NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS
The
unaudited condensed consolidated financial statements included herein have been prepared, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission (“SEC”). The condensed consolidated financial statements
and notes are presented as permitted on Form 10-Q and do not contain certain information included in the Company’s annual
statements and notes. Certain information and footnote disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.
It is suggested that these condensed consolidated financial statements be read in conjunction with the March 31, 2019 Form 10-K
filed with the SEC, including the audited consolidated financial statements and the accompanying notes thereto. While management
believes the procedures followed in preparing these condensed consolidated financial statements are reasonable, the accuracy of
the amounts is in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company
later in the year.
These
unaudited condensed consolidated financial statements reflect all adjustments, including normal recurring adjustments which, in
the opinion of management, are necessary to present fairly the operations and cash flows for the periods presented.
Nature
of Business
Tauriga
Sciences, Inc. (the “Company”) is a Florida corporation, with its principal place of business being located at 555
Madison Avenue, fifth floor, New York, NY 10022. The Company has, over time, moved into 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.
Tauriga
Pharma Corp.
On
January 4, 2018, the Company announced the formation of a wholly-owned subsidiary in Delaware. This subsidiary, incorporated in
Delaware, was initially named Tauriga IP Acquisition Corp., which changed its name to Tauriga Biz Dev Corp. on March 25, 2018,
and most recently (January 2020) changed its name to Tauriga Pharma Corp. (as described below).
Effective
January 2020, the Company amended the certificate of incorporation of Tauriga Business Development Corp. in relevant part to effectuate
a name change of this subsidiary to Tauriga Pharma Corp. The principal reason for the name change is to concentrate this subsidiary’s
focus on the development of a pharmaceutical product line that is synergistic with the Company’s primary CBD product line.
Currently, the plan is to initially create a pharmaceutical line of products to address nausea symptoms related to chemotherapy
treatment in patients, which we will submit for clinical trials and to regulatory agencies for approval.
Tauriga
Sciences Limited
On
June 10, 2019, the Company formed a wholly owned subsidiary, Tauriga Sciences Limited, with the registrar of Companies for Northern
Ireland. Tauriga Sciences Limited is a private limited Company. The entity was established in conjunction with online merchant
services. In conjunction to this new entity the Company entered into a two-year lease commencing on June 11, 2019 and expiring
on June 30, 2021. The office is located at Regus World Trade Centre Muelle de Barcelona, edif. Sur, 2a Planta Barcelona Cataluña
08039 Spain.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
COMPANY
PRODUCTS
TAURI-GUMTM
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-GumTM.
We have filed for trademark protection with the United States Patent and Trademark Office for our CBD infused chewing product
line for TAURI-GUMMITM and TAURI-GUMMIESTM. In October 2019, we also filed trademark applications for the
above-referenced marks in each of the European Union and Canada.
Under
the terms of the agreement, Per Os Bio produces Tauri-GumTM 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;
|
|
|
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 3rd 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; and
|
|
|
H.
|
Shipping
System: Bulk packed 266 Packs per master case (“Palletized”).
|
Under
terms of the agreement with Per Os Bio:
|
|
A.
|
Each
product order will consist of 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;
|
|
|
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; and
|
|
|
G.
|
Acquire
legal opinion with respect to the confirmation of the legality to sell this CBD Gum on
the Federal Statute Level.
|
The
Company’s 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 the Annual Report, including
with respect, but not limited, to Federal laws and regulations that govern CBD and cannabis.
The
Company’s E-commerce website is www.taurigum.com.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
COMPANY
PRODUCTS (CONTINUED)
During
the fiscal year 2020, the Company added two additional flavors. Blood Orange and Pomegranate.
TAURI-GUMMIES™
On November 25, 2019, the Company announced
that it has finalized the formulation for its Vegan 25 mg CBD (Isolate) Infused Gummies product to be branded Tauri-Gummies™
for which a trademark was filed with the U.S. Patent and Trademark Office, as well as in Switzerland and the European Union. This
product contains no gelatin in the formulation, as the Company has utilized plant-based alternatives in completion of this product.
There will be 4 flavors offered – cherry, orange, lemon and lime.
Each gummy package contains 24 gummies
in a jar, 6 of each flavor, containing 25mg of CBD isolate per individual gummy, or 600 mg of CBD isolate per jar. These Gum Drops
have been manufactured in the “Nostalgic” 1950s confectionary style and are both plant-based (Vegan Formulated) and
Kosher Certified. The Company has commenced sales of Tauri-Gummies™ during January 2020.
CANNABIGEROL
“CBG” ISOLATE INFUSED VERSION OF TAURI-GUM™
On
December 30, 2019, the Company announced it has commenced development of a Cannabigerol (“CBG”) Isolate Infused version
of its Tauri-Gum™ brand. The Company expects that each tablet of chewing gum will contain 10mg of CBG isolate. The flavor
(all natural) selected for this CBG product will be Starfruit/Peach. This product will also be Kosher Certified (Star K, Vegan
and 100% made in the USA). The Company has secured distinct GS1 barcodes for both: The Starfruit/Peach CBG infused Tauri-Gum™
blister pack and retail display box.
DISTRIBUTION
OF THE COMPANY’S PRODUCTS
E&M
Distribution Agreement
On
April 1, 2019, the Company entered into a distribution agreement with E&M Ice Cream Company (“E&M”) to establish
Tauri-GumTM in the marketplace (the “E&M Distribution Agreement”). The Company has supported the Tauri-GumTM
commercial launch with substantial levels of both financial resources and marketing support. The
Company had both received payment for and delivered the product for its previously announced $54,000 Tauri-GumTM purchase
order during March 2019, and re-orders in the first quarter of fiscal 2020. The Company has agreed to issue a one-time issuance
of 1,000,000 restricted shares of the Company’s common stock, and to tender a one-time cash payment of $125,000 to E&M.
This $125,000 cash component was paid in full to E&M on April 1, 2019, and the value of the shares is reflected in stock-based
compensation based on the grant date of April 1, 2019. These shares were issued on December 26, 2019.
Under
the terms of the E&M Distribution Agreement, the Company issued restricted shares of common stock to E&M for their support
services.
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-GumTM 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, $6,000 of the $10,000 cash stipend has been
paid. The value of the shares was reflected as stock-based compensation based on the grant date of April 8, 2019.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
DISTRIBUTION
OF THE COMPANY’S PRODUCTS (CONTINUED)
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-GumTM product line in the applicable regions.
In
connection with the SKL Agreement, the Company has agreed to issue a one-time issuance of an aggregate of 1,000,000 restricted
common shares the Company’s stock, which are subject to the customary resale and transfer restrictions imposed under the
rules and regulations of the Securities and Exchange Commission. The restricted equity issuance to SKL was issued in accordance
with the following schedule: (i) to Mr. Mahesh Lekkala, 500,000 restricted shares the Company’s common stock within ten
(10) business days of April 30, 2019; and (ii) to SKL, 500,000, which were permitted to be immediately allocated by SKL to persons
within its organization and, as such, (a) 250,000 of such shares shall be issued to SKL within ten (10) business days of April
30, 2019, and the additional issuance of (b) 250,000 of such shares shall be issued to SKL within ten (10) business days of August
1, 2019, which shares were issued on August 1, 2019. Other than the payment terms for Tauri-GumTM product purchased
and distributed under the terms of the Agreement, there is no additional cash payment currently due or owing by the Company thereunder.
The value of the shares is reflected as stock-based compensation with a grant date of April 30, 2019. All but 250,000 shares are
expensed on this date, with those 250,000 shares valued over the term of the one-year agreement.
On
May 11, 2019, the Company entered into a consulting agreement pursuant to the terms of the SKL 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-GumTM
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 Company. Ms. Lekkala’s compensation includes restricted shares of
the Company’s common stock, which are fully earned and vested upon the execution of her consulting agreement. Additionally,
Ms. Lekkala is entitled to receive a 30% commission on total gross sales through the sale of the Tauri-GumTM product
line, which the Company may pay in either stock or cash at the election of Ms. Lekkala.
Windmill
Health Distribution Agreement
On
June 28, 2019, the Company entered into a distribution agreement with Windmill Health Products, LLC (“Windmill Health”),
a New Jersey based distributor, with the intention of increasing and accelerating market penetration of the Company’s Tauri-GumTM
product line. The Company did not contribute any capital or issue any equity to Windmill Health in connection with the Windmill
Health distribution agreement.
These
arrangements are more fully described in our periodic and current reports that we have filed with the Securities and Exchange
Commission, included these agreements as exhibits thereto, and which are also discussed in our consolidated financial statements
to our Annual Report for the year ended March 31, 2019, as well as our Quarterly Reports filed in the applicable periods thereafter.
In
connection with the issuances of any restricted securities by the Company regarding the above-described distribution agreements
or other agreements described in this periodic report, please see Item 2, Unregistered Sales of Equity Securities for additional
information.
REGULATORY
MATTERS
Food
and Drug Administration
On
May 31, 2019, the U. S. Food and Drug Administration (“FDA”) held public hearings to obtain scientific data and information
about the safety, manufacturing, product quality, marketing, labeling, and sale of products containing cannabis or cannabis-derived
compounds, including CBD. The hearing came approximately five months after the Agricultural Improvement Act of 2018 (more commonly
known as the Farm Bill), went into effect and removed industrial hemp from the Schedule I prohibition under the Controlled Substances
Act (CSA) (industrial hemp means cannabis plants and derivatives that contain no more than 0.3 percent tetrahydrocannabinol, or
THC, on a dry weight basis).
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
REGULATORY
MATTERS (CONTINUED)
Food
and Drug Administration (Continued)
Though
the Farm Bill removed industrial hemp from the Schedule I list, the Farm Bill preserved the regulatory authority of the FDA over
cannabis and cannabis-derived compounds used in food and pharmaceutical products under the Federal Food, Drug, and Cosmetic Act
(FD&C Act) and section 351 of the Public Health Service Act. The FDA has been clear that it intends to use this authority
to regulate cannabis and cannabis-derived products, including CBD, in the same manner as any other food or drug ingredient. In
addition to holding the hearing, the agency had requested comments by July 2, 2019 regarding any health and safety risks of CBD
use, and how products containing CBD are currently produced and marketed, which comment period was concluded on July 16, 2019.
As of the date hereof, the FDA has taken the position that it is unlawful to put into interstate
commerce food products containing hemp derived CBD, or to market CBD as, or in, a
dietary supplement. Furthermore, since the closure of the FDA hearings on this issue, some state and local agencies have
issued a ban on the sale of any food or beverages containing CBD. H.R. 5587, a newly introduced legislative effort at the federal
level, seeks to consider hemp-derived CBD and substances containing hemp-derived CBD to be dietary supplements under the FD&C
Act, which would likely resolve ambiguity and provide clear guidance to stakeholders about how to comply with applicable FDA law.
However, H.R. 5587 was only recently introduced in the House of Representatives, and is in its infancy, requiring further approvals,
including approval of the House of Representatives, the Senate and the President of the United States before being enacted into
law, if at all.
Furthermore,
with respect to Company’s developing CBG product line, the FDA has
provided no guidance as to how cannabinoids other than CBD (sch as CBG) shall be regulated under the FD&C Act, and it is unclear
at this time how such potential regulation could affect the results of the operations or prospects of the Company or this
product line.
See
our Risk Factors for more information about these items, as well as certain related disclosures included our Results of Operations
under the heading “Going Concern”.
The
Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding,
success in developing and marketing its products and the level of competition and potential regulatory enforcement actions. These
risks and others are described in greater detail in the Risk Factors set forth in this periodic report and our annual reports
that we have filed and will also file in the future.
OTHER
BUSINESS ITEMS
2019
Increase in Authorized Shares
On
July 26, 2019, the Company held a meeting of its board of directors. The matters voted on and approved at the meeting included
an amendment to the Company’s Articles of Incorporation to increase the number of authorized shares of the Company’s
common stock, $0.00001 par value per share from 100,000,000 to 400,000,000 shares (the “Authorized Shares Increase”).
The increase in the authorized shares was approved by the shareholders of record at a special meeting of shareholders on September
10, 2019, and the Company promptly filed its Amended Articles of Incorporation with the division of corporations of the State
of Florida to effectuate the increase in authorized shares, which was formally accepted by the Florida Division of Corporations
on September 12, 2019.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
OTHER
BUSINESS ITEMS (CONTINUED)
Approval
to Operate Global Seller Account by Alibaba Group
On
January 6, 2020, the Company announced that is has been approved by Chinese multinational conglomerate, Alibaba Group (“Alibaba”),
to operate a Global Seller Account. In addition, the Company has been designated as a Gold Supplier (Gold Tier Level Supplier).
This Alibaba approval opens up the global marketplace to the Company, its products, its product lines, as well as future business
opportunities. The Company is working diligently towards establishing a partnership with a China based fulfillment and distribution
network.
Certified
as Affiliate Vendor by The National Association of College Stores
On
January 7, 2020, the Company announced that is has been certified by the National Association of College Stores (“NACS”)
as an affiliate vendor. As a vendor of NACS, the Company has joined the most comprehensive group of campus retailers working to
provide the best services and selections to college students across the United States.
HISTORICAL
BUSINESS ITEMS
See
Note 1 of our Consolidated Financial Statements in our Annual Report for the year ended March 31, 2019 for additional information
on the below-referenced historical business items.
Cupuaçu
Butter Lip Balm
On
December 23, 2016, the Company entered into a non-exclusive, 12-month license agreement (the “License Agreement”)
with Cleveland, Ohio based cosmetics products company Ice + Jam LLC (“Ice + Jam”) to market Ice + Jam’s proprietary
cupuaçu butter lip balm, sold under the trademark HerMan® which launched
during the quarter ended December 31, 2017. During February of 2018, the Company’s strategy with respect to the HerMan®
product was negatively impacted by a series of product defects relating to the twisting mechanism of the lip balm tube.
As a result of this and the concomitant halting of selling efforts, the Company had no sales of the HerMan®
product during the year ended March 31, 2019. The Company has removed the product from the website and the remaining inventory
was written-off as it was determined that the units were not usable. The Company has discontinued this operation as of March 31,
2019.
