019 to amend its articles of incorporation to increase its authorized
share capital to provide for a sufficient number of shares of Common Stock to satisfy the conversion rights of Eagle Equities
under the securities purchase agreement and the note. Eagle Equities further agreed that until the earlier to occur of
(i) the increase in the Company’s authorized share capital or (ii) April 15, 2019, it shall not and has no right
to seek, provide notice of or demand any conversions under the Note, seek additional shares of Common Stock, or to claim
a default, damages or other penalties thereunder. On March 25, 2019, the note holder converted the full note principal
of $62,000 and $840 of accrued interest for 1,391,045 shares ($0.045175 per share).
|
(h)
|
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 March 31, 2019, this note had accrued interest of $1,118. Also, in conjunction with
this note, the 213,334 five-year cashless warrants, associated with the June 27, 2017, $80,000 5% one-year note were fully
cancelled.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
9 – NOTES PAYABLE TO INDIVIDUALS AND COMPANIES (CONTINUED)
|
|
|
(i)
|
An
individual note was issued on February 22, 2013, in the amount of $15,000, bearing an interest rate of 8%. The note is convertible
into common stock of the Company at $1.875 per share. On October 22, 2018 the Company settled this note with the noteholder
for $25,500 cash and 1,000,000 common shares recognizing a loss on conversion of $27,975 on its consolidated statement of
operations.
|
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 year ended March 31, 2018, the Company paid $141,000 and $43,819 of note principal and accrued interest, respectively.
During
the year ended March 31, 2018, the Company issued 20,160,661 shares of common stock to holders of convertible notes to retire
$601,749 in principal and $85,055 of accrued interest (at $0.016875 to $0.09 per share) under the convertible notes. During the
year ended March 31, 2018, the Company paid cash of $347,681 to retire convertible note principal and cash of $145,550 to repay
interest and prepayment penalties.
Interest
expense for the year ended March 31, 2019 was $138,087 compared to $291,610 for the prior year. Accrued interest at March 31,
2019 and March 31, 2018 was $30,780 and $33,875, respectively.
NOTE
10 – RELATED PARTIES
On
June 15, 2017, Seth Shaw, Chief Executive Officer made a personal investment into the Company of $95,000. This investment is structured
as an equity private placement of 1,013,334 shares of Company common stock at $0.09375 per share. The Company used the proceeds
for general and administrative purposes. The shares were issued on August 1, 2017.
On
June 21, 2017, Seth Shaw, Chief Executive Officer made a personal investment into the Company of $55,000. This investment is structured
as an equity private placement of 586,667 shares of Company common stock at $0.09375 per share. The Company used the proceeds
for general and administrative purposes. The shares were issued on August 1, 2017.
On
October 6, 2017, Seth Shaw, Chief Executive Officer made a personal investment into the Company of $137,500. This investment is
structured as an equity private placement of 1,466,667 shares of Company common stock at $0.09375 per share. The Company used
the proceeds for general and administrative purposes. The shares were issued December 19, 2017.
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.
NOTE
11 – STOCKHOLDERS’ EQUITY (DEFICIT)
Common
Stock
As
of March 31, 2019, the Company is authorized to issue 100,000,000 shares of its common stock. As of March 31, 2019 and June
26, 2019, there were 68,123,326 and 72,925,920 shares, respectively of common stock issued and outstanding which
includes all adjustments for fractional shares.
Fiscal
Year 2018
During
the year ended March 31, 2018, the Company issued 20,160,661 shares of common stock to holders of convertible notes to retire
$601,749 in principal and $85,055 of accrued interest (at $0.016875 to $0.09 per share) under the convertible notes.
During
the year ended March 31, 2018, the Company issued 1,885,715 shares of common stock to a private investor for an aggregate value
of $177,500 (at $0.0975 per share).
During
the year ended March 31, 2018, the Company issued 1,600,000 shares of common stock to Seth Shaw, the Company’s Chief Executive
Officer, for an aggregate value of $150,000 ($0.09375 per share).
