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EX-32.2 - TAURIGA SCIENCES, INC.ex32-2.htm
EX-32.1 - TAURIGA SCIENCES, INC.ex32-1.htm
EX-31.2 - TAURIGA SCIENCES, INC.ex31-2.htm
EX-31.1 - TAURIGA SCIENCES, INC.ex31-1.htm
EX-10.16 - TAURIGA SCIENCES, INC.ex10-16.htm
EX-10.15 - TAURIGA SCIENCES, INC.ex10-15.htm
EX-10.14 - TAURIGA SCIENCES, INC.ex10-14.htm
EX-10.13 - TAURIGA SCIENCES, INC.ex10-13.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2019

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____ to _____

 

Commission file number 000-53723

 

 

TAURIGA SCIENCES, INC.

(Exact name of registrant as specified in its charter)

 

Florida   30-0791746

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

555 Madison Avenue, 5th Floor

New York, NY 10022

(Address of principal executive offices) (Zip Code)

 

(917) 796-9926

(Registrant’s telephone number, including area code)

 

Securities registered under Section 12(b) of the Exchange Act:

None

 

Securities registered under Section 12(g) of the Exchange Act:

 

Common Stock, $.00001 Par Value

(Title of class)

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [  ] No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or, an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company”, in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [X]
  Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

As of February 13, 2020, the registrant had 98,868,546 shares of its Common Stock, $0.00001 par value, outstanding.

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol  

Name of each exchange on which registered

Common Stock, par value $0.0001 per share   TAUG   OTCQB

 

 

 

 
 

 

TABLE OF CONTENTS

 

    Pages
     
PART I. FINANCIAL STATEMENTS  
     
Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS: F-1
     
  Condensed Consolidated Balance Sheets as of December 31, 2019 and March 31, 2019 (unaudited) F-1
     
  Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2019 and 2018 (unaudited) F-2
     
  Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the nine months ended December 31, 2019 and year ended March 31, 2019 (unaudited) F-3
     
  Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2019 and 2018 (unaudited) F-4
     
  Notes to Condensed Consolidated Financial Statements (unaudited) F-5
     
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 3
     
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 12
     
Item 4. CONTROLS AND PROCEDURES 12
     
PART II. OTHER INFORMATION  
     
Item 1. LEGAL PROCEEDINGS 14
     
Item 1A. RISK FACTORS 14
     
Item 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS 30
     
Item 3. DEFAULTS UPON SENIOR SECURITIES 36
     
Item 4. MINE SAFETY DISCLOSURES 36
     
Item 5. OTHER INFORMATION 36
     
Item 6. EXHIBITS 36

 

2
 

 

PART I. FINANCIAL STATEMENTS

 

TAURIGA SCIENCES, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN US$)

 

   December 31, 2019   March 31, 2019 
   (UNAUDITED)     
ASSETS          
Current assets:          
Cash  $89,329   $385,943 
Assets from discontinued operations   -    581 
Accounts receivable, net allowance for doubtful accounts   92,838    - 
Investment - trading securities   158,631    350,400 
Investment - other   152,400    72,500 
Inventory asset   117,722    10,872 
Prepaid expenses and other current assets   37,585    127,520 
Total current assets   648,505    947,816 
           
Lease right of use asset   25,548    - 
Property and equipment, net   11,084    13,010 
           
Total assets  $685,137   $960,826 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)          
Current liabilities:          
Notes payable, net of discounts  $507,683   $213,875 
Accounts payable   43,562    34,703 
Accrued interest   29,823    30,780 
Accrued expenses   46,229    - 
Loan Payable to Officer   50,159    - 
Liabilities from discontinued operations   -    5,522 
Liability for common stock to be issued   78,520    172,500 
Lease liability - current portion   13,591    - 
Deferred revenue   -    - 
Total current liabilities   769,567    457,380 
           
Lease liability - net of current portion   12,520    - 
           
Total liabilities   782,087    457,380 
           
Stockholders’ equity (deficit):          
Common stock, par value $0.00001; 400,000,000 shares authorized, 88,570,643 and 68,123,326 outstanding at December 31, 2019 and March 31, 2019, respectively   885    681 
Additional paid-in capital   57,498,460    55,991,704 
Accumulated deficit   (57,596,295)   (55,488,939)
Accumulated other comprehensive income   -    - 
Total stockholders’ equity (deficit)   (96,950)   503,446 
           
Total liabilities and stockholders’ equity (deficit)  $685,137    $960,826 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

F-1
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN US$)

(UNAIDITED)

 

   For the Three Months Ended   For the Nine Months Ended 
   December 31,   December 31, 
   2019   2018   2019   2018 
                 
Revenues  $

87,781

   $-   $

201,881

   $- 
Cost of goods sold   

75,263

    -    

166,162

    - 
                     
Gross profit   

12,518

    -    

35,719

    - 
                     
Operating expenses                    
Marketing and advertising   16,320    -    150,997    - 
Research and development   -    1,150    3,852    1,150 
General and administrative   

491,788

    200,722    

1,412,551

    719,035 
Depreciation and amortization expense   232    214    696    732 
Total operating expenses   

508,340

    202,086    

1,568,096

    720,917 
                     
Loss from operations   (495,822)   (202,086)   (1,532,377)   (720,917)
                     
Other income (expense)                    
Interest expense   (243,399)   (18,396)   (539,955)   (44,462)
Unrealized gain (loss) on trading securities   (87,468)   (49,596)   (161,769)   171,789 
Loss on conversion of debt   -    (27,975)   -    (27,975)
Loss on asset disposal   (1,230)   (907)   (1,230)   (907)
Gain on the extinguishment of debt   -    -    113,466    - 
Gain on disposal of discontinued operations   -    -    4,941    - 
Loss on sale of commodities   -    -    -    (2,737)
Unrealized loss on digital currency   -    -    -    (3,142)
Gain (loss) on sale of trading securities   -    (79,020)   10,000    151,605 
Foreign exchange   -    -    (29)   - 
Total other income (expense)   (332,097)   (175,894)   (574,576)   244,171 
                     
LOSS FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES AND LOSS FROM DISCONTINUED OPERATIONS   (827,919)   (377,980)   (2,106,953)   (476,746)
                     
LOSS FROM DISCONTINUED OPERATIONS   -     -     -    - 
                     
Net loss   (827,919)   (377,980)   (2,106,953)   (476,746)
                     
Net loss attributable to non-controlling interest     -    -    -    - 
Net loss attributable to controlling interest   (827,919)   (377,980)   (2,106,953)   (476,746)
                     
Net loss attributable to common shareholders  $(827,919)  $(377,980)  $(2,106,953)  $(476,746)
Loss per share - basic and diluted - Continuing operations  $(0.015)  $(0.007)  $(0.038)  $(0.009)
Loss per share - basic and diluted - Discontinuing operations  $-     

$

-   $-   $- 
Weighted average number of shares outstanding - basic   56,149,252    56,149,252    55,767,119    54,734,621 
                     
Loss per share - fully diluted  $(0.015)  $(0.007)  $(0.038)  $(0.009)
Weighted average number of shares outstanding - fully diluted   56,149,252    56,149,252    55,767,119    54,734,621 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

F-2
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND THE YEAR ENDED MARCH 31, 2019

(UNAUDITED)

 

                   Accumulated         
           Additional       other   Non-   Total 
   Number of     paid-in   Accumulated   comprehensive   Controlling   stockholders’ 
   shares   Amount   capital   deficit   income (loss)   Interest   deficit 
                             
Balance at March 31, 2018   52,264,476    523    54,680,382    (54,391,500)   8,042    (2,196)   295,251 
Shares issued for note conversion at $0.002888 per share   1,985,754    20    57,319    -    -    -    57,339 
Stock-based compensation vesting   -    -    43,221    -    -    -    43,221 
Stock issued for services at $0.345 to $0.42   130,000    1    (1)   -    -    -    - 
Reclassification of other comprehensive income to additional paid in capital   -    -    8,042    -    (8,042)   -    - 
Net loss for the three months ended June 30, 2018   -    -    -    166,788    -    -    166,788 
                                    
Balance at June 30, 2018   54,380,230    544    54,788,963    (54,224,712)   -    (2,196)   562,599 
                                    
Stock-based compensation vesting   -    -    132,055    -    -    -    132,055 
Net loss for the three months ended September 30, 2018   -    -    -    (265,552)   -    -    (265,552)
                                    
Balance at September 30, 2018   54,380,230    544    54,921,018    (54,490,264)   -    (2,196)   429,102 
                                    
Shares issued for note conversion at $0.0245 per share   1,000,000    10    24,490    -    -    -    24,500 
Stock-based compensation vesting   -    -    11,769    -    -    -    11,769 
Stock issued for services at $0.0269   1,750,000    18    (18)   -    -    -    - 
Net loss for the three months ended December 31, 2018   -    -    -    (377,982)   -    -    (377,982)
                                    
Balance at December 31, 2018   57,130,230    572    54,957,259    (54,868,246)   -    (2,196)   87,389 
                                    
Issuance of shares via private placement at $0.02 to $0.06 per share   5,686,667    56    301,144    -    -    -    301,200 
Issuances of commitment shares - debt financing at $0.042 per share   500,000    5    20,995    -    -    -    21,000 
Shares issued for note conversion at $0.0357 to $0.0452 per share   2,960,762    30    118,849    -    -    -    118,879 
Stock-based compensation vesting   -    -    109,660    -    -    -    109,660 
Stock issued for services at $0.0495   1,250,000    12    (12)   -    -    -    - 
Shares issued for settlement of contingent liability at $0.0405   500,000    5    74,995    -    -    -    75,000 
Shares issued for settlement of debt at $0.2091   95,667    1    20,003    -    -    -    20,004 
Recognition of benficial conversion feature of convertible notes   -    -    388,811    -    -    -    388,811 
Non-controlling interest   -    -    -    -    -    2,196    2,196 
Net loss for the year ended March 31, 2019   -    -    -    (620,693)   -    -    (620,693)
                                    