Honeywood
Following
the termination of a proposed 2014 merger between the Company and California-based Honeywood LLC (“Honeywood”), a
developer of a topical medicinal cannabis product, on August 1, 2017, the Company entered into a Debt Conversion Agreement, whereby
the Company agreed to convert an $170,000 note receivable due from Honeywood, including accrued interest into a 5% membership
interest in Honeywood. At the time of the Honeywood Conversion Agreement, the receivable balance under the Note of $199,119 had
been fully written off by the Company in a prior period. As a result of the Honeywood Conversion Agreement, the Company deemed
the investment to have no current value.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
HISTORICAL
BUSINESS ITEMS (CONTINUED)
Pilus
Energy
On
January 28, 2014, the Company acquired Pilus Energy, LLC (“Pilus”), an Ohio limited liability company and a developer
of alternative cleantech energy platforms using proprietary microbial solutions that create electricity while consuming polluting
molecules from wastewater. On December 22, 2016, the Company entered in a membership interest transfer agreement with Open Therapeutics
whereby the Company sold 80% of its membership interest in Pilus back to Open Therapeutics for consideration of the termination
of 80% of the unexercised portion of the warrants to purchase the Company’s common stock. Open Therapeutics agreed to pay
to the Company 20% of the net profit generated Pilus Energy from its previous year’s earnings, if any. On January 12, 2019,
the Company and Open Therapeutics agreed to extinguish a contingent liability in exchange for a one-time issuance of 500,000 restricted
shares of Company’s common stock.
Blink
Charging Company
On
March 29, 2018 the Company’s then named subsidiary - Tauriga Biz Dev Corp. - entered into an independent sales representative
agreement with Blink Charging Company (NASDAQ: BLNK) (“BLINK”). Under this agreement we became a non-exclusive independent
sales representative to solicit orders from potential customers for EV (“Electric Vehicle”) Stations placement. This
sales agreement is a three-tier compensation model based on whether we contract the new customer to purchase equipment outright
from BLINK or enter into one of two revenue-sharing agreements. If our subsidiary 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 our subsidiary secures a
revenue sharing agreement with a customer where BLINK remains the owner, then our subsidiary 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 will
pay for the cost of providing power to these unit as well as installation costs. As of December 31, 2019, we have not installed
any of these machines in any locations, and no revenue has been generated through the Blink contract. Management has not made
any decision regarding placement of these units at this time. The Company has not decided to abandon this business line, and therefore,
we have not reclassified these assets as held for sale.
Going
Concern
During the fourth quarter of the year ended
March 31, 2019, the Company began sales and marketing efforts for its Mint flavored Tauri-GumTM product. During the
three months ended March 31, 2019, the Company recognized sales of $57,134 and a gross profit of $20,006, which has continued
into the nine months ended December 31, 2019 where the Company recognized revenue of $201,881 and a gross profit of $35,719.
During the nine months ended December 31, 2019, the Company has entered into multiple distribution agreements and has engaged
an independent contractor to act as Vice President of Distribution and Marketing. At December 31, 2019, the Company had a working
capital deficit of $121,062, resultant largely from convertible notes payable and a liability to issue common stock. Although
the Company expects that the deficit will be remedied by repayment in cash or the conversion of notes into common
stock shares as well as the issuance of shares for which the Company is obligated, it still believes
that there is uncertainty with respect to continuing as a going concern.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
Going
Concern (Continued)
On
July 1, 2019, months after the NYC Department of Heath announced a ban on cannabidiol in foods and beverages (mainly focused on
restaurants and baked goods), the updated New York City Health Code now includes an embargoing of CBD-infused Edible(s) Products
(including packaged products). The Company is hopeful that the FDA as well as the New York City Council will implement regulations
surrounding the CBD industry in a logical and prompt manner. The FDA’s uncertainty surrounding CBD was the initial cause
of the New York City ban, and we believe further clarification from the FDA supporting its safety and regulating its labeling
will also offer a clearer pathway to the New York City CBD market. The Company believes it is well positioned under the circumstances
and has taken a conservative approach towards its products, including, for example, ensuring that its product manufacturer periodically
tests for compliance with the Agricultural Improvement Act of 2018, such as utilizing CBD oils from hemp plants which contain
0% THC content. The Company remains confident that this embargo on CBD Edible(s) products will be lifted and/or clarified in
the future. In the interim, as a result of this embargo, the Company has taken the necessary steps to ensure that their marketing
efforts are focused on areas outside of New York City, while maintaining its physical presence in New York City.
The
Company, in the short term, intends to continue funding its operations either through cash-on-hand or through financing alternatives.
Management’s plans with respect to this include raising capital through equity markets to fund future operations as well
as the possible sale of its remaining marketable securities which had a market value of $158,631at December 31, 2019. In the event
the Company cannot raise additional capital to fund and/or expand operations or fails to raise adequate capital and generate adequate
sales revenue, or if the regulatory landscape were to become more difficult or result in regulatory enforcement, it could result
in the Company having to curtail or cease operations.
Additionally,
even if the Company does raise sufficient capital to support its operating expenses and generate adequate revenues in the short
term, there can be no assurances that the revenues will be sufficient to enable it to develop business to a level where it will
generate profits and cash flows from operations to achieve profitability thereby eliminating its reliance on alternative sources
of funding. Although management believes that the Company is in a stronger position than it has been in in several years, there
is still no guarantee that profitable operations with sufficient cashflow to sustain operations can or will be achieved without
the need of alternative financing, which is limited. These matters still raise significant doubt about the Company’s ability
to continue as a going concern as determined by management. The Company believes that there is uncertainty with respect to continuing
as a going concern until the operating business can achieve more than nominal sales and profitable operations and sustain cash
flow to operate the Company for a period of twelve months. In the event the Company does need to raise additional capital to fund
operations or engage in a transaction, failure to raise adequate capital and generate adequate sales revenues could result in
the Company having to curtail or cease operations. Even if the Company does raise sufficient capital to support its operating
expenses, acquire new license agreements or ownership interests in life science companies and generate adequate revenues, or the
agreements entered into recently are successful, there can be no assurances that the revenues will be sufficient to enable it
to develop business to a level where it will generate profits and cash flows from operations. These matters raise substantial
doubt about the Company’s ability to continue as a going concern as determined by management. However, the accompanying
condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of
assets and satisfaction of liabilities in the normal course of business. These condensed consolidated financial statements do
not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might
be necessary should the Company be unable to continue as a going concern.
In
an effort to support the Company’s future capital needs, on January 21, 2020, the Company entered into a $5,000,000 equity
line financing agreement with Tangiers Global, LLC (“Tangiers”), as well as a registration right agreement related
thereto. The financing is over a maximum of 36 months. Pursuant to the Registration Rights Agreement, a maximum of 76,000,000
shares of our common stock, par value $.00001 per share that we may sell to Tangiers from time to time will be registered by us
on Form S-1 with the Securities and Exchange Commission under the Securities Act of 1933, as amended, for this financing. We are
required to use our best efforts to file the Registration Statement within ninety (90) days of the date the Investment Agreement.
(See Note 14).
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Condensed
Consolidated Financial Statements
The condensed consolidated financial statements
include the accounts and activities of Tauriga Sciences, Inc., its wholly-owned Canadian subsidiary, its wholly-owned subsidiary
Tauriga Pharma Corp. (f/k/a Tauriga Biz Dev Corp – or “Tauriga BDC”, and referenced herein as Tauriga BDC
for contextual purposes only in describing the Blink contractual arrangement) and Tauriga Sciences Limited. All intercompany
transactions have been eliminated in consolidation. As of December 31, 2019, there is no activity in any of the Company’s
subsidiaries other than Tauriga Pharma Corp. holding the electric car chargers and the leasehold interest in Tauriga Sciences
Limited.
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 will pay for the cost of providing power to these unit as well as installation costs.
As
of December 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.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(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 $181,111 during the
nine months ended December 31, 2019 compared to no revenue for the same period in the prior year. All revenue is from the sale
of the Company’s Tauri-GumTM product line and there were accounts receivable of $92,838 outstanding for
these sales, as of December 31, 2019.
The
Company recognized no revenue from discontinued operations during the nine months ended December 31, 2019 which was related
to the sales of the HERMAN® lip balm product.
Allowance for Doubtful Accounts
The Company maintains an allowance for
doubtful accounts, which includes sales returns, sales allowances and bad debts. The allowance adjusts the carrying value of trade
receivables for the estimate of accounts that will ultimately not be collected. An allowance for doubtful accounts is generally
established as trade receivables age beyond their due dates, whether as bad debts or as sales returns and allowances. As past
due balances age, higher valuation allowances are established, thereby lowering the net carrying value of receivables. The amount
of valuation allowance established for each past-due period reflects the Company’s historical collections experience, including
that related to sales returns and allowances, as well as current economic conditions and trends. The Company also qualitatively
establishes valuation allowances for specific problem accounts and bankruptcies, and other accounts that the Company deems relevant
for specifically identified allowances. The amounts ultimately collected on past-due trade receivables are subject to numerous
factors including general economic conditions, the financial condition of individual customers and the terms of reorganization
for accounts exiting bankruptcy. Changes in these conditions impact the Company’s collection experience and may result in
the recognition of higher or lower valuation allowances. At December 31, 2019, the Company has established an allowance for doubtful
accounts in the amount of $2,000.
Sales
Refunds
The
Company’s refund policy allows customers to return product for any reason except where the customer does not like the taste
of the product. The customer has 30 days from the date of purchase to initiate the process. Returns are limited to one return
or exchange per customer. Only purchases up to $100 qualify for a refund. Approved return/refund requests are typically processed
within 1-2 business days. For product purchases made through a Tauri-GumTM distributor or retailer, the customer is
required to work with original purchase location for any return or exchange. The Company has not established a reserve for returns
as of December 31, 2019 however will monitor the refunds to estimate whether a reserve will be required.
Use
of Estimates
The
preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash
Equivalents
For
purposes of reporting cash flows, cash equivalents include investment instruments purchased with an original maturity of three
months or less. At December 31, 2019, the Company’s cash on deposit with financial institutions did not exceed the total
FDIC insurance limit of $250,000. At December 31, 2019 and March 31, 2019, the Company had a cash balance of $89,329 and $385,943,
respectively. The Company’s does not expect, in the near term, for its cash balance to exceed the total FDIC insurance limit
of $250,000 for other than very short periods of time where the Company would use such cash in excess of insurance in the very
short-term in operating activities. To reduce its risk associated with the failure of such financial institution, the Company
holds its cash deposits in more than one financial institution and evaluates at least annually the rating of the financial institution
in which it holds its deposits. The Company had no cash equivalents as of December 31, 2019 and March 31, 2019.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investment
in Trading Securities
Investment
in trading securities consist of investments in shares of common stock of companies traded on public markets 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 December 31, 2019, the Company has
not impaired any of their cost method investments.
Inventory
Inventory
consists of finished goods in salable condition stated at the lower of cost or market determined by the first-in, first-out method.
The inventory consists of packaged and labeled salable inventory. Shipping of product to finished good inventory fulfillment center
is also included in the total inventory cost. Shipping of product upon sale for online sales is paid by the customer upon ordering
for orders of single packs of Tauri-GumTM. For multiple pack or wholesale product orders shipping cost is paid by the
Company. As of December 31, 2019, the Company’s inventory on hand had a value of $117,722. The Company also has paid deposits
in the amount of $49,500 to the manufacturer, Per Os Bio, towards orders not received as of December 31, 2019. Amounts paid to
Per Os Bio for Tauri-GumTM are classified as deposits (other current asset) on the Company’s condensed consolidated
balance sheet until the goods are available for sale. The Company has not established any inventory reserve on the Tauri-GumTM
as of December 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 Loss Per Common Share
The
Company computes per share amounts in accordance with FASB ASC Topic 260 “Earnings per Share” (“EPS”),
which requires presentation of basic and diluted EPS. Basic EPS is computed by dividing the income (loss) available to common
stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average
number of shares of common stock and common stock equivalents outstanding during the periods; however, potential common shares
are excluded for period in which the Company incurs losses, as their effect is anti-dilutive. For the three and nine months ended
December 31, 2019, basic and fully diluted earnings per share were the same as the Company had losses in this period.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-Based
Compensation
The
Company accounts for Stock-Based Compensation under ASC 718 “Compensation-Stock Compensation,” which addresses
the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus
on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 requires measurement
of cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the
award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant
date must be recognized.
The
Company accounts for stock-based compensation awards to non-employees in accordance with ASC 505-50, “Equity-Based Payments
to Non-Employees.” Under ASC 505-50, the Company determines the fair value of the warrants or stock-based compensation
awards granted on the grant date as either the fair value of the consideration received, or the fair value of the equity instruments
issued, whichever is more reliably measurable. Any stock options or warrants issued to non-employees are recorded in expense and
an offset to additional paid-in capital in stockholders’ equity over the applicable service periods using variable accounting
through the vesting dates based on the fair value of the options or warrants at the end of each period.
The
Company issues stock to consultants for various services. The costs for these transactions are measured at the fair value on the
grant date of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.
The Company recognized consulting expense and a corresponding increase to additional paid-in-capital related to stock issued for
services over the term of the related services.
Reclassifications
Certain
prior year amounts have been reclassified to conform to the current period presentation. The reclassifications had no effect on
the net loss or cash flows of the Company.
Impairment
of Long-Lived Assets
Long-lived
assets, primarily fixed assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of the assets might not be recoverable. The Company will perform a periodic assessment of assets for impairment in the
absence of such information or indicators. Conditions that would necessitate an impairment assessment include a significant decline
in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or a significant
adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. For long-lived
assets to be held and used, the Company would recognize an impairment loss only if it’s carrying amount is not recoverable
through its undiscounted cash flows and measures the impairment loss based on the difference between the carrying amount and estimated
fair value.
Research
and Development
The Company expenses research and development
costs as incurred. There were no research and development costs for the three months ended December 31, 2019 and $3,852 for the
nine months ended December 31, 2019 compared to no expense during the same periods in the prior year. The Company is continually
evaluating products and technologies in the natural wellness space, including its Tauri-GumTM product including new
flavor formulations and other CBD delivery products, as well as development of a Cannabigerol (“CBG”) Isolate Infused
version of its Tauri-Gum™ brand in addition to any intellectual property or other related technologies. As the Company
investigates and develops relationships in these areas, resultant expenses for trademark filings, license agreements, website
and product development and design materials will be expensed as research and development. Some costs will be accumulated for
subsidiaries prior to formation of any new entities.