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
11 – STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
Common
Stock (Continued)
Fiscal
Year 2018
(Continued)
During
the year ended March 31, 2018, the Company issued 1,926,667 shares of common stock for services rendered and to be rendered which
is reflected in stock-based compensation. Value represents contracts entered into with various consultants, with the grant date
fair value amortized over the life of the contracts.
During
the year ended March 31, 2018, the Company issued 1,133,334 shares of common stock as commitment fees to noteholders at an aggregate
value of $86,600 ($0.075 per share).
During
the year ended March 31, 2018, the Company issued 1,553,334 shares of common stock for debt and legal settlements at an aggregate
value of $75,050 ($0.045 per share).
During
the year ended March 31, 2018, the Company issued 868,000 shares of common stock to former officers and directors for amounts
previously accrued at an aggregate value of $173,999 ($0.2025 per share).
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.
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.
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 $296,705 and $701,347 in stock-based compensation
expense related to these agreements in the year ended March 31, 2019 and 2018.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
11 – STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
Warrants
for Common Stock
The
following table summarizes warrant activity for the years ended March 31, 2019 and 2018:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2017
|
|
|
1,220,277
|
|
|
$
|
1.50
|
|
|
3.16
Years
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
213,334
|
|
|
|
0.2625
|
|
|
4.99
Years
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
Canceled
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
$
|
1.20
|
|
|
1.28
Years
|
|
$
|
-
|
|
The
warrants were valued utilizing the following assumptions employing the Black-Scholes Pricing Model below. The Company had no
warrants issued during the year ended March 31, 2019.
|
|
Year
Ended
March 31, 2018
|
|
Volatility
|
|
|
108.6
|
%
|
Risk-free
rate
|
|
|
1.24
|
%
|
Dividend
|
|
|
-
|
|
Expected
life of warrants
|
|
|
5.00
|
|
On
June 27, 2017, the Company entered into a one-year 5% convertible note in the amount of $80,000 with GS Capital Partners, LLC.
As partial consideration for the purchase of the note the Company granted 213,334 five-year cashless warrants with an exercise
price of $0.2625 per share. Based on the relative fair value of the warrants, the Company recorded a debt discount of $12,546
on the $80,000 note, which was amortized over a period of one-year. 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 9
section h).
During
the three months 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 $0.75.
Stock
Options
On
February 1, 2012, the Company awarded to each of two executives’, one current and one former, options to purchase 66,667
common shares, an aggregate of 133,334 shares. These options vested immediately and were for services performed.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
11 – STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
Stock
Options (Continued)
The
following table summarizes option activity for the years ended March 31, 2019 and 2018:
|
|
Shares
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2017
|
|
|
133,334
|
|
|
$
|
7.50
|
|
|
4.85
Years
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2018
|
|
|
133,334
|
|
|
$
|
7.50
|
|
|
3.85
Years
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
and exercisable at March 31, 2019
|
|
|
133,334
|
|
|
$
|
7.50
|
|
|
2.85
Years
|
|
$
|
—
|
|
NOTE
12 – 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 years ended March 31, 2019 and 2018:
|
|
2019
|
|
|
2018
|
|
Federal
income taxes at statutory rate
|
|
|
21.00
|
%
|
|
|
31.00
|
%
|
State
income taxes at statutory rate
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Temporary
differences
|
|
|
1.48
|
%
|
|
|
373.84
|
%
|
Permanent
differences
|
|
|
0.24
|
%
|
|
|
(236.65
|
)%
|
Impact
of Tax Reform Act
|
|
|
(167.44
|
)%
|
|
|
(52.13
|
)%
|
Change
in valuation allowance
|
|
|
144.72
|
%
|
|
|
116.06
|
%
|
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 CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
12 – PROVISION FOR INCOME TAXES (CONTINUED)
|
|
As
of
|
|
|
As
of
|
|
|
|
March
31, 2019
|
|
|
March
31, 2018
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
Net
operating losses before non-deductible items
|
|
$
|
3,685,807
|
|
|
$
|
5,128,565
|
|
Loss
on disposal of fixed assets
|
|
|
355
|
|
|
|
243
|
|
Stock-based
compensation
|
|
|
209,591
|
|
|
|
217,418
|
|
Unrealized
gains or losses on investments
|
|
|
(4,258
|
)
|
|
|
61,979
|
|
Total
deferred tax assets
|
|
|
3,891,495
|
|
|
|
5,408,205
|
|
Less:
Valuation allowance
|
|
|
(3,891,495
|
)
|
|
|
(5,408,205
|
)
|
|
|
|
|
|
|
|
|
|
Net
deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
At
March 31, 2019, the Company had a U.S. net operating loss carryforward in the approximate amount of $17.6 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 decreased
by $1,516,710 in the year ended March 31, 2019 and decreased by $138,795 in the year ended March 31, 2018. The 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 in each of the years ended March 31, 2019 and 2018, respectively.
