Company Quick10K Filing
Tauriga Sciences
Price0.05 EPS-0
Shares79 P/E-2
MCap4 P/FCF-9
Net Debt-0 EBIT-2
TEV4 TEV/EBIT-2
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-12-31 Filed 2021-02-22
10-Q 2020-09-30 Filed 2020-11-16
10-Q 2020-06-30 Filed 2020-08-14
10-K 2020-03-31 Filed 2020-06-29
S-1 2020-03-05 Public Filing
10-Q 2019-12-31 Filed 2020-02-13
10-Q 2019-09-30 Filed 2019-11-12
10-Q 2019-06-30 Filed 2019-08-13
10-K 2019-03-31 Filed 2019-06-27
10-Q 2018-12-31 Filed 2019-01-29
10-Q 2018-09-30 Filed 2018-10-31
10-Q 2018-06-30 Filed 2018-07-31
10-K 2018-03-31 Filed 2018-06-27
10-Q 2017-12-31 Filed 2018-02-12
10-Q 2017-09-30 Filed 2017-11-13
10-Q 2017-06-30 Filed 2017-08-07
10-K 2017-03-31 Filed 2017-07-07
10-Q 2016-12-31 Filed 2017-01-31
10-Q 2016-09-30 Filed 2016-12-05
10-Q 2016-06-30 Filed 2016-11-09
10-K 2016-03-31 Filed 2016-10-14
10-Q 2015-12-31 Filed 2016-08-09
10-Q 2015-09-30 Filed 2016-07-12
10-Q 2015-06-30 Filed 2016-06-29
10-K 2015-03-31 Filed 2016-05-20
10-Q 2014-12-31 Filed 2015-02-17
10-Q 2014-09-30 Filed 2014-11-19
10-Q 2014-06-30 Filed 2014-08-19
10-K 2014-03-31 Filed 2014-07-15
10-Q 2013-12-31 Filed 2014-02-19
10-Q 2013-09-30 Filed 2013-11-19
10-Q 2013-06-30 Filed 2013-08-19
10-K 2013-03-31 Filed 2013-07-12
10-Q 2012-12-31 Filed 2013-02-19
10-Q 2012-09-30 Filed 2012-11-16
10-Q 2012-06-30 Filed 2012-08-14
10-K 2012-03-31 Filed 2012-07-16
10-Q 2011-12-31 Filed 2012-02-21
10-Q 2011-09-30 Filed 2011-11-21
10-Q 2011-06-30 Filed 2011-08-22
10-K 2011-03-31 Filed 2011-07-14
10-Q 2010-12-31 Filed 2011-02-22
10-Q 2010-09-30 Filed 2010-11-22
10-Q 2010-06-30 Filed 2010-08-23
10-K 2010-03-31 Filed 2010-07-14
10-Q 2009-12-31 Filed 2010-02-22
8-K 2020-11-18
8-K 2020-09-24
8-K 2020-07-15
8-K 2020-06-16
8-K 2020-06-04
8-K 2020-04-17
8-K 2020-03-17
8-K 2020-01-21
8-K 2019-12-16
8-K 2019-11-25
8-K 2019-09-13
8-K 2019-09-10
8-K 2019-07-18
8-K 2019-06-28
8-K 2019-05-27
8-K 2019-04-30
8-K 2019-03-14
8-K 2019-01-14
8-K 2018-07-06
8-K 2018-04-09
8-K 2018-02-14
8-K 2017-12-27

TAUG 10Q Quarterly Report

Part I. Financial Statements
Note 1 - Basis of Operations
Note 2 - Summary of Significant Accounting Policies
Note 3 - Revenue
Note 4 - Inventory
Note 5 - Property and Equipment
Note 6 - Operating Lease
Note 7 - Notes Payable
Note 8 - Related Parties
Note 9 - Stockholders' Equity (Deficit)
Note 10 - Provision for Income Taxes
Note 11 - Investments
Note 12 - Fair Value Measurements
Note 13 - Concentrations
Note 14 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-4.3 ex4-3.htm
EX-4.4 ex4-4.htm
EX-10.7 ex10-7.htm
EX-31.1 ex31-1.htm
EX-31.2 ex31-2.htm
EX-32.1 ex32-1.htm
EX-32.2 ex32-2.htm

Tauriga Sciences Earnings 2020-12-31

Balance SheetIncome StatementCash Flow
3.21.90.7-0.6-1.8-3.12012201420172020
Assets, Equity
1.60.90.2-0.5-1.2-1.92014201620182020
Rev, G Profit, Net Income
2.41.71.10.4-0.2-0.92012201420172020
Ops, Inv, Fin

10-Q 1 form10-q.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, 2020

 

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.)

 

4 Nancy Court, Suite 4

Wappingers Falls, NY 12590

(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]
(Do not check if smaller reporting company) 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 19, 2021, the registrant had 257,038,714 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, 2020 (unaudited) and March 31, 2020 F-1
     
  Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2020 and 2019 (unaudited) F-2
     
  Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the nine months ended December 31, 2020 and year ended March 31, 2020 (unaudited) F-3
     
  Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2020 and 2019 (unaudited) F-5
     
  Notes to Condensed Consolidated Financial Statements (unaudited) F-6
     
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 3
     
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 14
     
Item 4. CONTROLS AND PROCEDURES 14
     
PART II. OTHER INFORMATION  
     
Item 1. LEGAL PROCEEDINGS 15
     
Item 1A. RISK FACTORS 15
     
Item 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS 16
     
Item 3. DEFAULTS UPON SENIOR SECURITIES 17
     
Item 4. MINE SAFETY DISCLOSURES 17
     
Item 5. OTHER INFORMATION 17
     
Item 6. EXHIBITS 17

 

2
 

 

PART I. FINANCIAL STATEMENTS

 

TAURIGA SCIENCES, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN US$)

(UNAUDITED)

 

   December 31, 2020   March 31, 2020 
ASSETS          
Current assets:          
Cash  $172,658   $5,348 
Accounts receivable, net allowance for doubtful accounts   34,017    42,580 
Investment - trading securities   1,377,400    101,200 
Investment - other   279,706    178,100 
Inventory asset   230,918    128,711 
Prepaid expenses and other current assets   175,592    151,955 
Total current assets   2,267,291    607,894 
           
Lease right of use asset   -    22,090 
Assets held for resale   11,084    - 
Property and equipment, net   5,879    13,478 
           
Total assets  $2,284,254   $643,462 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)          
Current liabilities:          
Notes payable, net of discounts  $652,400   $585,134 
Accounts payable   77,855    76,055 
Accrued interest   21,786    39,384 
Accrued expenses   97,844    46,719 
Loan Payable to office   50,159    50,159 
Liability for common stock to be issued   442,250    131,000 
Lease liability - current portion   -    13,891 
Deferred revenue   2,310    384 
Total current liabilities   1,344,604    942,726 
           
Lease liability - net of current portion   -    8,933 
           
Total liabilities   1,344,604    951,659 
           
Stockholders’ equity (deficit):          
Common stock, par value $0.00001; 400,000,000 shares authorized, 227,291,853 and 107,039,107 outstanding at December 31, 2020 and March 31, 2020, respectively   2,274    1,070 
Additional paid-in capital   61,074,457    58,213,365 
Accumulated deficit   (60,137,081)   (58,522,632)
Accumulated other comprehensive income   -    - 
Total stockholders’ equity (deficit)   939,650    (308,197)
           