Fair
Value Measurements
ASC
820 “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally
accepted accounting principles and expands disclosure about fair value measurements.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair
Value Measurements (Continued)
The
following provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped
into Levels 1 to 3 based on the degree to which fair value is observable:
Level
1- fair value measurements are those derived from quoted prices (unadjusted in active markets for identical assets or liabilities);
Level
2- fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level
3- fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are
not based on observable market data (unobservable inputs).
Financial
instruments classified as Level 1 – quoted prices in active markets include cash.
These
condensed consolidated financial instruments are measured using management’s best estimate of fair value, where the inputs
into the determination of fair value require significant management judgment to estimation. Valuations based on unobservable inputs
are highly subjective and require significant judgments. Changes in such judgments could have a material impact on fair value
estimates. In addition, since estimates are as of a specific point in time, they are susceptible to material near-term changes.
Changes in economic conditions may also dramatically affect the estimated fair values.
Fair
value estimates discussed herein are based upon certain market assumptions and pertinent information available to management for
the respective periods. The respective carrying value of certain financial instruments approximated their fair values due to the
short-term nature of these instruments. These financial instruments include cash, investments, short-term notes payable, accounts
payable and accrued expenses.
Share
settled debt
The
general measurement guidance in ASC 480 requires obligations that can be settled in shares with a fixed monetary value at settlement
to be carried at fair value unless other accounting guidance specifies another measurement attribute. The Company has determined
that ASC 835-30 is the appropriate accounting guidance for the share-settled debt, which is what was done by setting up the debt
discount which is to be amortized to interest expense over the term of the instrument. Amortization of discounts are to be amortized
using the effective interest method over the term of the note.
ASC
480-10-25-14 requires liability accounting for (1) any financial instrument that embodies and unconditional obligation to transfer
a variable number of shares or (2) a financial instrument other than an outstanding share that embodies a conditional obligation
to transfer a variable number of shares, provided that the monetary value of the obligation is based solely or predominantly on
any of the following: 1. A fixed monetary amount known at inception (e.g. stock settled debt); 2. Variations in something other
than the fair value of the issuer’s equity shares (e.g. a preferred share that will be settled in a variable number of common
shares with tits monetary value tied to a commodity price); and 3. Variations in the fair value of the issuer’s equity shares,
but the monetary value to the counterparty moves inversely to the value of the issuer’s shares (e.g. net share settled written
put options, net share settled forward purchase contracts).
Notwithstanding
the fact that the above instruments can be settled in shares, FASB concluded that equity classification is not appropriate because
instruments with those characteristics do not expose the counterparty to risks and rewards similar to those of an owner and, therefore
do not create a shareholder relationship. The issuer is instead using its shares as the currency to settle its obligation.
The
Company has multiple notes that contain discount provisions whereby the holder can exercise conversion rights at a discount to
the market price for a 15-day trailing period based on the market volume average weighted price. ASC 470-20 defines this as a
beneficial conversion feature which that shall be recognized separately at issuance by allocating a portion of the proceeds equal
to the intrinsic value, not to exceed the face value of the note, to additional paid in capital. This segmented value, is to be
amortized using the effective interest method over the term of the note.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income
Taxes
Income
taxes are accounted for under the liability method of accounting for income taxes. Under the liability method, future tax liabilities
and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in
the financial statement carrying amounts of assets and liabilities and their respective tax bases.
Future
tax assets and liabilities are measured using enacted or substantially enacted income tax rates expected to apply when the asset
is realized, or the liability settled. The effect of a change in income tax rates on future income tax liabilities and assets
is recognized in income in the period that the change occurs. Future income tax assets are recognized to the extent that they
are considered more likely than not to be realized.
ASC
740 “Income Taxes” clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s
financial statements. This standard requires a company to determine whether it is more likely than not that a tax position will
be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a
company must measure the tax position to determine the amount to recognize in the financial statements.
As
a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with
recognition and measurement standards established by ASC 740 and concluded that the tax position of the Company does not meet
the more-likely-than-not threshold as of December31, 2019.
Recent
Accounting Pronouncements
In
June 2018, the FASB issued ASU No. 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee
Share-Based Payment Accounting” which addresses accounting for issuance of all share-based payments on the same accounting
model. Previously, accounting for share-based payments to employees was covered by ASC Topic 718 while accounting for such payments
to non-employees was covered by ASC Subtopic 505-50. As it considered recently issued updates to ASC 718, the FASB, as part of
its simplification initiatives, decided to replace ASC Subtopic 505-50 with Topic 718 as the guidance for non-employee share based
awards. Under this new guidance, both sets of awards, for employees and non-employees, will essentially follow the same model,
with small variations related to determining the term assumption when valuing a non-employee award as well as a different expense
attribution model for non-employee awards as opposed to employee awards. The ASU is effective for public business entities beginning
in 2019 calendar years and one year later for non-public business entities. The Company has determined that there is not a material
impact on their condensed consolidated financial position and results of operations as a result of this standard.
In
February 2016, FASB issued ASU 2016-02, “Leases (Topic 842).” The new standard requires lessees to apply a
dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is
effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on
an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use
asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with
a term of 12 months or less will be accounted for similar to existing guidance for operating leases.
The
new guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that
reporting period and is applied retrospectively. Early adoption is permitted. The Company has adopted this standard as of April
1, 2019 (See Note 6).
There
are several other new accounting pronouncements issued or proposed by the FASB. Each of these pronouncements, as applicable, has
been or will be adopted by the Company. Management does not believe any of these accounting pronouncements has had or will have
a material impact on the Company’s condensed consolidated financial position or operating results.
Subsequent
Events
In
accordance with ASC 855 “Subsequent Events” the Company evaluated subsequent events after the balance sheet
date through the date of issuance.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
3– INVENTORY
Inventory
from continuing operations
Inventory
value by product as of:
|
|
|
December
31, 2019
|
|
|
March
31, 2019
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
Tauri-GumTM
|
|
$
|
117,722
|
|
|
$
|
10,872
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Inventory
|
|
$
|
117,722
|
|
|
$
|
10,872
|
|
At
December 31, 2019, deposits to Per Os Bio in the amount of $49,500 for the manufacturing costs of Tauri-GumTM have
been classified as a deposit (prepaid expenses other current assets) on the Company’s condensed consolidated balance sheet,
as the goods are not yet available for sale.
At
March 31, 2019, the Company had deposits to Per Os Bio in the amount of $105,000 for the manufacturing costs of Tauri-GumTM
for goods not yet available for sale.
NOTE
4– DISCONTINUED OPERATIONS
On
March 31, 2019, the Company decided to discontinue operations relative to its HERMAN© Lip balm product line. After much effort
the Company was unable to resolve manufacturing issues as it related to it its lip balm tube mechanism. The Company did not believe
that these issues will be resolvable without a substantial investment of time and money. Therefore, the Company exchanged its
50% ownership in Ice+Jam, LLC for the balance of the non-controlling interest as of March 31, 2019. On April 1, 2019, the Company
recognized a gain on the disposal of discontinued operations in the amount of $4,941.
The
Company had no revenue or expenses from discontinued operations during the nine months ended December 31, 2019.
TAURIGA
SCIENCES, INC. AND SUBSIDIARY
BALANCE
SHEETS FROM DISCONTINUED OPERATIONS
|
|
|
December 31, 2019
|
|
|
March 31, 2019
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
Assets from discontinued operations
|
|
$
|
-
|
|
|
$
|
581
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities from discontinued operations
|
|
$
|
-
|
|
|
$
|
5,522
|
|
NOTE
5– PROPERTY AND EQUIPMENT
The
Company’s property and equipment is as follows:
|
|
|
December
31, 2019
|
|
|
March
31, 2019
|
|
|
Estimated
Life
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
Computers,
office furniture and other equipment
|
|
$
|
69,808
|
|
|
$
|
69,808
|
|
|
3-5
years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
accumulated depreciation
|
|
|
(58,724
|
)
|
|
|
(56,798
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
11,084
|
|
|
|
13,010
|
|
|
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
5– PROPERTY AND EQUIPMENT (CONTINUED)
On
June 29, 2018, the Company purchased four Blink Level 2 – 40” pedestal chargers for permanent placement in one or
more retail locations whereby the Company will share revenue from these electric car vehicle charging units with such location
owner. No depreciation expense has been recorded for the charging units as of December 31, 2019 due to the fact that they have
not been placed in service.
Depreciation
expense for the three and nine months ended December 31, 2019 were $232 and $695 compared to $214 and $732 for the same period
in the prior year. During the nine months ended December 31, 2019, the Company disposed of computer equipment valued at $2,782
recognizing a loss on disposal of $1,230.
During
the year ended March 31, 2019 the Company disposed of computer equipment valued at $1,632 recognizing a loss on disposal of $907.
NOTE
6 – OPERATING LEASE
The
Company has adopted ASU No. 2016-02, Leases (Topic 842), as of April 1, 2019 and will account for the new lease in terms
of the right of use assets and offsetting lease liability obligations for this new lease under this pronouncement. In accordance
with ASC 842 - Leases, effective April 1, 2019, the Company recorded a net lease right of use asset and a lease liability at present
value of approximately $7,492 and $7,895, respectively. The Company recorded these amounts 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 non-related
parties. 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 used the initial term of the two-year
lease. Upon the election by the Company to extend the lease for additional years, that election will be treated as a lease modification
and the lease will be reviewed for remeasurement. This lease will be treated as an operating lease under the new standard.
The
Company has chosen to implement this standard using the modified retrospective model approach with a cumulative-effect adjustment,
which does not require the Company to adjust the comparative periods presented when transitioning to the new guidance on April
1, 2019. The Company has also elected to utilize the transition related practical expedients permitted by the new standard. The
modified retrospective approach provides a method for recording existing leases at adoption and in comparative periods that approximates
the results of a modified retrospective approach. Adoption of the new standard resulted in the recording of additional net lease
assets and lease liabilities of approximately $7,492 and $7,895 as of April 1, 2019, respectively. The difference between the
additional lease assets and lease liabilities, net of the deferred tax impact, will be recorded as an adjustment to retained earnings.
The standard is not expected to materially impact our consolidated net earnings and had no impact on cash flows.
Corporate
office – New York
On
December 1, 2017, the Company relocated its corporate headquarters from Danbury, Connecticut to New York, New York. The Company
has entered into a two-year lease at $1,010 per month for the term of the lease. The lease right of use asset for this lease at
adoption was $7,492 and will be amortized on a straight-line basis over the remaining term of the lease. For the nine months ended
December 31, 2019 the Company recorded a lease expense of $6,322. On September 1, 2019, the Company entered into a two-year lease
extension with the modified lease expiring November 30, 2021. The lease modification required the Company to remeasure the lease
asset and lease liability based on the original lease. The Company recorded a net lease right of use asset and a lease liability
at present value of approximately $26,093 for each. The Company recorded these amounts at present value, in accordance with the
standard, using a discount rate of 8.98% which was representative of the weighted average borrowing rates for all notes issued
to non-related parties based on the respective principal balances at the time of the lease extension. As of December 31, 2019,
the value of the unamortized lease right of use asset is $22,205. As of December 31, 2019, the Company’s lease liability
was $22,688.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
6 – OPERATING LEASE (CONTINUED)
Barcelona
office
On
June 11, 2019 the Company entered into a two-year lease, expiring on June 30, 2021. The office is located at Regus World Trade
Centre Muelle de Barcelona, edif. Sur, 2a Planta Barcelona Cataluña 08039 Spain. Monthly rent payments will be approximately
$201 per month (based on the contractual rate of €178 multiplied by the exchange rate of 1.13 on the day the lease agreement
was entered into). In accordance with ASC 842 - Leases, effective June 11, 2019, the Company will record additional net lease
right of use asset and a lease liability at present value of approximately $4,574, respectively as a result of this lease. The
lease will be initially recorded using an exchange rate of 1.13. Any fluctuations in the currency rate will be recorded as gain
or loss on currency translation.
As
of December 31, 2019, the value of the unamortized lease right of use asset is $3,343. As of December 31, 2019, the Company’s
lease liability was $3,423.