NOTE
13 – INVESTMENTS
Trading
securities
For
investments in securities of other companies that are owned, the Company records them at fair value with unrealized gains and
losses reflected in other operating income or loss. For investments in these securities that are sold by us, the Company recognizes
the gains and losses attributable to these securities investments as realized gains or losses in other operating income or loss
on a first in first out basis.
Investment
in Trading Securities:
At
March 31, 2018*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
|
Beginning
of Period
Cost
|
|
|
Purchases
|
|
|
Sales
Proceeds
|
|
|
End
of
Period
Cost
|
|
|
Fair
Value
|
|
|
Realized
Gain (Loss)
|
|
|
Unrealized
Gain (Loss)
|
|
Green
Innovations Ltd (GNIN)**
|
|
(a)
|
|
$
|
250,000
|
|
|
$
|
-
|
|
|
$
|
(6,815
|
)
|
|
|
-
|
|
|
|
-
|
|
|
$
|
(243,185
|
)
|
|
$
|
-
|
|
VistaGen
Therapeutics Inc (VTGN)
|
|
(b)
|
|
|
-
|
|
|
|
490,117
|
|
|
|
-
|
|
|
|
490,117
|
|
|
|
306,207
|
|
|
|
-
|
|
|
|
(183,910
|
)
|
Blink
Charging Co (BLNK)
|
|
(c)
|
|
|
-
|
|
|
|
190,350
|
|
|
|
-
|
|
|
|
190,350
|
|
|
|
123,750
|
|
|
|
-
|
|
|
|
(66,600
|
)
|
Blink
Charging Co (BLNKW) (Warrants)
|
|
(c)
|
|
|
-
|
|
|
|
900
|
|
|
|
-
|
|
|
|
900
|
|
|
|
31,545
|
|
|
|
-
|
|
|
|
30,645
|
|
Aytu
BioScience Inc (AYTU)
|
|
(d)
|
|
|
-
|
|
|
|
82,270
|
|
|
|
-
|
|
|
|
82,270
|
|
|
|
119,947
|
|
|
|
-
|
|
|
|
37,677
|
|
Lightbridge
Corp. (LTBR)
|
|
(e)
|
|
|
-
|
|
|
|
37,511
|
|
|
|
-
|
|
|
|
37,511
|
|
|
|
29,250
|
|
|
|
-
|
|
|
|
(8,261
|
)
|
Totals
|
|
|
|
$
|
250,000
|
|
|
$
|
801,148
|
|
|
$
|
(6,815
|
)
|
|
$
|
801,148
|
|
|
$
|
610,699
|
|
|
$
|
(243,185
|
)
|
|
$
|
(190,449
|
)
|
*
There
were no trading securities during the quarter ended September 30, 2017
**
During the quarter ended December 31, 2017, this security was reclassified from Available for Sale to Trading Security
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
13 – INVESTMENTS (CONTINUED)
Trading
securities (Continued)
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
|
***
|
***
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 accumulative unrealized gain on trading securities of $223,349 on these investments.