Total liabilities and stockholders’ equity (deficit)  $2,284,254   $643,462 

 

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$)

(UNAUDITED)

 

   For the Three Months Ended   For the Nine Months Ended 
   December 31,   December 31, 
   2020   2019   2020   2019 
                 
Gross revenue  $95,049   $88,671   $266,713   $202,771 
Sales discounts   

(18,831

)   

(890

)   

(49,238

)   

(890

)
Sales returns   

(1,269

)   

-

    

(2,362

)   

-

 

Net revenue

   

74,949

    

87,781

    

215,113

    

201,881

 
                     
Cost of goods sold   34,348    70,972    133,391    163,905 
                     
Gross profit   40,601    16,809    81,722    37,976 
                     
Operating expenses                    
Marketing and advertising   105,899    16,320    180,801    150,997 
Research and development   7,173    -    34,478    3,852 
Fulfilment services   

25,200

    

6,450

    

64,200

    

6,450

 
General and administrative   436,097    489,629    1,328,786    1,408,358 
Depreciation and amortization expense   218    232    653    696 
Total operating expenses   

574,587

    512,631    

1,608,918

    1,570,377 
                     
Loss from operations   (533,986)   (495,822)   (1,527,196)   (1,532,377)
                     
Other income (expense)                    
Interest expense   (289,503)   (243,399)   (901,913)   (539,955)
Unrealized gain (loss) on trading securities   939,590    (87,468)   998,700    (161,769)
Gain (Loss) on conversion of debt   -    -    (45,770)   113,466 
Loss on asset disposal   -    (1,230)   -    (1,230)
Gain on lease termination   836    -    836    - 
Gain on sale of trading securities   -    -    -    10,000 
Loss on impairment of investment   (139,106)   -    (139,106)   - 
Gain on disposal of discontinued operations   -    -    -    4,941 
Foreign exchange   -    -    -    (29)
Total other income (expense)   511,817    (332,097)   (87,253)   (574,576)
                     
LOSS FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES   (22,169)   (827,919)   (1,614,449)   (2,106,953)
                     
PROVISION FOR INCOME TAXES             -      
                     
Net loss   (22,169)   (827,919)   (1,614,449)   (2,106,953)
                     
Net loss attributable to common shareholders  $(22,169)  $(827,919)  $(1,614,449)  $(2,106,953)
Loss per share - basic and diluted - Continuing operations  $(0.000)  $(0.015)  $(0.008)  $(0.038)
Loss per share - basic and diluted - Discontinuing operations  $-   $-   $-   $- 
Weighted average number of shares outstanding - basic and fully diluted   162,575,227    56,149,252    193,622,141    55,767,119 

 

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, 2020 AND THE YEAR ENDED MARCH 31, 2020

 

   
 
 
 
 
 
Number of
shares
 
 
 
 
 
 
 
 
 
 
 
Amount
 
 
 
 
 
 
 
 
 
Additional
paid-in
capital
 
 
 
 
 
 
 
 
 
 
Accumulated
deficit
 
 
 
 
 
 
 
 
Accumulated
other
comprehensive
income (loss)
 
 
 
 
 
 
 
 
 
 
Subscription
Receivable
 
 
 
 
 
 
 
 
 
Non-
Controlling
Interest
 
 
 
 
 
 
 
 
Total
stockholders’
deficit
 
 
 
 
Balance at April 1, 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 
Issuance 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   -    -    375,720    -    -    -    -    375,720 
Stock issued for services at $0.07 to $0.16   1,250,000    13    (13)   -    -    -    -    - 
Issuance of shares for distribution agreements at $0.08 to $0.2092   1,200,000    12    (12)   -    -    -    -    - 
Recognition of beneficial conversion feature of convertible notes   -    -    68,663    -    -    -    -    68,663 
Cumulative effect 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   $730   $56,665,511   $(56,138,666)  $-   $-   $-   $527,575 
                                         
Issuance of shares via private placement at $0.06 to $0.07 per share   -    -    -    -    -    -    -    - 
Issuance of commitment shares - debt financing at $0.19 per share   250,000    3    10,497    -    -    -    -    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    36,806    -    -    -    -    36,808 
Stock issued for services at $0.07 to $0.16   -    -         -    -    -    -    - 
Shares issued for settlement of debt   -    -    -    -    -    -    -    - 
Recognition of beneficial conversion feature of convertible notes   -    -    154,739    -    -    -    -    154,739 
Cumulative effect 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   $56,995,165   $(56,768,376)  $-   $-   $-   $227,579 
                                         
Issuance of shares via private placement at $0.02 per share   500,000    5    9,995    -    -    -    -    10,000 
Issuance 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   -    -    138,294    -    -    -    -    138,294 
Stock issued for services at $0.07 to $0.16   2,850,000    28    (28)   -    -    -    -    - 
Issuance of shares for distribution agreements at $0.2092   1,000,000    10    (10)   -    -    -    -    - 
Recognition of beneficial conversion feature of convertible notes   -    -    261,084    -    -    -    -    261,084 
Cumulative effect 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   $57,498,459   $(57,596,295)  $-   $-   $-   $(96,951)
                                         
Issuance of shares via private placement at $0.02 to $0.03 per share   4,256,000    43    88,378    -    -    -    -    88,421 
Issuance of commitment shares - debt financing at $0.018 to $0.031 per share   1,100,000    11    55,698    -    -    -    -    55,709 
Shares issued for note conversion at $0.01875 to $0.03067 per share   9,862,464    99    242,263    -    -    -    -    242,362 
Stock-based compensation vesting   -    -    18,813    -    -    -    -    18,813 
Stock issued for services at $0.07 to $0.16   3,250,000    32    (32)   -    -    -    -    - 
Shares issued for settlement of debt   -    -    -    -    -    -    -    - 
Recognition of beneficial conversion feature of convertible notes   -    -    309,786    -    -    -    -    309,786 
Cumulative effect of adoption of Lease standard ASC 842   -    -    -    -    -    -    -    - 
Net loss for the three months ended March 31, 2020   -    -    -    (926,337)   -    -         (926,337)
                                         
Balance at March 31, 2020   107,039,107   $1,070   $58,213,365   $(58,522,632)  $-   $-   $-   $(308,197)
    -    -    -    -                   - 
Issuance of shares via private placement at $0.025 to $0.035 per share   6,000,000    60    190,940    -    -    -    -    191,000 
Issuance of commitment shares - debt financing at $0.03 to $0.0322 per share   525,000    5    16,570    -    -    -    -    16,575 
Shares issued for note conversion at $0.01869 to $0.02128 per share   20,009,621    200    397,863    -    -    -    -    398,063 
Stock-based compensation vesting   -    -    245,849    -    -    -    -    245,849 
Stock issued for services at $0.31 to $0.32   6,000,000    60    (60)   -    -    -    -    - 
Issuance of unrestricted shares - Tangiers Investment agreement at $0.02614 to $0.02754   5,750,000    58    154,360    -    -    -    -    154,418 
Recognition of beneficial conversion feature of convertible notes   -    -    182,206    -                    -    -            -    182,206 
Cumulative effect of adoption of Lease standard ASC 842   -    -    -    -    -    -    -    - 
Net loss for the three months ended June 30, 2020   -    -    -    (949,411)   -    -    -    (949,411)
                                         
