NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS
Nature
of Business
The
unaudited condensed consolidated financial statements included herein have been prepared, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission (“SEC”). The condensed consolidated financial statements
and notes are presented as permitted on Form 10-Q and do not contain certain information included in the Company’s annual
statements and notes. Certain information and footnote disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.
It is suggested that these condensed consolidated financial statements be read in conjunction with the March 31, 2020 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.
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.
On
March 18, 2020, the Company filed a Provisional U.S. Patent Application covering its Pharmaceutical grade version of Tauri-Gum™.
This patent application, filed with the United States Patent & Trademark Office (“U.S.P.T.O.”), is titled: “MEDICATED
CBD COMPOSITIONS, METHODS OF MANUFACTURING, AND METHODS OF TREATMENT.” The Company’s proposed pharmaceutical
grade version of Tauri-Gum™ is being developed for nausea regulation, intended specifically to target patients subjected
to ongoing chemotherapy treatment(s) (the “Indication”). The delivery system for this pharmaceutical product
is an improved version of the existing “Tauri-Gum™” chewing gum formulation based on continued research and
development.
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 e-commerce
merchant services. In conjunction to this new entity the Company entered into a two-year lease commencing on June 11, 2019 and
expiring on September 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 SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
Nature of Business (Continued)
Collaboration
Agreement with Aegea Biotechnologies Inc.
On
April 3, 2020, Tauriga Sciences, Inc. entered into a collaboration agreement (“Collaboration Agreement”) with Aegea
Biotechnologies Inc. (“Aegea”), for the purpose of developing a Rapid, Multiplexed Novel Coronavirus (COVID-19) Point
of Care Test with Superior Sensitivity and Selectivity (the “SARS-Col 2 Test”). The parties believe that the benefits
of the SARS-CoV-2 Test are as follows: a Rapid SARS-CoV-2 test with the sensitivity and specificity to eliminate false negatives
and false positives, and with the ability to detect and measure viral shed, even in patients who are asymptomatic. This SARS-CoV-2
test would use Aegea’s patented technologies, to take coronavirus testing to the next level by differentiating different
strains of SARS-CoV-2. The test, if successful, would be adaptable to additional SARS-CoV-2 strain types as necessary and as the
virus mutates. It also has the possibility to be rapidly be customized to provide similarly sensitive and specific assays for
other viruses. The Company has committed to raise funding for the purposes set forth in under the Collaboration Agreement from
its $5,000,000 Equity Line of Credit (“ELOC”) beginning on March 16, 2020. Seventy percent (70%) of the net proceeds
from the sale of the initial 10,000,000 shares of stock of Tauriga under the ELOC were invested in Aegea for the development of
the Covid Test and used to purchase shares of common stock of Aegea, at a purchase price of $4.00 per share.
Pursuant
to the terms of the Collaboration Agreement, following the initial sale of 10,000,000 shares of our common stock under the ELOC,
twenty percent (20%) of all subsequent net proceeds from the sale of shares under the ELOC shall be used to purchase additional
shares of common stock of Aegea at a purchase price of $4.00 per share. The $4.00 stock price corresponds to a current pre-money
valuation of Aegea of $25,000,000 for each tranche of cash, up to the first $2,000,000 of our investment in Aegea. The valuation
will be reassessed and reset by the parties after the first $2,000,000 of Tauriga’s investment is received by Aegea. In
addition, as part of our agreement with Aegea, On May 26, 2020, Tauriga also issued to Aegea 5,000,000 unregistered common shares
of Tauriga common stock. The Collaboration Agreement commenced upon signing and will continue indefinitely, unless amended or
terminated by mutual written agreement of the parties. As of September 30, 2020, the Company has invested $278,212 in Aegea for
69,553 shares, representing an ownership percentage of 0.92%.
On
August 10, 2020, the Company and Aegea amended their Collaboration agreement dated April 3, 2020. Under the terms of the amendment,
having invested 70% of the proceeds from the sale of the initial 10,000,000 shares of Tauriga stock under the ELOC agreement with
Tangiers, the Company will increase the percentage of proceeds it will invest in Aegea on the sale of the remaining shares available
under the ELOC agreement from 20% to 40% after a 4,000,000 shares holdback to be fully retained by the Company to pay for legal
and professional costs associated with the ELOC financing facility. As of September 30, 2020, the Company has sold 2,750,000 shares
of the 4,000,000 share holdback.
Chief
Marketing Officer
On July 15, 2020, the Company appointed
Dr. Keith Aqua (“Dr. Aqua”) as an independent contractor to the position of Chief Medical Officer (“CMO”).
The Agreement carries a term of 12 months expiring on July 15, 2021. In his capacity, Dr. Aqua will help the Company progress
in the development of the Company’s proposed pharmaceutical grade version of Tauri-Gum™. In addition, Dr. Aqua will
help establish a distribution network for the Company to market its Tauri-Gum™ brand to a variety of physicians and medical
practices in southern Florida. In consideration of the services being provided by Dr. Aqua pursuant to the terms of the Agreement,
the Company has agreed to issue Dr. Aqua (i) upon entry into the Agreement 750,000 shares of restricted common stock, (ii) agreed
to 750,000 shares of restricted common stock which will be issued in equal monthly instalments of 62,500 shares beginning August
15, 2020 and (iii) agreed to $4,000 cash per quarter during the term of the Agreement, payable following the completion of each
such quarter.
COMPANY
PRODUCTS
Tauri-GumTM
In
October 2018, the Company’s management, along with its board of directors, began to explore the possibility of launching
a cannabidiol (“CBD”) infused gum product line into the commercial marketplace. After several weeks of diligence,
discussions with various parties and exploratory meetings, the Company made the determination to move forward with this business
opportunity.
To
begin this process, during the quarter ended December 31, 2018, the Company began discussions with a Maryland based chewing gum
manufacturer - Per Os Biosciences LLC (“Per Os Bio”), which consummated in a manufacturing agreement in late December
2018 to launch and bring to market a white label line of CBD infused chewing gum under the brand name Tauri-GumTM.
In October 2019, we also filed trademark applications for the above-referenced marks in each of the European Union and Canada.
On February 18, 2020, the Company received a notice of allowance from the European Union Intellectual Property Office granting
the Company its trademark registration for Tauri-Gum™ (E.U. Trademark # 018138334).
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
COMPANY
PRODUCTS (CONTINUED)
TAURI-GUMTM
(CONTINUED)
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.
|
To
implement Kosher Certification Process;
|
|
E.
|
Procure
appropriate Product & Liability insurance policy (as of this report date the Company has in effect an $8,000,000 product
liability policy); and
|
|
F.
|
Acquire
legal opinion with respect to the confirmation of the legality to sell this CBD Gum on the Federal Statute Level.
|
The
Company’s gum formulation includes distinctive features: allergen free, gluten free, vegan, kosher (K-Star certification),
and incorporates a proprietary manufacturing process. See our “Risk Factors” contained in our Annual Report dated
March 31, 2020 filed with the Securities and Exchange Commission on June 29, 2020, including with respect, but not limited, to
Federal laws and regulations that govern CBD and cannabis.
The
Company’s E-commerce website is www.taurigum.com.
During
the fiscal year 2020, the Company added two additional flavors: Blood Orange and Pomegranate.
On
August 31, 2020, the Company announced that it has obtained HALAL Certification for the entirety of its flagship brand Tauri-Gum™.
A HALAL Certification is a guarantee that the products comply with the Islamic dietary requirements or Islamic lifestyle.
TAURI-GUMMIES™
On
November 25, 2019, the Company announced that it has finalized the formulation for its Vegan 25 mg CBD (Isolate) Infused Gummies
product to be branded Tauri-Gummies™ for which a trademark was filed in Switzerland and the European Union. The company
has received a Notice of Allowance from the European Union Intellectual Property Office (“E.U.I.P.O.”) granting the
Company its trademark Registration for: Tauri-Gummies™ (E.U. Trademark # 018138348). The effective registration date, granting
this Tauri-Gummies™ trademark to the Company, was June 24, 2020. This product contains no gelatin in the formulation, as
the Company has utilized plant-based alternatives in completion of this product. Each bottle contains 4 flavors – cherry,
orange, lemon and lime.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
COMPANY
PRODUCTS (CONTINUED)
TAURI-GUMMIES™
(CONTINUED)
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 commenced sales of Tauri-Gummies™ in January 2020.
In addition, we also received a Notice
of Allowance to our Tauri-GummiesTM registered trademark application from the European Union Intellectual Property
Office. The trademark application was registered on June 24, 2020 under Serial No. 018138351, which extends our protective period
for this mark until October 2029, and which may be extended thereafter for ten-year intervals.
CANNABIGEROL
“CBG” ISOLATE INFUSED VERSION OF TAURI-GUM™
On
December 30, 2019, the Company announced it had commenced development of a Cannabigerol (“CBG”) Isolate Infused version
of its Tauri-Gum™ brand. This initial production run had been completed in its Peach-Lemon flavor (and each piece of Chewing
Gum contains 10mg CBG isolate). This initial production run yielded roughly 8,300 blister packs. The product is Kosher Certified,
Vegan Formulated, Lab Tested, NON-GMO, Allergen Free, Gluten Free, containing no THC, and 100% Made in the USA. MSRP has been
established at $19.99 per Blister Pack. During the six months ended September 30, 2020, the Company received and commenced sales
of Peach-Lemon CBG Gum.
The
Company has commenced production of its second version of CBG Infused Tauri-Gum - Black Currant Flavor (each piece of Chewing
Gum contains 15mg of CBG isolate). The Company’s Black Currant Flavor - CBG Infused Tauri-Gum™: Kosher Certified,
Vegan, Halal, Lab-Tested, NON-GMO, Allergen Free, Gluten Free, 15mg CBG/Piece of Chewing Gum, 100% Made in the USA. MSRP is $21.99
per blister pack.
IMMUNE
BOOSTER VERSION OF TAURI-GUM™
On
May 29, 2020, the Company announced that it has commenced development of an Immune Booster version of Tauri-Gum™. This proposed
product will contain 60mg of Vitamin C and 10mg of Elemental Zinc (“Zinc”) in each piece of chewing gum. This product
does not contain any phytocannabinoids (i.e. CBD or CBG). This product commenced sales during the three months ended September
30, 2020. The MSRP for the Pear Bellini flavor of Tauri-Gum™ is $12.99 per blister pack. The Company’s Immune Booster
Tauri-Gum™ product, is: Kosher certified, Halal Vegan, Lab-Tested, non-GMO, Allergen Free, Gluten Free, Infused
with 60mg Vitamin C & 10mg Elemental Zinc/per Each Piece of Chewing Gum, no phytocannabinoids, and 100% made in the
United States of America. This product was developed for general usage and as with respect to the entirety of the Company’s
retail Tauri-Gum™ product line, there are no “treatment claims” made.
RAINBOW
DELUXE SAMPLER PACK
On
June 15, 2020, the Company, introduced its Rainbow Deluxe Sampler Pack (“Rainbow Pack”). The Rainbow Pack is comprised
of one blister pack of each Tauri-Gum’s™ flavors (6 blister packs in total) and will be available exclusively on the
Company’s E-Commerce website (www.taurigum.com). Three of the Tauri-Gum™ flavors are Cannabidiol (“CBD”)
infused (Mint, Blood Orange, Pomegranate), two of the Tauri-Gum™ flavors are Cannabigerol (“CBG”) infused (Peach-Lemon,
Black Currant), and one Tauri-Gum™ flavor is Vitamin C + Zinc (“Immune Booster”) infused (Pear Bellini). The
introductory price of the Rainbow Pack is $99.99 per pack.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
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 greater New York City marketplace (the “E&M Distribution Agreement”), 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.
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. In connection with the SKL Agreement, the Company had
issued 1,000,000 restricted common shares the Company’s stock in accordance with a further division of such shares as previously
disclosed by us in previous periodic reports. This agreement expired on April 30, 2020, and was not renewed by us. Further, in
connection with this agreement, on May 11, 2019, we also entered into a consulting agreement with Ms. Neelima Lekkala, who was
appointed Vice President of Distribution & Marketing. This agreement had a one-year term and expired on May 11, 2020, and
was not renewed by us. As of September 30, 2020, Ms. Lekkala earned commission in the amount of $1,143.
Windmill
Health Distribution Agreement
On
June 28, 2019, the Company entered into a distribution agreement with Windmill Health Products, LLC (“Windmill Health”),
a New Jersey based distributor, with the intention of increasing and accelerating market penetration of the Company’s Tauri-GumTM
product line. The Company did not contribute any capital or issue any equity to Windmill Health in connection with the Windmill
Health distribution agreement.