(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 March 31, 2019, the Company has an unrealized
gain on these shares in the amount of $6,900, and for the year ended March 31, 2019 has recorded a total realized loss of
$34,630 in VTGN.
|
|
|
(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 $38,206 on this holding.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
13 – INVESTMENTS (CONTINUED)
Trading
securities (Continued)
(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.
|
|
|
(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). During the year end March 31, 2019, the Company had an unrealized gain of $26,000.
In conjunction with the investment, the Company agreed to a 12-month resale restriction. BASA is publicly traded on the OTC:Pink.
As March 31, 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
March 31, 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
March 31, 2019, these warrants were out of the money by $10.01 per share and are not publicly traded, the Company has not recognized
the value of these warrants as they are not liquid.
At
March 31, 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 March 31, 2019, these warrants were even money where
the stock closing price was equal to the option strike price. 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, 2018, the Company completed cumulative purchases in the Groestlcoin cryptocurrency in the aggregate amount
of $35,000 for 27,919.133 units ($0.79 per unit). (Crypto Currency Code: GRS). The purchase of this currency cannot be executed
directly using $USD. The Company must purchase Bitcoin (BTC) and then purchase the Groestlcoin cryptocurrency by using BTC. This
two-step process triggers the potential recognition of realized gains or losses on the purchase of Groestlcoin. For the year ended
March 31, 2018 the Company realized a loss of $2,859 on exchange from BTC reflected as other operation income. The investment
in Groestlecoin has a cost of $31,481 net of fees, unrealized loss of $9,425 and a fair value of $22,056.
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 $26,783.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
13 – INVESTMENTS (CONTINUED)
Digital
Currency (Continued)
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.
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 March 31, 2019.
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
$14 million.
The
Company tested the investment value for Serendipity as of March 31, 2019 for impairment. It was noted that the value of the company
has maintained its value through reviews of their financial performance, therefore, the Company does not believe there is any
impairment of this investment as of March 31, 2019.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
14 – LITIGATION
On
November 9, 2017, the Company entered into a Confidential Settlement Agreement and Release (the “Settlement Agreement”)
in connection with the case entitled Tauriga Sciences, Inc. v. Cowan, Gunteski & Co., P.A., et al.) before the United States
District Court of the District of New Jersey, Civil Action No. 3:16-cv-06285 (the “Action”) to resolve all claims
between the parties in the Action for aggregate consideration to the Company of $2,050,000. Also, as part of the Settlement Agreement,
the defendants agreed to release any and all claims against the Company. Upon receipt of the Settlement Payment, the Company dismissed
the Action with prejudice. The settlement amount was funded in its entirety by professional liability insurance for the defendants.
The Company and the defendants also exchanged general releases of all claims against the other as part of the Settlement Agreement,
including any potential derivative actions, and to avoid any future public comments on the Action, unless required by law.
NOTE
15 – FAIR VALUE MEASUREMENTS
The
following summarizes the Company’s financial assets and liabilities that are measured at fair value on a recurring basis
at March 31, 2019 and 2018:
|
|
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
|
|
|
|
March
31, 2018
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment-trading
securities
|
|
$
|
610,699
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
610,699
|
|
Investment
in digital currency
|
|
$
|
22,056
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
22,056
|
|
With
the issuance of the July 2017 FASB ASU 2017-11,
“Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity
(Topic 480) Derivatives and Hedging (Topic 815),”
which addresses the complexity of accounting for certain financial
instruments with down round features, the Company has chosen the early adopt retroactively the amendments in Part I of the standard
whereby fair value derivative liabilities previously recognized were derecognized in the current and comparative periods. Under
the amendments included in this update, the Company is no longer required to record changes in fair value during the period of
change as a separate component of other income/expense in the Consolidated Statements of Operations.