Balance at June 30, 2020   145,323,728   $1,453   $59,401,093   $(59,472,043)  $-   $-   $-   $(69,497)
                                         
Issuance of shares to CEO for cash at $0.05 per share   700,000    7    34,993    -    -    -    -    35,000 
Issuance of shares via private placement at $0.025 to $0.035 per share   7,850,000    79    214,296    -    -    (60,000)   -    154,375 
Issuance of commitment shares - debt financing at $0.027808 to $0.0344 per share   215,000    2    7,541    -    -    -    -    7,543 
Shares issued for note conversion at $0.01869 to $0.02128 per share   18,497,751    185    348,462    -    -    -    -    348,647 
Stock-based compensation vesting   -    -    31,221    -    -    -    -    31,221 
Stock issued for services at $0.31 to $0.32   -    -    -    -    -    -    -    - 
Issuance of unrestricted shares - Tangiers Investment agreement at $0.02614 to $0.02754   7,000,000    70    214,994    -    -    -    -    215,064 
Recognition of beneficial conversion feature of convertible notes   -    -    -    -    -    -    -    - 
Cumulative effect of adoption of Lease standard ASC 842   -    -    -    -    -    -    -    - 
Net loss for the three months ended September 30, 2020   -    -    -    (642,869)   -    -         (642,869)
                                         
Balance at September 30, 2020   179,586,479   $1,796   $60,252,600   $(60,114,912)  $-   $(60,000)  $-   $79,484 
                                         
Issuance of shares to CEO for cash at $0.05 per share   -    -    -    -    -    -    -    - 
Issuance of shares via private placement at $0.027 to $0.0275 per share   1,824,998    19    49,920    -    -    60,000    -    109,939 
Issuance of commitment shares - debt financing at $0.027808 to $0.0355 per share   2,250,000    23    67,977    -    -    -    -    68,000 
Shares issued for note conversion at $0.01242 to $0.019602 per share   37,407,876    374    574,992    -    -    -    -    575,366 
Stock-based compensation vesting   -    -    71,398    -    -    -    -    71,398 
Stock issued for services at $0.0306 to $0.05   5,062,500    50    (50)   -    -    -    -    - 
Issuance of unrestricted shares - Tangiers Investment agreement at $0.02675   1,160,000    12    31,020    -    -    -    -    31,032 
Recognition of beneficial conversion feature of convertible notes   -    -    26,600    -    -    -    -    26,600 
Cumulative effect of adoption of Lease standard ASC 842   -    -    -    -    -    -    -    - 
Net loss for the three months ended December 31, 2020   -    -    -    (22,169)   -    -         (22,169)
                                         
Balance at December 31, 2020   227,291,853   $2,274   $61,074,457   $(60,137,081)  $-   $-   $-   $939,650 

 

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, 
   2020   2019 
         
Cash flows from operating activities          
Net loss attributable to controlling interest  $(1,614,449)  $(2,106,953)
Adjustments to reconcile net loss to cash used in operating activities:          
Bad debt expense   29,404    2,000 
Amortization of original issue discount   84,377    42,715 
Non-cash lease operating lease expense   102    160 
Depreciation and amortization   653    696 
Loss on disposal of fixed assets   -    1,230 
Non-cash interest   92,119    20,250 
Loss (gain) on extinguishment of debt   -    (113,468)
Gain on lease termination   (836)   - 
Amortization of debt discount   616,121    440,578 
Common stock issued and issuable for services (including stock-based compensation)   348,469    550,824 
Gain on disposal of discontinued operation   139,106    (4,941)
Legal fees deducted from proceeds of notes payable   6,700    16,500 
(Gain) loss on the sale of trading securities   -    (10,000)
Unrealized loss (gain) on trading securities   (998,700)   161,769 
(Increase) decrease in assets          
Prepaid expenses   (20,637)   89,935 
Inventory   (102,207)   (106,850)
Proceeds (purchase) of trading securities, net   -    40,000 
Accounts receivable   (20,841)   (94,838)
Increase (decrease) in liabilities          
Accounts payable   1,800    8,859 
Deferred revenue   1,926    - 
Accrued expenses   51,125    46,230 
Accrued interest   60,551    36,411 
Cash used in operating activities   (1,325,217)   (978,893)
           
Cash flows from investing activities          
Investment in VTGN warrants   -    (37,500)
Exercise of unregistered warrants for common stock   (240,000)   - 
Loan from Officer   -    50,159 
Investment - other   (278,212)   (42,400)
Purchase of property and equipment   (4,138)     
Cash used in investing activities   (522,350)   (29,741)
           
Cash flows from financing activities          
Repayment of principal on notes payable to individuals and companies   (100,000)   - 
Proceeds from the sale of common stock (including to be issued)   801,563    103,520 
Proceeds from notes payable to individuals and companies   220,000    608,500 
Proceeds from sale of registered shares - Tangiers Investment Agreement   400,515    - 
Proceeds from convertible notes   692,800    - 
Cash provided by financing activities   2,014,878    712,020 
Net decrease in cash   167,310    (296,614)
           
Cash, beginning of year   5,348    385,943 
Cash, end of period  $172,658   $89,329 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW          
INFORMATION:          
Interest Paid  $50,000   $- 
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  $1,322,075   $253,900 
Original issue discount on notes payable and debentures  $63,333   $52,500 
Recognition of debt discount  $208,806   $484,486 

 

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, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 1 – BASIS OF OPERATIONS

 

Nature of Business

 

The unaudited condensed consolidated financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The condensed consolidated financial statements and notes are presented as permitted on Form 10-Q and do not contain certain information included in the Company’s annual statements and notes. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the March 31, 2020 Form 10-K filed with the SEC, including the audited consolidated financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these condensed consolidated financial statements are reasonable, the accuracy of the amounts is in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year.

 

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

 

Tauriga Sciences, Inc. (the “Company”) is a Florida corporation, with its principal place of business being located at 4 Nancy Court, Suite 4, Wappingers Falls, NY 12590. During October 2020, the Company terminated its primary lease in New York City and established its new corporate headquarters in Wappingers Falls New York, effective January 6, 2021. The Company has, over time, moved into a diversified life sciences technology and consumer products company, with its mission to operate a revenue generating business, while continuing to evaluate potential acquisition candidates operating in the life sciences technology and consumer products spaces.

 

Tauriga Pharma Corp.

 

On January 4, 2018, the Company announced the formation of a wholly-owned subsidiary in Delaware initially named Tauriga IP Acquisition Corp., which changed its name to Tauriga Biz Dev Corp. on March 25, 2018.