The
lease right of use asset, at inception, of $27,050 is amortized on a straight-line basis over the term of the lease. The present
value of the New York corporate office lease had an initial present value of $22,476 at December 1, 2017. The Barcelona office
lease value had an initial present value of $4,574. The present value of the modified New York Corporate office lease, at September
1, 2019 was $26,092. For the nine months ended December 31, 2019 the Company recorded a lease expense of $9,775. As of December
31, 2019, the value of the unamortized lease right of use asset is $25,548. As of December 31, 2019, the Company’s lease
liability was $26,111.
|
Maturity
of Operating Lease Liability for fiscal year ended March 31,
|
|
|
2020
|
|
|
$
|
3,287
|
|
|
2021
|
|
|
$
|
13,891
|
|
|
2022
|
|
|
$
|
8,933
|
|
|
|
|
|
|
|
|
|
Total
lease payments
|
|
|
$
|
26,111
|
|
The
following chart shows the Company’s operating lease cost for the three and nine months ended December 31, 2019 and 2018:
|
|
|
For
the three months ended
December 31,
|
|
For
the nine months ended
December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Amortization
of right of lease asset
|
|
$
|
3,453
|
|
|
$
|
-
|
|
|
$
|
9,775
|
|
|
$
|
-
|
|
|
Lease
interest cost
|
|
|
714
|
|
|
|
-
|
|
|
|
1,142
|
|
|
|
-
|
|
|
Total
Lease cost
|
|
$
|
4,168
|
|
|
$
|
-
|
|
|
$
|
10,918
|
|
|
$
|
-
|
|
The
following chart shows the Company’s operating lease liability at December 31, 2019.
|
Discounted
Operating Lease liability at inception - December 1, 2017
|
|
$
|
27,050
|
|
|
Lease
modification - September 1, 2019
|
|
|
26,093
|
|
|
Lease
modification adjustment- September 1, 2019
|
|
|
(200
|
)
|
|
Financing
cost
|
|
|
11,142
|
|
|
Less
of lease payments made
|
|
|
(27,544
|
)
|
|
Cumulative
effect of adoption of ASC 842
|
|
|
(430
|
)
|
|
Operating
lease liability at December 31, 2019
|
|
|
26,111
|
|
|
Less
Lease Liability current portion
|
|
|
(13,591
|
)
|
|
Lease
Liability - net current portion at December 31, 2019
|
|
$
|
12,520
|
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE
Notes
payable and convertible notes consisted of the following as of:
|
|
|
|
|
|
December
31, 2019
|
|
|
March
31, 2019
|
|
|
|
|
|
|
|
Alternative
Strategy Partners PTE Ltd.
|
|
(a)
|
|
|
|
-
|
|
|
|
90,000
|
|
|
GS
Capital Partners LLC - Oct 2018
|
|
(b)
|
|
|
|
-
|
|
|
|
180,000
|
|
|
GS
Capital Partners LLC - Mar 2019
|
|
(c)
|
|
|
|
300,000
|
|
|
|
300,000
|
|
|
GS
Capital Partners LLC - May 2019
|
|
(d)
|
|
|
|
-
|
|
|
|
-
|
|
|
GS
Capital Partners LLC - Jun 2019
|
|
(e)
|
|
|
|
60,000
|
|
|
|
-
|
|
|
Jefferson
Street Capital LLC - Jul 2019
|
|
(f)
|
|
|
|
55,000
|
|
|
|
-
|
|
|
Adar
Alef, LLC - Aug 2019
|
|
(g)
|
|
|
|
55,000
|
|
|
|
-
|
|
|
Odyssey
Funding, LLC - Sep 2019
|
|
(h)
|
|
|
|
100,000
|
|
|
|
-
|
|
|
BHP
Capital NY Inc.
|
|
(i)
|
|
|
|
55,000
|
|
|
|
-
|
|
|
Tangier’s
Global, LLC
|
|
(j)
|
|
|
|
137,500
|
|
|
|
-
|
|
|
Odyssey
Funding, LLC
|
|
(k)
|
|
|
|
100,000
|
|
|
|
-
|
|
|
Jefferson
Street Capital LLC
|
|
(l)
|
|
|
|
55,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
notes payable and convertible notes
|
|
|
|
|
$
|
917,500
|
|
|
$
|
570,000
|
|
|
Less
- note discounts
|
|
|
|
|
|
(409,817
|
)
|
|
|
(356,125
|
)
|
|
Less
- current portion of these notes
|
|
|
|
|
|
(507,683
|
)
|
|
|
(213,875
|
)
|
|
Total
notes payable and convertible notes, net discounts
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
(a)
|
Three-month
$180,000 non-convertible debenture dated September 23, 2015 bearing an interest rate
of 11.50% per annum (the “ASP Loan”). 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 Eishin, Inc. (“Eishin”), but the
holder never provided any documentation evidencing that $90,000 was paid to Eishin. The
Company had been in dispute with the noteholder about the amount owed,
and the Company had not recorded this liability as of December 31, 2018 or March
31, 2018. On May 29, 2019, the Company and ASP consummated the retirement of the ASP
Loan. The Company did not pay cash or issue any securities in connection with the termination
of the ASP Loan, and instead the Company agreed to transfer and assign to ASP all right,
title and interest it has or may have in securities of Eishin. Since the Eishen rights
were not valued on the Company’s balance sheet, the $113,468 liability (at the
time of settlement) has been removed from the Company’s balance sheet, as is
reflected in the Company’s financial statement as a gain on extinguishment of debt
in the amount of $113,467 during the nine months ended December 31, 2019.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
|
(b)
|
On
October 25, 2018, the Company entered into a one year $180,000 convertible note bearing 8% interest with GS Capital Partners,
LLC (“GS Capital”). 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. 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 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. During the nine
months ended December 31, 2019, GS Capital fully converted $180,000 of principal and $11,248 of accrued interest into 7,410,229
shares of common stock.
|
|
|
|
|
(c)
|
On
March 14, 2019, the Company entered into a 12-month $300,000 principal face value 8.0%
convertible debenture with GS Capital, with a maturity date of March 13, 2020. The GS
Capital Note carried a $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 was 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
condensed consolidated statement of operations during the year ended March 31, 2019.
These shares were issued on June 20, 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. At December 31, 2019, this note had
accrued interest of $19,200. 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. On February 10, 2020, GS Capital elected to partially convert
the $75,000 of principal of this note plus $5,458 of accrued interest for 2,628,548 common shares ($0.0307
per share). After the conversion, the remaining balance of this note is $225,000.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
|
(d)
|
On May 24, 2019, the Company entered into a one
year 8% $60,000 Convertible Note with GS Capital 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. 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”) and was required to maintain a 2.5
times reserve for the amount then outstanding. Upon full conversion of this Note, any shares remaining in the Share Reserve
shall be cancelled. At December 31, 2019, GS Capital fully converted $60,000 of principal and $2,670 of accrued interest,
and 4,327,198 shares then in reserve were cancelled and placed back into the Company’s treasury.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
|
(e)
|
On June 21, 2019, the Company entered into a one year 8% $60,000
Convertible Note with GS Capital Partners, LLC pursuant to the terms of a Securities Purchase Agreement. The GS Capital Note has
a maturity date of June 21, 2020 and carried a $5,000 original issue discount (such that $55,000 was funded to the Company on June
21, 2019). The holder is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal
face amount of the GS Note then outstanding into shares of the Company’s common stock at a price for each share of common
stock equal to 66% of the lowest daily volume weighted average price (VWAP) of the common stock as reported on the National Quotations
Bureau OTC Markets exchange, which the Company’s shares are traded or any exchange upon which the common stock may be traded
in the future, for the fifteen (15) prior trading days including the day upon which a notice of conversion is received by the Company
or its transfer agent. Such conversion shall be effectuated by the Company delivering the shares of common stock to the holder
within 3 business days of receipt by the Company of the notice of conversion. Accrued but unpaid interest shall be subject to conversion.
To the extent the conversion price of the Company’s common stock closes below the par value per share, the Company will take
all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law.
The Company agrees to honor all conversions submitted pending this decrease. 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. 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 if 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”), 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. As of December 31, 2019, this note
had accrued interest of $2,538.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
|
(f)
|
On
July 22, 2019, the Company and Jefferson Street Capital, LLC (“Jefferson Street”)
consummated entry into a Securities Purchase Agreement where the Company has borrowed
$55,000 ($50,000 with original issuance discount reflected) at 10% annual interest under
a term of nine-months in the form of a convertible note. The note is convertible into
restricted stock of the Company. In connection with this agreement, the Company issued
250,000 commitment shares having a value of $10,500 ($0.042 per share, the closing price
of our common stock on the day preceding the note) which was reflected as interest expense
in the Company’s condensed consolidated statement of operations during the three
months ended December 31, 2019. The restricted stock was valued at the closing price
on July 22, 2019. Legal fees of $2,000 were deducted from cash proceeds of the note payable
to investor’s counsel, and a $5,000 original issue discount recognized. The Company
received cash proceeds of $48,000 at closing. Under the Jefferson Street note, the Company
reserved 15,000,000 shares of its common stock, The noteholder may, at any time,
at its option, convert all or any amount of the principal face amount of the note then
outstanding into shares of the Company’s common stock at a conversion price for
each share of Common Stock equal to 65% of the lowest volume weighted average price for
the Company’s common stock during the previous fifteen trading day period as reported
on the National Quotations Bureau OTC Markets exchange which the Company’s shares
are traded or any exchange upon which the Common Stock may be traded in the future, including
the day upon which a notice of conversion is received by the Company. Upon an event of
default (as defined and described in the note), among other default penalties, the Company
shall pay the Default Amount (as defined in the agreement) as well as incur annual interest
at a default interest rate of 24% per annum. In consideration of Jefferson Street loaning
the Company the proceeds under this note, the Chief Executive Officer had personally
guaranteed the repayment of the outstanding principal amount, accrued and unpaid
interest until such time that the Company had satisfied its share reserve requirement
under the note. As of December 31, 2019, this note had accrued interest of $2,441.
On January 23, Jefferson converted $27,500 of principal and accrued interest in the amount
of $1,375 into 1,339,031 shares of restricted stock of the Company ($0.0219 per share).
The Company repaid the remaining balance of $27,500 of the Jefferson Street Note including
accrued interest and prepayment premium of $10,904. As a result, the Jefferson Street
Note is now fully repaid and retired and no further obligations or remuneration is due
and owing thereunder.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
|
(g)
|
On
August 12, 2019, the Company received $47,500 net proceeds for the second of two notes (the “Back-End Note”) under
a December 20, 2018 security purchase agreement with Adar Alef, LLC whereby the Company issued two 8% convertible redeemable
notes in the cumulative principal amount of $110,000. Both notes were for $55,000 and had funded with net proceeds of $47,500,
after the deduction of $5,000 for OID and $2,500 in legal fees. The first note was previously funded on December 24, 2018
and was fully converted on March 18, 2019. The Back-End Note was initially paid for by an offsetting promissory note issued
by Adar Alef, LLC to the Company (the “Note Receivable”). The terms of the Back-End Note required cash funding
prior to any conversion thereunder. The Note Receivable was due December 20, 2019, unless certain conditions were not met,
in which case both the Back-End Note and the Note Receivable may both have been cancelled. The Back-End Note has a maturity
date one year from the date of issuance upon which any outstanding principal and interest is due and payable. The face value
amount plus accrued interest under the Back-End Note are convertible into shares of the Company’s common stock at a
price for each share of common stock equal to 60% of the lowest daily VWAP of the common stock as reported on the National
Quotations Bureau OTC Markets market on which the Company’s shares are traded or any exchange upon which the common
stock may be traded in the future, for the 20 prior trading days including the day upon which a notice of conversion is received
by the Company or its transfer agent. In the event the Company experiences a DTC “chill” on its shares, the conversion
price shall be decreased to 50% instead of 60% while that “chill” is in effect. Upon an event of default, principal
and accrued interest will become immediately due and payable under the notes. Additionally, upon an event of default, both
notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest permitted by law. Further,
certain events of default may trigger penalty and liquidated damage provisions. (This note contains a provision where if the
Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has
entered and failed to cure such default within the appropriate grace period they would be considered in default of this note.
This Back-End Note may not be repaid. The note holder may redeem this note at any time after the first six months. As of December
31, 2019, this note had accrued interest of $2,125. Effective December 20, 2019, it was mutually agreed to extend the maturity
date of this note to September 20, 2020. On February 12, 2020, $15,000 of note principal was converted into 554,324 common
shares ($0.02706 per share).
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
|
(h)
|
On
September 13, 2019, the Company entered into a one year 8% $100,000 Convertible Note with Odyssey Funding, LLC (“Investor”)
pursuant to the terms of a Securities Purchase Agreement (the “Odyssey Note”). The Odyssey Note has a maturity
date of September 13, 2020 and carried a $5,000 original issue discount (such that $95,000 was funded to the Company at closing).
The Investor is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face
amount of the Odyssey Note then outstanding into shares of the Company’s common stock at a price for each share of common
stock equal to 64% 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 Investor 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 decrease.
In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 54%
instead of 64% while that “Chill” is in effect. In no event shall the Investor be allowed to effect a conversion
if such conversion, along with all other shares of Company Common Stock beneficially owned by the Investor and its affiliates
would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased up to 9.9% upon 60
days’ prior written notice by the Investor. During the first 180 calendar days that the Odyssey Note is in effect, the
Company may redeem the Odyssey Note by paying to the Investor an amount as follows: (i) if the redemption is within the first
60 days of the issuance date, then for an amount equal to 125% 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 61st day, but by the 120th day of the issuance
date, then for an amount equal to 135% of the unpaid principal amount of this Note along with any accrued interest, and (iii)
if the redemption is after the 120th day, but less than the 180th day of the issuance date, then for
an amount equal to 140% of the unpaid principal amount of this Note along with any accrued interest. The Company may not redeem
the Odyssey Note after the 180th day from entering into it. Upon an event of default, among other default provisions set forth
in the Odyssey 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 Investor 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 Odyssey Note shall
increase by 50%; or (iv) if the Odyssey Note is not paid at maturity, the outstanding principal due under this Note shall
increase by 10%. In connection with the Odyssey Note, the Company issued irrevocable transfer agent instructions reserving
22,727,000 shares (the “Share Reserve”) of its Common Stock for conversions under this Note. The Investor shall
have the right to periodically request that the number of reserved shares be increased so that the number of reserved shares
at least equals four hundred percent of the number of shares of Company common stock issuable upon conversion of the Note
so long as there are sufficient authorized and unissued shares of the Company not otherwise reserved available to do so. Upon
full conversion or repayment of this Odyssey Note, any shares remaining in the Share Reserve shall be cancelled. As of December
31, 2019, this note had accrued interest of $2,389.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
|
(i)
|
On
October 17, 2019, the Company entered into a Convertible Promissory Note (“BHP Note”), bearing an interest rate
of 10% per annum, pursuant to a Securities Purchase Agreement with BHP Capital NY, Inc. dated October 7, 2019. The BHP Note
has a maturity date of July 3, 2020 and carried a $5,000 original issue discount (such that $50,000 was funded to the Company
on October 8, 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 BHP Note then outstanding into shares of the Company’s common stock at a price for
each share of common stock equal to 65% 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. Holder shall be entitled to deduct $500.00 from the conversion
amount in each Notice of Conversion to cover Holder’s deposit fees associated with each Notice of Conversion. The Borrower
is required at all times to have authorized and reserved three times the number of shares that would be issuable upon full
conversion of the Note (assuming that the 4.99% limitation is not exceeded) in effect, initially 7,000,000 shares. Borrower
shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common
Stock issuable upon such conversion within two (2) business days after such receipt. If delivery of the Common Stock issuable
upon conversion of this Note is not delivered by the Deadline due to action and/or inaction of the Borrower, the Borrower
shall pay to the Holder $2,000 per day in cash. The Borrower shall have the right, exercisable on not more than three (3)
Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest)
paying the holder the amounts 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 BHP Note may not be redeemed after 180
days. Upon an event of default, among other default provisions set forth in the BHP Note, (i) interest shall accrue at a default
interest rate of 24% per annum, (ii) Borrower shall fail to maintain the listing of the Common Stock on at least one of the
OTC (which specifically includes the quotation platforms maintained by the OTC Markets Group) or an equivalent replacement
exchange, (iii) Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall
cease to be subject to the reporting requirements of the Exchange Act, (iv) bankruptcy, (v) cessation of operations, (vi)
liquidation, (vii) restatement of any financial statements filed by the Borrower with the SEC at any time after 180 days after
the Issuance Date for any date or period until this Note is no longer outstanding, if the result of such restatement would,
by comparison to the un-restated financial statement, have constituted a material adverse effect on the rights of the Holder
with respect to this Note or the Purchase Agreement, and (viii) breach or default by the Borrower of any covenant or other
term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods,
shall, at the option of the Holder, be considered a default. In the event of default due to restatement, failure to comply
with the Exchange act, delisting from exchange or cross default the borrower must pay 150% times the sum the then outstanding
principal amount of this Note plus (x) accrued and unpaid interest. During the period where any monies are owed to the Holder
pursuant to this Note, if the Borrower engages in any future financing transactions with a third party investor, the Borrower
will provide the Holder with written notice thereof promptly but in no event less than 10 days prior to closing any financing
transactions. In the event the Holder determines that the terms of the subsequent investment are preferable to the terms of
the securities of the Borrower issued to the Holder pursuant to the terms of the Purchase Agreement, the Holder will notify
the Borrower in writing. Promptly after receipt of such written notice from the Holder, the Borrower agrees to amend and restate
the Securities (which may include the conversion terms of this Note), to be identical to the instruments evidencing the subsequent
investment. On October 16, 2019, the Company issued 250,000 commitment shares to noteholder, BHP Capital NY, Inc. pursuant
to the BHP Note. The shares had a value of $9,750 ($0.039 per share) which was recorded as interest expense on the Company’s
condensed consolidated balance sheet. As of December 31, 2019, this note had accrued interest in the amount of $1,130. Upon
full conversion or repayment of this BHP note, any shares remaining in the Share Reserve shall be cancelled.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
|
(j)
|
On
November 7, 2019, the Company effectuated a nine-month convertible promissory note with Tangier’s Global, LLC (the “Tangier’s
Note”). The Company received funds in the amount of $125,000 after reduction of the Original Issue Discount of $12,500.