Balance at March 31, 2019   68,123,326   $681   $55,991,704   $(55,488,939)  $-   $-   $503,446 
                                    
Issuance of shares via private placement at $0.06 to $0.07 per share   714,286    7    44,993    -    -    -    45,000 
Issuances of commitment shares - debt financing at $0.19 per share   750,000    8    142,492    -    -    -    142,500 
Shares issued for note conversion at $0.04725 per share   888,308    9    41,964    -    -    -    41,973 
Stock-based compensation vesting   -    -    375,718    -    -    -    375,718 
Stock issued for services at $0.07 to $0.16   2,450,000    26    (26)   -    -    -    - 
Shares issued for settlement of debt   -    -    -    -    -    -    - 
Recognition of benficial conversion feature of convertible notes   -    -    68,663    -    -    -    68,663 
Cumulative affect of adoption of Lease standard ASC 842   -    -    -    (403)   -    -    (403)
Net loss for the three months ended June 30, 2019   -    -    -    (649,324)   -    -    (649,324)
                                    
Balance at June 30, 2019   72,925,920   $731   $56,665,508   $(56,138,666)  $-   $-   $527,573 
                                    
Issuance of shares via private placement at $0.06 to $0.07 per share   -    -    -    -    -    -    - 
Issuances of commitment shares - debt financing at $0.19 per share   250,000    2    10,498    -    -    -    10,500 
Shares issued for note conversion at $0.04725 per share   5,523,714    55    127,612    -    -    -    127,667 
Stock-based compensation vesting   250,000    2    36,809    -    -    -    36,811 
Stock issued for services at $0.07 to $0.16   -    -         -    -    -    - 
Shares issued for settlement of debt   -    -    -    -    -    -    - 
Recognition of benficial conversion feature of convertible notes   -    -    154,739    -    -    -    154,739 
Cumulative affect of adoption of Lease standard ASC 842   -    -    -    -    -    -    - 
Net loss for the three months ended September 30, 2019   -    -    -    (629,710)   -    -    (629,710)
                                    
Balance at September 30, 2019   78,949,634   $790   $56,995,166   $(56,768,376)  $-   $-   $227,580 
                                    
Issuance of shares via private placement at $0.02 per share   500,000    5    9,995    -    -    -    10,000 
Issuances of commitment shares - debt financing at $0.039 per share   250,000    2    9,748    -    -    -    9,750 
Shares issued for note conversion at $0.01736 to $0.02163 per share   5,021,009    50    84,211    -    -    -    84,261 
Stock-based compensation vesting   3,850,000    38    138,256    -    -    -    138,294 
Stock issued for services at $0.07 to $0.16   -    -         -    -    -    - 
Shares issued for settlement of debt   -    -    -    -    -    -    - 
Recognition of benficial conversion feature of convertible notes   -    -    261,084    -    -    -    261,084 
Cumulative affect of adoption of Lease standard ASC 842   -    -    -    -    -    -    - 
Net loss for the three months ended December 31, 2019   -    -    -    (827,919)   -    -    (827,919)
                                    
Balance at December 31, 2019   88,570,643   $885   $57,498,460   $(57,596,295)  $-   $-   $(96,950)

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

F-3
 

 

TAURIGA SCIENCES, INC. AND SUBSDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN US$)

(UNAUDITED)

 

   For the Nine Months Ended 
   December 31, 
   2019   2018 
         
Cash flows from operating activities          
Net loss  $(2,106,953)  $(476,746)
Adjustments to reconcile net loss to cash used in operating activities:         
Amortization of original issue discount   42,715    5,904 
Bad debt expense   

2,000

    - 
Loss on sale of commodities   -    2,737 
Non-cash lease operating lease expense   160    - 
Unrealized loss on digital currency   -    3,142 
Depreciation and amortization   696    732 
Loss on disposal of fixed assets   1,230    907 
Non-cash interest   20,250    - 
Loss (gain) on extinguishment of debt   (113,468)   27,975 
Amortization of debt discount   440,578    - 
Common stock issued and issuable for services (including stock-based compensation)   550,824    187,045 
Gain on disposal of discontinued operation   (4,941)   - 
Legal fees deducted from proceeds of notes payable   16,500    2,500 
Loss on sale of trading securities   (10,000)   (151,605)
Unrealized gain (loss) on trading securities   161,769    (171,789)
(Increase) decrease in assets          
Prepaid expenses   89,935    (2,400)
Inventory   (106,850)   - 
Proceeds of trading securities, net   40,000    477,631 
Accounts receivable   (94,838)   - 
Increase (decrease) in liabilities          
Accounts payable   8,859    42,686 
Deferred revenue   -    - 
Accrued expenses   46,230    1,050 
Accrued interest   36,411    (5,292)
Cash used in operating activities   (978,893)   (55,523)
           
Cash flows from investing activities          
Investment in VTGN warrants   (37,500)   - 
Proceeds (purchase) of digital currency, net   -    16,177 
Loan from Officer   50,159      
Investment - other   (42,400)   (50,000)
Purchase of property and equipment   -    (12,390)
Cash used in investing activities   (29,741)   (46,213)
           
Cash flows from financing activities          
Repayment of principal on notes payable to individuals and companies   -    (141,000)
Proceeds from the sale of common stock (including to be issued)   103,520    - 
Proceeds from convertible notes   608,500    240,750 
Cash provided by financing activities   712,020    99,750 
Net decrease in cash   (296,614)   (1,986)
           
Cash, beginning of period   385,943    12,291 
Cash, end of period  $89,329   $10,305 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:         
Interest Paid  $-   $43,819 
Taxes Paid  $-   $- 
           
NON CASH ITEMS          
Recognition of lease liability and right of use asset at inception  $12,066   $- 
Recognition of lease liability and right of use asset lease modification  $23,177   $- 
Conversion of notes payable and accrued interest for common stock  $253,900   $81,839 
Original issue discount on notes payable and debentures  $10,000   $- 
Recognition of debt discount  $484,486   $- 
Reclassification of other comprehensive income to additional paid in capital  $-   $8,042 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

F-4
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 1 – BASIS OF OPERATIONS

 

The unaudited condensed consolidated financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The condensed consolidated financial statements and notes are presented as permitted on Form 10-Q and do not contain certain information included in the Company’s annual statements and notes. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the March 31, 2019 Form 10-K filed with the SEC, including the audited consolidated financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these condensed consolidated financial statements are reasonable, the accuracy of the amounts is in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year.

 

These unaudited condensed consolidated financial statements reflect all adjustments, including normal recurring adjustments which, in the opinion of management, are necessary to present fairly the operations and cash flows for the periods presented.

 

Nature of Business

 

Tauriga Sciences, Inc. (the “Company”) is a Florida corporation, with its principal place of business being located at 555 Madison Avenue, fifth floor, New York, NY 10022. The Company has, over time, moved into a diversified life sciences technology company, with its mission to operate a revenue generating business, while continuing to evaluate potential acquisition candidates operating in the life sciences technology space.

 

Tauriga Pharma Corp.

 

On January 4, 2018, the Company announced the formation of a wholly-owned subsidiary in Delaware. This subsidiary, incorporated in Delaware, was initially named Tauriga IP Acquisition Corp., which changed its name to Tauriga Biz Dev Corp. on March 25, 2018, and most recently (January 2020) changed its name to Tauriga Pharma Corp. (as described below).

 

Effective January 2020, the Company amended the certificate of incorporation of Tauriga Business Development Corp. in relevant part to effectuate a name change of this subsidiary to Tauriga Pharma Corp. The principal reason for the name change is to concentrate this subsidiary’s focus on the development of a pharmaceutical product line that is synergistic with the Company’s primary CBD product line. Currently, the plan is to initially create a pharmaceutical line of products to address nausea symptoms related to chemotherapy treatment in patients, which we will submit for clinical trials and to regulatory agencies for approval.

 

Tauriga Sciences Limited

 

On June 10, 2019, the Company formed a wholly owned subsidiary, Tauriga Sciences Limited, with the registrar of Companies for Northern Ireland. Tauriga Sciences Limited is a private limited Company. The entity was established in conjunction with online merchant services. In conjunction to this new entity the Company entered into a two-year lease commencing on June 11, 2019 and expiring on June 30, 2021. The office is located at Regus World Trade Centre Muelle de Barcelona, edif. Sur, 2a Planta Barcelona Cataluña 08039 Spain.

 

F-5
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 1 – BASIS OF OPERATIONS (CONTINUED)

 

COMPANY PRODUCTS

 

TAURI-GUMTM

 

In October 2018, the Company’s management, along with its board of directors, began to explore the possibility of launching a cannabidiol (“CBD”) infused gum product line into the commercial marketplace. After several weeks of diligence, discussions with various parties and exploratory meetings, the Company made the determination to move forward with this business opportunity.