 

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

 

On March 18, 2020, the Company filed a Provisional U.S. Patent Application covering its Pharmaceutical grade version of Tauri-Gum™. This patent application, filed with the United States Patent & Trademark Office (“U.S.P.T.O.”), is titled: “MEDICATED CBD COMPOSITIONS, METHODS OF MANUFACTURING, AND METHODS OF TREATMENT.” The Company’s proposed pharmaceutical grade version of Tauri-Gum™ is being developed for nausea regulation, intended specifically to target patients subjected to ongoing chemotherapy treatment(s) (the “Indication”). The delivery system for this pharmaceutical product is an improved version of the existing “Tauri-Gum™” chewing gum formulation based on continued research and development.

 

Tauriga Sciences Limited

 

On June 10, 2019, the Company formed a wholly owned subsidiary, Tauriga Sciences Limited, with the Registrar of Companies for Northern Ireland. Tauriga Sciences Limited is a private limited Company. The entity was established in conjunction with e-commerce merchant services. In conjunction to this new entity the Company entered into a two-year lease commencing on June 11, 2019. The office is located at Regus World Trade Centre Muelle de Barcelona, edif. Sur, 2a Planta Barcelona Cataluña 08039 Spain. The Company terminated this lease during October 2020.

 

F-5
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 1 – BASIS OF OPERATIONS (CONTINUED)

 

Nature of Business (Continued)

 

Collaboration Agreement with Aegea Biotechnologies Inc.

 

On April 3, 2020, Tauriga Sciences, Inc. entered into a collaboration agreement (“Collaboration Agreement”) with Aegea Biotechnologies Inc. (“Aegea”), for the purpose of developing a Rapid, Multiplexed Novel Coronavirus (COVID-19) Point of Care Test with Superior Sensitivity and Selectivity (the “SARS-Col 2 Test”). The parties believed that the benefits of the SARS-CoV-2 Test were the following: a Rapid SARS-CoV-2 test with the sensitivity and specificity to eliminate false negatives and false positives, and with the ability to detect and measure viral shed, even in patients who are asymptomatic. This SARS-CoV-2 test would use Aegea’s patented technologies, to take coronavirus testing to the next level by differentiating different strains of SARS-CoV-2. The test, if successful, would be adaptable to additional SARS-CoV-2 strain types as necessary and as the virus mutates. It also has the possibility to be rapidly be customized to provide similarly sensitive and specific assays for other viruses. The Company committed to raise funding for the purposes set forth in under the Collaboration Agreement from its $5,000,000 Equity Line of Credit (“ELOC”) with Tangiers Global, LLC, which became effective on March 16, 2020. Seventy percent (70%) of the net proceeds from the sale of the initial 10,000,000 shares of stock of Tauriga under the ELOC were invested in Aegea for the development of the Covid Test and used to purchase shares of common stock of Aegea, at a purchase price of $4.00 per share. The $4.00 stock price corresponds to a current pre-money valuation of Aegea of $25,000,000 for each tranche of cash, up to the first $2,000,000 of our investment in Aegea. Additionally, as part of our agreement with Aegea, on May 26, 2020, Tauriga issued to Aegea 5,000,000 unregistered common shares of Tauriga common stock. On August 10, 2020, the Company and Aegea amended their Collaboration Agreement. Under the terms of the amendment, having invested 70% of the proceeds from the sale of the initial 10,000,000 shares of Tauriga stock under the ELOC with Tangiers, the Company increased the percentage of proceeds it invested in Aegea on the sale of the remaining shares available under the ELOC agreement from 20% to 40%.

 

On January 6, 2021, however, the Company determined to terminate its ELOC by terminating each of the Investment Agreement and Registration Rights Agreement, and on January 8, 2021 filed a Post-Effective Amendment to its Form S-1 Registration Statement (333-236923) which removed from registration all shares not previously sold thereunder. This effectively also eliminates our obligation to any additional funding to Aegea under the Collaboration Agreement. As of December 31, 2020, the Company had invested $278,212 in Aegea for 69,553 shares, representing an ownership percentage of 1.03%. As of December 31, 2020, resultant delays of project milestones have led the Company to determined that full recovery of its investment in Aegea is in doubt and has recorded a 50% impairment loss on its condensed consolidated Statement of Operations in the amount of $139,106. Aegea is still moving forward on this project and the Company will continue to monitor the progress.

 

Chief Marketing Officer

 

On July 15, 2020, the Company appointed Dr. Keith Aqua (“Dr. Aqua”) as an independent contractor to the position of Chief Medical Officer (“CMO”) and entered into a consulting agreement with Dr. Aqua which carries a term of 12 months from inception, expiring on July 15, 2021. In his CMO capacity, Dr. Aqua will help the Company progress in the development of the Company’s proposed pharmaceutical grade version of Tauri-Gum™. In addition, Dr. Aqua will help establish a distribution network for the Company to market its Tauri-Gum™ brand to a variety of physicians and medical practices in southern Florida. In consideration of the services being provided by Dr. Aqua, and pursuant to the terms of the Agreement, the Company has agreed to issue Dr. Aqua (i) upon entry into the Agreement 750,000 shares of restricted common stock, (ii) agreed to 750,000 shares of restricted common stock which will be issued in equal monthly instalments of 62,500 shares beginning August 15, 2020 and (iii) agreed to $4,000 cash per quarter during the term of the Agreement, payable following the completion of each such quarter. As of December 31, 2020, the Company issued 1,062,500 restricted shares of its common stock to Dr. Aqua valued at $41,969 ($0.0395 per share). Subsequent to December 31, 2020, Dr. Aqua was issued 125,000 restricted shares of its common stock valued at $4,938 ($0.0395 per share).

 

Master Services Agreement

 

On December 16, 2020, we entered into a Master Services Agreement with North Carolina based Clinical Strategies & Tactics, Inc. (“CSTI”) to resume the clinical development of its proposed anti-nausea pharmaceutical grade version of Tauri-Gum™. CSTI will primarily focus its efforts on (i) Pharmaceutical Development Strategy, (ii) Commercialization Strategy, and (iii) Funding Strategy. The Company will with work with CSTI’s founder and chief executive officer, JoAnn C. Giannone, who has over 25 years’ experience effectively leading companies through the drug and medical device development process. On December 23, 2020, the Company funded the costs associated with this Agreement, which total consulting fees were $67,500, exclusive of out-of-pocket reimbursable expenses. Under the terms of the Agreement and related statement of work, CTSI will provide a high-level assessment and documentation of the development efforts required to commercialize the proposed pharmaceutical product globally, a commercial assessment, and a review of potential funding strategies and funding sources and potential business partners. The delivery system for this proposed pharmaceutical version is a modified version (with higher concentration of CBD) of the existing Tauri-Gum™” chewing gum formulation based on continued research and development.

 

COMPANY PRODUCTS

 

Tauri-GumTM

 

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

 

To begin this process, during the quarter ended December 31, 2018, the Company began discussions with a Maryland based chewing gum manufacturer - Per Os Biosciences LLC (“Per Os Bio”), which consummated in a manufacturing agreement in late December 2018 to launch and bring to market a white label line of CBD infused chewing gum under the brand name Tauri-GumTM. In October 2019, we also filed trademark applications for the above-referenced marks in each of the European Union and Canada. On February 18, 2020, the Company received a notice of allowance from the European Union Intellectual Property Office granting the Company its trademark registration for Tauri-Gum™ (E.U. Trademark # 018138334).