The $137,500 face value note matures on August 5, 2020 and bears and interest rate of 10%. The Note 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 Tangier’s
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 twenty (20) prior trading days including the day upon which a notice of conversion is received by the
Company or its transfer agent. If the Company is placed on “chilled” status with the DTC, the discount shall be
increased by 10%, i.e., from 34% to 44%, until such chill is remedied. If the Company is not DWAC eligible through their transfer
agent and DTC’s FAST system, the Conversion Price discount will be increased by 5%, i.e., from 34% to 39%. In the case
of both, the Conversion Price discount shall be a cumulative increase of 15%, i.e., from 34% to 49%. Any default of this Note
not remedied within the applicable cure period will result in a permanent additional 10% increase, i.e., from 34% to 44%,
in the Conversion Price discount in addition to any and all other Conversion Price discounts, as provided above. Any conversion
shall be effectuated by the Company delivering the shares of common stock to the Investor within 2 business days of receipt
by the Company of the notice of conversion. Accrued but unpaid interest shall be subject to conversion. During the first 180
calendar days that the Tangier’s Note is in effect, the Company may redeem the note by paying to the note holder Investor
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 by 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 Company may not redeem the Tangier’s Note after the
180th day from entering into it without written approval by the noteholder. If the Company fails to deliver shares in accordance
with the timeframe stated, the Holder, at any time prior to selling all of those shares, may rescind any portion, in whole
or in part, of that particular conversion attributable to the unsold shares. Holder may not engage in any “shorting”
or “hedging” transaction(s) in the Common Stock of the Company prior to conversion. Upon an event of default,
among other default provisions set forth in the Tangier’s Note (i) interest shall accrue at a default interest rate
of lesser of 20% per annum or the maximum rate permitted under applicable law; (ii) after the occurrence of an Event of Default
that results in the eventual acceleration of this Note, an additional 10% increase to the Conversion Price discount will go
into effect; (iii) a default in the timely issuance of underlying shares in excess of any conversion not delivered prior to
20 Trading Days after the Conversion Date, the Company shall pay to the Holder as liquidated damages an amount equal to $2,000
per day, until such certificate or certificates are delivered. The Company shall be considered in default and subject to a
mandatory default amount commencing 5 days after the occurrence the following but not limited to: (i) a default in payment
of any amount due hereunder; (ii) a default in the timely issuance of underlying shares upon, which default continues for
2 Trading Days after the Company has failed to issue shares or deliver stock certificates within the 3rd Trading Day following
the Conversion Date; (iii) failure by the Company for 3 days after notice has been received by the Company to comply with
any material provision of this Note; (iv) failure of the Company to remain compliant with DTC, thus incurring a “chilled”
status with DTC; (v) any default of any mortgage, indenture or instrument which may be issued, or by which there may be secured
or evidenced any indebtedness, for money borrowed by the Company or for money borrowed the repayment of which is guaranteed
by the Company, whether such indebtedness or guarantee now exists or shall be created hereafter; (vi) if the Company is subject
to any Bankruptcy Event; (vii) any failure of the Company to satisfy its “filing” obligations under Securities
Exchange Act of 1934, as amended (the “1934 Act”) and the rules and guidelines issued by OTC Markets News Service,
OTCMarkets.com and their affiliates; (viii) failure of the Company to remain in good standing under the laws of its state
of domicile; (ix) failure by the Company to maintain the Required Reserve in accordance with the term; (x) failure of Company’s
Common Stock to maintain a closing bid price in its Principal Market for more than 3 consecutive Trading Days; (xi) any delisting
from a Principal Market for any reason; (xii) failure by Company to pay any of its transfer agent fees in excess of $2,000
or to maintain a transfer agent of record; (xiii) any trading suspension imposed by the United States Securities and Exchange
Commission (the “SEC”) under Sections 12(j) or 12(k) of the 1934 Act; (xiv) failure by the Company to meet all
requirements necessary to satisfy the availability of Rule 144 to the Holder or its assigns, including but not limited to
the timely fulfillment of its filing requirements as a fully-reporting issuer registered with the SEC, requirements for XBRL
filings, and requirements for disclosure of financial statements on its website. In connection with the Tangier’s Note,
the Company issued irrevocable transfer agent instructions reserving 35,000,000 shares (the “Share Reserve”) of
its Common Stock for conversions under this Note.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
|
(j)
|
The
Company covenants that it will at all times reserve and keep available for Holder, out of its authorized and unissued Common
Stock solely for the purpose of issuance upon conversion of this Note, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holder, five times the number of shares of Common Stock as shall be issuable. If
the amount of shares on reserve in Holder’s name at the Company’s transfer agent for this Note shall drop below
the Required Reserve, the Company will, within 2 Trading Days of notification from Holder, instruct the transfer agent to
increase the number of shares so that the Required Reserve is met. Upon full conversion or repayment of this Tangiers note,
any shares remaining in the Share Reserve shall be cancelled.
|
|
|
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|
(k)
|
On
December 18, 2019, the Company entered into a one year 8% $100,000 Convertible Note with Odyssey Capital, LLC (“Odyssey”)
pursuant to the terms of a Securities Purchase Agreement (the “Odyssey Note”). The Odyssey Note has a maturity
date of December 18, 2020 and carried a $5,000 original issue discount (such that $95,000 was funded to the Company at closing).
The Investor is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face
amount of the Odyssey Note then outstanding into shares of the Company’s common stock at a price for each share of common
stock equal to 64% 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 Odyssey 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 54%
instead of 64% while that “Chill” is in effect. In no event shall the Investor be allowed to effect a conversion
if such conversion, along with all other shares of Company Common Stock beneficially owned by Odyssey and its affiliates would
exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased up to 9.9% upon 60 days’
prior written notice by Odyssey). During the first 180 calendar days that the Odyssey Note is in effect, the Company may redeem
the Odyssey Note by paying to Odyssey an amount as follows: (i) if the redemption is within the first 60 days of the issuance
date, then for an amount equal to 125% of the unpaid principal amount of this Odyssey Note along with any interest that has
accrued during that period, (ii) if the redemption is after the 61st day, but by the 120th day of the issuance date, then
for an amount equal to 135% of the unpaid principal amount of this Odyssey Note along with any accrued interest, and (iii)
if the redemption is after the 120th day, but less than the 180th day of the issuance date, then for
an amount equal to 140% of the unpaid principal amount of this Note along with any accrued interest. The Company may not redeem
the Odyssey Note after the 180th day from entering into it. Upon an event of default, among other default provisions set forth
in the Odyssey 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 Investor 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 Odyssey Note shall
increase by 50%; or (iv) if the Odyssey Note is not paid at maturity, the outstanding principal due under this Odyssey Note
shall increase by 10%. In connection with the Odyssey Note, the Company issued irrevocable transfer agent instructions reserving
22,084,000 shares (the “Share Reserve”) of its Common Stock for conversions under this Odyssey Note. Odyssey shall
have the right to periodically request that the number of reserved shares be increased so that the number of reserved shares
at least equals four hundred percent of the number of shares of Company common stock issuable upon conversion of the Odyssey
Note so long as there are sufficient authorized and unissued shares of the Company not otherwise reserved available to do
so. Upon full conversion or repayment of this Odyssey Note, any shares remaining in the Share Reserve shall be cancelled.
At December 31, 2019, this note had accrued interest in the amount of $285.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
|
(l)
|
On
December 26, 2019, the Company entered into a one year 10% $55,000 Convertible Note with Jefferson Street Capital LLC (“Jefferson
Street”) pursuant to the terms of a Securities Purchase Agreement (the “Jefferson Street Note”). The Jefferson
Street Note has a maturity date of December 26, 2020 and carried a $5,000 original issue discount (such that $50,000 was funded
to the Company at closing). The Investor is entitled, at its option, at any time after cash payment, to convert all or any
amount of the principal face amount of the Jefferson Street Note then outstanding into shares of the Company’s common
stock at a price for each share of common stock equal to 65% 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. Commencing on the date which is
180 days following the date of this Jefferson Street Note and ending on the later of: (i) the Maturity Date and (ii) the date
of payment of the Default Amount, this Jefferson Street Note may be converted by Jefferson Street in whole or in part at any
time from time to time after the Issue Date as noted in the Jefferson Street Note. During the first 180 calendar days that
the Jefferson Street Note is in effect, the Company may redeem the Jefferson Street Note by paying Jefferson Street 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 Jefferson Street Note along with any interest that has accrued during that period, and (ii)
if the redemption is after the 91st day, but by the 180th day of the issuance date, then for an amount equal to 133% of the
unpaid principal amount of this Jefferson Street Note along with any accrued interest. The Company may not redeem the Jefferson
Street Note after the 180th day from entering into it. Upon an event of default, among other default provisions set forth
in the Jefferson Street Note 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. In connection with the Jefferson Street
Note, the Company is required at all times to have authorized and reserved six times the number of common shares that would
be issuable upon full conversion of the Jefferson Street Note in effect (assuming that the 4.99% limitation set forth in the
Jefferson Street Note is not in effect) which shall initially be reserved at 20,000,000 common shares (the “Share Reserve”)
of its Common Stock for conversions under this Jefferson Street Note. Upon full conversion or repayment of this Jefferson
Street Note, any shares remaining in the Share Reserve shall be cancelled. At December 31, 2019, this note had accrued interest
of $75.
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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.
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During
the nine months ended December 31, 2019, the Company issued 11,433,031 shares of common stock to holders of convertible notes
to retire $240,000 and $13,900 of note principal and accrued interest, respectively.
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Interest
expense for the nine months ended December 31, 2019 was $539,955 compared to $44,462 for the prior year. Accrued interest
at December 31, 2019 and March 31, 2019 was $29,823 and $30,780, respectively.
|
NOTE
8 – RELATED PARTIES
As
a result of the Company’s joint venture with Ice + Jam, a receivable and a payable was recorded on the Company’s books.
As of December 31, 2018, these amounts represented cash Ice + Jam collected from sales of HerMan®
through their website in the amount of $581 and a payable in the amount of $5,522 for expenses incurred through the operation
of the business. As of March 31, 2019, these assets and liabilities were reflected in assets and liabilities from discontinued
operations.
On
December 26, 2019, Chief Executive Officer, Seth Shaw, deposited $50,159 to be used for operating expenses. This is an
interest free loan and the Company intends to repay this loan within 60 days.
In
conjunction with and consideration for a July 22, 2019, 10% convertible note, in the amount of $55,000, under a Securities Purchase
Agreement the Company entered into with Jefferson Street Capital, LLC, the Chief Executive Officer had personally guaranteed
the prompt, full and complete payment of the outstanding principal amount, accrued and unpaid interest, default interest (if any)
and applicable fees (if any), owing by the Company under the note. This personal guaranty was to remain in effect until
such time that the Company was able to reserve at least six times the amount of common shares issuable upon full conversion
of the note. As a result of the increase in the authorized shares taking effect on September 13, 2019, this personal guaranty
was removed and the Company reserved the appropriate amount of shares on October 2, 2019.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
9 – STOCKHOLDERS’ EQUITY (DEFICIT)
Common
Stock
As
of December 31, 2019, the Company is authorized to issue 400,000,000 shares of its common stock. As of December 31, 2019 and February
13, 2019, there were 88,570,643 and 98,868,564 shares, respectively of common stock issued and outstanding which
includes all adjustments for fractional shares.
On July 26, 2019, the Company’s
Board of Directors approved the (i) increase of the authorized common stock of the Company from 100,000,000 shares to 400,000,000
shares; (ii) the filing of both the preliminary and definitive information statements; and (iii) approved the record date of July
29, 2019. The Company’s shareholders approved the increase of the authorized shares to 400,000,000 in its Special Meeting
on September 10, 2019 and the State of Florida certified the amendment of our Articles of Incorporation effective
on September 13, 2019 to reflect this increase.
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 condensed consolidated financial statements.
Fiscal
Year 2020
During
the nine months ended December 31, 2019, the Company issued 2,450,000 shares under our various distribution agreements,
as more fully described in Note 1.