These
arrangements are more fully described in our periodic and current reports that we have filed with the Securities and Exchange
Commission and included in these agreements filed by reference as exhibits thereto.
In
connection with the issuances of any restricted securities by the Company regarding the above-described distribution agreements
or other agreements described in our annual report dated March 31, 2020 filed with the Securities and Exchange Commission on June
29, 2020, Part II, Item 5, Unregistered Sales of Equity Securities for additional information.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
DISTRIBUTION
OF THE COMPANY’S PRODUCTS (CONTINUED)
Resale
Agreement with OG LABORATORIES, LLC
On
January 21, 2020, the Company entered into a joint venture agreement with OG LABORATORIES, LLC (“OG”). Under this
agreement the Company acts as a wholesaler of OG’s product labeled under OG’s name. The Company began wholesaling
two of OG’s products: “Omega-3 Heart Wellness+CBD” and “Collagen Skin Wellness+CBD”. Both of these
products were offered on the Company’s website. The Company will be compensated for sales generated through its efforts
according the following formula: the Company shall receive, no later than 30 days after collection, the following percentage of
the total order amount for third-party customers who purchase OG products that Tauriga originated or derived: for aggregate purchases
greater than one hundred thousand dollars ($100,000.00), Tauriga shall receive commission of three and a half percent (3.5%),
and for aggregate purchases of one hundred thousand dollars ($100,000.00) or less, Tauriga shall receive commission of five percent
(5%). Tauriga shall receive the above-referenced 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. The OG agreement may be terminated by either party with
thirty days of prior written notice to the other party. The Company made an initial purchase of OG inventory of $3,050 for e-commerce
fulfillment.
On
July 28, 2020, the Company and OG mutually agreed to terminate this sales arrangement. The Company and OG arranged for a buyer
to purchase substantially all of the remaining inventory. Any remaining inventory will be used as samples and promotional items.
All items under this agreement were removed from the Company’s website. As of September 30, 2020, no third-party commissionable
sales were recorded.
Tauri-GumTM
Product Line on IndiaMART
On
May 26, 2020, the Company, announced that it has entered the fast-growing CBD retail marketplace of India. After several months
of preparatory work, the Company has successfully listed the entirety of its Tauri-Gum™ product line with India’s
leading E-Commerce Company (B2B, B2C, Customer to Customer), IndiaMART InterMESH Ltd. (“IndiaMART” or “IndiaMART.com”).
The Company will sell each blister pack of its CBD infused Tauri-Gum™ (Mint, Blood Orange, and Pomegranate flavors) for
1,200 INR and each blister pack of its CBG infused Tauri-Gum™ (Peach-Lemon flavor) for 1,650 Indian Rupees. As of September
30, 2020, the Company has not recognized any sales under this arrangement.
Mr.
Checkout Distribution Agreement
On June 29, 2020, the Company entered into
a “Go-To-Market” distribution agreement with Mr. Checkout Distributors (“Mr. Checkout”), a marketing and
consulting company located in Oviedo, Florida. The Mr. Checkout agreement enables the Company to launch its flagship brand
Tauri-Gum™ through Mr. Checkout’s network of independent direct store distributors that service approximately 150,000
stores and retail locations across the United States. These stores include well-known convenience stores, gas station marts and
supermarket chains. Under the terms of this agreement, on July 7, 2020, the Company paid a one-time $5,000 retainer
on commission against the first $100,000 in sales. Subsequent commissions shall be paid to Mr. Checkout during the first thirty
(30) days of the subsequent quarter once retainer has been met and exceeded. Commission will not be paid until the retainer has
been met. As of September 30, 2020, the Company has recognized no sales via this agreement.
Think
BIG, LLC License Agreement
On September 24, 2020, we entered into
(i) a License Agreement (“License”) with Think BIG, LLC, a Los Angeles based company (“Think BIG”), (ii)
a Professional Services Agreement (the “PSA”) with Willie C. Mack, Jr., CEO of Think BIG and (iii) a Professional
Services Agreement (“PSA 2”) with Christopher J. Wallace, a co-founder of Think BIG (each of Willie C. Mack, Jr. and
Christopher J. Wallace referred to herein as a “Brand Ambassador”), with the collective intent to enhance sales and
marketing of the Company’s product lines, including its proprietary Rainbow Deluxe Sampler Pack (“Rainbow Pack”),
and any co-branded products created by the parties to the License and each of the PSAs (the “Co-Branded Products”).
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
DISTRIBUTION
OF THE COMPANY’S PRODUCTS (CONTINUED)
Think
BIG, LLC License Agreement (Continued)
The term of this license is for a period
of two years from September 24, 2020 (the “Effective Date”), unless earlier terminated by either party pursuant to
the terms thereunder. The term of each of the PSA and the PSA 2 shall commence on the Effective Date and end on the earlier of
(i) the two-year anniversary thereof; (ii) the termination for any reason of the License; or (iii) the earlier termination of
the PSA Agreement pursuant to the terms thereunder.
The licensing arrangement permits for cross
licensing, brand building, e-commerce customer acquisition efforts, retail customer acquisition efforts, enhanced social media
presence, public relations & visibility strategies, as well as potential outreach to celebrities, and various other types
of in-kind services in order to increase both Company revenue and customer acquisition efforts. The License will also allow for
future joint development projects that will leverage the iconic “Frank White” brand and likeness/intellectual property
(to which Think Big has the intellectual property rights). Under the terms of the License, the Company shall pay to Think BIG
a royalty of 12% in year one and 13% in year two of the License, based on net sales, payable on or before the 15th day of each
calendar month for the immediately preceding calendar month. In addition, the Company shall pay to Think BIG, a quarterly marketing
fee for a period of twelve months in the amount $15,000 per quarter (for an aggregate total of $60,000), the first payment of
which was paid by the Company within 10 days of the entry into the License, with the remaining payments to be made
on or about each 90th day thereafter during the term of the License until the aggregate total has been reached.
Under each of the PSA and the PSA 2, each Brand
Ambassador shall provide promotional and marketing services (“Services”) to the Company during the term of the respective
PSAs, subject to the terms and conditions set forth therein, in connection with the Co-Branded Products and any co-developed products;
and perform their individual marketing and promotional services set forth under the PSA and the PSA 2, respectively, and each of
the exhibits annexed thereto.
As
consideration for each Brand Ambassador’s Services set forth under their respective PSAs, the Company agrees to issue each
Brand Ambassador 1,500,000 restricted shares of the Company’s common stock, which will be issued as compensation upon execution
of the PSA and PSA 2. In the event that the applicable PSA has not previously been terminated, following the one-year anniversary
of the Effective Date, an additional 1,500,000 restricted shares of Company’s common stock shall be issued to each Brand
Ambassador, subject to the satisfaction of the terms of such additional services and/or criteria to be mutually agreed upon by
the parties to the PSA and/or the PSA 2, as the case may be. As of the date of this report, these shares were not issued by the
Company. These shares had a value of $91,800 and the cost will be recognized over the term of the contract.
REGULATORY
MATTERS
Food
and Drug Administration
On
May 31, 2019, the U. S. Food and Drug Administration (“FDA”) held public hearings to obtain scientific data and information
about the safety, manufacturing, product quality, marketing, labeling, and sale of products containing cannabis or cannabis-derived
compounds, including CBD. The hearing came approximately five months after the Agricultural Improvement Act of 2018 (more commonly
known as the Farm Bill), went into effect and removed industrial hemp from the Schedule I prohibition under the Controlled Substances
Act (CSA) (industrial hemp means cannabis plants and derivatives that contain no more than 0.3 percent tetrahydrocannabinol, or
THC, on a dry weight basis).
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
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. There have been legislative efforts at the federal level, which seek to
provide clear guidance to industry stakeholders regarding how to comply with applicable FDA law with respect to CBD and other
hemp derived cannabinoids. However, such legislative efforts have been limited and as of this date, these legislative efforts
require extensive further approvals, including approval from both houses of Congress and the President of the United States, before
being enacted into law, if at all.
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.
New York State Department of Health
On October 27, 2020, the New York State
Department of Health (NYDPH) released its proposed regulations concerning the processing and retail sale of hemp derived cannabinoids.
Under the regulations, “cannabinoid” is broadly defined as “any phytocannabinoid found in hemp, including but
not limited to, Tetrahydrocannabinol (THC), tetrahydrocannabinolic acid (THCA), cannabidiol (CBD), cannabidiolic acid (CBDA),
cannabinol (CBN), cannabigerol (CBG), cannabichromene (CBC), cannabicyclol (CBL), cannabivarin (CBV), tetrahydrocannabivarin (THCV),
cannabidivarin (CBDV), cannabichromevarin (CBCV), cannabigerovarin (CBGV), cannabigerol monomethyl ether (CBGM), cannabielsoin
(CBE), cannabicitran (CBT). Cannabinoids do not include synthetic cannabinoids as that term is defined [under New York law].”
These regulations go into effect on January
1, 2021, and once in effect, all “cannabinoid hemp processors” and “cannabinoid hemp retailers” operating
within the state of New York must be licensed by the NYDPH. The regulations expressly allow for food and beverages to contain
“cannabinoids”, so long as such products meet certain requirements.
The product requirements include but are
not limited to: the product must not contain more than 0.3% total Δ9- Tetrahydrocannabinol concentration; the product must
not contain tobacco or alcohol; the product must not be in the form of an injectable, transdermal patch, inhaler, suppository,
flower product including cigarette, cigar or pre-roll, or any other disallowed form as determined by the NYDPH; if the product
is sold as a food or beverage product, it must not have more than 25mg of cannabinoids per product; and, if sold as an inhalable
cannabinoid hemp product, the product will be subject to a number of additional safety measures.
Furthermore, all cannabinoid products sold
at retail are subject to a series of labeling requirements. All such products must be labeled with the amount of cannabinoids
in the product and the amount of milligrams per serving. If the product contains THC, the amount of THC in the product needs to
be stated on the label in milligrams on a per serving and per package basis. In addition, all products are required to have a
scannable bar code or QR code which links to a certificate of analysis and the packaging is prohibited from being attractive to
consumers under 18 years of age. Products are also required to list appropriate warnings for consumer awareness. The Company’s
entire product line will comply with the above standards.
See our Risk Factors and going concern
opinion in our annual report for the year ended March 31, 2020 as filed with the Securities and Exchange Commission on June 29,
2020 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
Certified by Wal-Mart, Inc. to become a
Domestic Supplier
On December 23, 2019, the Company announced
that is has been certified by Wal-Mart, Inc. (“Walmart”) to become a Domestic Supplier. This certification from Walmart
was obtained by the Company on December 19, 2019. On May 26, 2020, we also announced that our Walmart Marketplace Seller Application
had been officially approved. In joining Walmart Marketplace, the Company has the opportunity to expand the presence of its products
and product lines, with access to over a hundred million monthly customers. The Company is also approved to both list products
on Walmart.com and sell directly to Walmart buyers. As of September 30, 2020, the Company has not recognized any sales through
this channel.
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 has a
relationship with a fulfillment facility in mainland China and is focusing on meeting buyers and virtual Alibaba Tradeshows. As
of September 30, 2020, the Company has not recognized any sales through this channel.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
OTHER
BUSINESS ITEMS
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.
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 Global, LLC (“Tangiers”), as well as a registration right agreement related thereto (“Registration
Rights Agreement”). The term of the financing is over a period of 36 months. Pursuant to the Registration Rights Agreement,
a maximum of 76,000,000 shares of our Common Stock may be sold to Tangiers from time to time, which have been registered on our
Form S-1 Registration Statement, which was declared effective by the Securities and Exchange Commission on March 16, 2020.
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. As of March 31, 2020, the Company had exercised no put options under the Investment
Agreement. As of September 30, 2020, we have issued 12,750,000 shares of Common Stock in exchange for an aggregate of $369,482.
Whole Foods Market, Inc. Registration
On June 8, 2020, the Company, announced that
it is now a Registered Whole Foods Market, Inc. (“Whole Foods”) Vendor (“Supplier”). The Company’s
information has now been updated in the Whole Foods Vendor Reporting Portal. As of September 30, 2020, the Company has not
recognized any sales through this channel.
Federal Award Management Registration
On October 6, 2020, the Company announced that
it was officially approved to operate as a U.S. Government Vendor. The Company has retained Federal Award Management Registration
(“FAMR”) to commence the bidding process on several identified potential U.S. Government Contracts (“Contracts”).
These potential Contracts are presented by the Department of Defense (“DOD”). FAMR is an independent consulting firm
that specializes in: Registrations, Certifications, and Federal Contracting. The Company’s Commercial & Government Entity
(“CAGE”) Code # is: 8QXV4 with an expiration date of October 1, 2021.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
OTHER
BUSINESS ITEMS (CONTINUED)
KushCo
Holdings, Inc.