NOTE
16 – CONCENTRATIONS
During
the year ended March 31, 2019, we have one supplier for 100% of our product who is also the manufacturer of Tauri-Gum
TM
.
For
the year ended March 31, 2019, one customer accounted for 97% of product sales from continuing operations.
NOTE
17 – SUBSEQUENT EVENTS
Common
Stock
Subsequent
to March 31, 2019, the Company issued additional shares of common stock as follows: (i) 1,200,000 shares under distribution
agreements (noted below); (ii) 888,308 shares for conversion of debt; (iii) 250,000 shares issued to Vice President of Distribution
and Marketing; (iv) 1,000,000 shares issued for services rendered; (v) 750,000 shares for debt commitment and (vi) 714,286
shares under stock purchase agreements in consideration for $45,000 (average of $0.063 per share) to accredited investors that
are unrelated third parties.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
17 – SUBSEQUENT EVENTS (CONTINUED)
Corporate
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).
Tauri-Gum
TM
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 CBD Gum-Infused Lollipops and gummi products. During April 2019, the Company filed for trademark
for TAURI-GUMMI
TM
and TAURI-GUMMIES
TM
.
E&M
Distribution Agreement
In
connection with the E&M Distribution Agreement related to the sale and distribution of our Tauri-Gum
TM
product
line in the New York City Metropolitan area marketplace, the Company agreed to 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 restricted shares will be reflected in stock-based compensation
based on the grant date of April 1, 2019 (See NOTE 1).
South
Florida Region Distribution Agreement
On
April 8, 2019, the Company entered into a non-exclusive distribution agreement with IRM Management Corporation, an established
medical practice management firm, the purpose of which 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. In connection
with the 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, $2,000 of the $10,000 cash stipend
has been paid. The value of the shares will be reflected in stock-based compensation based on the grant date of April 8, 2019.
North
Eastern United States Distribution Agreement
On
April 30, 2019, the Company, entered into the SKL Agreement with Sai Krishna LLC, with the intention of increasing and accelerating
market penetration of the Company’s Tauri-Gum
TM
product line in the applicable regions See NOTE 1). In connection
with the SKL Agreement, the Company agreed to a one-time issuance of an aggregate of 1,000,000 restricted shares of the Company’s
common stock. The restricted equity issuance to SKL was completed in accordance with the following schedule: (i) to Mr. Mahesh
Lekkala, 500,000 restricted shares the Company’s common stock within ten (10) business days of April 30, 2019; and (ii)
to SKL, 500,000, which were permitted to be immediately allocated by SKL to persons within its organization and, as such, (a)
250,000 of such shares shall be issued to Sai Krishna within ten (10) business days of April 30, 2019, and an additional issuance
of (b) 250,000 of such shares shall be issued to Sai Krishna within ten (10) business days of August 1, 2019. Other than the payment
terms for Tauri-Gum
TM
product purchased and distributed under the terms of the SKL Agreement, there is no additional
cash payment currently due or owing by the Company thereunder. The value of the shares will be reflected as stock-based compensation
with a grant date of April 30, 2019. All but 250,000 shares are expensed on this date, with those 250,000 shares valued over the
term of the one-year agreement.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
17 – SUBSEQUENT EVENTS (CONTINUED)
Tauri-Gum
TM
(Continued)
Vice
President of Distribution & Marketing
On
May 11, 2019, the Company entered into a consulting agreement pursuant to the terms of the SKL distribution agreement,
whereby Ms. Neelima Lekkala was appointed Vice President of Distribution & Marketing. This agreement has a one
year term and may be extended based upon mutual agreement of Ms. Lekkala and the Company. Ms. Lekkala will focus
her efforts on the expansion of Tauri-Gum
TM
in terms of gross sales and revenue growth through the acquisition
of new customers, establishment of professional marketing materials & protocols, logistics improvement(s) and fulfillment
services. Ms. Lekkala is not an executive officer of the Company and, therefore, is not deemed to be an affiliate of the Compny.