 

To begin this process, during the quarter ended December 31, 2018, the Company began discussions with a Maryland based chewing gum manufacturer - Per Os Biosciences LLC (“Per Os Bio”), which consummated in a manufacturing agreement in late December 2018 to launch and bring to market a white label line of CBD infused chewing gum under the brand name Tauri-GumTM. We have filed for trademark protection with the United States Patent and Trademark Office for our CBD infused chewing product line for TAURI-GUMMITM and TAURI-GUMMIESTM. In October 2019, we also filed trademark applications for the above-referenced marks in each of the European Union and Canada.

 

Under the terms of the agreement, Per Os Bio produces Tauri-GumTM based on the following criteria:

 

  A. By composition, the CBD Gum will contain 10 mg of CBD Isolate;
  B. The initial production run will be mint flavor;
  C. This proprietary CBD Gum will be manufactured under U.S. Patent # 9,744,128 (“Method for manufacturing medicated chewing gum without cooling”);
  D. Each Production Batch, including the initial production run, is estimated to yield 70,000 gum tablets or 8,700 Units (each Unit contains 8 gum tablets);
  E. Integrated Quality Control Procedures: Each production batch will be tested by a 3rd Party for CBD label content, THC content (0%), and clear for microbiology;
  F. The packaging, for retail marketplace, will consist of 8 count (gum tablet count) blister card labeled (the “Pack(s)”) with Lot # as well as Expiration Date.;
  G. Outer sleeve in the Company’s artwork and graphic design(s) and label copy; and
  H. Shipping System: Bulk packed 266 Packs per master case (“Palletized”).

 

Under terms of the agreement with Per Os Bio:

 

  A.

Each product order will consist of 8,700 Packs (unless otherwise agreed upon by both parties);

  B.

½ of initial production invoice due within 3 days of execution of Manufacturing Agreement;

  C. Provide graphic design artwork, logo, and label design to Per Os Bio;
  D. Trademark has been successfully filed with U.S.P.T.O.;
  E. To implement Kosher Certification Process;
  F. Procure appropriate Product & Liability insurance policy; and
  G.

Acquire legal opinion with respect to the confirmation of the legality to sell this CBD Gum on the Federal Statute Level.

 

The Company’s gum formulation includes distinctive features: allergen free, gluten free, vegan, kosher (K-Star certification), and incorporates a proprietary manufacturing process. See our “Risk Factors” contained in the Annual Report, including with respect, but not limited, to Federal laws and regulations that govern CBD and cannabis.

 

The Company’s E-commerce website is www.taurigum.com.

 

F-6
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 1 – BASIS OF OPERATIONS (CONTINUED)

 

COMPANY PRODUCTS (CONTINUED)

 

During the fiscal year 2020, the Company added two additional flavors. Blood Orange and Pomegranate.

 

TAURI-GUMMIES™

 

On November 25, 2019, the Company announced that it has finalized the formulation for its Vegan 25 mg CBD (Isolate) Infused Gummies product to be branded Tauri-Gummies™ for which a trademark was filed with the U.S. Patent and Trademark Office, as well as in Switzerland and the European Union. This product contains no gelatin in the formulation, as the Company has utilized plant-based alternatives in completion of this product. There will be 4 flavors offered – cherry, orange, lemon and lime.

 

Each gummy package contains 24 gummies in a jar, 6 of each flavor, containing 25mg of CBD isolate per individual gummy, or 600 mg of CBD isolate per jar. These Gum Drops have been manufactured in the “Nostalgic” 1950s confectionary style and are both plant-based (Vegan Formulated) and Kosher Certified. The Company has commenced sales of Tauri-Gummies™ during January 2020.

 

CANNABIGEROL “CBG” ISOLATE INFUSED VERSION OF TAURI-GUM™

 

On December 30, 2019, the Company announced it has commenced development of a Cannabigerol (“CBG”) Isolate Infused version of its Tauri-Gum™ brand. The Company expects that each tablet of chewing gum will contain 10mg of CBG isolate. The flavor (all natural) selected for this CBG product will be Starfruit/Peach. This product will also be Kosher Certified (Star K, Vegan and 100% made in the USA). The Company has secured distinct GS1 barcodes for both: The Starfruit/Peach CBG infused Tauri-Gum™ blister pack and retail display box.

 

DISTRIBUTION OF THE COMPANY’S PRODUCTS

 

E&M Distribution Agreement

 

On April 1, 2019, the Company entered into a distribution agreement with E&M Ice Cream Company (“E&M”) to establish Tauri-GumTM in the marketplace (the “E&M Distribution Agreement”). The Company has supported the Tauri-GumTM commercial launch with substantial levels of both financial resources and marketing support. The Company had both received payment for and delivered the product for its previously announced $54,000 Tauri-GumTM purchase order during March 2019, and re-orders in the first quarter of fiscal 2020. The Company has agreed to issue a one-time issuance of 1,000,000 restricted shares of the Company’s common stock, and to tender a one-time cash payment of $125,000 to E&M. This $125,000 cash component was paid in full to E&M on April 1, 2019, and the value of the shares is reflected in stock-based compensation based on the grant date of April 1, 2019. These shares were issued on December 26, 2019.

 

Under the terms of the E&M Distribution Agreement, the Company issued restricted shares of common stock to E&M for their support services.

 

South Florida Region Distribution Agreement

 

On April 8, 2019, the Company entered into a non-exclusive distribution agreement with IRM Management Corporation (“IRM”), an established medical practice management firm (the “IRM Distribution Agreement”). The purpose of the IRM Distribution Agreement is to target our Tauri-GumTM product to the South Florida based medical market, including chiropractors, orthopedists, as well as prospective retail customers in this geographic area.

 

Under terms of this IRM Distribution Agreement, the Company will work closely with IRM to promote Tauri-Gum™. In connection with this IRM Distribution Agreement, the Company has also agreed to a one-time issuance of 450,000 shares of the Company’s restricted common stock and a cash stipend of $10,000 to IRM. As of the date of this report, $6,000 of the $10,000 cash stipend has been paid. The value of the shares was reflected as stock-based compensation based on the grant date of April 8, 2019.

 

F-7
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 1 – BASIS OF OPERATIONS (CONTINUED)

 

DISTRIBUTION OF THE COMPANY’S PRODUCTS (CONTINUED)

 

North Eastern United States Distribution Agreement

 

On April 30, 2019, the Company, entered into a non-exclusive comprehensive distribution agreement with Sai Krishna LLC (“SKL”), a New Jersey based distributor, with relationships in the Northeast region of the United States and Asia, with the intention of increasing and accelerating market penetration of the Company’s Tauri-GumTM product line in the applicable regions.

 

In connection with the SKL Agreement, the Company has agreed to issue a one-time issuance of an aggregate of 1,000,000 restricted common shares the Company’s stock, which are subject to the customary resale and transfer restrictions imposed under the rules and regulations of the Securities and Exchange Commission. The restricted equity issuance to SKL was issued in accordance with the following schedule: (i) to Mr. Mahesh Lekkala, 500,000 restricted shares the Company’s common stock within ten (10) business days of April 30, 2019; and (ii) to SKL, 500,000, which were permitted to be immediately allocated by SKL to persons within its organization and, as such, (a) 250,000 of such shares shall be issued to SKL within ten (10) business days of April 30, 2019, and the additional issuance of (b) 250,000 of such shares shall be issued to SKL within ten (10) business days of August 1, 2019, which shares were issued on August 1, 2019. Other than the payment terms for Tauri-GumTM product purchased and distributed under the terms of the Agreement, there is no additional cash payment currently due or owing by the Company thereunder. The value of the shares is reflected as stock-based compensation with a grant date of April 30, 2019. All but 250,000 shares are expensed on this date, with those 250,000 shares valued over the term of the one-year agreement.

 

On May 11, 2019, the Company entered into a consulting agreement pursuant to the terms of the SKL agreement, whereby Ms. Neelima Lekkala was appointed Vice President of Distribution & Marketing. This agreement has a one-year term and may be extended based upon mutual agreement of Ms. Lekkala and the Company. Ms. Lekkala will focus her efforts on the expansion of Tauri-GumTM in terms of gross sales and revenue growth through the acquisition of new customers, establishment of professional marketing materials & protocols, logistics improvement(s) and fulfillment services. Ms. Lekkala is not an executive officer of the Company and, therefore, is not deemed to be an affiliate of the Company. Ms. Lekkala’s compensation includes restricted shares of the Company’s common stock, which are fully earned and vested upon the execution of her consulting agreement. Additionally, Ms. Lekkala is entitled to receive a 30% commission on total gross sales through the sale of the Tauri-GumTM product line, which the Company may pay in either stock or cash at the election of Ms. Lekkala.

 

Windmill Health Distribution Agreement

 

On June 28, 2019, the Company entered into a distribution agreement with Windmill Health Products, LLC (“Windmill Health”), a New Jersey based distributor, with the intention of increasing and accelerating market penetration of the Company’s Tauri-GumTM product line. The Company did not contribute any capital or issue any equity to Windmill Health in connection with the Windmill Health distribution agreement.

 

These arrangements are more fully described in our periodic and current reports that we have filed with the Securities and Exchange Commission, included these agreements as exhibits thereto, and which are also discussed in our consolidated financial statements to our Annual Report for the year ended March 31, 2019, as well as our Quarterly Reports filed in the applicable periods thereafter.

 

In connection with the issuances of any restricted securities by the Company regarding the above-described distribution agreements or other agreements described in this periodic report, please see Item 2, Unregistered Sales of Equity Securities for additional information.