 

F-6
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 1 – BASIS OF OPERATIONS (CONTINUED)

 

COMPANY PRODUCTS (CONTINUED)

 

TAURI-GUMTM (CONTINUED)

 

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

 

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

 

Under terms of the agreement with Per Os Bio:

 

  A. Each product order will consist of 8,700 Packs (unless otherwise agreed upon by both parties);
  B. ½ of initial production invoice due within 3 days of execution of Manufacturing Agreement;
  C.

We will provide graphic design artwork, logo, and label design to Per Os Bio;

  D. We implement Kosher Certification Process;
  E. We procure appropriate Product & Liability insurance policy (as of this report date the Company has in effect an $8,000,000 product liability policy); and
  F. We acquire legal opinion with respect to the confirmation of the legality to sell this CBD Gum on the Federal Statute Level.

 

The Company’s gum formulation includes distinctive features: allergen free, gluten free, vegan, kosher (K-Star certification), and incorporates a proprietary manufacturing process. See our “Risk Factors” contained in our Annual Report dated March 31, 2020 filed with the Securities and Exchange Commission on June 29, 2020, including with respect, but not limited, to Federal laws and regulations that govern CBD and cannabis.

 

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

 

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

 

On August 31, 2020, the Company announced that it has obtained HALAL Certification for the entirety of its flagship brand Tauri-Gum™. A HALAL Certification is a guarantee that the products comply with the Islamic dietary requirements or Islamic lifestyle.

 

TAURI-GUMMIES

 

On November 25, 2019, the Company announced that it has finalized the formulation for its Vegan 25 mg CBD (Isolate) Infused Gummies product to be branded Tauri-Gummies™ for which a trademark was filed in Switzerland and the European Union. The company has received a Notice of Allowance from the European Union Intellectual Property Office (“E.U.I.P.O.”) granting the Company its trademark Registration for: Tauri-Gummies™ (E.U. Trademark # 018138348). The effective registration date, granting this Tauri-Gummies™ trademark to the Company, was June 24, 2020. This product contains no gelatin in the formulation, as the Company has utilized plant-based alternatives in completion of this product. Each bottle contains 4 flavors – cherry, orange, lemon and lime.

 

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

 

In addition, we also received a Notice of Allowance to our Tauri-GummiesTM registered trademark application from the European Union Intellectual Property Office. The trademark application was registered on June 24, 2020 under Serial No. 018138351, which extends our protective period for this mark until October 2029, and which may be extended thereafter for ten-year intervals.

 

F-7
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 1 – BASIS OF OPERATIONS (CONTINUED)

 

COMPANY PRODUCTS (CONTINUED)

 

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

 

On December 30, 2019, the Company announced it had commenced development of a Cannabigerol (“CBG”) Isolate Infused version of its Tauri-Gum™ brand. This initial production run had been completed in its Peach-Lemon flavor (and each piece of Chewing Gum contains 10mg CBG isolate). This initial production run yielded roughly 8,300 blister packs. The product is Kosher Certified, Vegan Formulated, Lab Tested, NON-GMO, Allergen Free, Gluten Free, containing no THC, and 100% Made in the USA. MSRP has been established at $19.99 per Blister Pack.

 

The Company has also commenced production of its second version of CBG Infused Tauri-Gum - Black Currant Flavor (each piece of Chewing Gum contains 15mg of CBG isolate). The Company’s Black Currant Flavor - CBG Infused Tauri-Gum™: Kosher Certified, Vegan, Halal, Lab-Tested, NON-GMO, Allergen Free, Gluten Free, 15mg CBG/Piece of Chewing Gum, 100% Made in the USA.

 

During the nine months ended December 31, 2020, the Company received and commenced sales of Peach-Lemon and Black Currant CBG Gum.

 

IMMUNE BOOSTER VERSION OF TAURI-GUM™

 

On May 29, 2020, the Company announced that it has commenced development of an Immune Booster version of Tauri-Gum™, which commenced sales during the three months ended September 30, 2020. This product contains 60mg of Vitamin C and 10mg of Elemental Zinc (“Zinc”) in each piece of chewing gum. This product does not contain any phytocannabinoids (i.e., CBD or CBG). The Company’s Immune Booster Tauri-Gum™ product, is: Kosher certified, Halal Vegan, Lab-Tested, non-GMO, allergen free, gluten free, infused with 60mg Vitamin C & 10mg Elemental Zinc/per each piece of gum, no phytocannabinoids, and 100% made in the United States of America. This product was developed for general usage and as with respect to the entirety of the Company’s retail Tauri-Gum™ product line, there are no “treatment claims” made.

 

RAINBOW DELUXE SAMPLER PACK

 

On June 15, 2020, the Company, introduced its Rainbow Deluxe Sampler Pack (“Rainbow Pack”). The Rainbow Pack is comprised of one blister pack of each Tauri-Gum’s™ flavors (6 blister packs in total) and will be available exclusively on the Company’s E-Commerce website (www.taurigum.com). The Rainbow Pack is comprised of three Tauri-Gum™ flavors of Cannabidiol (“CBD”) infused (Mint, Blood Orange, Pomegranate), two of the Tauri-Gum™ flavors are Cannabigerol (“CBG”) infused (Peach-Lemon, Black Currant), and one Tauri-Gum™ flavor is Vitamin C + Zinc (“Immune Booster”) infused (Pear Bellini). The introductory price of the Rainbow Pack is $99.99 per pack. The Rainbow pack commercially launched in late September 2020.

 

OTHER PRODUCTS

 

The Company, from time to time, will offer various formats of CBD product through its e-commerce website. As of this report date the Company is currently offering a 70% dark chocolate 20mg CBD non-GMO dietary supplement and 100mg CBD scented bath bombs (Mint, Pomegranate and Blood Orange). The Company’s current offering includes a line of skin care products sold on its ecommerce website under the product line name of Uncle Bud’s. The skin care products include three different 4.2mg CBD facemasks (collagen, detoxifying and tightening masks), 100mg CBD daily moisturizer, 30mg CBD anti-wrinkle dream, hand and foot cream with hemp seed oil, 120mg CBD massage and body oil, 240mg CBD body revive roll-on, 35mg CBD transdermal patch and 120mg CBD body spray. Additionally, on December 1, 2020 the Company announced the commencement of development of a Caffeine infused version of Tauri-Gum™. When production run is complete, this will represent the 7th SKU of the Tauri-Gum™ product line.

 

COVID-19 delays, affecting delivery of Tauri-Gummies™ inventory, during December 2020 and adverse effect on December 2020 E-Commerce sales

 

Following the highest monthly e-commerce sales that the Company has generated to date, November 2020 e-commerce net revenue of $41,730, delays arose due to COVID-19 related issues, specifically affecting the packager of the Tauri-Gummies™ product. As a result, the manufacturer failed to to deliver the anticipated shipment of Tauri-Gummies™ inventory during December 2020. This negatively impacted e-commerce revenue for the three months ended December 31, 2020. In addition to deferred revenue of $2,030 as a result of paid-in-full out-of-stock orders, it is likely a substantial number of e-commerce orders were not placed due to product unavailability. The Company depleted its Tauri-Gummies™ inventory on or around December 1, 2020. The Company was notified by its manufacturer (CureSupport NA) that the delivery of approximately 2,000 jars of Tauri-Gummies™, had been delayed until approximately January 15, 2021. The Company has received the shipment of Tauri-Gummies™ and fulfilled the orders associated with the deferred revenue as of this report date.