During
the nine months ended December 31, 2019, the Company issued 11,433,031 shares for conversion of debt in the amount of $240,000
as well as accrued interest in the amount of $13,900 ($0.01412 to $0.04725 per share).
During
the nine months ended December 31, 2019, the Company issued 250,000 shares issued to Vice President of Distribution and Marketing.
During
the nine months ended December 31, 2019, the Company issued 3,850,000 shares issued for services rendered
During
the nine months ended December 31, 2019, the Company issued 1,250,000 shares for debt commitment in the amount of $162,750 ($0.039
to $0.19 per share), 750,000 of these shares had a value of $142,500 were recorded as a liability to issue shares at March 31,
2019 on the Company’s balance sheet.
During
the nine months ended December 31, 2019, the Company issued 1,214,286 shares under stock purchase agreements in consideration
for $55,000 ($0.02 to $0.07 per share) to accredited investors that are unrelated third parties.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
9 – STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
Common
Stock (Continued)
Fiscal
Year 2020 (Continued)
In
connection with some of the consulting agreements and board advisory agreements the Company has entered into, as the following
clauses are part of the compensation arrangements: (a) the consultant will be reimbursed for all reasonable out of pocket expenses
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 $138,294 and $550,823 in stock-based compensation
expense related to these agreements in the nine months ended December 31, 2019 and 2018.
Warrants
for Common Stock
The
following table summarizes warrant activity for the nine months and year ended December 31, 2019 and March 31, 2019:
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Weighted
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Average
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|
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Average
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|
Remaining
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Aggregate
|
|
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Exercise
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Contractual
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Intrinsic
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Shares
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Price
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Term
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Value
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Outstanding
at March 31, 2018
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1,433,611
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$
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1.06
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3.02
Years
|
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$
|
-
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Granted
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-
|
|
|
|
-
|
|
|
|
|
|
|
-
|
|
|
Expired
|
|
|
|
(223,335
|
)
|
|
|
0.2843
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
and exercisable March 31, 2019
|
|
|
|
1,210,276
|
|
|
$
|
1.2
|
|
|
1.28
Years
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
-
|
|
|
Expired
|
|
|
|
(488,011
|
)
|
|
|
0.75
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
and exercisable December 31, 2019
|
|
|
|
722,265
|
|
|
$
|
1.50
|
|
|
1.08
Years
|
|
|
$
|
-
|
|
During
the year ended March 31, 2019, 213,334 warrants expired which were issued in conjunction with a one year 5% convertible note in
the amount of $80,000 with GS Capital Partners, LLC. The five-year cashless warrants had an exercise price of $0.2625 per share.
These warrants were cancelled as part of the convertible note agreement which the Company entered into with GS Capital Partners,
LLC on March 14, 2019 in the amount of $300,000 (See Note 7 section c).
During
the year ended March 31, 2019, 10,001 three-year warrants expired which were awarded to investors in conjunction with security
purchase agreements. These warrants had a strike price of $0.75.
During
the nine months ended December 31, 2019, 488,011 three-year warrants expired which were awarded to investors in conjunction with
security purchase agreements. These warrants had a strike price of $0.75.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
9 – STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
Stock
Options
On
February 1, 2012, the Company awarded to each of two executives’, one current and one former, options to purchase 66,667
common shares, an aggregate of 133,334 shares. These options vested immediately and were for services performed.
The
following table summarizes option activity for the year and nine months ended December 31, 2019 and March 31, 2019:
|
|
|
Shares
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2018
|
|
|
133,334
|
|
|
$
|
7.50
|
|
|
3.85
Years
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2019
|
|
|
133,334
|
|
|
$
|
7.50
|
|
|
2.85
Years
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
and exercisable at December 31, 2019
|
|
|
133,334
|
|
|
$
|
7.50
|
|
|
2.15
Years
|
|
|
$
|
—
|
|
NOTE
10 – PROVISION FOR INCOME TAXES
Deferred
income taxes are determined using the liability method for the temporary differences between the financial reporting basis and
income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected
to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities
are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts
of assets and liabilities and their respective tax bases.
The
following table summarizes the significant differences between the U.S. Federal statutory tax rate and the Company’s effective
tax rate for financial statement purposes for the nine months and years ended December 31, 2019 March 31, 2019:
|
|
|
December
31, 2019
|
|
|
March
31,2019
|
|
|
Federal
income taxes at statutory rate
|
|
|
21.00
|
%
|
|
|
21.00
|
%
|
|
State
income taxes at statutory rate
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
Temporary
differences
|
|
|
7.04
|
%
|
|
|
1.48
|
%
|
|
Permanent
differences
|
|
|
0.10
|
%
|
|
|
0.24
|
%
|
|
Impact
of Tax Reform Act
|
|
|
0.00
|
%
|
|
|
(167.44
|
)%
|
|
Change
in valuation allowance
|
|
|
(27.14
|
)%
|
|
|
144.72
|
%
|
|
Totals
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Realization
of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences
and carry-forwards are expected to be available to reduce taxable income. As the achievement of required future taxable income
is uncertain, the Company recorded a valuation allowance.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
10 – PROVISION FOR INCOME TAXES (CONTINUED)
|
|
|
As
of
|
|
|
As
of
|
|
|
|
|
December
31, 2019
|
|
|
March
31, 2019
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
|
Net
operating losses before non-deductible items
|
|
$
|
3,980,491
|
|
|
$
|
3,685,807
|
|
|
Loss
on disposal of fixed assets
|
|
|
355
|
|
|
|
355
|
|
|
Stock-based
compensation
|
|
|
325,364
|
|
|
|
209,591
|
|
|
Unrealized
gains or losses on investments
|
|
|
29,712
|
|
|
|
(4,258
|
)
|
|
Total
deferred tax assets
|
|
|
4,335,822
|
|
|
|
3,891,495
|
|
|
Less:
Valuation allowance
|
|
|
(4,335,822
|
)
|
|
|
(3,891,495
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
At
December 31, 2019, the Company had a U.S. net operating loss carryforward in the approximate amount of $18.95 million available
to offset future taxable income through 2038. The Company established valuation allowances equal to the full amount of the deferred
tax assets due to the uncertainty of the utilization of the operating losses in future periods. The valuation allowance increased
by $444,327 in the nine months ended December 31, 2019 and decreased by $1,516,710 in the year ended March 31, 2019. The net decreases
were the result of the tax effects of the Tax Cuts and Jobs Act (the “TCJA”) offset by taxable losses net of timing
differences in each of the years.
On
December 22, 2017, Public Law 115-97, informally referred to as the TCJA was enacted into law. The TCJA provides for significant
changes to the U.S. Internal Revenue Code of 1986, as amended, that impact corporate taxation requirements. Effective January
1, 2018, the federal tax rate for corporations was reduced from 35% to 21% for US taxable income and requires one-time re-measurement
of deferred taxes to reflect their value at a lower tax rate of 21%. The effective rate for the year ended March 31, 2018 was
31% as the rate was changed effective January 1, 2018 to the lower rate. Also, mandatory repatriation of untaxed foreign earnings
and profits will be taxed at 15.5% to the extent the underlying assets are liquid and 8% on the remaining balance. There are other
provisions to the TCJA, such as conversion of a worldwide system to a territorial system, limitations on interest expense and
domestic production deductions, which will be effective in fiscal 2019. Given
the significant complexity of the TCJA and anticipated additional implementation guidance from the Internal Revenue Service, further
implications of the TCJA may be identified in future periods. The Company has adjusted their NOLs and valuation allowances to
account for the changes brought about by the TCJA for the three months and year ended December 31, 2019 and March 31, 2019, respectively.
NOTE
11 – INVESTMENTS
Trading
securities
For
investments in securities of other companies that are owned, the Company records them at fair value with unrealized gains and
losses reflected in other operating income or loss. For investments in these securities that are sold by us, the Company recognizes
the gains and losses attributable to these securities investments as realized gains or losses in other operating income or loss
on a first in first out basis.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
11 – INVESTMENTS (CONTINUED)
Investment
in Trading Securities:
At
March 31, 2019
|
Company
|
|
|
|
|
Beginning
of Period
Cost
|
|
|
Purchases
|
|
|
Sales
Proceeds
|
|
|
End
of
Period
Cost
|
|
|
Fair
Value
|
|
|
Realized
Gain
(Loss)
|
|
|
Unrealized
Gain
(Loss)
|
|
|
Green
Innovations Ltd (GNIN)*
|
|
|
(a)
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
VistaGen
Therapeutics Inc (VTGN)
|
|
|
(b)
|
|
|
|
490,117
|
|
|
|
349,498
|
|
|
|
(517,485
|
)
|
|
|
287,500
|
|
|
|
294,400
|
|
|
|
(34,630
|
)
|
|
|
6,900
|
|
|
Blink
Charging Co (BLNK)
|
|
|
(c)
|
|
|
|
190,350
|
|
|
|
151,666
|
|
|
|
(367,142
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
25,126
|
|
|
|
-
|
|
|
Blink
Charging Co (BLNKW) (Warrants)
|
|
|
(c)
|
|
|
|
900
|
|
|
|
162,215
|
|
|
|
(468,496
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
305,381
|
|
|
|
-
|
|
|
Aytu
BioScience Inc (AYTU)
|
|
|
(d)
|
|
|
|
82,270
|
|
|
|
100,030
|
|
|
|
(144,094
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(38,206
|
)
|
|
|
-
|
|
|
Lightbridge
Corp. (LTBR)
|
|
|
(e)
|
|
|
|
37,511
|
|
|
|
299,028
|
|
|
|
(276,159
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(60,380
|
)
|
|
|
-
|
|
|
Pulmatrix
Inc. (PULM)
|
|
|
(f)
|
|
|
|
-
|
|
|
|
204,802
|
|
|
|
(183,737
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(21,065
|
)
|
|
|
-
|
|
|
Axovant
Sciences Ltd. (AXON)
|
|
|
(g)
|
|
|
|
-
|
|
|
|
103,938
|
|
|
|
(98,433
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,505
|
)
|
|
|
-
|
|
|
Basanite
Inc. (BASA)
|
|
|
(h)
|
|
|
|
-
|
|
|
|
42,998
|
|
|
|
(10,821
|
)
|
|
|
30,000
|
|
|
|
56,000
|
|
|
|
(2,177
|
)
|
|
|
26,000
|
|
|
Achieve
Life Sciences (ACHV)
|
|
|
(i)
|
|
|
|
-
|
|
|
|
177,356
|
|
|
|
(112,221
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(65,135
|
)
|
|
|
-
|
|
|
Decision
Diagnostics (DECN)
|
|
|
(j)
|
|
|
|
-
|
|
|
|
20,479
|
|
|
|
(16,893
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,586
|
)
|
|
|
-
|
|
|
Totals
|
|
|
|
|
|
$
|
801,148
|
|
|
$
|
1,612,010
|
|
|
$
|
(2,195,481
|
)
|
|
$
|
317,500
|
|
|
$
|
350,400
|
|
|
$
|
99,823
|
|
|
$
|
32,900
|
*
|
At
December 31, 2019
|
Company
|
|
|
|
|
Beginning
of Period
Cost
|
|
|
Purchases
|
|
|
Sales
Proceeds
|
|
|
End
of
Period
Cost
|
|
|
Fair
Value
|
|
|
Realized
Gain
(Loss)
|
|
|
Unrealized
Gain
(Loss)
|
|
|
VistaGen
Therapeutics Inc (VTGN)
|
|
|
(b)
|
|
|
|
287,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
287,500
|
|
|
|
158,631
|
|
|
|
-
|
|
|
|
(135,769
|
)
|
|
Basanite
Inc. (BASA)
|
|
|
(h)
|
|
|
|
30,000
|
|
|
|
-
|
|
|
|
40,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
-
|
|
|
Totals
|
|
|
|
|
|
$
|
317,500
|
|
|
$
|
-
|
|
|
$
|
40,000
|
|
|
$
|
287,500
|
|
|
$
|
158,631
|
|
|
$
|
-
|
|
|
$
|
(135,769
|
)**
|
*
Represents the Unrealized Gain (Loss) at March 31, 2019 for securities being held by the Company. For the year ended March 31,
2019, there was a cumulative unrealized gain on trading securities of $223,349 on these investments.
**This
amount represents the cumulative unrealized gain as of December 31, 2019, which includes $161,769 for the nine months ended
December 31, 2019.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
11 – INVESTMENTS (CONTINUED)
|
Trading
securities (Continued)
|
|
|
|
|
(a)
|
During
the year ended March 31, 2018, the Company’s investment in Green Innovations, Ltd. was sold for net proceeds of $6,815
and was previously carried as an investment included within Current Assets. The Company’s investment in Green Innovations,
Ltd. had a cost of $250,000. A loss of $243,185 was recognized on the sale of this security in the year ended March 31, 2018.
For the year ended March 31, 2019, there was a realized gain of $125.
|
|
|
|
|
(b)
|
On
December 11, 2017 the Company invested $480,000 in the common stock of VistaGen Therapeutics, Inc. (VTGN). The Company purchased
320,000 common shares along with 320,000 five-year warrants with a strike price of $1.50. On March 26, 2018, the Company purchased
an additional 10,000 common shares. The investment in the common shares is recorded at fair valve with unrealized gains and
losses, reflected in other operating income. The Company’s investment in VTGN has a cost of $490,117, unrealized loss
of $183,910 and a fair value of $306,207 at March 31, 2018. During the year ended March 31, 2019, the Company purchased 59,380
shares of VTGN for $61,998 (average price per share of $1.04 per share) in the open market. The Company sold 389,380 shares
of VTGN for $517,485 ($1.33 per share) for a realized loss of $34,630. The Company also purchased in a direct offering 230,000
restricted common shares directly from VTGN during the year ended March 31, 2019 for a cost of $287,500. On December 11, 2019,
the Company purchased 250,000 three-year restricted warrant at a cost of $0.15 each (total value of $37,500). As of December
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. As December 31, 2019, these shares were on deposit held with a broker.
|
|
|
|
|
(c)
|
The
Company participated in an $18,500,250 underwritten public offering by BLINK, which closed on February 14, 2018. The Company
invested $191,250 of its balance sheet cash and purchased 45,000 registered shares, as well as warrants exercisable immediately
for a period of five (5) years from the date of issuance for up to 90,000 additional shares of common stock of BLINK. The
Warrants carry an exercise price of $4.25 per share, and also trade on the NASDAQ under the ticker symbol: BLNKW. The Company’s
investment in BLINK common stock and warrants had a cost of $191,250, unrealized loss of $35,955 and a fair value of $155,295
at March 31, 2018. During the three months ended June 30, 2018 the Company purchased 41,018 shares of BLINK at a cost of $151,666
(average price per share of $3.69). The Company sold its total holding of 86,018 shares of BLINK for $367,142 (average price
per share of $4.26) realizing a gain of $25,126. During the three months ended June 30, 2018, the Company also purchased 208,800
warrants of BLNKW (average price per warrant of $0.77) and sold its entire position of 298,800 for $468,496 (average price
per warrant of $1.60) realizing a gain of $305,381.
|
|
|
|
|
(d)
|
On
March 2 and March 8, 2018, the Company purchased 188,300 common shares of AYTU Bioscience (ATYU). The investment in the common
shares is recorded at fair valve with unrealized gains and losses, reflected in other operating income. The Company’s
investment in ATYU had a cost of $82,270, unrealized gain of $37,677 and a fair value of $119,947 at March 31, 2018. During
the year ended March 31, 2019, the Company purchased 260,000 shares of AYTU for a $100,830 (average price per share $0.38).