Effective
July 10, 2020, the Company and KushCo Holdings, Inc., a Nevada corporation (“KushCo”), entered into a Product Placement
Membership Agreement (the “Placement Agreement”). Under the terms of the Placement Agreement, KushCo will provide
placement services of the Company’s Tauri-Gum™ product line(s), and will assist with retail activation, product incubation,
branding and marketing solutions, and sales management services. As compensation for providing such services and placement of
the Company’s products, when KushCo or one of its affiliates consummates a purchase, distribution or sale of products (either
directly or through third parties), KushCo will be paid a fee equal to 10% of the total gross sales for such transaction(s) (the
“Placement Fee”). The Placement Fee shall be earned as of the date of the respective transaction and shall be paid
in cash by the Company on a monthly basis and no later than the last calendar day of each calendar month. The Placement Agreement
has a term of two (2) years, unless earlier terminated upon sixty (60) days notice to the Company, as provided under the KushCo
Agreement.
HISTORICAL
BUSINESS ITEMS
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 debt 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 debt conversion agreement,
the Company deemed the investment to have no current value.
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 has 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. 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. As of September 30, 2020, we have not installed any of these machines in any locations,
and no revenue has been generated through the Blink contract. The Company has decided to abandon this business line, and therefore,
we have reclassified these assets as held for sale.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
Going
Concern
During
the fourth quarter of the year ended March 31, 2019, the Company began sales and marketing efforts for its Mint flavored Tauri-GumTM
product. During the six months ended September 30, 2020, the Company recognized sales of $140,164 and a gross profit of
$14,151, compared to sales of $44,377 and a gross profit of $14,959 for the same period during the same period in the prior year.
During the year ended March 31, 2020, the Company has entered into multiple distribution agreements, was approved and provisioned
to sell to many large retailers and ecommerce platforms. At September 30, 2020, the Company had a working capital surplus of $53,387
compared to a working capital deficit of $334,832 for the year ended March 31, 2020. The improvement is largely resultant from
increased inventory levels, investment in Aegea and an increase in value of trading securities. Although the Company has a working
capital surplus, there is no guarantee that this will continue therefore it still believes that there is uncertainty with respect
to continuing as a going concern.
On
July 1, 2019, months after the NYC Department of Heath announced a ban on cannabidiol in foods and beverages (mainly focused on
restaurants and baked goods), the 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 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. Subsequent to the balance sheet date, the State of New York has determined that it is allowable to sell CBD Infused
Edible products in the forms of both food and drink (inclusive of chewing gum). It was also determined that no time can CBD be
sold in products that contain either alcohol or tobacco. Additionally, the State of New York also said that NO CBD product may
be sold if it contains more than 0.3% (1/333rd by Composition) THC. No Individual food or beverage product may contain more than
25mg of Hemp-Extracted Cannabinoids (“CBD” or “CBG”) per serving. Food and drink infused with CBD and
Other Hemp Extracts must be packaged by the manufacturer and extracts cannot be added at the retail level. The Company’s
entire product line will comply with these standards.
The
Company, in the short term, intends to continue funding its operations either through cash-on-hand or through financing alternatives.
Management’s plans with respect to this include raising capital through equity markets as well as through its equity line
with Tangiers to fund future operations as well as the possible sale of its remaining marketable securities which had a market
value of $160,310 at September 30, 2020. In the event the Company cannot raise additional capital to fund and/or expand operations
or fails to raise adequate capital and generate adequate sales revenue, or if the regulatory landscape were to become more difficult
or result in regulatory enforcement, it could result in the Company having to curtail or cease operations.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
1 – BASIS OF OPERATIONS (CONTINUED)
Going
Concern (Continued)
Additionally,
even if the Company does raise sufficient capital to support its operating expenses and generate adequate revenues in the short
term, there can be no assurances that the revenues will be sufficient to enable it to develop business to a level where it will
generate profits and cash flows from operations to achieve profitability thereby eliminating its reliance on alternative sources
of funding. Although management believes that the Company continues to strengthen its financial position over time, there is still
no guarantee that profitable operations with sufficient cashflow to sustain operations can or will be achieved without the need
of alternative financing, which is limited. These matters still raise significant doubt about the Company’s ability to continue
as a going concern as determined by management. The Company believes that there is uncertainty with respect to continuing as a
going concern until the operating business can achieve sufficient sales to maintain profitable operations and sustain cash flow
to operate the Company for a period of twelve months. In the event the Company does need to raise additional capital to fund operations
or engage in a transaction, failure to raise adequate capital and generate adequate sales revenues could result in the Company
having to curtail or cease operations.
Even
if the Company does raise sufficient capital to support its operating expenses, acquire new license agreements or ownership interests
in life science companies and generate adequate revenues, or the agreements entered into recently are successful, there can be
no assurances that the revenues will be sufficient to enable it to develop business to a level where it will generate profits
and cash flows from operations. These matters raise substantial doubt about the Company’s ability to continue as a going
concern as determined by management. However, the accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
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, 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 $.00001
per share that we may sell to Tangiers from time to time will be registered by us on Form S-1 with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, for this financing. As a result of the Company’s Collaboration
Agreement with Aegea, whereby seventy percent (70%) of the Net Proceeds from the sale of the initial 10,000,000 shares of stock
of Tauriga using the ELOC were transferred to and invested in Aegea for the purchase of common stock of Aegea, and forty percent
(40%) as amended August 10, 2020 of all subsequent Net Proceeds, this arrangement will provide less capital to ongoing operations.
Additionally, the Company has excluded 4,000,000 shares under this agreement to cover liabilities and expenses related to the
establishment and maintenance of this agreement. (See earlier in this Note for a more complete description under Investment Agreement
and Registration Rights Agreement). As of September 30, 2020, the Company has issued 2,750,000 of the excluded 4,000,000 shares.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Condensed
Consolidated Financial Statements
These
condensed consolidated financial statements include the accounts and activities of Tauriga Sciences, Inc., its wholly-owned Canadian
subsidiary, its wholly-owned subsidiary Tauriga Pharma Corp. (f/k/a Tauriga Biz Dev Corp – or “Tauriga BDC”
and referenced herein as Tauriga BDC for contextual purposes only in describing the Blink contractual arrangement) and Tauriga
Sciences Limited. All intercompany transactions have been eliminated in consolidation. As of September 30, 2020, there is no activity
in any of the Company’s subsidiaries other than Tauriga Pharma Corp. holding the electric car chargers and the leasehold
interest in Tauriga Sciences Limited.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
Segment
Information
The
Company is planning to adopt provisions of ASC 280-10 Segment Reporting, subsequent to this report date. This standard
requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making
internal operating decisions. The Company and its Chief Operating Decision Makers determined that the Company’s operations
effective with the April 3, 2020, Collaboration Agreement with Aegea now consist of two segments, its CBD/CBD edibles business
and SARS-Col 2 Test business. The Company will operate in two operating divisions. The first division consists of all retail,
wholesale and e-commerce product sales of CBD/CBG Tauri-GumTM, Tauri-GummiesTM, and other gummy products.
The second segment will be a research and development division that consist of liabilities and results from its collaboration
agreement with Aegea and any activity relative to the progress in the development of the Company’s proposed pharmaceutical
grade version of Tauri-Gum™. The current cost basis investment in Aegea will be treated as a non-operating asset and will
therefore not be reported as a part of the research and development division. During the six months ended September 30, 2020 and
2019, all operating revenue and expenses fall under the Gum and Gummies division. All assets and liabilities are included in the
Gum and Gummies division except for $5,000 of prepaid legal expense related to a payment to get cleared (“IND” for
its Pharma Grade Version) with the FDA for Phase II Trial.
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. 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 September 30, 2020, we have not installed
any of these machines in any locations, and no revenue has been generated through the Blink contract. The Company has decided
to abandon this business line, and therefore, we have reclassified these assets as held for sale.
The
Company recognizes revenue upon the satisfaction of the performance obligation. The Company considers the performance obligation
met upon shipment of the product or delivery of the product. For ecommerce orders, the Company’s products are shipped by
a fulfillment company and payment is made in advance of shipment either through credit card or PayPal. The Company also delivers
the product to its customers that they market to in the metropolitan New York Tri-State area that are not covered under any existing
distribution agreements. The Company generally collects payment within 30 to 60 days of completion of its performance obligation,
and the Company has no agency relationships. The Company recognized revenue from operations in the amount of $140,164 during the
six months ended September 30, 2020 compared to $44,377 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, net of allowance for doubtful accounts
in the amount of $29,351 outstanding for these sales, as of September 30, 2020.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 September 30, 2020, the Company has established
an allowance for doubtful accounts in the amount of $93,550.
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 September 30, 2020 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 September 30, 2020, the Company’s cash on deposit with financial institutions did not exceed the total
FDIC insurance limit of $250,000. At September 30, 2020 and March 31, 2020, the Company had a cash balance of $2,155 and
$5,348, respectively. The Company’s does not expect, in the near term, for its cash balance to exceed the total FDIC insurance
limit of $250,000 for other than very short periods of time where the Company would use such cash in excess of insurance in the
very short-term in operating activities. To reduce its risk associated with the failure of such financial institution, the Company
holds its cash deposits in more than one financial institution and evaluates at least annually the rating of the financial institution
in which it holds its deposits. The Company had no cash equivalents as of September 30, 2020 and March 31, 2020.
Investment
in Trading Securities
Investment
in trading securities consist of investments in shares of common stock of companies traded on public markets as well as publicly
traded warrants of these companies should there be a market for them. These securities are carried on the Company’s balance
sheet at fair value based on the closing price of the shares owned on the last trading day before the balance sheet date of this
report. Fluctuations in the underlying bid price of the stocks result in unrealized gains or losses. The Company recognizes these
fluctuations in value as other income or loss.
For
investments sold, the Company recognizes the gains and losses attributable to these investments as realized gains or losses in
other income or loss.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 September 30, 2020 and March 31,
2020, 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 e-commerce sales is paid by the customer upon
ordering for orders of single packs of Tauri-GumTM. For multiple pack or wholesale product orders shipping cost is
paid by the Company. As of September 30, 2020, the Company’s inventory on hand had a value of $253,800. The Company has
not established any inventory reserve on the Tauri-GumTM as of September 30, 2020.
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 six months ended September 30, 2020 and 2019,
basic and fully diluted earnings per share were the same as the Company had losses in this period.
Stock-Based
Compensation
The
Company accounts for Stock-Based Compensation under ASC 718 “Compensation-Stock Compensation,” which addresses
the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus
on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 requires measurement
of cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the
award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant
date must be recognized.
The
Company accounts for stock-based compensation awards to non-employees in accordance with ASC 505-50, “Equity-Based Payments
to Non-Employees.” Under ASC 505-50, the Company determines the fair value of the warrants or stock-based compensation
awards granted on the grant date as either the fair value of the consideration received, or the fair value of the equity instruments
issued, whichever is more reliably measurable. Any stock options or warrants issued to non-employees are recorded in expense and
an offset to additional paid-in capital in stockholders’ equity over the applicable service periods using variable accounting
through the vesting dates based on the fair value of the options or warrants at the end of each period.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The
Company issues stock to consultants for various services. The costs for these transactions are measured at the fair value on the
grant date of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.
The Company recognized consulting expense and a corresponding increase to additional paid-in-capital related to stock issued for
services over the term of the related services.
Impairment
of Long-Lived Assets
Long-lived
assets, primarily fixed assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of the assets might not be recoverable. The Company will perform a periodic assessment of assets for impairment in the
absence of such information or indicators. Conditions that would necessitate an impairment assessment include a significant decline
in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or a significant
adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. For long-lived
assets to be held and used, the Company would recognize an impairment loss only if it’s carrying amount is not recoverable
through its undiscounted cash flows and measures the impairment loss based on the difference between the carrying amount and estimated
fair value.
Research
and Development
The
Company expenses research and development costs as incurred. Research and development costs were $27,305 and $3,852 for the six
months ended September 30, 2020 and 2019, respectively. The Company is continually evaluating products and technologies in the
natural wellness space, including its Tauri-Gum™ 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.
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.
Fair
Value Measurements
ASC
820 “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally
accepted accounting principles and expands disclosure about fair value measurements.
The
following provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped
into Levels 1 to 3 based on the degree to which fair value is observable:
Level
1- fair value measurements are those derived from quoted prices (unadjusted in active markets for identical assets or liabilities);
Level
2- fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level
3- fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are
not based on observable market data (unobservable inputs).