 

DISTRIBUTION OF THE COMPANY’S PRODUCTS

 

E&M Distribution Agreement

 

On April 1, 2019, the Company entered into a distribution agreement with E&M Ice Cream Company (“E&M”) to establish Tauri-GumTM in the greater New York City marketplace (the “E&M Distribution Agreement”), with substantial levels of both financial resources and marketing support. The Company had both received payment for and completed an initial delivery of $54,000 of Company product to E&M in March 2019, and re-orders in the first quarter of fiscal 2020. In connection with the E&M Distribution Agreement, the Company issued 1,000,000 restricted shares of the Company’s common stock and tendered a one-time cash payment of $125,000 to E&M for early stage marketing and distribution support services. 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.

 

F-8
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 1 – BASIS OF OPERATIONS (CONTINUED)

 

DISTRIBUTION OF THE COMPANY’S PRODUCTS

 

South Florida Region Distribution Agreement

 

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

 

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

 

North Eastern United States Distribution Agreement

 

On April 30, 2019, the Company, entered into a non-exclusive comprehensive distribution agreement with Sai Krishna LLC (“SKL”), a New Jersey based distributor, with relationships in the Northeast region of the United States and Asia. In connection with the SKL Agreement, the Company had issued 1,000,000 restricted common shares the Company’s stock in accordance with a further division of such shares as previously disclosed by us in previous periodic reports. The SKL distribution agreement expired on April 30, 2020 and was not renewed. Further, in connection with this agreement, on May 11, 2019, we also entered into a consulting agreement with Ms. Neelima Lekkala, who was appointed Vice President of Distribution & Marketing. This consulting agreement had a one-year term and expired on May 11, 2020 and was not renewed by us. As of December 31, 2020, Ms. Lekkala earned commission in the amount of $1,143.

 

Windmill Health Distribution Agreement

 

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

 

These arrangements are more fully described in our periodic and current reports that we have filed with the Securities and Exchange Commission and included in these agreements filed by reference as exhibits thereto.

 

In connection with the issuances of any restricted securities by the Company regarding the above-described distribution agreements or other agreements described in our annual report dated March 31, 2020 filed with the Securities and Exchange Commission on June 29, 2020, Part II, Item 5, Unregistered Sales of Equity Securities for additional information. No equity was issued as a result of this agreement.

 

Resale Agreement with OG LABORATORIES, LLC

 

On January 21, 2020, the Company entered into a joint venture agreement with OG LABORATORIES, LLC (“OG”). Under this agreement the Company acts as a wholesaler of OG’s product labeled under OG’s name. The Company began wholesaling two of OG’s products: “Omega-3 Heart Wellness+CBD” and “Collagen Skin Wellness+CBD”. Both of these products were offered on the Company’s website. The Company will be compensated for sales generated through its efforts according the following formula: the Company shall receive, no later than 30 days after collection, the following percentage of the total order amount for third-party customers who purchase OG products that Tauriga originated or derived: for aggregate purchases greater than one hundred thousand dollars ($100,000.00), Tauriga shall receive commission of three and a half percent (3.5%), and for aggregate purchases of one hundred thousand dollars ($100,000.00) or less, Tauriga shall receive commission of five percent (5%). Tauriga shall receive the above-referenced commission on such sales as long as the sale is made while the contract is in force or within six (6) months after the contract’s termination. The OG agreement may be terminated by either party with thirty days of prior written notice to the other party. The Company made an initial purchase of OG inventory of $3,050 for e-commerce fulfillment.

 

On July 28, 2020, the Company and OG mutually agreed to terminate this sales arrangement. The Company and OG arranged for a buyer to purchase substantially all of the remaining inventory. Any remaining inventory will be used as samples and promotional items. All items under this agreement were removed from the Company’s website. As of December 31, 2020, no third-party commissionable sales were recorded.

 

F-9
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 1 – BASIS OF OPERATIONS (CONTINUED)

 

DISTRIBUTION OF THE COMPANY’S PRODUCTS (CONTINUED)

 

Tauri-GumTM Product Line on IndiaMART

 

On May 26, 2020, the Company, announced that it has entered the fast-growing CBD retail marketplace of India. After several months of preparatory work, the Company has successfully listed the entirety of its Tauri-Gum™ product line with India’s leading E-Commerce Company (B2B, B2C, Customer to Customer), IndiaMART InterMESH Ltd. (“IndiaMART” or “IndiaMART.com”). The Company will sell each blister pack of its CBD infused Tauri-Gum™ (Mint, Blood Orange, and Pomegranate flavors) for 1,200 INR and each blister pack of its CBG infused Tauri-Gum™ (Peach-Lemon flavor) for 1,650 Indian Rupees. As of December 31, 2020, the Company has not recognized any sales under this arrangement.

 

Mr. Checkout Distribution Agreement

 

On June 29, 2020, the Company entered into a “Go-To-Market” distribution agreement with Mr. Checkout Distributors (“Mr. Checkout”), a marketing and consulting company located in Oviedo, Florida. The Mr. Checkout agreement enables the Company to launch its flagship brand Tauri-Gum™ through Mr. Checkout’s network of independent direct store distributors that service approximately 150,000 stores and retail locations across the United States. These stores include well-known convenience stores, gas station marts and supermarket chains. Under the terms of this agreement, on July 7, 2020, the Company paid a one-time $5,000 retainer on commission against the first $100,000 in sales. Subsequent commissions shall be paid to Mr. Checkout during the first thirty (30) days of the subsequent quarter once retainer has been met and exceeded. Commission will not be paid until the retainer has been met. As of December 31, 2020, the Company has recognized no sales via this agreement.

 

Think BIG, LLC License Agreement

 

On September 24, 2020, we entered into (i) a License Agreement (“License”) with Think BIG, LLC, a Los Angeles based company (“Think BIG”), (ii) a Professional Services Agreement (the “PSA”) with Willie C. Mack, Jr., CEO of Think BIG and (iii) a Professional Services Agreement (“PSA 2”) with Christopher J. Wallace, a co-founder of Think BIG (each of Willie C. Mack, Jr. and Christopher J. Wallace referred to herein as a “Brand Ambassador”), with the collective intent to enhance sales and marketing of the Company’s product lines, including its proprietary Rainbow Deluxe Sampler Pack (“Rainbow Pack”), and any co-branded products created by the parties to the License and each of the PSAs (the “Co-Branded Products”).

 

The term of this license is for a period of two years from September 24, 2020 (the “Effective Date”), unless earlier terminated by either party pursuant to the terms thereunder. The term of each of the PSA and the PSA 2 shall commence on the Effective Date and end on the earlier of (i) the two-year anniversary thereof; (ii) the termination for any reason of the License; or (iii) the earlier termination of the PSA Agreement pursuant to the terms thereunder.