During the year ended March 31, 2019, the Company sold all 448,300 shares of AYTU for $144,094 ($0.32 per share). During the
year ended March 31, 2019, the Company had a realized loss of $38,206 on this holding.
|
|
|
|
|
(e)
|
On
March 12, 2018, the Company purchased 25,000 common shares of Lightbridge Corp (LTBR). The investment in the common shares
is recorded at fair valve with unrealized gains and losses, reflected in other operating income. The Company’s investment
in LTBR had a cost of $37,511, unrealized loss of $8,261 and a fair value of $29,250 at March 31, 2018. During the year ended
March 31, 2019, the Company purchased 287,405 shares of LTBR for $295,625 (average of $1.03 per share). During the year ended
March 31, 2019, the Company sold 312,405 shares of LTBR for $276,159 (average price per share of $0.884) realizing a loss
of $60,380.
|
|
|
|
|
(f)
|
During
the year ended March 31, 2019, the Company purchased 391,514 shares of Pulmatix Inc. (PULM) for $204,802 (average per share
price of $0.52). During the year ended March 31, 2019, the Company sold all 391,514 shares for $183,747 ($0.47 per share).
The Company had a realized loss of $21,065 on this holding.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
11 – INVESTMENTS (CONTINUED)
|
Trading
securities (Continued)
|
|
|
|
|
(g)
|
During
the year ended March 31, 2019, the Company purchased 40,000 shares of Axovant Sciences Ltd. (AXON) for $103,938 (average share
price of $2.60). During the year ended March 31, 2019, the Company sold all 40,000 shares for $98,433 ($2.46 per share). The
Company had a realized loss of $5,505 on this holding.
|
|
|
|
|
(h)
|
On
July 5, 2018, the Company purchased 100,000 shares of Basanite Industries Inc. (BASA) (formerly Paymeon, Inc. (PAYM)) for
$12,998 ($0.13 per share) in the open market. During July 2018 the Company sold the 100,000 shares for $10,821 ($0.11 per
share) for a realized loss of $2,177. On July 9, 2018, the Company purchased 400,000 restricted common shares directly from
the Company for $30,000 ($0.075 per share). During the three months ended December 31, 2019, the Company sold its 400,000
shares for $40,000 ($0.10 per share) recognizing a profit of $10,000.
|
|
|
|
|
(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
December 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
December 31, 2019, these warrants were out of the money by $9.83 per share and are not publicly traded, and the Company
has not recognized the value of these warrants as they are not liquid.
On
December 11, 2019, the Company purchased 250,000 three-year restricted warrant for VTGN at a cost of $0.15 each (total value of
$37,500). These warrants have a strike price of $0.50 each. These shares are $0.19 in the money but since these warrants are not
publicly traded, the Company has not recognized the value of these warrants as they are not liquid.
In
addition to the 250,000 VTGN warrants noted above, at December 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.
These warrants were out of the money by $0.81 each. The Company also owns 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. On December 4, 2019, VTGN adjusted the strike
price of the February 2022 warrants to $0.50 each. These was neither a gain nor loss on the transaction since there is no value
recognized by the Company. At December 31, 2019, these warrants were in the money by $0.19 per share. Since these 550,000 total
warrants are not publicly traded, the Company has not recognized the value of these warrants as they are not liquid.
Digital
Currency
On
April 2, 2018, the Company completed a purchase in
the Groestlcoin cryptocurrency (Crypto Currency Code: GRS) in the aggregate amount of $8,000 for 11,922.81 units
($0.6569 per unit). The purchase of this currency cannot be executed directly using $USD. The Company must purchase
Bitcoin (BTC) and then purchase the Groestlcoin cryptocurrency by using BTC. This two-step process triggers the potential
recognition of realized gains or losses on the purchase of Groestlcoin. On July 15, 2018, the Company sold all of its
39,862 units of Groestlcoin cryptocurrency converting it into 4.17 units of BTC having a value of $32,230. On August 20,
2018, the Company converted its BTC to gold bullion and silver coins at a value of $26,783.
On
August 25, 2018, the Company sold all gold and silver commodities held for a sum of $24,046, recognizing a loss on the
transaction of $2,737. During the year ended March 31, 2019, had an unrealized loss on digital currency of $3,143
prior to the conversion to the gold and silver. During
the nine months ended December 31, 2019, the Company had no digital currency activity.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
11 – INVESTMENTS (CONTINUED)
Equity
investments
Honeywood
Effective
August 1, 2017, the Company entered into a Debt Conversion Agreement in respect to a secured promissory note issued following
the unwinding of the Honeywood acquisition (See NOTE 1), whereby the Company agreed to convert the entire principal and accrued
but unpaid interest due under the note into a 5% membership interest in Honeywood.
The
Company made an assessment for impairment of its investment in Honeywood at the entity level. During the relationship between
the Company and Honeywood, Honeywood had a working capital deficiency and had a history of operating losses. In accordance with
FASB ASC 320-10-35-28, “Investments—Debt and Equity Securities,” a Company may not record an impairment
loss on the investment but shall continue to evaluate whether the investment is impaired (that is, shall estimate the fair value
of the investment) in each subsequent reporting period until either of the following occurs: (a) the investment experiences a
recovery of fair value up to (or beyond) its cost; or (b) the entity recognizes an other-than-temporary impairment loss. At
the time of the Debt Conversion Agreement the receivable balance of $199,119 had been fully written off by the Company in a prior
period. As a result of this Debt Conversion Agreement, the Company deemed the investment to still have no current value. The Company
recorded this investment at $0. Thus, no recovery of bad debt and no impairment will be recognized in this year.
Cost
investments
Küdzoo,
Inc.
On
September 4, 2018, the Company invested $15,000 in Küdzoo, Inc. (“Küdzoo”), a privately held company. Küdzoo
is the developer of a mobile application that rewards students for their grades and achievements with deals and opportunities.
The investment is recorded at cost and represents 0.2% of the value of Küdzoo based on a pre-money valuation of $7,500,000.
On
March 21, 2019, the Company invested $22,500 in Küdzoo. This investment was recorded at cost and represents 0.22% of the
proportionate interest in the outstanding of the Company after this offering based on a pre-money valuation of $10,200,000. On
April 8, 2019, the Company invested another $20,400, which was recorded at cost representing a 0.42% of the proportionate interest
in the outstanding of the Company after this offering based on a pre-money valuation of $10,200,000.
The
Company tested the investment value for Küdzoo as of March 31, 2019 for impairment. It was noted that the value of the Küdzoo
had 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 December 31, 2019.
On
April 8, 2019, the Company invested $20,400, in Küdzoo, Inc., 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 $10,200,000.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
11 – INVESTMENTS (CONTINUED)
Cost
investments (Continued)
Küdzoo,
Inc. (Continued)
On
December l8, 2019, the Company invested $22,000, in Küdzoo, Inc. The $22,000 investment was recorded at cost representing
a 0.2% of the proportionate interest in the outstanding of the Company after this offering based on a pre-money valuation of $10,200,000.
Serendipity
On
October 31, 2018, the Company invested $35,000 in Serendipity Brands LLC (dba Serendipity Ice Cream Co.) (“Serendipity”),
a privately held Company. Serendipity is an ice cream distribution company providing wholesale distribution to retail customers.
The investment was recorded at cost and represents 0.24% of the value of Serendipity based on a pre-money valuation of approximately
$14 million.
The
Company tested the investment value for Serendipity as of March 31, 2019 for impairment. It was noted that the value of the company
has maintained its value through reviews of their financial performance, therefore, the Company does not believe there is any
impairment of this investment as of December 31, 2019.
NOTE
12 – FAIR VALUE MEASUREMENTS
The
following summarizes the Company’s financial assets and liabilities that are measured at fair value on a recurring basis
at December 31, 2019 and March 31, 2019:
|
|
|
December
31, 2019
|
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment-trading
securities
|
|
$
|
158,631
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
158,631
|
|
|
Cost
method investment – Küdzoo
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
79,900
|
|
|
$
|
79,900
|
|
|
Cost
method investment – Serendipity Brands
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
35,000
|
|
|
$
|
35,000
|
|
|
|
|
March
31, 2019
|
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment-trading
securities
|
|
$
|
350,400
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
350,400
|
|
|
Cost
method investment – Küdzoo
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
37,500
|
|
|
$
|
37,500
|
|
|
Cost
method investment – Serendipity Brands
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
35,000
|
|
|
$
|
35,000
|
|
NOTE
13 – CONCENTRATIONS
During
the nine months and year ended December 31, 2019 and March 31, 2019, we have one supplier for 100% of our product who is also
the manufacturer of Tauri-GumTM.
For
the nine months ended December 31, 2019, two customers accounted for 42.09% of product sales from continuing
operations. For the year ended March 31, 2019, one customer accounted for 97% of product sales from continuing
operations.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
14 – SUBSEQUENT EVENTS
Subsequent to December 31, 2019, the Company
issued additional shares of common stock as follows; (i) 2,926,000 restricted shares of common stock in a private
placement purchased by accredited individual investors for cash of $58,520 ($0.02 per share) and (ii) 2,500,000 shares of restricted
common stock were issued to consultants for services rendered (iii) 600,000 shares of restricted common stock for commitment
shares relative to convertible notes issued and (ii) 4,521,903 shares of restricted common stock in conversion of
convertible notes issued by us of $117,500 and accrued interest of $6,833.
On January 31, 2020, the Company entered
into a stock purchase agreement with an accredited investor to purchase 330,000 restricted shares of Company’s common stock
for $9,900 ($0.03 per share.) As of this report date, these shares have not been issued.
Approval
to Operate Global Seller Account by Alibaba Group
On
January 6, 2020, the Company announced that is has been approved by Chinese multinational conglomerate, Alibaba Group (“Alibaba”),
to operate a Global Seller Account. In addition, the Company has been designated as a Gold Supplier (Gold Tier Level Supplier).
This Alibaba approval opens up the global marketplace to the Company, its products, its product lines, as well as future business
opportunities. The Company is working diligently towards establishing a partnership with a China based fulfillment and distribution
network.
Certified
as Affiliate Vendor by The National Association of College Stores
On
January 7, 2020, the Company announced that is has been certified by the National Association of College Stores (“NACS”)
as an affiliate vendor. As a vendor of NACS, the Company has joined the most comprehensive group of campus retailers working to
provide the best services and selections to college students across the United States.
Joint Venture with OG LABRATORIES, LLC
On January 21, 2020, the Company entered
into a joint venture agreement with OG LABRATORIES, LLC (“OG”). Under this agreement the Company will act as a wholesaler
of OG’s product labeled under OG’s name. The Company currently has two products: “Omega-3 Heart Wellness+CBD”
and “Collagen Skin Wellness+CBD”. Both of these products will be offered on the Company’s website. The Company
shall be compensated for sales generated through its efforts according the following formula: the Company shall receive, no later
than 30 days after collection, a set percentage of the total order amount for third-party customers who purchase directly from
OG. For deals greater than One Hundred Thousand Dollars ($100,000.00), Contractor shall receive commission of three and a half
percent (3.5%) and for deals of One Hundred Thousand Dollars ($100,000.00) or less, Contractor shall receive commission of five
percent (5%). The Company will only receive a commission on sales to customers that it brings to OG. Contractor shall receive
the commission on such sales as long as the sale is made while the contract is in force or within six (6) months after the contract’s
termination. This Agreement may be terminated by either party with thirty days of prior written notice to the other part. Contemporaneous
to this agreement, the Company has purchased of inventory of $3,050 for e-commerce fulfillment.
Investment
Agreement and Registration Rights Agreement
On
January 21, 2020, the Company entered into a $5,000,000 equity line financing agreement (“Investment Agreement”) with
Tangiers, as well as a registration right agreement related thereto (“Registration Rights Agreement”). The financing
is over a maximum of 36 months. Pursuant to the Registration Rights Agreement, a maximum of 76,000,000 shares of our common stock,
par value $.00001 per share that we may sell to Tangiers from time to time will be registered by us on Form S-1 with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, for this financing. We are required to use our best efforts
to file the Registration Statement within ninety (90) days of the date the Investment Agreement.
Subject
to the terms and conditions of the equity line documents, from time to time, the Company may, in its sole discretion, deliver
a Put Notice to Tangiers which states the number of shares that the Company intends to sell to Tangiers on a closing date. The
maximum amount of shares of Common Stock that the Company shall be entitled to put to Tangiers per any applicable Put Notice shall
be an amount of shares up to or equal to two hundred percent (200%) of the average of the daily trading volume (U.S. market only)
of the Common Stock for the ten (10) consecutive Trading Days immediately prior to the applicable Put Notice Date (the “Put
Amount”) so long as such amount is at least Five Thousand Dollars ($5,000) and does not exceed Three Hundred Fifty Thousand
Dollars ($350,000), as calculated by multiplying the Put Amount by the average daily VWAP for the ten (10) consecutive Trading
Days immediately prior to the applicable Put Notice Date. The “Purchase Price” of the shares of our common stock that
we may sell to Tangiers will be 88% of the lowest VWAP of the Common Stock during the five (5) consecutive Trading Days including
and immediately following the applicable to the Put Notice, provided, however, an additional 10% will be added to the discount
of each Put if (i) the Company is not DWAC eligible and (ii) an additional 15% will be added to the discount of each Put if the
Company is under DTC “chill” status on the applicable Put Notice Date.