Financial
instruments classified as Level 1 – quoted prices in active markets include cash.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair
Value Measurements (Continued)
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 or 20 day trailing period based on the market volume average weighted price. ASC 470-20 defines this
as a beneficial conversion feature which that shall be recognized separately at issuance by allocating a portion of the proceeds
equal to the intrinsic value, not to exceed the face value of the note, to additional paid in capital. This segmented value, is
to be amortized using the effective interest method over the term of the note.
Income
Taxes
Income
taxes are accounted for under the liability method of accounting for income taxes. Under the liability method, future tax liabilities
and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in
the financial statement carrying amounts of assets and liabilities and their respective tax bases.
Future
tax assets and liabilities are measured using enacted or substantially enacted income tax rates expected to apply when the asset
is realized, or the liability settled. The effect of a change in income tax rates on future income tax liabilities and assets
is recognized in income in the period that the change occurs. Future income tax assets are recognized to the extent that they
are considered more likely than not to be realized.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income
Taxes (Continued)
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 September 30, 2020.
Recent
Accounting Pronouncements
In August 2020, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt with Conversion
and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting
for Convertible Instruments and Contract’s in an Entity’s Own Equity. The ASU simplifies accounting for convertible
instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will
be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain
settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit
more equity contracts to qualify for it. The ASU simplifies the diluted net income per share calculation in certain areas. The
ASU is effective for annual and interim periods beginning after December 31, 2021, and early adoption is permitted for fiscal
years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the
impact that this new guidance will have on its consolidated financial statements.
In
June 2018, the FASB issued ASU No. 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee
Share-Based Payment Accounting” which addresses accounting for issuance of all share-based payments on the same accounting
model. Previously, accounting for share-based payments to employees was covered by ASC Topic 718 while accounting for such payments
to non-employees was covered by ASC Subtopic 505-50. As it considered recently issued updates to ASC 718, the FASB, as part of
its simplification initiatives, decided to replace ASC Subtopic 505-50 with Topic 718 as the guidance for non-employee share based
awards. Under this new guidance, both sets of awards, for employees and non-employees, will essentially follow the same model,
with small variations related to determining the term assumption when valuing a non-employee award as well as a different expense
attribution model for non-employee awards as opposed to employee awards. The ASU is effective for public business entities beginning
in 2019 calendar years and one year later for non-public business entities. The Company has determined that there is not a material
impact on their 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 SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
3 - REVENUE
The
Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which the Company
adopted simultaneous with the commencement of sales in March 2019. No cumulative adjustment to accumulated deficit was done, and
the adoption did not have an impact on our condensed consolidated financial statements, as no material arrangements prior to the
adoption were impacted by the new pronouncement.
The
following table disaggregates the Company’s revenue by major source for the six months ended September 30:
|
|
2020
|
|
|
2019
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Distributor
|
|
$
|
-
|
|
|
$
|
15,592
|
|
E-Commerce
|
|
|
96,489
|
|
|
|
3,796
|
|
Wholesale
|
|
|
43,675
|
|
|
|
94,712
|
|
|
|
$
|
140,164
|
|
|
$
|
114,100
|
|
Revenues
in the six months ended September 30, 2020 from largely from its E-Commerce channel. As of September 30, 2020, the Company’s
established allowance for doubtful account collectability in the amount of $93,550 was wholly attributable to the Wholesale channel.
There were no significant contract asset or contract liability balances for all periods presented. The Company does not disclose
the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii)
contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.
Collections
of the amounts billed are typically paid by the customers within 30 to 60 days.
NOTE
4– INVENTORY
Inventory
from continuing operations
Inventory
value by product as of:
|
|
September
30, 2020
|
|
|
March
31,
2020
|
|
|
|
(Unaudited)
|
|
|
|
|
CBD/CBG
Tauri-GumTM
|
|
$
|
243,844
|
|
|
$
|
120,480
|
|
Tauri-GummiesTM
|
|
|
8,217
|
|
|
|
4,029
|
|
Other
Gummies (1)
|
|
|
-
|
|
|
|
2,425
|
|
Other
(2)
|
|
|
1,739
|
|
|
|
1,776
|
|
Total
Inventory
|
|
$
|
253,800
|
|
|
$
|
128,710
|
|
|
(1)
|
This
segment of inventory is stock that was purchased in conjunction with Resale Agreement with OG Laboratories, LLC.
|
|
|
|
|
(2)
|
Other
inventory consists of holiday pouches sold as a bundled of Tauri-GumTM
|
At
September 30, 2020, there were no deposits to Per Os Bio for the manufacturing costs of Tauri-GumTM.
At
March 31, 2020, the Company had deposits to Per Os Bio in the amount of $96,688 for the manufacturing costs of Tauri-GumTM
for goods not yet available for sale.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
5– PROPERTY AND EQUIPMENT
The
Company’s property and equipment is as follows:
|
|
September
30, 2020
|
|
|
March
31, 2020
|
|
|
Estimated
Life
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Computers,
office furniture and other equipment
|
|
$
|
58,554
|
|
|
$
|
69,638
|
|
|
3-5
years
|
Less:
accumulated depreciation
|
|
|
(56,595
|
)
|
|
|
(56,160
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
1,959
|
|
|
|
13,478
|
|
|
|
On
June 29, 2018, the Company purchased four Blink Level 2 – 40” pedestal chargers for permanent placement in one or
more retail locations whereby the Company would share revenue from these electric car vehicle charging units with such location
owner. No depreciation expense has been recorded for the charging units as of September 30, 2020 due to the fact that they have
not been placed in service. As of April 1, 2020, these charging units were reclassified as assets held for resale.
Depreciation
expense for the three and six months ended September 30, 2020 was $218 and $435 and $232 and $464 for the same periods in the
prior year.
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 six months ended
September 30, 2020 and 2019, the Company recorded a lease expense of $3,453 and $2,810. 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 September 30, 2020, the value of this unamortized lease right of use asset is $13,512. As of September 30, 2020, the Company’s
lease liability associated with this lease was $10,987.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
6 – OPERATING LEASE (CONTINUED)
Barcelona
office
On
June 11, 2019, the Company entered into a two-year lease, expiring on September 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 September 30, 2020, the value of this unamortized lease right of use asset is $1,671. As of September 30, 2020, the Company’s
lease liability was $1,671.
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 six months ended September 30, 2020 the Company recorded a lease expense of $6,999. As of September
30, 2020, the value of the unamortized lease right of use asset is $15,184. As of September 30, 2020, the Company’s lease
liability was $19,464.
Maturity
of Operating Lease Liability for fiscal year ended March 31,
|
|
|
2021
|
|
$
|
10,531
|
|
2022
|
|
$
|
8,933
|
|
|
|
|
|
|
Total
lease payments
|
|
$
|
19,464
|
|
The
following chart shows the Company’s operating lease cost for the six months ended September 30, 2020 and 2019:
|
|
For
the three months ended September 30,
|
|
|
For
the six months ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Amortization
of right of lease asset
|
|
$
|
3,082
|
|
|
$
|
3,396
|
|
|
$
|
6,999
|
|
|
$
|
6,323
|
|
Lease
interest cost
|
|
|
376
|
|
|
|
326
|
|
|
|
1,057
|
|
|
|
851
|
|
Total
Lease cost
|
|
$
|
3,458
|
|
|
$
|
3,722
|
|
|
$
|
8,056
|
|
|
$
|
7,174
|
|
The
following chart shows the Company’s operating lease liability at September 30, 2020.
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
|
|
|
1,206
|
|
Less
of lease payments made
|
|
|
(34,255
|
)
|
Cumulative
effect of adoption of ASC 842
|
|
|
(430
|
)
|
Operating
lease liability at September 30, 2020
|
|
|
19,464
|
|
Less
Lease Liability current portion
|
|
|
(17,334
|
)
|
Lease
Liability - net current portion at September 30, 2020
|
|
$
|
2,130
|
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE
Notes
payable and convertible notes consisted of the following as of:
|
|
|
|
|
September
30, 2020
|
|
|
March
31,
2020
|
|
GS
Capital Partners LLC – Mar 2019
|
|
|
(a)
|
|
|
|
-
|
|
|
|
175,000
|
|
GS
Capital Partners LLC – Jun 2019
|
|
|
(b)
|
|
|
|
-
|
|
|
|
60,000
|
|
Odyssey
Funding, LLC – Sep 2019
|
|
|
(c)
|
|
|
|
-
|
|
|
|
80,000
|
|
BHP
Capital NY Inc. – Oct 2019
|
|
|
(d)
|
|
|
|
-
|
|
|
|
55,000
|
|
Tangier’s
Global, LLC – Nov 2019
|
|
|
(e)
|
|
|
|
87,500
|
|
|
|
137,500
|
|
Odyssey
Funding, LLC – Dec 2019
|
|
|
(f)
|
|
|
|
-
|
|
|
|
100,000
|
|
Jefferson
Street Capital LLC – Dec 2019
|
|
|
(g)
|
|
|
|
-
|
|
|
|
55,000
|
|
BHP
Capital NY Inc. – Jan 2020
|
|
|
(h)
|
|
|
|
-
|
|
|
|
44,000
|
|
ADAR
Alef, LLC – Jan 2020
|
|
|
(i)
|
|
|
|
-
|
|
|
|
44,000
|
|
GS
Capital LLC – Jan 2020
|
|
|
(j)
|
|
|
|
-
|
|
|
|
110,000
|
|
Tangier’s
Global, LLC – Feb 2020
|
|
|
(k)
|
|
|
|
65,000
|
|
|
|
65,000
|
|
Crown
Bridge Partners, LLC – Feb 2020
|
|
|
(l)
|
|
|
|
46,458
|
|
|
|
55,000
|
|
ADAR
Alef, LLC – Mar 2020
|
|
|
(m)
|
|
|
|
22,000
|
|
|
|
44,000
|
|
Tangier’s
Global, LLC – Mar 2020
|
|
|
(n)
|
|
|
|
43,050
|
|
|
|
43,050
|
|
GS
Capital Partners, LLC – Apr 2020
|
|
|
(o)
|
|
|
|
55,000
|
|
|
|
-
|
|
ADAR
Alef, LLC – Apr – 2020
|
|
|
(p)
|
|
|
|
44,000
|
|
|
|
-
|
|
Tangier’s
Global, LLC – May 2020
|
|
|
(q)
|
|
|
|
102,500
|
|
|
|
-
|
|
First
Fire Investments – May 2020
|
|
|
(r)
|
|
|
|
88,333
|
|
|
|
-
|
|
GS
Capital LLC – Jun 2020
|
|
|
(s)
|
|
|
|
33,000
|
|
|
|
-
|
|
Tangier’s
Global, LLC – Jun 2020
|
|
|
(t)
|
|
|
|
210,000
|
|
|
|
-
|
|
Total
notes payable and convertible notes
|
|
|
|
|
|
$
|
796,841
|
|
|
$
|
1,067,550
|
|
Less
– note discounts
|
|
|
|
|
|
|
(157,057
|
)
|
|
|
(482,416
|
)
|
Less
– current portion of these notes
|
|
|
|
|
|
|
(639,784
|
)
|
|
|
(585,134
|
)
|
Total
notes payable and convertible notes, net discounts
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
(a)
|
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 was 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. 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.
As of September 30, 2020, the noteholder fully converted the $300,000 of principal and $26,009 of accrued interest into 14,473,254
shares of the Company’s common stock ($0.0225 per share). Upon conversion, the balance of the share reserve was returned
to treasury.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
(b)
|
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 had 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 was 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.