 

REGULATORY MATTERS

 

Food and Drug Administration

 

On May 31, 2019, the U. S. Food and Drug Administration (“FDA”) held public hearings to obtain scientific data and information about the safety, manufacturing, product quality, marketing, labeling, and sale of products containing cannabis or cannabis-derived compounds, including CBD. The hearing came approximately five months after the Agricultural Improvement Act of 2018 (more commonly known as the Farm Bill), went into effect and removed industrial hemp from the Schedule I prohibition under the Controlled Substances Act (CSA) (industrial hemp means cannabis plants and derivatives that contain no more than 0.3 percent tetrahydrocannabinol, or THC, on a dry weight basis).

 

F-8
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 1 – BASIS OF OPERATIONS (CONTINUED)

 

REGULATORY MATTERS (CONTINUED)

 

Food and Drug Administration (Continued)

 

Though the Farm Bill removed industrial hemp from the Schedule I list, the Farm Bill preserved the regulatory authority of the FDA over cannabis and cannabis-derived compounds used in food and pharmaceutical products under the Federal Food, Drug, and Cosmetic Act (FD&C Act) and section 351 of the Public Health Service Act. The FDA has been clear that it intends to use this authority to regulate cannabis and cannabis-derived products, including CBD, in the same manner as any other food or drug ingredient. In addition to holding the hearing, the agency had requested comments by July 2, 2019 regarding any health and safety risks of CBD use, and how products containing CBD are currently produced and marketed, which comment period was concluded on July 16, 2019. As of the date hereof, the FDA has taken the position that it is unlawful to put into interstate commerce food products containing hemp derived CBD, or to market CBD as, or in, a dietary supplement. Furthermore, since the closure of the FDA hearings on this issue, some state and local agencies have issued a ban on the sale of any food or beverages containing CBD. H.R. 5587, a newly introduced legislative effort at the federal level, seeks to consider hemp-derived CBD and substances containing hemp-derived CBD to be dietary supplements under the FD&C Act, which would likely resolve ambiguity and provide clear guidance to stakeholders about how to comply with applicable FDA law. However, H.R. 5587 was only recently introduced in the House of Representatives, and is in its infancy, requiring further approvals, including approval of the House of Representatives, the Senate and the President of the United States before being enacted into law, if at all.

 

Furthermore, with respect to Company’s developing CBG product line, the FDA has provided no guidance as to how cannabinoids other than CBD (sch as CBG) shall be regulated under the FD&C Act, and it is unclear at this time how such potential regulation could affect the results of the operations or prospects of the Company or this product line.

 

See our Risk Factors for more information about these items, as well as certain related disclosures included our Results of Operations under the heading “Going Concern”.

 

The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding, success in developing and marketing its products and the level of competition and potential regulatory enforcement actions. These risks and others are described in greater detail in the Risk Factors set forth in this periodic report and our annual reports that we have filed and will also file in the future.

 

OTHER BUSINESS ITEMS

 

2019 Increase in Authorized Shares

 

On July 26, 2019, the Company held a meeting of its board of directors. The matters voted on and approved at the meeting included an amendment to the Company’s Articles of Incorporation to increase the number of authorized shares of the Company’s common stock, $0.00001 par value per share from 100,000,000 to 400,000,000 shares (the “Authorized Shares Increase”). The increase in the authorized shares was approved by the shareholders of record at a special meeting of shareholders on September 10, 2019, and the Company promptly filed its Amended Articles of Incorporation with the division of corporations of the State of Florida to effectuate the increase in authorized shares, which was formally accepted by the Florida Division of Corporations on September 12, 2019.

 

F-9
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 1 – BASIS OF OPERATIONS (CONTINUED)

 

OTHER BUSINESS ITEMS (CONTINUED)

 

Approval to Operate Global Seller Account by Alibaba Group

 

On January 6, 2020, the Company announced that is has been approved by Chinese multinational conglomerate, Alibaba Group (“Alibaba”), to operate a Global Seller Account. In addition, the Company has been designated as a Gold Supplier (Gold Tier Level Supplier). This Alibaba approval opens up the global marketplace to the Company, its products, its product lines, as well as future business opportunities. The Company is working diligently towards establishing a partnership with a China based fulfillment and distribution network.

 

Certified as Affiliate Vendor by The National Association of College Stores

 

On January 7, 2020, the Company announced that is has been certified by the National Association of College Stores (“NACS”) as an affiliate vendor. As a vendor of NACS, the Company has joined the most comprehensive group of campus retailers working to provide the best services and selections to college students across the United States.

 

HISTORICAL BUSINESS ITEMS

 

See Note 1 of our Consolidated Financial Statements in our Annual Report for the year ended March 31, 2019 for additional information on the below-referenced historical business items.

 

Cupuaçu Butter Lip Balm

 

On December 23, 2016, the Company entered into a non-exclusive, 12-month license agreement (the “License Agreement”) with Cleveland, Ohio based cosmetics products company Ice + Jam LLC (“Ice + Jam”) to market Ice + Jam’s proprietary cupuaçu butter lip balm, sold under the trademark HerMan® which launched during the quarter ended December 31, 2017. During February of 2018, the Company’s strategy with respect to the HerMan® product was negatively impacted by a series of product defects relating to the twisting mechanism of the lip balm tube. As a result of this and the concomitant halting of selling efforts, the Company had no sales of the HerMan® product during the year ended March 31, 2019. The Company has removed the product from the website and the remaining inventory was written-off as it was determined that the units were not usable. The Company has discontinued this operation as of March 31, 2019.

 

Honeywood

 

Following the termination of a proposed 2014 merger between the Company and California-based Honeywood LLC (“Honeywood”), a developer of a topical medicinal cannabis product, on August 1, 2017, the Company entered into a Debt Conversion Agreement, whereby the Company agreed to convert an $170,000 note receivable due from Honeywood, including accrued interest into a 5% membership interest in Honeywood. At the time of the Honeywood Conversion Agreement, the receivable balance under the Note of $199,119 had been fully written off by the Company in a prior period. As a result of the Honeywood Conversion Agreement, the Company deemed the investment to have no current value.

 

F-10
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 1 – BASIS OF OPERATIONS (CONTINUED)

 

HISTORICAL BUSINESS ITEMS (CONTINUED)

 

Pilus Energy

 

On January 28, 2014, the Company acquired Pilus Energy, LLC (“Pilus”), an Ohio limited liability company and a developer of alternative cleantech energy platforms using proprietary microbial solutions that create electricity while consuming polluting molecules from wastewater. On December 22, 2016, the Company entered in a membership interest transfer agreement with Open Therapeutics whereby the Company sold 80% of its membership interest in Pilus back to Open Therapeutics for consideration of the termination of 80% of the unexercised portion of the warrants to purchase the Company’s common stock. Open Therapeutics agreed to pay to the Company 20% of the net profit generated Pilus Energy from its previous year’s earnings, if any. On January 12, 2019, the Company and Open Therapeutics agreed to extinguish a contingent liability in exchange for a one-time issuance of 500,000 restricted shares of Company’s common stock.

 

Blink Charging Company

 

On March 29, 2018 the Company’s then named subsidiary - Tauriga Biz Dev Corp. - entered into an independent sales representative agreement with Blink Charging Company (NASDAQ: BLNK) (“BLINK”). Under this agreement we became a non-exclusive independent sales representative to solicit orders from potential customers for EV (“Electric Vehicle”) Stations placement. This sales agreement is a three-tier compensation model based on whether we contract the new customer to purchase equipment outright from BLINK or enter into one of two revenue-sharing agreements. If our subsidiary effectuates a sale of BLINK equipment it will receive a one-time sales commission based on the sales price of the equipment sale. In the case where our subsidiary secures a revenue sharing agreement with a customer where BLINK remains the owner, then our subsidiary will be paid an on-going commission based off of gross charger revenue, subject to which party paid for the installation. Commission payments under the revenue sharing agreement are subject to minimum revenue generation hurdles.

 

On June 29, 2018, the Company purchased four BLINK Level – 2 - 40” pedestal chargers for permanent placement in a retail location or locations whereby the Company will pay a variable annual fee based on 7% of total revenue per charging unit. The rest of the proceeds will be split 80/20 between the Company and the host location owner or its assignee. The host location owner will pay for the cost of providing power to these unit as well as installation costs. As of December 31, 2019, we have not installed any of these machines in any locations, and no revenue has been generated through the Blink contract. Management has not made any decision regarding placement of these units at this time. The Company has not decided to abandon this business line, and therefore, we have not reclassified these assets as held for sale.

 

Going Concern

 

During the fourth quarter of the year ended March 31, 2019, the Company began sales and marketing efforts for its Mint flavored Tauri-GumTM product. During the three months ended March 31, 2019, the Company recognized sales of $57,134 and a gross profit of $20,006, which has continued into the nine months ended December 31, 2019 where the Company recognized revenue of $201,881 and a gross profit of $35,719. During the nine months ended December 31, 2019, the Company has entered into multiple distribution agreements and has engaged an independent contractor to act as Vice President of Distribution and Marketing. At December 31, 2019, the Company had a working capital deficit of $121,062, resultant largely from convertible notes payable and a liability to issue common stock. Although the Company expects that the deficit will be remedied by repayment in cash or the conversion of notes into common stock shares as well as the issuance of shares for which the Company is obligated, it still believes that there is uncertainty with respect to continuing as a going concern.