The
closing of a purchase by Tangiers of the shares specified by us in the Put Notice will occur on the date which is no earlier than
five and no later than seven trading days following the date Tangiers receives the Put Notice. On a closing date we will sell
to Tangiers the shares of our common stock specified in the Put Notice, and Tangiers will pay us an amount equal to the Purchase
Price multiplied by the number of shares specified in the Put Notice.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE
14 – SUBSEQUENT EVENTS (CONTINUED)
Convertible
Notes
BHP Capital NY Inc. Note
On January 3, 2020, the Company entered
into a one year 2% $44,000 Convertible Promissory Note with BHP Capital NY Inc. (“BHP Capital”) pursuant to the terms
of a Securities Purchase Agreement (the “BHP Capital Note”). The BHP Capital Note has a maturity date of January 3,
2021 and carries a $4,000 original issue discount (such that $40,000 was funded to the Company at closing). BHP has the right
from time to time, and at any time after closing, to convert all or any amount of the principal face amount of the BHP Capital
Note then outstanding into shares of the Company’s common stock at a price for each share of common stock equal to 65% of
the lowest one-day 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 twenty (20) 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 BHP Capital
within three (3) business days of receipt by the Company of the notice of conversion. The conversion price may be adjusted downward
if, within three (3) business days of the transmittal of the Notice of Conversion to the Company, the Common Stock has a closing
bid which is 5% or lower than that set forth in 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 50% instead of 65% while that “Chill” is in effect. In no
event shall BHP be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially
owned by BHP Capital and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2019
AND 2018
(UNAUDITED)
(US$)
NOTE 14 – SUBSEQUENT EVENTS (CONTINUED)
Convertible Notes (Continued)
BHP Capital NY Inc. Note (Continued)
During the first 180 calendar days that
the BHP Capital Note is in effect, the Company may redeem the BHP Capital Note by paying to BHP Capital an amount as follows:
(i) if the redemption is within the first thirty (30) days of the issuance date, then for an amount equal to 110% of the unpaid
principal amount of this BHP Capital Note along with any interest that has accrued during that period, (ii) if the redemption
is on or after the 31st day, but by the 60th day of the issuance date, then for an amount equal to 115% of the unpaid principal
amount of this BHP Capital Note along with any accrued interest, (iii) if the redemption is on or after the 61st day and through
the 90th day of the issuance date, then for an amount equal to 120% of the unpaid principal amount of this Note along with any
accrued interest and (iv) if the redemption is on or after the 91st day and through 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 Company may not redeem
the BHP Capital Note after the 180th day from entering into it. Upon an event or continuation of default, among other penalty
provisions, of the BHP Note (1) interest shall accrue at a default interest rate of 24% per annum (“Default Interest”),
and (2) the Note shall become immediately due and payable and the Company shall pay to the BHP, in full satisfaction of its obligations
thereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note
plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment plus (y) Default Interest,
if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to BHP pursuant to the BHP Capital Note
and all other amounts payable thereunder shall immediately become due and payable. The BHP Capital Note contains cross-default
provisions to other Company agreements which, if triggered after the passage of all applicable notice and cure or grace periods,
shall, at the option of BHP, be considered a default under the BHP Capital Note in which event BHP shall be entitled (but in no
event required) to apply all rights and remedies of BHP under the terms and provisions of the BHP Capital Note and such other
applicable agreements.
In connection with the BHP Capital Note,
the Company issued irrevocable transfer agent instructions pursuant to which the Company is required at all times to have reserved
three times the number of shares that would be issuable upon full conversion of the Note (assuming that the 4.99% beneficial ownership
limitation is not in effect) (based on the respective Conversion Price of the Note in effect from time to time, initially 14,100,000
shares of its Common Stock (the “Share Reserve”) for conversions under this BHP Capital Note. Failure to maintain
the share Reserve may be an event of default. Upon full conversion or repayment of this BHP Capital Note, any shares remaining
in the Share Reserve shall be cancelled.
TAURIGA SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2019
AND 2018
(UNAUDITED)
(US$)
NOTE 14 – SUBSEQUENT EVENTS (CONTINUED)
Convertible Notes (Continued)
Adar Alef, LLC Note
On January 15, 2020, the Company entered
into security purchase agreement with Adar Alef, LLC whereby the Company issued an 8% convertible redeemable note in the principal
amount of $44,000. The note was funded with net proceeds of $37,800, after the deduction of $4,000 for OID and $2,200 in legal
fees. The note has a maturity date of January 15, 2021. The face value amount 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 65% 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 55% instead of 65% 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. During the first 6 months following the Issuance Date, the Company may redeem this Note by paying to the Holder
an amount equal to the sum of 140% of the face amount plus any accrued interest. This Note may not be prepaid after the 6-month
anniversary of the Issuance Date. The redemption must be closed and paid for within 3 business days of the Company sending the
redemption demand or the redemption will be invalid, and the Company may not redeem this Note. In the event this Note is not prepaid
within the 6-month period, the Conversion Price described in Section 4(a) shall be decreased from 65% to 60% (reflecting an effective
conversion discount of 40%). 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. The Company shall establish an initial reserve of 6,296,000 shares of its common stock and at all times
reserve a minimum of 4 times the amount of shares required if the note were to fully convert.
GS
Capital Partners, LLC Note
On
January 17, 2020, the Company entered into a one year 8% $110,000 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 January 21, 2021 and carried a $10,000 original
issue discount (such that $100,000 was funded to the Company on January 21, 2020). The holder is entitled, at its option, at any
time after cash payment, to convert all or any amount of the principal face amount of the GS Note then outstanding into shares
of the Company’s common stock at a price for each share of common stock equal to 65% of the lowest daily volume weighted
average price (VWAP) of the common stock as reported on the National Quotations Bureau OTC Markets exchange, which the Company’s
shares are traded or any exchange upon which the common stock may be traded in the future, for the twenty (20) prior trading days
including the day upon which a notice of conversion is received by the Company or its transfer agent. Such conversion shall be
effectuated by the Company delivering the shares of common stock to the holder within 3 business days of receipt by the Company
of the notice of conversion. Accrued but unpaid interest shall be subject to conversion. To the extent the conversion price of
the Company’s common stock closes below the par value per share, the Company will take all steps necessary to solicit the
consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions
submitted pending this increase. In the event the Company experiences a DTC “Chill” on its shares, the conversion
price shall be decreased to 55% instead of 65% while that “Chill” is in effect. In no event shall the holder be allowed
to affect a conversion if such conversion, along with all other shares of the Company common stock beneficially owned by the holder
and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE 14 – SUBSEQUENT EVENTS (CONTINUED)
Convertible Notes (Continued)
GS Capital Partners, LLC Note (Continued)
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 5,150,000 shares of
its Common Stock for conversions under this 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 or repayment of this Note, any shares
remaining in the Share Reserve shall be cancelled.
Pursuant
to this note, the Company issued to the noteholder 400,000 shares
of its restricted common stock as debt commitment shares valued at $20,960 ($0.0524 per share).
Retirement
of July 2019 Convertible note with Jefferson Street through
partial conversion and partial cash payment
On
January 23, Jefferson converted $27,500 of principal and accrued interest in the amount of $1,375 into 1,339,031 shares of restricted
stock of the Company ($0.0219 per share). The Company repaid the remaining balance of $27,500 of the Jefferson Street Note including
accrued interest and prepayment premium of $10,904. As a result, the Jefferson Street Note is now fully repaid and retired, and
no further obligations or remuneration is due and owing thereunder.
Tangiers Global, LLC Note
On February 7, 2020, the Company effectuated
a six-month convertible promissory note with Tangier’s Global, LLC (the “Tangier’s Note”). The Company
received funds in the amount of $60,000 after reduction of the Original Issue Discount of $5,000. The $65,000 face value note
matures on August 6, 2020 and bears and interest rate of 2%. This note has a fixed conversion price of $0.03 per share. The Company
may redeem the note by paying to the note holder Investor an amount as follows: (i) if the redemption is within the first 30 days
of the issuance date, then for an amount equal to 110% of the unpaid principal amount of this Note along with any interest that
has accrued during that period, (ii) if the redemption is after the 31st day, but by the 60th day of the issuance date, then for
an amount equal to 115%, (iii) if the redemption is after the 61st day, but by the 90th day of the issuance date, then for an
amount equal to 120%, (iv) if the redemption is after the 91st day, but by the 180th day of the issuance date, then for an amount
equal to 133%. The Company covenants that it will at all times reserve and keep available for Holder, out of its authorized and
unissued Common Stock five times the number of shares of Common Stock as shall be issuable upon the full conversion of this Note.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(UNAUDITED)
(US$)
NOTE 14 – SUBSEQUENT EVENTS (CONTINUED)
Convertible Notes (Continued)
Tangiers Global, LLC Note (Continued)
If the Note is not retired on or before
the Maturity Date, then at any time and from time to time after the Maturity Date, and subject to the terms hereof and restrictions
and limitations contained herein, the Holder shall have the right, at the Holder’s sole option, to convert in whole or in
part the outstanding and unpaid Principal Amount under this Note into shares of Common Stock at the Variable Conversion Price
which shall be equal to the lower of: (a) the Fixed Conversion Price or (b) 65% of the lowest volume weighted average price of
the Company’s Common Stock during the 20 consecutive Trading Days prior to the date on which Holder elects to convert all
or part of the Note. If the Company is placed on “chilled” status with the DTC, the discount shall be increased by
10%, i.e., from 35% to 45%, until such chill is remedied. If the Company is not DWAC eligible through their transfer
agent and DTC’s FAST system, the discount will be increased by 5%, i.e., from 35% to 40%. In the case of both,
the discount shall be a cumulative increase of 15%, i.e., from 35% to 50%. Holder may not engage in any “shorting”
or “hedging” transaction(s) in the Common Stock of the Company prior to conversion. In the “Event of Default”,
defined (i) a default in payment of any amount due hereunder; (ii) a default in the timely issuance of underlying shares, which
default continues for 2 Trading Days after the Company has failed to issue shares or deliver stock certificates within the 3rd
Trading Day following the Conversion Date; (iii) if the Company does not issue the press release or file the Current Report on
Form 8-K; (iv) failure by the Company for 3 days after notice has been received by the Company to comply with any material provision
of this Note; (iv) any representation or warranty of the Company in this Note that is found to have been incorrect in any material
respect when made, including, without limitation, the Exhibits; (vi) failure of the Company to remain compliant with DTC, thus
incurring a “chilled” status with DTC; (vii) any default of any mortgage, indenture or instrument which may be issued,
or by which there may be secured or evidenced any indebtedness, for money borrowed by the Company or for money borrowed the repayment
of which is guaranteed by the Company, whether such indebtedness or guarantee now exists or shall be created hereafter; (viii)
if the Company is subject to any Bankruptcy Event; (ix) any failure of the Company to satisfy its “filing” obligations
under the Securities Exchange Act of 1934, as amended (the “1934 Act”) and the rules and guidelines issued
by OTC Markets News Service, OTC Markets Group, Inc. and their affiliates; (x) failure of the Company to remain in good standing
under the laws of its state of domicile; (xi) any failure of the Company to provide the Holder with information related to its
corporate structure including, but not limited to, the number of authorized and outstanding shares, public float, etc. within
1 Trading Day of request by Holder; (xii) failure by the Company to maintain the Required Reserve in accordance with the terms
of Section 2.00(e); (xiii) failure of Company’s Common Stock to maintain a closing bid price in its Principal Market for
more than 3 consecutive Trading Days; (xiv) any delisting from a Principal Market for any reason; (xv) failure by Company to pay
any of its transfer agent fees in excess of $2,000 or to maintain a transfer agent of record; (xvi) failure by Company to notify
Holder of a change in transfer agent within 24 hours of such change; (xvii) any trading suspension imposed by the United States
Securities and Exchange Commission (the “SEC”) under Sections 12(j) or 12(k) of the 1934 Act; (xviii) failure
by the Company to meet all requirements necessary to satisfy the availability of Rule 144 to the Holder or its assigns, including
but not limited to the timely fulfillment of its filing requirements as a fully- reporting issuer registered with the SEC, requirements
for XBRL filings, and requirements for disclosure of financial statements on its website; or (xix) failure of the Company to abide
by the Use of Proceeds or failure of the Company to inform the Holder of a change in the Use of Proceeds.
If an Event of Default occurs, the outstanding
Principal Amount of this Note owing in respect thereof through the date of acceleration, shall become, at the Holder’s election,
immediately due and payable in cash at the “Mandatory Default Amount”. The Mandatory Default Amount means 33% of the
outstanding Principal Amount of this Note will be automatically added to the Principal Sum of the Note and tack back to the Effective
Date for purposes of Rule 144. Commencing 5 days after the occurrence of any Event of Default that results in the eventual acceleration
of this Note, this Note shall accrue additional interest, in addition to the Note’s “guaranteed” interest, at
a rate equal to the lesser of 12% per annum or the maximum rate permitted under applicable law. In connection with such acceleration
described herein, the Holder need not provide, and the Issuer hereby waives, any presentment, demand, protest or other notice
of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by the
Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the note until such time, if
any, as the Holder receives full payment. No such rescission or annulment shall affect any subsequent event of default or impair
any right consequent thereon.
On February
10, 2020, GS Capital LLC elected to partially convert the $300,000 March 14, 2019 note in the amount of $75,000 of principal
plus $5,458 of accrued interest for 2,628,548 common shares ($0.0307 per share). The remaining balance of this note is
$225,000.
On February 12, 2020, Adar Alef, LLC elected to partially convert
its Back-end Note under a December 20, 2018 Securities Purchase Agreement which was funded on August 12, 2019. The noteholder converted
$15,000 of principal into 554,324 common shares ($0.02706 per share).