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 maintain a 2.5 times reserve for the amount then outstanding. On June 3, 2020, the noteholder converted
the entire $60,000 of principal and $4,937 of accrued interest into 3,162,115 shares of common stock ($0.0205 per share) and
the balance of the reserved shares were returned to the treasury.
|
(c)
|
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 holder was 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. 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. As of September 30, 2020, the full principal of $100,000 and accrued interest in the amount of $4,443 of accrued
interest as well as $500 in fees were converted into 5,543,332 shares of common stock ($0.0188 per share). Upon conversion,
all shares remaining in the Share Reserve were cancelled and returned to the treasury.
|
(d)
|
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
had 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 was 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 was entitled to deduct $500 from the conversion amount
in each Notice of Conversion to cover Holder’s deposit fees associated with each Notice of Conversion. The Borrower
was 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. 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 September 30, 2020, the noteholder converted the full principal of $55,000, accrued interest in the amount
of $2,795 as well as $500 in fees into 3,060,931shares of common stock ($0.0191 per share). Upon conversion, all shares remaining
in the Share Reserve were cancelled and returned to the treasury.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
(e)
|
On
November 7, 2019, the Company effectuated a nine-month convertible promissory note with Tangiers Global, LLC (the “Tangiers
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%, guaranteed. 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
Tangiers 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 Tangiers 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 Tangiers 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 Tangiers 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 $2,000
per day, until such certificate or certificates are delivered.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
(e)
|
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 Tangiers 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, which
Share Reserve has since been reduced as a result of conversions and other transactions between the parties. 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. 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 20% per annum or the maximum rate permitted under applicable law. Finally, 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. As of September 30, 2020, Tangiers converted $50,000 of note principal
under this note. Interest on this note was guaranteed and prorated over the term of the note. Accrued interest in the amount
of $13,750 has been recognized on this note as of September 30, 2020. Subsequent to September 30, 2020, the noteholder converted
an additional $25,000 note principal for 1,275,380 shares ($0.019602) per share.
|
|
|
(f)
|
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 was 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. 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. As of September 30, 2020, the Company fully paid and retired this note including accrued interest $4,252
and a prepayment penalty in the amount of $45,748. The full share reserve was released upon satisfaction of the note and returned
to treasury.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
(g)
|
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 had 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 was 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. In connection with the Jefferson Street
Note, the Company was 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, initially reserved at 20,000,000 common shares (the
“Share Reserve”) of its Common Stock for conversions under this Jefferson Street Note. Upon full conversion of
this note, remaining in the Share Reserve were cancelled. At September 30, 2020, the noteholder converted the full principal
of $55,000 plus accrued interest of $2,750 and $1,000 in fees for 3,095,362 shares of common stock ($0.01898 per share).
|
|
|
(h)
|
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). Subsequent to this note funding, BHP exercised a most favored nations clause increasing this notes
interest rate to 8%, based on subsequent notes issued by the Company. 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. 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. As of September
30, 2020, the noteholder fully converted the full principal of $44,000 plus accrued interest of $2,290 and $1,000 fees for
3,095,362 common shares ($0.01512 per shares). Upon full conversion of this note, any shares remaining in the Share Reserve
were cancelled.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
(i)
|
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. The Company established 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. As of September 30, 2020, the noteholder
converted the full principal of $44,000 plus accrued interest of $2,750 and $1,000 in fees for 3,095,362 shares of common
stock ($0.01898 per share). The full share reserve was released upon satisfaction of the note and returned to treasury.
|
(j)
|
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. 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).
As of September 30, 2020, the noteholder converted the full principal of $110,000 plus accrued interest of $4,388 for 6,045,769
shares of common stock ($0.01898 per share).
|
|
|
(k)
|
On
February 7, 2020, the Company effectuated a six-month convertible promissory note with Tangiers Global, LLC (the “Tangiers
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%, guaranteed. This note has a fixed
conversion price of $0.03 per share. The Company may redeem the note by paying to the note holder Investor an amount as follows:
(i) if the redemption is within the first 30 days of the issuance date, then for an amount equal to 110% of the unpaid principal
amount of this Note along with any interest that has accrued during that period, (ii) if the redemption is after the 31st
day, but by the 60th day of the issuance date, then for an amount equal to 115%, (iii) if the redemption
is after the 61st day, but by the 90th day of the issuance date, then for an amount equal to 120%, (iv)
if the redemption is after the 91st day, but by the 180th day of the issuance date, then for an amount equal to
133%. The Company has established an initial reserve of 7,000,000 shares of its common stock and has agreed to reserve
a multiple of shares to fully convert under the terms of this note.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
(k)
|
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; (v) 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. Accrued
interest in the amount of $1,300 has been recognized on this note as of September 30, 2020.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
(l)
|
Effective
February 11, 2020 the Company entered into a one-year 10% convertible promissory note with Crown Bridge Partners, LLC (“Crown”),
having a face value of $55,000. The Company received funds in the amount of $50,000 on February 23, 2020, after reduction
of the Original Issue Discount of $5,000. The $55,000 face value note matures on February 11, 2021. Any amount of principal
or interest on this Note, which is not paid by the Maturity Date, shall bear interest at the rate of the lesser of (i) fifteen
percent (15%) per annum or (ii) the maximum amount permitted by law from the due date thereof until the same is paid. Crown
shall have the right at any time to convert all or any part of the outstanding and unpaid principal amount and accrued and
unpaid interest of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the
Issue Date, or any shares of capital stock or other securities of the Company into which such Common Stock shall hereafter
be changed or reclassified at the conversion price determined; provided, however, that in no event shall Crown be entitled
to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number
of shares of Common Stock beneficially owned by Crown and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion
of any other security of the Company subject to a limitation on conversion or exercise analogous to the limitations contained
herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect
to which the determination of this proviso is being made, would result in beneficial ownership by Crown and its affiliates
of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), and Regulations 13D-G thereunder. The number of shares of Common Stock to be issued upon
each conversion of this Note shall be determined by dividing the Conversion Amount by the applicable Conversion Price then
in effect on the date specified in the notice of conversion, delivered to the Company or Company’s transfer agent by
Crown. The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal
amount of this Note to be converted in such conversion plus (2) at Crown’s option, accrued and unpaid interest, if any,
on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at Crown’s option,
Default Interest, if any. The Conversion Price shall be the lesser of (i) 65% multiplied by the lowest volume weighted average
price on the OTCQB, or applicable trading market during the previous twenty (20) trading day period ending on the latest complete
trading day prior to the date of this note or (ii) the variable conversion price which shall mean 65% multiplied by lowest
intraday trading price of any market makers for the Common Stock during the twenty (20) trading day period ending on the last
complete trading day prior to the conversion date. In the event that shares of the Company’s Common Stock are not deliverable
via DWAC following the conversion of any amount hereunder, an additional ten percent (10%) discount shall be factored into
the Variable Conversion Price until this Note is no longer outstanding (resulting in a discount rate of 45% assuming no other
adjustments are triggered hereunder). Additionally, if the Company fails to comply with the reporting requirements of the
Exchange Act (including but not limited to becoming late or delinquent in its filings, even if the Company subsequently cures
such delinquency) at any time while after the Issue Date, and/or the Company shall cease to be subject to the reporting requirements
of the Exchange Act, an additional fifteen percent (15%) discount shall be factored into the Variable Conversion Price until
this Note is no longer outstanding (resulting in a discount rate of 50% assuming no other adjustments are triggered hereunder).
Each time, while this Note is outstanding, the Company enters into a Section 3(a)(9) transaction (including but not limited
to the issuance of new promissory notes or of a replacement promissory note), or Section 3(a)(10) transaction, in which any
3rd party has the right to convert monies owed to that 3rd party (or receive shares pursuant to a settlement or otherwise)
at a discount to market greater than the Variable Conversion Price in effect at that time, then the Variable Conversion Price
shall be automatically adjusted to such greater discount percentage until this Note is no longer outstanding. Each time, while
this Note is outstanding, the Company enters into a Section 3(a)(9) transaction (including but not limited to the issuance
of new promissory notes or of a replacement promissory note), or Section 3(a)(10) transaction, in which any 3rd party has
a look back period greater than the look back period in effect under the Note at that time, then Crown’s look back period
shall automatically be adjusted to such greater number of days until this Note is no longer outstanding. The Company shall
give written notice to Crown, with the adjusted Variable Conversion Price and/or adjusted look back period, within one (1)
business day of an event that requires any adjustment described in the two immediately preceding sentences. If at any time
while this Note is outstanding, the Company enters into a transaction structured in accordance with, based upon, or related
or pursuant to, in whole or in part, Section 3(a)(10) of the Securities Act (a “3(a)(10) Transaction”), then a
liquidated damages charge of 25% of the outstanding principal balance of this Note at that time, will be assessed and will
become immediately due and payable to the Crown, either in the form of cash payment or as an addition to the balance of the
Note, as determined by mutual agreement of the Company and Crown.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
(l)
|
Crown
shall be entitled to deduct $1,500 from the conversion amount in each Notice of Conversion to cover Crown’s deposit
fees associated with each Notice of Conversion. If at any time the Conversion Price as determined hereunder for any conversion
would be less than the par value of the Common Stock, then at the sole discretion of Crown, the Conversion Price hereunder
may equal such par value for such conversion and the Conversion Amount for such conversion may be increased to include Additional
Principal, where “Additional Principal” means such additional amount to be added to the Conversion Amount to the
extent necessary to cause the number of conversion shares issuable upon such conversion to equal the same number of conversion
shares as would have been issued had the Conversion Price not been adjusted by Crown to the par value price. The Company covenants
that during the period the conversion right exists, the Company will reserve from its authorized and unissued Common Stock
a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion
of this Note. The Company is required at all times to have authorized and reserved six times the number of shares that is
actually issuable upon full conversion of the Note. If the Company fails to maintain its status as “DTC Eligible”
for any reason, or, if at any time while this Note is outstanding the Conversion Price is equal to or lower than $0.01, then
an additional twenty five percent (25%) discount shall be factored into the Variable Conversion Price until this Note is no
longer outstanding (resulting in a discount rate of 60%, assuming no other adjustments are triggered hereunder). A breach
or default by the Company of any covenant or other term or condition contained in any of the other financial instrument, including
but not limited to all convertible promissory notes, currently issued, or hereafter issued, by the Company, to the Crown or
any other 3rd party, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Crown,
be considered a default under this Note, in which event the Crown shall be entitled to apply all rights and remedies of the
Crown under the terms of this Note by reason of a default under said Other Agreement or hereunder. The Company, on February
24, 2020, issued 250,000 debt commitment shares in conjunction with this note. The commitment shares had a value of $13,500
($0.054 per share). The Company, on August 25, 2020 agreed issue 125,000 additional make-whole shares valued at $4,438 ($0.0355).
As of September 30, 2020, the noteholder converted $8,453 on note principal including $1,500 in interest for 500,000 shares
$0.020085. As of September 30, 2020, this note had accrued interest of $2,872.
|
|
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(m)
|
On
March 17, 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 March 17, 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 for the 20 prior trading days including the day upon which a notice of conversion is received by the Company
or its transfer agent. The Company established an initial reserve of 7,584,500 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. Upon full conversion of this
note, any shares remaining in the Share Reserve were cancelled. As of September 30, 2020, the noteholder converted $22,000
of note principal for 1,106,083 ($ 0.01989 per share). As of September 30, 2020, this note had accrued interest of $1,837.
Subsequent to September 30, 2020, the noteholder fully converted the remaining $22,000 of note principal and $1,937 accrued
interest ($0.0143 per share).
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
(n)
|
On
March 23, 2020, the Company effectuated a six-month convertible promissory note with Tangiers Global, LLC. The Company received
funds in the amount of $41,000 after reduction of the Original Issue Discount of $2,050. The $43,050 face value note matures
on September 23, 2020 and bears an interest rate of 5%, guaranteed. This note has a fixed conversion price of $0.03 per share.
The Company may redeem the note by paying to Tangiers 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%. After 180 days from the
effective date, the Company may not pay this note, in whole or in part without prior written consent by Holder. The Company
covenants that it will at all times reserve and keep available for Tangiers, out of its authorized and unissued Common Stock
a multiple of the number of shares of Common Stock as shall be issuable upon the full conversion of this Note. 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 Tangiers shall have the right, at the Tangiers’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 Tangiers 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%. Tangiers
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; (v) 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 Tangiers with information related to its corporate
structure including, but not limited to, the number of authorized and outstanding shares, public float within 1 Trading Day
of request by Tangiers; (xii) failure by the Company to maintain the Required Reserve; (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 $2,000
or to maintain a transfer agent of record; (xvi) failure by Company to notify Tangiers of a change in transfer agent within
24 hours of such change; (xvii) any trading suspension imposed by the United States Securities and Exchange Commission (the
“SEC”) under Sections 12(j) or 12(k) of the 1934 Act; (xviii) failure by the Company to meet all requirements
necessary to satisfy the availability of Rule 144 to the Tangiers or its assigns, including but not limited to the timely
fulfillment of its filing requirements as a fully- reporting issuer registered with the SEC, requirements for XBRL filings,
and requirements for disclosure of financial statements on its website; or (xix) failure of the Company to abide by the Use
of Proceeds or failure of the Company to inform the Tangiers of a change in the Use of Proceeds. If an Event of Default occurs,
the outstanding Principal Amount of this Note owing in respect thereof through the date of acceleration, shall become, at
the Tangiers’s election, immediately due and payable in cash at the “Mandatory Default Amount”. The Mandatory
Default Amount means 33% of the outstanding Principal Amount of this Note will be automatically added to the Principal Sum
of the Note and tack back to the Effective Date for purposes of Rule 144.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
(n)
|
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 15% per annum or the maximum rate permitted under applicable law. In connection with such acceleration described herein,
the Tangiers need not provide, and the Issuer hereby waives, any presentment, demand, protest or other notice of any kind,
and the Tangiers 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 Tangiers at any time prior to payment hereunder and the Tangiers shall have all rights as a Tangiers of the note until
such time, if any, as the Tangiers receives full payment. No such rescission or annulment shall affect any subsequent event
of default or impair any right consequent thereon. As of September 30, 2020, this note had accrued interest of $2,284.