 

F-11
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 1 – BASIS OF OPERATIONS (CONTINUED)

 

Going Concern (Continued)

 

On July 1, 2019, months after the NYC Department of Heath announced a ban on cannabidiol in foods and beverages (mainly focused on restaurants and baked goods), the updated New York City Health Code now includes an embargoing of CBD-infused Edible(s) Products (including packaged products). The Company is hopeful that the FDA as well as the New York City Council will implement regulations surrounding the CBD industry in a logical and prompt manner. The FDA’s uncertainty surrounding CBD was the initial cause of the New York City ban, and we believe further clarification from the FDA supporting its safety and regulating its labeling will also offer a clearer pathway to the New York City CBD market. The Company believes it is well positioned under the circumstances and has taken a conservative approach towards its products, including, for example, ensuring that its product manufacturer periodically tests for compliance with the Agricultural Improvement Act of 2018, such as utilizing CBD oils from hemp plants which contain 0% THC content. The Company remains confident that this embargo on CBD Edible(s) products will be lifted and/or clarified in the future. In the interim, as a result of this embargo, the Company has taken the necessary steps to ensure that their marketing efforts are focused on areas outside of New York City, while maintaining its physical presence in New York City.

 

The Company, in the short term, intends to continue funding its operations either through cash-on-hand or through financing alternatives. Management’s plans with respect to this include raising capital through equity markets to fund future operations as well as the possible sale of its remaining marketable securities which had a market value of $158,631at December 31, 2019. In the event the Company cannot raise additional capital to fund and/or expand operations or fails to raise adequate capital and generate adequate sales revenue, or if the regulatory landscape were to become more difficult or result in regulatory enforcement, it could result in the Company having to curtail or cease operations.

 

Additionally, even if the Company does raise sufficient capital to support its operating expenses and generate adequate revenues in the short term, there can be no assurances that the revenues will be sufficient to enable it to develop business to a level where it will generate profits and cash flows from operations to achieve profitability thereby eliminating its reliance on alternative sources of funding. Although management believes that the Company is in a stronger position than it has been in in several years, there is still no guarantee that profitable operations with sufficient cashflow to sustain operations can or will be achieved without the need of alternative financing, which is limited. These matters still raise significant doubt about the Company’s ability to continue as a going concern as determined by management. The Company believes that there is uncertainty with respect to continuing as a going concern until the operating business can achieve more than nominal sales and profitable operations and sustain cash flow to operate the Company for a period of twelve months. In the event the Company does need to raise additional capital to fund operations or engage in a transaction, failure to raise adequate capital and generate adequate sales revenues could result in the Company having to curtail or cease operations. Even if the Company does raise sufficient capital to support its operating expenses, acquire new license agreements or ownership interests in life science companies and generate adequate revenues, or the agreements entered into recently are successful, there can be no assurances that the revenues will be sufficient to enable it to develop business to a level where it will generate profits and cash flows from operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern as determined by management. However, the accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These condensed consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

 

In an effort to support the Company’s future capital needs, on January 21, 2020, the Company entered into a $5,000,000 equity line financing agreement with Tangiers Global, LLC (“Tangiers”), as well as a registration right agreement related thereto. The financing is over a maximum of 36 months. Pursuant to the Registration Rights Agreement, a maximum of 76,000,000 shares of our common stock, par value $.00001 per share that we may sell to Tangiers from time to time will be registered by us on Form S-1 with the Securities and Exchange Commission under the Securities Act of 1933, as amended, for this financing. We are required to use our best efforts to file the Registration Statement within ninety (90) days of the date the Investment Agreement. (See Note 14).

 

F-12
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Condensed Consolidated Financial Statements

 

The condensed consolidated financial statements include the accounts and activities of Tauriga Sciences, Inc., its wholly-owned Canadian subsidiary, its wholly-owned subsidiary Tauriga Pharma Corp. (f/k/a Tauriga Biz Dev Corp – or “Tauriga BDC”, and referenced herein as Tauriga BDC for contextual purposes only in describing the Blink contractual arrangement) and Tauriga Sciences Limited. All intercompany transactions have been eliminated in consolidation. As of December 31, 2019, there is no activity in any of the Company’s subsidiaries other than Tauriga Pharma Corp. holding the electric car chargers and the leasehold interest in Tauriga Sciences Limited.

 

Revenue Recognition

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This standard provides a single set of guidelines for revenue recognition to be used across all industries and requires additional disclosures. The updated guidance introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted the updated guidance effective October 1, 2017 as the Company commenced sales of HerMan® using the full retrospective method. The new standard did not have a material impact on its financial position and results of operations, as it did not change the manner or timing of recognizing revenue.

 

Under ASC 606, in order to recognize revenue, the Company is required to identify an approved contract with commitments to preform respective obligations, identify rights of each party in the transaction regarding goods to be transferred, identify the payment terms for the goods transferred, verify that the contract has commercial substance and verify that collection of substantially all consideration is probable. The adoption of ASC 606 did not have an impact on the Company’s operations or cash flows.

 

On March 29, 2018 the Company, through Tauriga BDC, entered into an independent sales representative agreement with Blink to be a non-exclusive independent sales representative. Under the agreement with Blink, the Company may solicit orders from potential customers for EV charging station placement. Tauriga BDC will be compensated upon contracting for so long as the Company’s acquired prospect remains under contract. This sales agreement is a three-tier model based on whether Tauriga BDC contracts the new customer to purchase equipment outright from Blink or enter into one of two revenue-sharing agreements. In the case Tauriga BDC effectuates a sale of Blink equipment it will receive a one-time sales commission based on the sales price of the equipment sale. In the case where Tauriga BDC secures a revenue sharing agreement with a customer where Blink remains the owner, Tauriga BDC will be paid an on-going commission based off of gross charger revenue, subject to which party paid for the installation. Commission payments under the revenue sharing agreement are subject to minimum revenue generation hurdles.

 

On June 29, 2018, the Company purchased four Blink Level 2 - 40” pedestal chargers for permanent placement in a retail location or locations whereby the Company will pay a variable annual fee based on 7% of total revenue per charging unit. The remainder of the proceeds will be split 80/20 between the Company and the host location owner or its assignee. The host location owner will pay for the cost of providing power to these unit as well as installation costs.

 

As of December 31, 2019, the Tauriga BDC has not installed any of these machines in any locations, and no revenue has been generated through the Blink contract.

 

F-13
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Revenue Recognition (Continued)

 

The Company recognizes revenue upon the satisfaction of the performance obligation. The Company considers the performance obligation met upon shipment of the product or delivery of the product. For ecommerce orders, the Company’s products are shipped by a fulfillment company and payment is made in advance of shipment either through credit card or PayPal. The Company also delivers the product to its customers that they market to in the metropolitan New York Tri-State area that are not covered under any existing distribution agreements. The Company generally collects payment within 30 to 60 days of completion of its performance obligation, and the Company has no agency relationships. The Company recognized revenue from operations in the amount of $181,111 during the nine months ended December 31, 2019 compared to no revenue for the same period in the prior year. All revenue is from the sale of the Company’s Tauri-GumTM product line and there were accounts receivable of $92,838 outstanding for these sales, as of December 31, 2019.

 

The Company recognized no revenue from discontinued operations during the nine months ended December 31, 2019 which was related to the sales of the HERMAN® lip balm product.

 

Allowance for Doubtful Accounts

 

The Company maintains an allowance for doubtful accounts, which includes sales returns, sales allowances and bad debts. The allowance adjusts the carrying value of trade receivables for the estimate of accounts that will ultimately not be collected. An allowance for doubtful accounts is generally established as trade receivables age beyond their due dates, whether as bad debts or as sales returns and allowances. As past due balances age, higher valuation allowances are established, thereby lowering the net carrying value of receivables. The amount of valuation allowance established for each past-due period reflects the Company’s historical collections experience, including that related to sales returns and allowances, as well as current economic conditions and trends. The Company also qualitatively establishes valuation allowances for specific problem accounts and bankruptcies, and other accounts that the Company deems relevant for specifically identified allowances. The amounts ultimately collected on past-due trade receivables are subject to numerous factors including general economic conditions, the financial condition of individual customers and the terms of reorganization for accounts exiting bankruptcy. Changes in these conditions impact the Company’s collection experience and may result in the recognition of higher or lower valuation allowances. At December 31, 2019, the Company has established an allowance for doubtful accounts in the amount of $2,000.

 

Sales Refunds

 

The Company’s refund policy allows customers to return product for any reason except where the customer does not like the taste of the product. The customer has 30 days from the date of purchase to initiate the process. Returns are limited to one return or exchange per customer. Only purchases up to $100 qualify for a refund. Approved return/refund requests are typically processed within 1-2 business days. For product purchases made through a Tauri-GumTM distributor or retailer, the customer is required to work with original purchase location for any return or exchange. The Company has not established a reserve for returns as of December 31, 2019 however will monitor the refunds to estimate whether a reserve will be required.

 

Use of Estimates

 

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash Equivalents

 

For purposes of reporting cash flows, cash equivalents include investment instruments purchased with an original maturity of three months or less. At December 31, 2019, the Company’s cash on deposit with financial institutions did not exceed the total FDIC insurance limit of $250,000. At December 31, 2019 and March 31, 2019, the Company had a cash balance of $89,329 and $385,943, respectively. The Company’s does not expect, in the near term, for its cash balance to exceed the total FDIC insurance limit of $250,000 for other than very short periods of time where the Company would use such cash in excess of insurance in the very short-term in operating activities. To reduce its risk associated with the failure of such financial institution, the Company holds its cash deposits in more than one financial institution and evaluates at least annually the rating of the financial institution in which it holds its deposits. The Company had no cash equivalents as of December 31, 2019 and March 31, 2019.