 

The licensing arrangement permits for cross licensing, brand building, e-commerce customer acquisition efforts, retail customer acquisition efforts, enhanced social media presence, public relations & visibility strategies, as well as potential outreach to celebrities, and various other types of in-kind services in order to increase both Company revenue and customer acquisition efforts. The License will also allow for future joint development projects that will leverage the iconic “Frank White” brand and likeness/intellectual property (to which Think Big has the intellectual property rights). Under the terms of the License, the Company shall pay to Think BIG a royalty of 12% in year one and 13% in year two of the License, based on net sales, payable on or before the 15th day of each calendar month for the immediately preceding calendar month. In addition, the Company shall pay to Think BIG, a quarterly marketing fee for a period of twelve months in the amount $15,000 per quarter (for an aggregate total of $60,000), the first payment of which was paid by the Company within 10 days of the entry into the License, with the remaining payments to be made on or about each 90th day thereafter during the term of the License until the aggregate total has been reached.

 

Under each of the PSA and the PSA 2, each Brand Ambassador shall provide promotional and marketing services (“Services”) to the Company during the term of the respective PSAs, subject to the terms and conditions set forth therein, in connection with the Co-Branded Products and any co-developed products; and perform their individual marketing and promotional services set forth under the PSA and the PSA 2, respectively, and each of the exhibits annexed thereto.

 

As consideration for each Brand Ambassador’s Services set forth under their respective PSAs, the Company agrees to issue each Brand Ambassador 1,500,000 restricted shares of the Company’s common stock, which will be issued as compensation upon execution of the PSA and PSA 2. In the event that the applicable PSA has not previously been terminated, following the one-year anniversary of the Effective Date, an additional 1,500,000 restricted shares of Company’s common stock shall be issued to each Brand Ambassador, subject to the satisfaction of the terms of such additional services and/or criteria to be mutually agreed upon by the parties to the PSA and/or the PSA 2, as the case may be. These shares had a value of $91,800 and the cost will be recognized over the term of the contract.

 

F-10
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 1 – BASIS OF OPERATIONS (CONTINUED)

 

DISTRIBUTION OF THE COMPANY’S PRODUCTS (CONTINUED)

 

Stock Up Express Agreement

 

Effective February 1, 2021, the Company entered into a distribution agreement with Connecticut based Stock Up Express, a division of Bozzuto’s Inc., a distributor that generates more than $3 Billion in annual sales. The agreement shall remain in effect for a period of two (2) years, with automatic renewal for additional successive one (1) year terms. Under terms of this distribution agreement, Stock Up Express will market and resell the Company’s flagship brand, Tauri-Gum™, to its customer base of wholesale and retail customers in the mainland United States. The two companies will jointly market Tauri-Gum™ to Stock Up Express’ customer base. The Agreement allows for modification of product offerings, and the Company expects to offer additional product items over the course of calendar year 2021. Either party may terminate this Agreement for convenience by giving a sixty (60) day written notice to the other party or either party has the right to terminate this agreement if the other party breaches or is in default of any obligation hereunder, including the failure to make any payment when due, which default is incapable of cure or which, being capable of cure, has not been cured within thirty (30) days after receipt of written notice from the non-defaulting Party or within such additional cure period as the non-defaulting Party may authorize in writing.

 

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).

 

Though the Farm Bill removed industrial hemp from the Schedule I list, the Farm Bill preserved the regulatory authority of the FDA over cannabis and cannabis-derived compounds used in food and pharmaceutical products under the Federal Food, Drug, and Cosmetic Act (FD&C Act) and section 351 of the Public Health Service Act. The FDA has been clear that it intends to use this authority to regulate cannabis and cannabis-derived products, including CBD, in the same manner as any other food or drug ingredient. In addition to holding the hearing, the agency had requested comments by July 2, 2019 regarding any health and safety risks of CBD use, and how products containing CBD are currently produced and marketed, which comment period was concluded on July 16, 2019. As of the date hereof, the FDA has taken the position that it is unlawful to put into interstate commerce food products containing hemp derived CBD, or to market CBD as, or in, a dietary supplement. Furthermore, since the closure of the FDA hearings on this issue, some state and local agencies have issued a ban on the sale of any food or beverages containing CBD. There have been legislative efforts at the federal level, which seek to provide clear guidance to industry stakeholders regarding how to comply with applicable FDA law with respect to CBD and other hemp derived cannabinoids. However, such legislative efforts have been limited and as of this date, these legislative efforts require extensive further approvals, including approval from both houses of Congress and the President of the United States, before being enacted into law, if at all.

 

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

 

New York State Department of Health

 

The New York State Department of Health (NYDPH) has begun implementing regulations concerning the processing and retail sale of hemp derived cannabinoids. Under the regulations, “cannabinoid” is broadly defined as “any phytocannabinoid found in hemp, including but not limited to, Tetrahydrocannabinol (THC), tetrahydrocannabinolic acid (THCA), cannabidiol (CBD), cannabidiolic acid (CBDA), cannabinol (CBN), cannabigerol (CBG), cannabichromene (CBC), cannabicyclol (CBL), cannabivarin (CBV), tetrahydrocannabivarin (THCV), cannabidivarin (CBDV), cannabichromevarin (CBCV), cannabigerovarin (CBGV), cannabigerol monomethyl ether (CBGM), cannabielsoin (CBE), cannabicitran (CBT). Cannabinoids do not include synthetic cannabinoids as that term is defined [under New York law].”

 

These regulations came into effect on January 1, 2021, and all “cannabinoid hemp processors” and “cannabinoid hemp retailers” operating within the state of New York must be licensed by the NYDPH. The regulations expressly allow for food and beverages to contain “cannabinoids”, so long as such products meet certain requirements. To this end, the Company is in the process of preparing to submit its license application with the NYDPH in compliance with this legislation.

 

F-11
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 1 – BASIS OF OPERATIONS (CONTINUED)

 

REGULATORY MATTERS (Continued)

 

New York State Department of Health (Continued)

 

The product requirements include but are not limited to: the product must not contain more than 0.3% total Δ9- Tetrahydrocannabinol concentration; the product must not contain tobacco or alcohol; the product must not be in the form of an injectable, transdermal patch, inhaler, suppository, flower product including cigarette, cigar or pre-roll, or any other disallowed form as determined by the NYDPH; if the product is sold as a food or beverage product, it must not have more than 25mg of cannabinoids per product; and, if sold as an inhalable cannabinoid hemp product, the product will be subject to a number of additional safety measures.

 

Furthermore, all cannabinoid products sold at retail are subject to a series of labeling requirements. All such products must be labeled with the amount of cannabinoids in the product and the amount of milligrams per serving. If the product contains THC, the amount of THC in the product needs to be stated on the label in milligrams on a per serving and per package basis. In addition, all products are required to have a scannable bar code or QR code which links to a certificate of analysis and the packaging is prohibited from being attractive to consumers under 18 years of age. Products are also required to list appropriate warnings for consumer awareness. The Company’s entire product line will comply with the above standards.