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|
(o)
|
On
April 17, 2020, the Company entered into a one year 8% $55,000 convertible Note with GS Capital Partners, LLC pursuant to
the terms of a Securities Purchase Agreement (“GS Note”). The GS Note has a maturity date of April 17, 2021 and
carried a $5,000 original issue discount (such that $50,000 was funded to the Company on April 17, 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. 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 after 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
5,717,000 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. The Company issued to the noteholder 150,000 shares
of its restricted common stock as debt commitment shares valued at $5,000 ($0.03 per share). As of September 30, 2020, this
note had accrued interest of $2,001.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
(p)
|
On
April 30, 2020, the Company entered into securities 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 April 30, 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. 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 above 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 established an initial reserve
of 7,736,000 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. This Note may not be prepaid after the 6-month anniversary of the issuance date. As of September
30, 2020, this note had accrued interest of $1,476.
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(q)
|
On
May 8, 2020, the Company effectuated a six-month fixed convertible promissory note with Tangiers Global, LLC with a total
face value of $102,500 containing an original issue discount of $2,500. On May 8, 2020 and June 10, 2020, the Company received
funds, on each date, in the amount of $50,000 and recognized original issue discount of $1,250. This note matures on November
8, 2020 and bears an annual interest rate of 5%. This note has a fixed conversion price of $0.03 per share. The Company may
redeem the note by paying to Tangiers an amount as follows: (i) if the redemption is within the first 90 days of the issuance
date, then for an amount equal to 110% of the unpaid principal amount so paid of this Note along with any interest that has
accrued during that period, and (ii) if the redemption is after the 91st day, but by the 180th day of the issuance date, then
for an amount equal to 120%. After 180 days from the effective date, the Company may not pay this note, in whole or in part
without prior written consent by Holder. The Company covenants that it will at all times reserve and keep available for Tangiers,
out of its authorized and unissued Common Stock a multiple of the number of shares of Common Stock as shall be issuable
upon the full conversion of this Note. 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
Tangiers shall have the right, at the Tangiers’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) 70% of the lowest volume weighted average price of the Company’s Common
Stock during the 15 consecutive Trading Days prior to the date on which Tangiers 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
30% to 40%, 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 30% to 35%. In the case of both, the discount shall be a cumulative
increase of 15%, i.e., from 30% to 45%. Tangiers may not engage in any “shorting” or “hedging” transaction(s)
in the Common Stock of the Company prior to conversion.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
(q)
|
“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; (v) 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 Tangiers with information related to its corporate structure including, but
not limited to, the number of authorized and outstanding shares, public float within 1 Trading Day of request by Tangiers;
(xii) failure by the Company to maintain the Required Reserve; (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 Tangiers 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 Tangiers 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 Tangiers 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 Tangiers’s election,
immediately due and payable in cash at the “Mandatory Default Amount”. The Mandatory Default Amount means 20%
of the outstanding Principal Amount of this Note will be automatically added to the Principal Sum of the Note and tack back
to the Effective Date for purposes of Rule 144. 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 15% per annum or the maximum rate permitted under applicable law. In connection
with such acceleration described herein, the Tangiers need not provide, and the Issuer hereby waives, any presentment, demand,
protest or other notice of any kind, and the Tangiers 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 Tangiers at any time prior to payment hereunder and the Tangiers shall have all rights
as a Tangiers of the note until such time, if any, as the Tangiers receives full payment. No such rescission or annulment
shall affect any subsequent event of default or impair any right consequent thereon. As of September 30, 2020, this note had
accrued interest of $4,128.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
(r)
|
On
May 18, 2020, the Company entered into a Securities Purchase Agreement (“SPA”) with Firstfire Global Opportunities
Fund, LLC (“Firstfire”) pursuant to a convertible promissory note in the principal amount of $88,333, having an
original issue discount in the amount of $8,833. On May 24, 2020, the Company received funds in the amount of $75,000 after
the deduction of legal fees in the amount of $4,500. This note bears an annual interest rate of 8%. Any principal amount or
interest on this Note which is not paid when due shall bear interest at the rate of the lesser of (i) fifteen percent (15%)
per annum and (ii) the maximum amount permitted by law from the due date thereof until the same is paid. The Holder shall
have the right, at any time on or after the Issue Date, to convert all or any portion of the then outstanding and unpaid Principal
Amount and interest into fully paid and non-assessable shares of Common Stock. In no event shall the Holder be entitled to
convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum would result in beneficial
ownership by the Holder and its affiliates of more than 4.99% of the then outstanding shares of Common Stock. The per share
conversion price into which Principal Amount and interest under this Note shall be convertible into shares of Common Stock
hereunder shall be equal to 65% multiplied by the average of the two (2) lowest volume weighted average prices of the Common
Stock during the fifteen (15) consecutive Trading Day period immediately preceding the date of the respective conversion.
The borrower covenants that at all times until the Note is satisfied in full, the borrower will reserve from its authorized
and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of a number
of Conversion Shares equal to the greater of: (a) 8,500,000 shares of Common Stock or (b) the sum of the number of Conversion
Shares issuable upon the full conversion of this Note multiplied by (ii) three and a half (3.5). At any time after the Issue
Date, (i) if in the case that the borrower’s Common Stock is not deliverable by DWAC, (ii) if the borrower ceases to
be a reporting company pursuant or subject to the Exchange Act, (iii) if the borrower loses a market for its common Stock,
(iv) if the borrower fails to maintain its status as “DTC Eligible” for any reason, (v) if the Conversion Price
is less than one cent ($0.01), (vi) if the Note cannot be converted into free trading shares on or after six months from the
Issue Date, (vii) if at any time the borrower does not maintain or replenish the Reserved Amount (as defined herein) within
three (3) business days of the request of the Holder, (viii) if the borrower fails to maintain the listing of the Common Stock
on at least one of the OTC Markets or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq Small Cap
Market, the New York Stock Exchange, or the NYSE MKT, (ix) if the borrower fails to comply with the reporting requirements
of the Exchange Act; the reporting 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, the requirements for XBRL filings, the requirements for disclosure of financial statements on its website, (x) if
the borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder,
(xi) if OTC Markets changes the borrower’s designation to ‘No Information’ (Stop Sign), ‘Caveat Emptor’
(Skull and Crossbones), or ‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign),
(xii) the restatement of any financial statements filed by the borrower with the SEC for any date or period from two years
prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would,
by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder
with respect to this Note or the Purchase Agreement, (xiii) any cessation of trading of the Common Stock on at least one of
the OTC Markets or an equivalent replacement exchange, and such cessation of trading shall continue for a period of five consecutive
(5) Trading Days, and/or (xiv) the borrower loses the “bid” price for its Common Stock ($0.0001 on the “Ask”
with zero market makers on the “Bid” per Level 2), and/or (xv) if the Holder is notified in writing by the Company
or the Company’s transfer agent that the Company does not have the necessary amount of authorized and issuable shares
of Common Stock available to satisfy the issuance of Shares pursuant to a Conversion Notice, then in addition to all other
remedies under this Note (including but not limited the default provisions provided in this Note), the Holder shall be entitled
to increase, by 15% for each occurrence, cumulative or otherwise, the discount to the Conversion Price shall apply for all
future conversions under the Note. The Holder maintains the option and sole discretion to increase by Ten Thousand and No/100
United States Dollars ($10,000) per each occurrence described above (under Holder’s and borrower’s expectation
that any principal amount increase will tack back to the Issue Date) the principal amount of the Note instead of applying
further discounts to the Conversion Price. At any time prior to or as of the earlier of the (i) the first conversion date
and (ii) the 180th calendar day after the issue date, the borrower shall have the right to prepay the outstanding
principal amount and interest then due under this note. If the borrower exercises its right to prepay the note at any time
within the initial 30 calendar days following the issue date, the borrower shall make payment to the holder of an amount in
cash equal to the sum of: (w) 115% multiplied by the principal amount then outstanding plus (x) accrued and unpaid interest
on the principal amount.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
(r)
|
If
the borrower exercises its right to prepay the note at any time from the 31st calendar day through the 60th calendar day following
the issue date, the borrower shall make payment to the holder of an amount in cash equal to the sum of: (w) 125% multiplied
by the principal amount then outstanding plus (x) accrued and unpaid interest on the principal amount. If the borrower exercises
its right to prepay the note at any time from the 61st calendar day through the 120th calendar day following the issue date,
the borrower shall make payment to the holder of an amount in cash equal to the sum of: (w) 135% multiplied by the principal
amount then outstanding plus (x) accrued and unpaid interest on the principal amount. If the borrower exercises its right
to prepay the note at any time from the 121st calendar day through the 180th calendar day following the issue date, the borrower
shall make payment to the holder of an amount in cash equal to the sum of: (w) 140% multiplied by the principal amount then
outstanding plus (x) accrued and unpaid interest on the principal amount. It shall be considered an event of default if any
of the following events shall occur: (a) Failure to Pay Principal or Interest; (b) the borrower fails to issue conversion
shares to the holder upon exercise by the holder of the conversion rights; (c) the borrower breaches any material agreement,
covenant or other material term or condition contained in the purchase agreement, this note, the irrevocable transfer agent
instructions or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith;
(d) any representation or warranty of the borrower made in the purchase agreement, this note, the irrevocable transfer agent
instructions or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith
shall be false or misleading in any material respect; (e) the borrower or any subsidiary of the borrower shall make an assignment
for the benefit of creditors; (f) any money judgment, writ or similar process shall be entered or filed against the borrower
or any subsidiary of the borrower or any of its property or other assets for more than $100,000; (g) bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy
law or any law for the relief of debtors shall be instituted by or against the borrower or any subsidiary of the borrower;
(h) delisting of common stock; (i) failure to comply with the reporting requirements of the 1934 Act and/or the borrower shall
cease to be subject to the reporting requirements of the 1934 Act; (j) any dissolution, liquidation, or winding up of borrower
or any substantial portion of its business; (k) cessation of operations; (l) failure by borrower to maintain any material
intellectual property rights, personal, real property or other assets which are necessary to conduct its business; (m) financial
statement restatement from two years prior to the issue date of this note and until this note is no longer outstanding, whereby
the restatement, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights
of the holder with respect to this note or the purchase agreement; (n) the borrower effectuates a reverse split of its common
stock without twenty (20) days prior written notice to the holder; (o) replacement of transfer agent whereby the borrower
fails to provide, prior to the effective date of such replacement, a fully executed irrevocable transfer agent instructions
in a form as initially delivered pursuant to the SPA; (p) the DTC places a “chill” on any of the borrower’s
securities (q) any court of competent jurisdiction issues an order declaring this note, the SPA or any provision hereunder
or thereunder to be illegal; (r) the common stock is not eligible for trading through the DTC’s Fast Automated Securities
Transfer or Deposit/Withdrawal at Custodian programs; (s) declaration of an event of default by any lender or other extender
of after the passage of all applicable notice and cure or grace periods; (t) borrower loses the “bid” price for
its Common Stock; (u) attempt by the borrower to transmit, convey or disclose material non-public information concerning the
borrower which is not immediately cured by borrower filing a Form 8-K pursuant to Regulation FD on that same date; (v) at
any time on or after the date which is six (6) months after the issue date, the holder is unable to obtain a standard “144
legal opinion letter” from an attorney reasonably acceptable to the holder; (y) delisting or suspension of trading of
common stock. Upon the occurrence and during the continuation of any event of default become immediately due and payable and
the borrower shall pay to the holder, in full satisfaction of its obligations hereunder, an amount equal to the principal
amount then outstanding plus accrued interest through the date of full repayment multiplied by 150%. holder may, in its sole
discretion, determine to accept payment part in common stock and part in cash. If a breach occurs as a result of the unavailability
of Rule 144, failure to comply with the 1934 Act or the borrower fails to issue conversion shares. occurs or is continuing
after the six (6) month anniversary of the issue date, then the holder shall be entitled to use the lowest closing bid price
during the delinquency period as a base price for any conversion hereunder. The Company issued to the noteholder 375,000 shares
of its restricted common stock as debt commitment shares valued at $12,075 ($0.0322 per share). As of September 30, 2020,
this note had accrued interest of $2,497.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
(s)
|
On
June 4, 2020, the Company entered into a one year 8% $33,000 convertible Note with GS Capital Partners, LLC (the “GS
Note”) pursuant to the terms of a Securities Purchase Agreement (the “SPA”). The GS Note has a maturity
date of June 4, 2021 and carried a $3,000 original issue discount (such that $30,000 was funded to the Company on or about
June 4, 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. 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 loses its bid price for its stock in a
market (including the OTC marketplace or other exchange), the principal amount due under the GS note shall increase by 20%;
(iv) 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 (v) if the GS Capital Note
is not paid at maturity, the outstanding principal due under this Note shall increase by 10%. In connection with the GS Capital
Note, the Company issued irrevocable transfer agent instructions reserving 3,678,000 shares of its common Stock for conversions
under this Note (the “Share Reserve”) 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 and placed back
into the treasury of the company and available for issuance at a future date. The Company issued to the noteholder 90,000
shares of its restricted common stock as debt commitment shares valued at $3,105 ($0.0345 per share). As of September 30,
2020, this note had accrued interest of $846.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
(t)
|
On
June 24, 2020, the Company effectuated a six-month fixed convertible promissory note with Tangiers Global, LLC with a total
face value of $210,000 containing an original issue discount of $10,000. On June 26, 2020, the Company received funds in the
amount of $200,000 and recognized original issue discount of $10,000. This note matures on December 24, 2020 and bears an
interest rate of 8%, guaranteed. This note has a fixed conversion price of $0.03 per share. The Company may redeem the note
by paying to Tangiers an amount as follows: (i) if the redemption is within the first 90 days of the issuance date, then for
an amount equal to 110% of the unpaid principal amount so paid of this Note along with any interest that has accrued during
that period, and (ii) if the redemption is after the 91st day, but by the 180th day of the issuance date, then for an amount
equal to 120%. After 180 days from the effective date, the Company may not pay this note, in whole or in part without prior
written consent by Holder. The Company covenants that it will at all times reserve and keep available for Tangiers, out of
its authorized and unissued Common Stock a multiple of the number of shares of Common Stock as shall be issuable
upon the full conversion of this Note. 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
Tangiers shall have the right, at the Tangiers’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) 70% of the lowest volume weighted average price of the Company’s Common
Stock during the 15 consecutive Trading Days prior to the date on which Tangiers 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
30% to 40%, 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 30% to 35%. In the case of both, the discount shall be a cumulative
increase of 15%, i.e., from 30% to 45%. Tangiers 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; (v) 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 Tangiers with information related to its corporate
structure including, but not limited to, the number of authorized and outstanding shares, public float within 1 Trading Day
of request by Tangiers; (xii) failure by the Company to maintain the Required Reserve; (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 Tangiers 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 Tangiers 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 Tangiers 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 Tangiers’s election, immediately due and payable in cash at the “Mandatory Default Amount”. The Mandatory
Default Amount means 20% of the outstanding Principal Amount of this Note will be automatically added to the Principal Sum
of the Note and tack back to the Effective Date for purposes of Rule 144. 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 18% per annum or the maximum rate
permitted under applicable law. In connection with such acceleration described herein, the Tangiers need not provide, and
the Issuer hereby waives, any presentment, demand, protest or other notice of any kind, and the Tangiers 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 Tangiers at any time prior to payment hereunder
and the Tangiers shall have all rights as a Tangiers of the note until such time, if any, as the Tangiers receives full payment.