 

F-14
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Investment in Trading Securities

 

Investment in trading securities consist of investments in shares of common stock of companies traded on public markets as well as publicly traded warrants of these companies should there be a market for them. These securities are carried on the Company’s balance sheet at fair value based on the closing price of the shares owned on the last trading day before the balance sheet date of this report. Fluctuations in the underlying bid price of the stocks result in unrealized gains or losses. The Company recognizes these fluctuations in value as other income or loss.

 

For investments sold, the Company recognizes the gains and losses attributable to these investments as realized gains or losses in other income or loss.

 

Investment – Cost Method

 

Investment in other companies that are not currently trading, are valued based on the cost method as the Company holds less than 20% ownership in these companies and has no influence over operational and financial decisions of the companies. The Company will evaluate, at least annually, whether impairment of these investments is necessary under ASC 320. As of December 31, 2019, the Company has not impaired any of their cost method investments.

 

Inventory

 

Inventory consists of finished goods in salable condition stated at the lower of cost or market determined by the first-in, first-out method. The inventory consists of packaged and labeled salable inventory. Shipping of product to finished good inventory fulfillment center is also included in the total inventory cost. Shipping of product upon sale for online sales is paid by the customer upon ordering for orders of single packs of Tauri-GumTM. For multiple pack or wholesale product orders shipping cost is paid by the Company. As of December 31, 2019, the Company’s inventory on hand had a value of $117,722. The Company also has paid deposits in the amount of $49,500 to the manufacturer, Per Os Bio, towards orders not received as of December 31, 2019. Amounts paid to Per Os Bio for Tauri-GumTM are classified as deposits (other current asset) on the Company’s condensed consolidated balance sheet until the goods are available for sale. The Company has not established any inventory reserve on the Tauri-GumTM as of December 31, 2019.

 

Property and Equipment

 

Property and equipment are stated at cost and is depreciated using the straight-line method over the estimated useful lives of the respective assets. Routine maintenance, repairs and replacement costs are expensed as incurred and improvements that extend the useful life of the assets are capitalized. When property and equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is recognized in operations.

 

Intangible Assets

 

Intangible assets consisted of licensing fees and a patent prior to being impaired which were stated at cost. Licenses were amortized over the life of the agreement and patents were amortized over the remaining life of the patent at the date of acquisition.

 

Net Loss Per Common Share

 

The Company computes per share amounts in accordance with FASB ASC Topic 260 “Earnings per Share” (“EPS”), which requires presentation of basic and diluted EPS. Basic EPS is computed by dividing the income (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock and common stock equivalents outstanding during the periods; however, potential common shares are excluded for period in which the Company incurs losses, as their effect is anti-dilutive. For the three and nine months ended December 31, 2019, basic and fully diluted earnings per share were the same as the Company had losses in this period.

 

F-15
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Stock-Based Compensation

 

The Company accounts for Stock-Based Compensation under ASC 718 “Compensation-Stock Compensation,” which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 requires measurement of cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized.

 

The Company accounts for stock-based compensation awards to non-employees in accordance with ASC 505-50, “Equity-Based Payments to Non-Employees.” Under ASC 505-50, the Company determines the fair value of the warrants or stock-based compensation awards granted on the grant date as either the fair value of the consideration received, or the fair value of the equity instruments issued, whichever is more reliably measurable. Any stock options or warrants issued to non-employees are recorded in expense and an offset to additional paid-in capital in stockholders’ equity over the applicable service periods using variable accounting through the vesting dates based on the fair value of the options or warrants at the end of each period.

 

The Company issues stock to consultants for various services. The costs for these transactions are measured at the fair value on the grant date of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The Company recognized consulting expense and a corresponding increase to additional paid-in-capital related to stock issued for services over the term of the related services.

 

Reclassifications

 

Certain prior year amounts have been reclassified to conform to the current period presentation. The reclassifications had no effect on the net loss or cash flows of the Company.

 

Impairment of Long-Lived Assets

 

Long-lived assets, primarily fixed assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. The Company will perform a periodic assessment of assets for impairment in the absence of such information or indicators. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or a significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. For long-lived assets to be held and used, the Company would recognize an impairment loss only if it’s carrying amount is not recoverable through its undiscounted cash flows and measures the impairment loss based on the difference between the carrying amount and estimated fair value.

 

Research and Development

 

The Company expenses research and development costs as incurred. There were no research and development costs for the three months ended December 31, 2019 and $3,852 for the nine months ended December 31, 2019 compared to no expense during the same periods in the prior year. The Company is continually evaluating products and technologies in the natural wellness space, including its Tauri-GumTM product including new flavor formulations and other CBD delivery products, as well as development of a Cannabigerol (“CBG”) Isolate Infused version of its Tauri-Gum™ brand in addition to any intellectual property or other related technologies. As the Company investigates and develops relationships in these areas, resultant expenses for trademark filings, license agreements, website and product development and design materials will be expensed as research and development. Some costs will be accumulated for subsidiaries prior to formation of any new entities.

 

Fair Value Measurements

 

ASC 820 “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosure about fair value measurements.

 

F-16
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Fair Value Measurements (Continued)

 

The following provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which fair value is observable:

 

Level 1- fair value measurements are those derived from quoted prices (unadjusted in active markets for identical assets or liabilities);

 

Level 2- fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

 

Level 3- fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

Financial instruments classified as Level 1 – quoted prices in active markets include cash.

 

These condensed consolidated financial instruments are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment to estimation. Valuations based on unobservable inputs are highly subjective and require significant judgments. Changes in such judgments could have a material impact on fair value estimates. In addition, since estimates are as of a specific point in time, they are susceptible to material near-term changes. Changes in economic conditions may also dramatically affect the estimated fair values.

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management for the respective periods. The respective carrying value of certain financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash, investments, short-term notes payable, accounts payable and accrued expenses.

 

Share settled debt

 

The general measurement guidance in ASC 480 requires obligations that can be settled in shares with a fixed monetary value at settlement to be carried at fair value unless other accounting guidance specifies another measurement attribute. The Company has determined that ASC 835-30 is the appropriate accounting guidance for the share-settled debt, which is what was done by setting up the debt discount which is to be amortized to interest expense over the term of the instrument. Amortization of discounts are to be amortized using the effective interest method over the term of the note.

 

ASC 480-10-25-14 requires liability accounting for (1) any financial instrument that embodies and unconditional obligation to transfer a variable number of shares or (2) a financial instrument other than an outstanding share that embodies a conditional obligation to transfer a variable number of shares, provided that the monetary value of the obligation is based solely or predominantly on any of the following: 1. A fixed monetary amount known at inception (e.g. stock settled debt); 2. Variations in something other than the fair value of the issuer’s equity shares (e.g. a preferred share that will be settled in a variable number of common shares with tits monetary value tied to a commodity price); and 3. Variations in the fair value of the issuer’s equity shares, but the monetary value to the counterparty moves inversely to the value of the issuer’s shares (e.g. net share settled written put options, net share settled forward purchase contracts).

 

Notwithstanding the fact that the above instruments can be settled in shares, FASB concluded that equity classification is not appropriate because instruments with those characteristics do not expose the counterparty to risks and rewards similar to those of an owner and, therefore do not create a shareholder relationship. The issuer is instead using its shares as the currency to settle its obligation.

 

The Company has multiple notes that contain discount provisions whereby the holder can exercise conversion rights at a discount to the market price for a 15-day trailing period based on the market volume average weighted price. ASC 470-20 defines this as a beneficial conversion feature which that shall be recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value, not to exceed the face value of the note, to additional paid in capital. This segmented value, is to be amortized using the effective interest method over the term of the note.

 

F-17
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Income Taxes

 

Income taxes are accounted for under the liability method of accounting for income taxes. Under the liability method, future tax liabilities and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in the financial statement carrying amounts of assets and liabilities and their respective tax bases.

 

Future tax assets and liabilities are measured using enacted or substantially enacted income tax rates expected to apply when the asset is realized, or the liability settled. The effect of a change in income tax rates on future income tax liabilities and assets is recognized in income in the period that the change occurs. Future income tax assets are recognized to the extent that they are considered more likely than not to be realized.

 

ASC 740 “Income Taxes” clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. This standard requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.

 

As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by ASC 740 and concluded that the tax position of the Company does not meet the more-likely-than-not threshold as of December31, 2019.

 

Recent Accounting Pronouncements

 

In June 2018, the FASB issued ASU No. 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” which addresses accounting for issuance of all share-based payments on the same accounting model. Previously, accounting for share-based payments to employees was covered by ASC Topic 718 while accounting for such payments to non-employees was covered by ASC Subtopic 505-50. As it considered recently issued updates to ASC 718, the FASB, as part of its simplification initiatives, decided to replace ASC Subtopic 505-50 with Topic 718 as the guidance for non-employee share based awards. Under this new guidance, both sets of awards, for employees and non-employees, will essentially follow the same model, with small variations related to determining the term assumption when valuing a non-employee award as well as a different expense attribution model for non-employee awards as opposed to employee awards. The ASU is effective for public business entities beginning in 2019 calendar years and one year later for non-public business entities. The Company has determined that there is not a material impact on their condensed consolidated financial position and results of operations as a result of this standard.

 

In February 2016, FASB issued ASU 2016-02, “Leases (Topic 842).” The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases.

 

The new guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period and is applied retrospectively. Early adoption is permitted. The Company has adopted this standard as of April 1, 2019 (See Note 6).

 

There are several other new accounting pronouncements issued or proposed by the FASB. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe any of these accounting pronouncements has had or will have a material impact on the Company’s condensed consolidated financial position or operating results.