Ms. Lekkala’s compensation includes 250,000 shares of the Company’s restricted common stock, which are 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 the Company
may pay in either stock or cash at the election of Ms. Lekkala.
Convertible
Notes
GS
Capital Partners, LLC May and June – 2019 Notes
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 $500 per day beginning on the 10th day); (iii) if
the Company’s stock ceases to be listed on an exchange, its stock is suspended from trading for more than 10 consecutive
trading days or the Company ceases to file its reports with the SEC under the Securities Exchange Act of 1934, as amended, then
the outstanding principal due under the GS Capital Note shall increase by 50%; or (iv) if the GS Capital Note is not paid at maturity,
the outstanding principal due under this Note shall increase by 10%.
In
connection with the GS Capital Note, the Company issued irrevocable transfer agent instructions reserving 3,327,000 shares of
its Common Stock for conversions under this Note equal to two and a half times the discounted value of the Note (the “Share
Reserve”) within 5 days from the date of execution and shall maintain a 2.5 times reserve for the amount then outstanding.
Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
17 – SUBSEQUENT EVENTS (CONTINUED)
Convertible
Notes (Continued)
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 pursuant to the October 25,
2018 one-year $180,000 convertible note.
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 $500 per day beginning on the 10th day); (iii) if the Company’s
stock ceases to be listed on an exchange, its stock is suspended from trading for more than 10 consecutive trading days or the
Company ceases to file its reports with the SEC under the Securities Exchange Act of 1934, as amended, then the outstanding principal
due under the GS Capital Note shall increase by 50%; or (iv) if the GS Capital Note is not paid at maturity, the outstanding principal
due under this Note shall increase by 10%.
In connection with the GS Capital Note,
the Company issued irrevocable transfer agent instructions reserving 2,650,000 shares of its Common Stock for conversions under
this Note equal to two and a half times the discounted value of the Note (the “Share Reserve”) within 5 days from
the date of execution, and shall maintain a 2.5 times reserve for the amount then outstanding. Upon full conversion of this Note,
any shares remaining in the Share Reserve shall be cancelled.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
(US$)
NOTE
17 – SUBSEQUENT EVENTS (CONTINUED)
Notes
Payable
ASP
September 2015 Note
On
May 29, 2019, the Company and ASP consummated the retirement of that certain $180,000 face value non-convertible bridge loan agreement
(“ASP Loan Agreement”), which had been entered into by the Company and ASP on September 23, 2015. As disclosed on
the Company’s quarterly report on Form 10-Q (filed January 21, 2019), the ASP Loan Agreement matured in December 2015 and
carried a liability (principal and accrued interest) on the Company’s books of $113,468. By way of background, under the
terms of the ASP Loan Agreement, $90,000 (of the 180,000 principal loan) was to be wired by ASP directly to Eishin, a Japanese
based consumer product firm, in exchange for an equity stake in Eishin by the Company; however, the remaining $90,000 was never
documented or evidenced as being sent, and the Company never received any shares of common or other class of stock in Eishin,
which formed the basis of the Company’s disputed balance with ASP.
In
settlement of the aggregate sums claimed to be owed by ASP under the ASP Loan Agreement, the Company agreed to transfer and assign
to ASP all right, title and interest it has or may have in securities of Eishin, and to do all things necessary to effect such
transfer and assignment under Japanese law upon ASP’s written request, which shall be at ASP’s sole reasonable expense.
As a result, the Company and ASP 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). The $113,468 liability has been removed from the Company’s balance sheet, as will be reflected in the Company’s
next quarterly report to be filed on Form 10-Q.
Investments
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.
Operating
Lease
Effective
April 1, 2019, the Company has adopted ASU No. 2016-02,
Leases (Topic 842)
, and will account for its existing 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 $18,730 and $18,978, respectively. 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 $18,730 and $1,978 as of April 1, 2019. Any 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.
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 April 1, 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.