No such rescission or annulment shall affect any subsequent event of default or impair any right consequent thereon. As of
September 30, 2020, accrued interest was $9,147.
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
7 – NOTES PAYABLE (CONTINUED)
During
the six months year ended September 30, 2019, the Company issued 38,507,372 shares of common stock to holders of convertible notes
to retire $703,542 in principal and $43,166 of accrued interest (at an average conversion price of $0.01939 per share) under the
convertible notes.
During
the year ended March 31, 2020, the Company issued 21,295,495 shares of common stock to holders of convertible notes to retire
$467,500 and $28,762 of note principal and accrued interest, respectively (average conversion price of $0.0233 per share.)
Interest
expense for the six months ended September 30, 2020 was $612,410 compared to $296,556 for the same period in the prior year. Accrued
interest at September 30, 2020 and March 31, 2020 was $42,964 and $39,384, respectively.
NOTE
8 – RELATED PARTIES
On
December 26, 2019, Chief Executive Officer, Seth Shaw, deposited $50,159 to be used for operating expenses. This is an interest
free loan to the Company.
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.
NOTE
9 – STOCKHOLDERS’ EQUITY (DEFICIT)
Common
Stock
As of September 30, 2020, the Company was
authorized to issue 400,000,000 shares of its common stock. As of September 30, 2020 and November 13, 2020 there were 179,586,479
and 185,766,396 shares, respectively of common stock issued and outstanding.
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.
S-1
Registration Statement and Investment Agreement with Tangiers Global, LLC
On
March 5, 2020, the Company filed and S-1 Registration Statement pursuant to the January 21, 2020, Investment Agreement entered
into Tangiers in order to establish a source of funding for our operations. Under the Investment Agreement, Tangiers has agreed
to provide us with up to $5,000,000 of funding during the period ending three years from the date of this prospectus. From time
to time during the period ending three (3) years after this filing, we may, in our sole discretion, deliver a Put Notice to Tangiers.
The Put Notice will specify the number of shares of common stock which we intend to sell to Tangiers on a closing date. The closing
of a purchase by Tangiers of the shares specified by us in the Put Notice will occur on the date which is no earlier than five
and no later than seven Trading Days following the date Tangiers receives the Put Notice. On the closing date we will sell to
Tangiers the shares specified in the Put Notice, and Tangiers will pay us an amount equal to the Purchase Price multiplied by
the number of shares specified in the Put Notice.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
9 – STOCKHOLDERS’ EQUITY (DEFICIT)
Common
Stock (Continued)
S-1
Registration Statement and Investment Agreement with Tangiers Global, LLC (Continued)
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. During the 36-month term of the Investment Agreement, the Company shall
not be entitled to submit a Put Notice until after the previous Closing has been completed. Notwithstanding the foregoing, the
Company may not deliver a Put Notice on or earlier of the eighth (8th) Trading Day immediately following the preceding Put Notice
Date (the “Waiting Period”), unless a written waiver to deliver Put Notice during the Waiting Period is obtained by
the Company from the Investor in advance. The number of shares to be sold by Tangiers in this offering will vary from time-to-time
and will depend upon the number of shares purchased from us pursuant to the terms of the Investment Agreement. However, 76,000,000
shares of common stock is the maximum number of shares which we may sell to Tangiers.
Purchase
Price means 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. Principal Market means the NYSE MKT, the Nasdaq Capital Market,
the OTC Bulletin Board or the OTC Markets Group, whichever is the principal market on which our common stock is traded. VWAP means
a price determined by the daily volume weighted average price of our common stock on the Principal Market as reported by (i) Bloomberg
Financial L.P. or (ii) Stock Charts/Quote Media for the ten consecutive Trading Days immediately prior to the date of the delivery
of a Put Notice.
The
S-1 Registration statement became effective March 16, 2020. As of September 30, 2020, the Company has initiated put notices to
Tangiers for 12,750,000 shares receiving proceeds in the amount of $369,482.
Fiscal
Year 2020
During
the year ended March 31, 2020, the Company issued 2,450,000 shares under our various distribution agreements, as more fully described
in Note 1. Common shares issued had a value of $496,261 ($0.08 to $0.2092 per share).
During
the year ended March 31, 2020, the Company issued 21,295,495 shares for conversion of debt in the amount of $467,500 as well as
accrued interest in the amount of $28,762 ($0.01412 to $0.04725 per share).
During
the year ended March 31, 2020, the Company issued 250,000 shares issued to Vice President of Distribution and Marketing.
During
the year ended March 31, 2020, the Company issued 7,100,000 shares issued for services rendered.
During
the year ended March 31, 2020, the Company issued 2,350,000 shares for debt commitments in the amount of $218,460 ($0.039 to $0.19
per share).
During
the year ended March 31, 2020, the Company recognized $569,636 in beneficial conversion feature for convertible notes whereby
the holder can exercise conversion rights at a discount to the market price.
During
the year ended March 31, 2020, the Company issued 5,470,286 shares under stock purchase agreements in consideration for $143,420
($0.02 to $0.07 per share) to accredited investors that are unrelated third parties.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
9 – STOCKHOLDERS’ EQUITY (DEFICIT)
Common
Stock (Continued)
Fiscal
Year 2020 (Continued)
On
March 27, 2020, the Company entered into a stock purchase agreement with an accredited investor to purchase 200,000 restricted
shares of Company’s common stock for $5,000 ($0.025 per share.) As of this report date, these shares have not been issued.
Fiscal
Year 2021
During
the six months ended September 30, 2020, the Company issued 12,750,000 shares pursuant to put notices issued by Tangiers receiving
proceeds in the amount of $369,482.
During
the six months ended September 30, 2020, the Company issued 38,507,372 shares for conversion of debt in the amount of $703,543
as well as accrued interest in the amount of $39,944 ($0.01632 to $0.02128 per share).
During
the six months ended September 30, 2020, the Company issued 6,000,000 shares issued for services rendered.
During
the six months ended September 30, 2020, the Company issued 740,000 shares for debt commitments in the amount of $16,570 ($0.03
to $0.0355 per share).
During
the six months ended September 30, 2020, the Company recognized $182,206 in beneficial conversion feature for convertible notes
whereby the holder can exercise conversion rights at a discount to the market price.
During
the six months ended September 30, 2020, the Company issued 6,000,000 shares issued for services rendered for ecommerce and product
marketing. These shares had a value of $32,000 ($0.031 to $0.032 per share).
Pursuant
to the April 3, 2020, collaboration agreement the Company entered into with Aegea Biotechnologies Inc. (“Aegea”)
the Company issued to Aegea 5,000,000 unregistered common shares of Tauriga common stock. The shares were valued at $155,000
($0.031 per share). For a more complete description of this arrangement please refer to Note 1 to the financial statements
under the subheading “Collaboration Agreement with Aegea Biotechnologies Inc.” as well as the agreement as
exhibits file by reference thereto.
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 $277,072 and $412,530 in stock-based compensation
expense related to these agreements in the six months ended September 30, 2020 and 2019.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
9 – STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
Warrants
for Common Stock
The
following table summarizes warrant activity for the six months and year ended September 30, 2020 and March 31, 2020:
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2019
|
|
|
1,210,276
|
|
|
$
|
1.2
|
|
|
1.28
Years
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
Expired
|
|
|
(488,011
|
)
|
|
|
0.75
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Canceled
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
and exercisable March 31, 2020
|
|
|
722,265
|
|
|
$
|
1.19
|
|
|
0.83
Years
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Canceled
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
and exercisable September 30, 2020
|
|
|
722,265
|
|
|
$
|
1.50
|
|
|
0.33
Years
|
|
$
|
—
|
|
During
the year ended March 31, 2020, 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.
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 six months and year ended September 30, 2020 and March 31, 2020:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2019
|
|
|
133,334
|
|
|
$
|
7.50
|
|
|
2.85
Years
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2020
|
|
|
133,334
|
|
|
$
|
7.50
|
|
|
1.85
Years
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
and exercisable September 30, 2020
|
|
|
133,334
|
|
|
$
|
7.50
|
|
|
1.35
Years
|
|
$
|
—
|
|
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
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 six months and year ended September 30, 2020 and March 31, 2020:
|
|
September 30, 2020
|
|
|
March 31,2020
|
|
Federal income taxes at statutory rate
|
|
|
21.00
|
%
|
|
|
21.00
|
%
|
State income taxes at statutory rate
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Temporary differences
|
|
|
1.26
|
%
|
|
|
2.42
|
%
|
Permanent differences
|
|
|
(0.01
|
)%
|
|
|
(0.87
|
)%
|
Impact of Tax Reform Act
|
|
|
0.00
|
%
|
|
|
(0.00
|
)%
|
Change in valuation allowance
|
|
|
(22.25
|
)%
|
|
|
(22.55
|
)%
|
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
|
|
As of
|
|
|
As of
|
|
|
|
September 30, 2020
|
|
|
March 31, 2020
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating losses before non-deductible items
|
|
$
|
4,604,317
|
|
|
$
|
4,269,938
|
|
Loss on disposal of fixed assets
|
|
|
-
|
|
|
|
613
|
|
Stock-based compensation
|
|
|
58,185
|
|
|
|
329,214
|
|
Unrealized gains or losses on investments
|
|
|
(12,413
|
)
|
|
|
(50,290
|
)
|
Total deferred tax assets
|
|
|
4,650,089
|
|
|
|
4,599,765
|
|
Less: Valuation allowance
|
|
|
(4,650,089
|
)
|
|
|
(4,599,765
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
At September 30, 2020, the Company had a U.S.
net operating loss carryforward in the approximate amount of $21 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 $50,384 in the six months
ended September 30, 2020 and decreased by $657,980 in the year ended March 31, 2020. The net decreases were the result of the
tax effects of the Tax Cuts and Jobs Act (the “TCJA”) offset by taxable losses net of timing differences in each of
the years.