 

Subsequent Events

 

In accordance with ASC 855 “Subsequent Events” the Company evaluated subsequent events after the balance sheet date through the date of issuance.

 

F-18
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 3– INVENTORY

 

Inventory from continuing operations

 

Inventory value by product as of:

 

   December 31, 2019   March 31, 2019 
   (unaudited)     
Tauri-GumTM  $117,722   $10,872 
           
Total Inventory  $117,722   $10,872 

 

At December 31, 2019, deposits to Per Os Bio in the amount of $49,500 for the manufacturing costs of Tauri-GumTM have been classified as a deposit (prepaid expenses other current assets) on the Company’s condensed consolidated balance sheet, as the goods are not yet available for sale.

 

At March 31, 2019, the Company had deposits to Per Os Bio in the amount of $105,000 for the manufacturing costs of Tauri-GumTM for goods not yet available for sale.

 

NOTE 4– DISCONTINUED OPERATIONS

 

On March 31, 2019, the Company decided to discontinue operations relative to its HERMAN© Lip balm product line. After much effort the Company was unable to resolve manufacturing issues as it related to it its lip balm tube mechanism. The Company did not believe that these issues will be resolvable without a substantial investment of time and money. Therefore, the Company exchanged its 50% ownership in Ice+Jam, LLC for the balance of the non-controlling interest as of March 31, 2019. On April 1, 2019, the Company recognized a gain on the disposal of discontinued operations in the amount of $4,941.

 

The Company had no revenue or expenses from discontinued operations during the nine months ended December 31, 2019.

 

TAURIGA SCIENCES, INC. AND SUBSIDIARY

BALANCE SHEETS FROM DISCONTINUED OPERATIONS

 

   December 31, 2019   March 31, 2019 
   (unaudited)     
Assets from discontinued operations  $            -   $581 
           
Liabilities from discontinued operations  $-   $5,522 

 

NOTE 5– PROPERTY AND EQUIPMENT

 

The Company’s property and equipment is as follows:

 

   December 31, 2019   March 31, 2019   Estimated Life
   (unaudited)        
Computers, office furniture and other equipment  $69,808   $69,808   3-5 years
              
Less: accumulated depreciation   (58,724)   (56,798)   
              
Net  $11,084    13,010    

 

F-19
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 5– PROPERTY AND EQUIPMENT (CONTINUED)

 

On June 29, 2018, the Company purchased four Blink Level 2 – 40” pedestal chargers for permanent placement in one or more retail locations whereby the Company will share revenue from these electric car vehicle charging units with such location owner. No depreciation expense has been recorded for the charging units as of December 31, 2019 due to the fact that they have not been placed in service.

 

Depreciation expense for the three and nine months ended December 31, 2019 were $232 and $695 compared to $214 and $732 for the same period in the prior year. During the nine months ended December 31, 2019, the Company disposed of computer equipment valued at $2,782 recognizing a loss on disposal of $1,230.

 

During the year ended March 31, 2019 the Company disposed of computer equipment valued at $1,632 recognizing a loss on disposal of $907.

 

NOTE 6 – OPERATING LEASE

 

The Company has adopted ASU No. 2016-02, Leases (Topic 842), as of April 1, 2019 and will account for the new lease in terms of the right of use assets and offsetting lease liability obligations for this new lease under this pronouncement. In accordance with ASC 842 - Leases, effective April 1, 2019, the Company recorded a net lease right of use asset and a lease liability at present value of approximately $7,492 and $7,895, respectively. The Company recorded these amounts at present value, in accordance with the standard, using a discount rate of 8% which is representative of the last borrowing rates for notes issued to non-related parties. The right of use asset is composed of the sum of all lease payments, at present value, and is amortized straight line over the life of the expected lease term. For the expected term of the lease the Company used the initial term of the two-year lease. Upon the election by the Company to extend the lease for additional years, that election will be treated as a lease modification and the lease will be reviewed for remeasurement. This lease will be treated as an operating lease under the new standard.

 

The Company has chosen to implement this standard using the modified retrospective model approach with a cumulative-effect adjustment, which does not require the Company to adjust the comparative periods presented when transitioning to the new guidance on April 1, 2019. The Company has also elected to utilize the transition related practical expedients permitted by the new standard. The modified retrospective approach provides a method for recording existing leases at adoption and in comparative periods that approximates the results of a modified retrospective approach. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of approximately $7,492 and $7,895 as of April 1, 2019, respectively. The difference between the additional lease assets and lease liabilities, net of the deferred tax impact, will be recorded as an adjustment to retained earnings. The standard is not expected to materially impact our consolidated net earnings and had no impact on cash flows.

 

Corporate office – New York

 

On December 1, 2017, the Company relocated its corporate headquarters from Danbury, Connecticut to New York, New York. The Company has entered into a two-year lease at $1,010 per month for the term of the lease. The lease right of use asset for this lease at adoption was $7,492 and will be amortized on a straight-line basis over the remaining term of the lease. For the nine months ended December 31, 2019 the Company recorded a lease expense of $6,322. On September 1, 2019, the Company entered into a two-year lease extension with the modified lease expiring November 30, 2021. The lease modification required the Company to remeasure the lease asset and lease liability based on the original lease. The Company recorded a net lease right of use asset and a lease liability at present value of approximately $26,093 for each. The Company recorded these amounts at present value, in accordance with the standard, using a discount rate of 8.98% which was representative of the weighted average borrowing rates for all notes issued to non-related parties based on the respective principal balances at the time of the lease extension. As of December 31, 2019, the value of the unamortized lease right of use asset is $22,205. As of December 31, 2019, the Company’s lease liability was $22,688.

 

F-20
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 6 – OPERATING LEASE (CONTINUED)

 

Barcelona office

 

On June 11, 2019 the Company entered into a two-year lease, expiring on June 30, 2021. The office is located at Regus World Trade Centre Muelle de Barcelona, edif. Sur, 2a Planta Barcelona Cataluña 08039 Spain. Monthly rent payments will be approximately $201 per month (based on the contractual rate of €178 multiplied by the exchange rate of 1.13 on the day the lease agreement was entered into). In accordance with ASC 842 - Leases, effective June 11, 2019, the Company will record additional net lease right of use asset and a lease liability at present value of approximately $4,574, respectively as a result of this lease. The lease will be initially recorded using an exchange rate of 1.13. Any fluctuations in the currency rate will be recorded as gain or loss on currency translation.

 

As of December 31, 2019, the value of the unamortized lease right of use asset is $3,343. As of December 31, 2019, the Company’s lease liability was $3,423.

 

The lease right of use asset, at inception, of $27,050 is amortized on a straight-line basis over the term of the lease. The present value of the New York corporate office lease had an initial present value of $22,476 at December 1, 2017. The Barcelona office lease value had an initial present value of $4,574. The present value of the modified New York Corporate office lease, at September 1, 2019 was $26,092. For the nine months ended December 31, 2019 the Company recorded a lease expense of $9,775. As of December 31, 2019, the value of the unamortized lease right of use asset is $25,548. As of December 31, 2019, the Company’s lease liability was $26,111.

 

Maturity of Operating Lease Liability for fiscal year ended March 31, 
2020   $3,287 
2021   $13,891 
2022   $8,933 
       
Total lease payments   $26,111 

 

The following chart shows the Company’s operating lease cost for the three and nine months ended December 31, 2019 and 2018:

 

   For the three months ended
December 31,
  For the nine months ended
December 31,
 
   2019   2018   2019   2018 
Amortization of right of lease asset  $3,453   $-   $9,775   $- 
Lease interest cost   714    -    1,142    - 
Total Lease cost  $4,168   $-   $10,918   $- 

 

The following chart shows the Company’s operating lease liability at December 31, 2019.

 

Discounted Operating Lease liability at inception - December 1, 2017  $27,050 
Lease modification - September 1, 2019   26,093 
Lease modification adjustment- September 1, 2019   (200)
Financing cost   11,142 
Less of lease payments made   (27,544)
Cumulative effect of adoption of ASC 842   (430)
Operating lease liability at December 31, 2019   26,111 
Less Lease Liability current portion   (13,591)
Lease Liability - net current portion at December 31, 2019  $12,520 

 

F-21
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 7 – NOTES PAYABLE

 

Notes payable and convertible notes consisted of the following as of:

 

       December 31, 2019   March 31, 2019 
     
Alternative Strategy Partners PTE Ltd.  (a)    -    90,000 
GS Capital Partners LLC - Oct 2018  (b)    -    180,000 
GS Capital Partners LLC - Mar 2019  (c)    300,000    300,000 
GS Capital Partners LLC - May 2019  (d)    -    - 
GS Capital Partners LLC - Jun 2019  (e)    60,000    - 
Jefferson Street Capital LLC - Jul 2019  (f)    55,000    - 
Adar Alef, LLC - Aug 2019  (g)    55,000    - 
Odyssey Funding, LLC - Sep 2019  (h)    100,000    - 
BHP Capital NY Inc.  (i)    55,000    - 
Tangier’s Global, LLC  (j)    137,500    - 
Odyssey Funding, LLC  (k)    100,000    - 
Jefferson Street Capital LLC  (l)    55,000    - 
               
Total notes payable and convertible notes      $917,500   $570,000 
Less - note discounts       (409,817)   (356,125)
Less - current portion of these notes       (507,683)   (213,875)
Total notes payable and convertible notes, net discounts      $-   $- 

 

(a)

Three-month $180,000 non-convertible debenture dated September 23, 2015 bearing an interest rate of 11.50% per annum (the “ASP Loan”). The note matured in December 2015. The Company received cash of $90,000 ($75,000 wired directly to the Company and $15,000 wired directly from Alternative Strategy Partners PTE Ltd. (“ASP”) to compensate a consultant. The balance of this note ($90,000) was to be wired directly to a Japanese based consumer product firm Eishin, Inc. (“Eishin”), but the holder never provided any documentation evidencing that $90,000 was paid to Eishin. The Company had been in dispute with the noteholder about the amount owed, and the Company had not recorded this liability as of December 31, 2018 or March 31, 2018. On May 29, 2019, the Company and ASP consummated the retirement of the ASP Loan. The Company did not pay cash or issue any securities in connection with the termination of the ASP Loan, and instead the Company agreed to transfer and assign to ASP all right, title and interest it has or may have in securities of Eishin. Since the Eishen rights were not valued on the Company’s balance sheet, the $113,468 liability (at the time of settlement) has been removed from the Company’s balance sheet, as is reflected in the Company’s financial statement as a gain on extinguishment of debt in the amount of $113,467 during the nine months ended December 31, 2019.

 

F-22
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 7 – NOTES PAYABLE (CONTINUED)

 

(b) On October 25, 2018, the Company entered into a one year $180,000 convertible note bearing 8% interest with GS Capital Partners, LLC (“GS Capital”). The note has an original issue discount of $11,750. A portion of the proceeds will be used to retire the two remaining convertible notes on the books of the Company as of December 31, 2018 with GS Capital. The face value of this note plus accrued interest under the note are convertible into shares of the Company’s common stock at a price for each share of common stock equal to 70% of the lowest daily VWAP of the common stock as reported on the National Quotations Bureau OTC Markets market on which the Company’s shares are traded or any exchange upon which the common stock may be traded in the future, for the 15 prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. In the event the Company experiences a DTC “chill” on its shares, the conversion price shall be decreased to 60% instead of 70% while that “chill” is in effect. Due to the discount to market conversion, a beneficial conversion feature was recorded on this note as a discount to the note in the amount of the $108,111 which will be amortized over the life of the note. This amortization will be reflected as interest cost ratably over the term of the note. Upon an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon an event of default, notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions. This note contains a provision where if the Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered and failed to cure such default within the appropriate grace period they would be considered in default of this note. During the first six months this note is in effect, the Company may redeem by paying to GS Capital an amount as follows: (i) if the redemption is within the first 90 days either note is in effect, then for an amount equal to 120% of the unpaid principal amount of either note along with any interest that has accrued during that period, and (ii) if the redemption is after the 91st day the either note is in effect, but less than the 180th day, then for an amount equal to 133% of the unpaid principal amount of either note along with any accrued interest. During the nine months ended December 31, 2019, GS Capital fully converted $180,000 of principal and $11,248 of accrued interest into 7,410,229 shares of common stock.
   
(c)

On March 14, 2019, the Company entered into a 12-month $300,000 principal face value 8.0% convertible debenture with GS Capital, with a maturity date of March 13, 2020. The GS Capital Note carried a $20,000 original issue discount (OID) and, as such, the initial net proceeds to the Company was $280,000. In connection with this agreement, the Company was obligated to issue 750,000 commitment shares having a value of $142,500 ($0.19 per share) which is reflected as interest expense in the Company’s condensed consolidated statement of operations during the year ended March 31, 2019. These shares were issued on June 20, 2019. The Holder is entitled, at its option, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock at a price for each share of Common Stock equal to 68% of the lowest daily VWAP of the Common Stock as reported on the National Quotations Bureau OTC Markets exchange for the fifteen (15) prior trading days. Due to the discount to market conversion, a beneficial conversion feature was recorded on this note as a discount to the note in the amount of the full-face value of the note which will be amortized over the life of the note. This amortization will be reflected as interest cost ratably over the term of the note. At December 31, 2019, this note had accrued interest of $19,200. Also, in conjunction with this note, the 213,334 five-year cashless warrants, associated with the June 27, 2017, $80,000 5% one-year note were fully cancelled. On February 10, 2020, GS Capital elected to partially convert the $75,000 of principal of this note plus $5,458 of accrued interest for 2,628,548 common shares ($0.0307 per share). After the conversion, the remaining balance of this note is $225,000.

 

F-23
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 7 – NOTES PAYABLE (CONTINUED)

 

(d) On May 24, 2019, the Company entered into a one year 8% $60,000 Convertible Note with GS Capital pursuant to the terms of a Securities Purchase Agreement. The GS Capital Note has a maturity date of May 23, 2020 and carried a $5,000 original issue discount (such that $55,000 was funded to the Company on May 24, 2019). The holder is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of the GS Note then outstanding into shares of the Company’s common stock at a price for each share of common stock equal to 66% of the lowest daily volume weighted average price (VWAP) of the common stock as reported on the National Quotations Bureau OTC Markets exchange which the Company’s shares are traded or any exchange upon which the common stock may be traded in the future, for the fifteen (15) prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. Such conversion shall be effectuated by the Company delivering the shares of common stock to the holder within 3 business days of receipt by the Company of the notice of conversion. Accrued but unpaid interest shall be subject to conversion. In connection with the GS Capital Note, the Company issued irrevocable transfer agent instructions reserving 3,327,000 shares of its Common Stock for conversions under this Note equal to two and a half times the discounted value of the Note (the “Share Reserve”) and was required to maintain a 2.5 times reserve for the amount then outstanding. Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. At December 31, 2019, GS Capital fully converted $60,000 of principal and $2,670 of accrued interest, and 4,327,198 shares then in reserve were cancelled and placed back into the Company’s treasury.

 

F-24
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 7 – NOTES PAYABLE (CONTINUED)

 

(e)

On June 21, 2019, the Company entered into a one year 8% $60,000 Convertible Note with GS Capital Partners, LLC pursuant to the terms of a Securities Purchase Agreement. The GS Capital Note has a maturity date of June 21, 2020 and carried a $5,000 original issue discount (such that $55,000 was funded to the Company on June 21, 2019). The holder is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of the GS Note then outstanding into shares of the Company’s common stock at a price for each share of common stock equal to 66% of the lowest daily volume weighted average price (VWAP) of the common stock as reported on the National Quotations Bureau OTC Markets exchange, which the Company’s shares are traded or any exchange upon which the common stock may be traded in the future, for the fifteen (15) prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. Such conversion shall be effectuated by the Company delivering the shares of common stock to the holder within 3 business days of receipt by the Company of the notice of conversion. Accrued but unpaid interest shall be subject to conversion. To the extent the conversion price of the Company’s common stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this decrease. In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 56% instead of 66% while that “Chill” is in effect. In no event shall the holder be allowed to affect a conversion if such conversion, along with all other shares of the Company common stock beneficially owned by the holder and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company. Upon an event of default, among other default provisions set forth in the GS Capital Note, (i) interest shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. (ii) if the Company shall fail to deliver to the holder the shares of common stock without restrictive legend (when permissible in accordance with applicable law) within three (3) business days of its receipt of a notice of conversion, then the Company shall pay a penalty of $250 per day if the shares are not issued beginning on the 4th day after the conversion notice was delivered to the Company (which shall be increased to $500 per day beginning on the 10th day); (iii) if the Company’s stock ceases to be listed on an exchange, its stock is suspended from trading for more than 10 consecutive trading days or the Company ceases to file its reports with the SEC under the Securities Exchange Act of 1934, as amended, then the outstanding principal due under the GS Capital Note shall increase by 50%; or (iv) if the GS Capital Note is not paid at maturity, the outstanding principal due under this Note shall increase by 10%. In connection with the GS Capital Note, the Company issued irrevocable transfer agent instructions reserving 2,650,000 shares of its Common Stock for conversions under this Note equal to two and a half times the discounted value of the Note (the “Share Reserve”), and shall maintain a 2.5 times reserve for the amount then outstanding. Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. As of December 31, 2019, this note had accrued interest of $2,538.

 

F-25
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(UNAUDITED)

(US$)

 

NOTE 7 – NOTES PAYABLE (CONTINUED)

 

(f)

On July 22, 2019, the Company and Jefferson Street Capital, LLC (“Jefferson Street”) consummated entry into a Securities Purchase Agreement where the Company has borrowed $55,000 ($50,000 with original issuance discount reflected) at 10% annual interest under a term of nine-months in the form of a convertible note. The note is convertible into restricted stock of the Company. In connection with this agreement, the Company issued 250,000 commitment shares having a value of $10,500 ($0.042 per share, the closing price of our common stock on the day preceding the note) which was reflected as interest expense in the Company’s condensed consolidated statement of operations during the three months ended December 31, 2019. The restricted stock was valued at the closing price on July 22, 2019. Legal fees of $2,000 were deducted from cash proceeds of the note payable to investor’s counsel, and a $5,000 original issue discount recognized. The Company received cash proceeds of $48,000 at closing. Under the Jefferson Street note, the Company reserved 15,000,000 shares of its common stock, The noteholder may, at any time, at its option, convert all or any amount of the principal face amount of the note then outstanding into shares of the Company’s common stock at a conversion price for each share of Common Stock equal to 65% of the lowest volume weighted average price for the Company’s common stock during the previous fifteen trading day period as reported on the National Quotations Bureau OTC Markets exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future, including the day upon which a notice of conversion is received by the Company. Upon an event of default (as defined and described in the note), among other default penalties, the Company shall pay the Defa