NOTE
11 – INVESTMENTS
Trading
securities
For
investments in securities of other companies that are owned, the Company records them at fair value with unrealized gains and
losses reflected in other operating income or loss. For investments in these securities that are sold by us, the Company recognizes
the gains and losses attributable to these securities investments as realized gains or losses in other operating income or loss
on a first in first out basis.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
11 – INVESTMENTS (CONTINUED)
Investment
in Trading Securities:
At
March 31, 2020
Company
|
|
|
|
|
Beginning
of
Period
Cost
|
|
|
Purchases
|
|
|
Sales
Proceeds
|
|
|
End
of
Period
Cost
|
|
|
Fair
Value
|
|
|
Realized
Gain
(Loss)
|
|
|
Unrealized
Gain
(Loss)
|
|
VistaGen
Therapeutics Inc (VTGN)
|
|
|
(a)
|
|
|
|
287,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
287,500
|
|
|
$
|
101,200
|
|
|
|
-
|
|
|
|
(186,300
|
)
|
Basanite
Inc. (BASA)
|
|
|
(b)
|
|
|
|
30,000
|
|
|
|
-
|
|
|
|
40,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
-
|
|
Totals
|
|
|
|
|
|
$
|
317,500
|
|
|
$
|
-
|
|
|
$
|
40,000
|
|
|
$
|
287,500
|
|
|
$
|
101,200
|
|
|
$
|
-
|
|
|
$
|
(186,300
|
)*
|
At
September 30, 2020
Company
|
|
|
|
|
Beginning
of
Period
Cost
|
|
|
Purchases
|
|
|
Sales
Proceeds
|
|
|
End
of
Period
Cost
|
|
|
Fair
Value
|
|
|
Realized
Gain
(Loss)
|
|
|
Unrealized
Gain
(Loss)
|
|
VistaGen
Therapeutics Inc (VTGN)
|
|
|
(a)
|
|
|
|
287,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
287,500
|
|
|
$
|
160,310
|
|
|
|
-
|
|
|
|
(127,190
|
)*
|
*This
amount represents the cumulative unrealized loss as of March 31, 2020 and September 30, 2020.
(a)
|
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 September
30, 2020, the Company has recognized an unrealized gain on these shares in the amount of $59,110, compared to an unrealized
loss of $74,301 for the six months ended September 30, 2019 in VTGN. As December 31, 2019, these shares were on deposit held
with a broker.
|
|
|
(b)
|
On
July 5, 2018, the Company purchased 100,000 shares of Basanite Industries Inc. (BASA) (formerly Paymeon, Inc. (PAYM)) for
$12,998 ($0.13 per share) in the open market. During July 2018 the Company sold the 100,000 shares for $10,821 ($0.11 per
share) for a realized loss of $2,177. On July 9, 2018, the Company purchased 400,000 restricted common shares directly from
the Company for $30,000 ($0.075 per share). During the year ended March 31, 2020, the Company sold its 400,000 shares for
$40,000 ($0.10 per share) recognizing a profit of $10,000.
|
At
September 30, 2020, 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
September 30, 2020, these warrants were out of the money by $9.61 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. As of September 30, 2020, these shares were $0.20 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 September 30, 2020, 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. At September 30,
2020 these warrants were out of the money by $0.80 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 September 30, 2020, these warrants were in the money by $0.20 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.
The strike price on these options will revert back to $1.50 at December 4, 2021 for all unexercised options.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
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
Aegea
Biotechnologies Inc.
Pursuant
to April 3, 2020, Collaboration Agreement, the Company has invested seventy percent (70%) of the Net Proceeds received from the
sale of the initial 10,000,000 shares of stock of Tauriga under the ELOC with Tangiers in Aegea for the development of the Covid
Test and used to purchase shares of common stock of Aegea, at a purchase price of $4.00 per share. Please see Note 1, under the
subheading “Collaboration Agreement with Aegea Biotechnologies Inc.” Pursuant to the terms of the Collaboration Agreement,
following the initial sale of 10,000,000 shares of our common stock under the ELOC, twenty percent (20%) of all subsequent net
proceeds from the sale of shares under the ELOC shall be used to purchase additional shares of common stock of Aegea at a purchase
price of $4.00 per share. The $4.00 stock price corresponds to a current pre-money valuation of Aegea of $25,000,000 for each
tranche of cash, up to the first $2,000,000 of our investment in Aegea. The valuation will be reassessed and reset by the parties
after the first $2,000,000 of Tauriga’s investment is received by Aegea. The Collaboration Agreement commenced upon signing
and will continue indefinitely, unless amended or terminated by mutual written agreement of the parties. As of September 30, 2020,
the Company has invested $278,212 in Aegea for 69,553 shares, representing an ownership percentage of 1.1128%.
Küdzoo,
Inc.
As of March 31, 2020, the Company had invested,
in a total of $105,600 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 investments
were recorded at cost and represents 0.2% of the value of Küdzoo based on a pre-money valuation of $10,200,000. The Company
had made a total of six investments beginning September 4, 2018 and each were valued at the same pre-money valuation. As of
September 30, 2020, the Company owned 1.41% of Küdzoo. As of September 30, 2020, there has been no change in this investment.
The
Company tested the investment value for Küdzoo as of March 31, 2020 for impairment. It was noted that the value of the company
has maintained its value largely due to the fact that Küdzoo is currently raising money at the same valuation consistent
with the Company’s investment, therefore, the Company does not believe there is any impairment of this investment as of
March 31, 2020. As of September 30, 2020, there has been no change in this investment.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
11 – INVESTMENTS (CONTINUED)
Cost
investments (Continued)
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, 2020 for impairment. It was noted that the value of the company
has maintained its value through reviews of their financial performance, therefore, the Company does not believe there is any
impairment of this investment as of March 31, 2020.
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 September 30, 2020 and March 31, 2020:
|
|
September
30, 2020
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment-trading
securities
|
|
$
|
160,310
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
160,310
|
|
Cost
method investment – Küdzoo
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
105,600
|
|
|
$
|
105,600
|
|
Cost
method investment – Serendipity Brands
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
35,000
|
|
|
$
|
35,000
|
|
Cost
method investment - Aegea Biotechnologies, Inc.
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
278,212
|
|
|
$
|
278,212
|
|
|
|
March
31, 2020
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment-trading
securities
|
|
$
|
101,200
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
101,200
|
|
Cost
method investment – Küdzoo
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
105,600
|
|
|
$
|
106,600
|
|
Cost
method investment – Serendipity Brands
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
35,000
|
|
|
$
|
35,000
|
|
NOTE
13 – CONCENTRATIONS
During the six months ended September 30,
2020, we had one supplier for our product CBD/CBG Tauri-GumTM. The Tauri-GumTM product line
represents approximately 71% of net sales.
During
the six months ended September 30, 2019, we have one supplier for our Tauri-GumTM product which accounted for 100%
sales for this period.
NOTE
14 – SUBSEQUENT EVENTS
Subsequent
to September 30, 2020, the Company issued additional shares of Common Stock as follows: (i); 1,000,000 share under a consulting
agreement, (ii) 150,000 shares of restricted common stock for commitment shares relative to a factoring agreement (further
disclosed below), (iii) 2,769,917 shares of restricted common stock in conversion of convertible notes issued by us of $47,000
and accrued interest of $11,243 as well as $1,987 in fees ($0.0143 to $0.019602 per share) and (iv) 1,160,000 registered
shares of our Common Stock were issued under the Investment Agreement with Tangiers.
TAURIGA
SCIENCES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
(US$)
NOTE
14 – SUBSEQUENT EVENTS (CONTINUED)
Federal
Award Management Registration
On
October 6, 2020, the Company announced that it was officially approved to operate as a U.S. Government Vendor. The Company has
retained Federal Award Management Registration (“FAMR”) to commence the bidding process on several identified potential
U.S. Government Contracts. These potential U.S. Government contracts are presented by the Department of Defense (“DOD”).
FAMR is an independent consulting firm that specializes in: Registrations, Certifications, and Federal Contracting. The Company’s
Commercial & Government Entity (“CAGE”) Code # is: 8QXV4 with an expiration date of October 1, 2021.
Convertible
Notes
On
October 13, 2020, ADAR Alef, LLC converted $10,000 of note principal under the March 17, $44,000 note.
On
October 19, 2020, Tangiers Global, LLC converted $25,000 of note principal under the November 7, 2019 convertible promissory note
for 1,275,380 shares ($0.019602) per share.
On November 2, 2020, ADAR Alef, LLC converted
$12,000 of note principal and $1,989 of accrued interest under the March 17, 2020, $44,000 note.
Loan Payable – Other
On
October 5, 2020, the Company entered into (i) an Inventory Financing Promissory Note in the aggregate principal amount of $135,000
(the “Note”) with Jefferson Street, and (ii) a Securities Purchase Agreement. The Note has a maturity date of October
5, 2021, carries a $10,000 original issue discount (and a $3,000 due diligence fee paid to Moody Capital Solutions, Inc., the
placement agent on behalf of Jefferson Street), and carries an interest on the unpaid principal balance hereof at the rate
of ten percent (10%, the “Interest Rate”) per annum beginning on the issuance date of October 5, 2020. Any amount
of principal or interest on the Note which is not paid when due shall bear interest at the rate of eighteen percent (18%) per
annum from the due date thereof until the same is paid or converted in accordance with the terms of the Note. The repayment of
the Note shall be in cash in seven equal monthly installments beginning on April 5, 2021 and ending on October 5, 2021, for total
repayment with interest in the aggregate amount of $148,500 (assuming no defaults or partial or complete conversions of our Common
Stock as a form of repayment). This Note may not be converted by Jefferson Street into shares of our Common Stock unless
we default in our monthly repayment obligation pursuant to the cash repayment schedule noted above. In the event of a default
of the Note, Jefferson Street shall have the right to convert all or any part of the outstanding and unpaid amount of the
Note into fully paid and non-assessable shares of Common Stock; provided, however, that in no event shall the Holder be entitled
to convert any portion of the Note in excess of that portion of the Note upon the conversion of which would result in beneficial
ownership by Jefferson Street and its affiliates of more than 4.99% of the outstanding shares of Common Stock (as determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (“1934 Act”), and Regulations
13D-G thereunder. The beneficial ownership limitations noted above may not be waived by Jefferson Street. The conversion
price shall equal (subject to customary adjustments for stock splits, stock dividends or rights offerings, recapitalization, reclassifications,
extraordinary distributions and similar events) 75% multiplied by the “Market Price”, which is defined to mean the
lowest one day volume weighted average price of our Common Stock during the ten (10) trading day period ending on the latest complete
trading day prior to the conversion date. The Note contains a number of default or penalty provisions, including, but not limited
to, the following: (a) at any time after October 5, 2020, if in the case that the Company’s Common Stock is not deliverable
by DWAC for any reason, an additional 10% discount will apply for all future conversions under all Notes. If in the case that
the Company’s Common Stock is “chilled” for deposit into the DTC system and only eligible for clearing deposit,
an additional 15% discount shall apply for all future conversions under the Note while the “chill” is in effect; (ii)
if both the events noted in (i) above were to occur, an additional cumulative 25% discount shall apply; (iii) if the Company ceases
to be a reporting company pursuant to the 1934 Act or if the Note cannot be converted into free trading shares after one hundred
eighty-one (181) days from the issuance date, an additional 15% discount will be attributed to the conversion price; if the Company
ceases to be a reporting company under the 1934 Act, (iv) if, at any time the Borrower does not maintain the Share Reserve (defined
below); (v) the Company fails to pay the principal or interest under the Note when due under the terms thereof (including the
five (5) calendar day cure period); (vi) a cross-default by the Company of another of its outstanding notes; or (vii) the completion
of a reverse stock split while this Note is outstanding (and without consent). Subject to certain exempt issuances by the Company,
during the period where any portion of the Note remains outstanding to Jefferson Street, if the Company engages in any
future financing transactions with a third party investor, the Company will provide Jefferson Street with written notice
thereof promptly but in no event less than 10 days prior to closing any financing transactions, and if applicable, the Company
shall adjust the terms of the Note to such more favorable terms of a subsequent financing, if any. In connection with the Note,
the Company issued irrevocable transfer agent instructions reserving 21,000,000 shares of the Company’s Common Stock (“Share
Reserve”) for the amount then outstanding. Upon full conversion or repayment of this Note, any shares remaining in such
share reserve shall be cancelled and placed back into the treasury of the Company and available for issuance at a future date.
On October 22, 2020, the Company issued to Jefferson Street 1,250,000 shares of its restricted common stock as debt commitment
shares valued at $40,000 ($0.032 per share).