 

See our Risk Factors and going concern opinion in our annual report for the year ended March 31, 2020 as filed with the Securities and Exchange Commission on June 29, 2020 for more information about these items, as well as certain related disclosures included our Results of Operations under the heading “Going Concern”.

 

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

 

OTHER BUSINESS ITEMS

 

Certified by Wal-Mart, Inc. to become a Domestic Supplier

 

On December 23, 2019, the Company announced that is has been certified by Wal-Mart, Inc. (“Walmart”) to become a domestic supplier. This certification from Walmart was obtained by the Company on December 19, 2019. On May 26, 2020, we also announced that our Walmart marketplace seller application had been officially approved. In joining Walmart marketplace, the Company has the opportunity to expand the presence of its products and product lines, with access to over a hundred million monthly customers. The Company is also approved to both list products on Walmart.com and sell directly to Walmart buyers. As of December 31, 2020, the Company has not recognized any sales through this channel. The Company was designated, by Walmart, Supplier ID # 36223459 and SAP Supplier # 1600179472.

 

Approval to Operate Global Seller Account by Alibaba Group

 

On January 6, 2020, the Company announced that is has been approved by Chinese multinational conglomerate, Alibaba Group (“Alibaba”), to operate a Global Seller Account. In addition, the Company has been designated as a Gold Supplier (Gold Tier Level Supplier). This Alibaba approval opens up the global marketplace to the Company, its products, its product lines, as well as future business opportunities. The Company has a relationship with a fulfillment facility in mainland China and is focusing on meeting buyers and virtual Alibaba Tradeshows. As of December 31, 2020, the Company has not recognized any sales through this channel.

 

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. On January 12, 2021, the Company announced that its status as an affiliate vendor has been renewed by the NACS. The Company has been designated, by NACS, its Affiliate Vendor ID # 113921.

 

F-12
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 1 – BASIS OF OPERATIONS (CONTINUED)

 

OTHER BUSINESS ITEMS

 

Investment Agreement and Registration Rights Agreement

 

On January 21, 2020, the Company entered into a $5,000,000 equity line financing agreement (“Investment Agreement”) with Tangiers Global, LLC (“Tangiers”), as well as a registration right agreement related thereto (“Registration Rights Agreement”). The term of the financing is over a period of 36 months. Pursuant to the Registration Rights Agreement, a maximum of 76,000,000 shares of our Common Stock may be sold to Tangiers from time to time, which were registered on our Form S-1 Registration Statement and declared effective by the Securities and Exchange Commission on March 16, 2020.

 

Subject to the terms and conditions of the equity line documents, from time to time, the Company may, in its sole discretion, deliver a put notice to Tangiers which states the number of shares that the Company intends to sell to Tangiers on a closing date. The maximum amount of shares of common stock that the Company shall be entitled to put to Tangiers per any applicable put notice shall be an amount of shares up to or equal to two hundred percent (200%) of the average of the daily trading volume (U.S. market only) of the common stock for the ten (10) consecutive trading days immediately prior to the applicable put notice date (the “Put Amount”) so long as such amount is at least five thousand dollars ($5,000) and does not exceed three hundred fifty thousand dollars ($350,000), as calculated by multiplying the Put Amount by the average daily VWAP for the ten (10) consecutive trading days immediately prior to the applicable put notice date. The “Purchase Price” of the shares of our Common Stock that we may sell to Tangiers will be 88% of the lowest VWAP of the common stock during the five (5) consecutive Trading Days including and immediately following the applicable to the put notice, provided, however, an additional 10% will be added to the discount of each put if (i) the Company is not DWAC eligible and (ii) an additional 15% will be added to the discount of each put if the Company is under DTC “chill” status on the applicable put notice date.

 

As of December 31, 2020, we had issued 13,910,000 shares of Common Stock in exchange for an aggregate of $400,514 under this equity line of credit facility. The Company has not issued any put notices subsequent to this balance sheet date. The final put notice was issued October 1, 2020.

 

On January 6, 2021, the Company determined to terminate its equity line of credit facility by terminating each of the Investment Agreement and Registration Rights Agreement, and on January 8, 2021 filed a Post-Effective Amendment to its Form S-1 Registration Statement (333-236923) removing from registration all shares of common stock not previously sold thereunder.

 

Whole Foods Market, Inc. Registration

 

On June 8, 2020, the Company, announced that became a Registered Whole Foods Market, Inc. (“Whole Foods”) Vendor (“Supplier”). The Company’s information has now been updated in the Whole Foods Vendor Reporting Portal. As of December 31, 2020, the Company has not recognized any sales through this channel.

 

Federal Award Management Registration

 

On October 6, 2020, the Company announced that it was officially approved to operate as a U.S. Government Vendor. The Company has retained Federal Award Management Registration (“FAMR”) to commence the bidding process on several identified potential U.S. Government Contracts (“Contracts”). These potential Contracts are presented by the Department of Defense (“DOD”). FAMR is an independent consulting firm that specializes in: Registrations, Certifications, and Federal Contracting. The Company’s Commercial & Government Entity (“CAGE”) Code # is: 8QXV4 with an expiration date of October 1, 2021.

 

KushCo Holdings, Inc.

 

Effective July 10, 2020, the Company and KushCo Holdings, Inc., a Nevada corporation (“KushCo”), entered into a Product Placement Membership Agreement (the “Placement Agreement”). Under the terms of the Placement Agreement, KushCo will provide placement services of the Company’s Tauri-Gum™ product line(s), and will assist with retail activation, product incubation, branding and marketing solutions, and sales management services. As compensation for providing such services and placement of the Company’s products, when KushCo or one of its affiliates consummates a purchase, distribution or sale of products (either directly or through third parties), KushCo will be paid a fee equal to 10% of the total gross sales for such transaction(s) (the “Placement Fee”). The Placement Fee shall be earned as of the date of the respective transaction and shall be paid in cash by the Company on a monthly basis and no later than the last calendar day of each calendar month. The Placement Agreement has a term of two (2) years, unless earlier terminated upon sixty (60) days’ notice to the Company, as provided under the KushCo Agreement. As of December 31, 2020, the Company has not recognized any sales through this channel.

 

F-13
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

NOTE 1 – BASIS OF OPERATIONS (CONTINUED)

 

HISTORICAL BUSINESS ITEMS

 

Honeywood

 

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

 

Pilus Energy

 

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

 

Blink Charging Company

 

On March 29, 2018 the Company’s then named subsidiary - Tauriga Biz Dev Corp. - entered into an independent sales representative agreement with Blink Charging Company (NASDAQ: BLNK) (“BLINK”). Under this agreement we became a non-exclusive independent sales representative to solicit orders from potential customers for EV (“Electric Vehicle”) Stations placement. This sales agreement has a three-tier compensation model based on whether we contract the new customer to purchase equipment outright from BLINK or enter into one of two revenue-sharing agreements. On June 29, 2018, the Company purchased four BLINK Level – 2 - 40” pedestal chargers for permanent placement in a retail location or locations whereby the Company will pay a variable annual fee based on 7% of total revenue per charging unit. The rest of the proceeds will be split 80/20 between the Company and the host location owner or its assignee. As of December 31, 2020, we had not installed any of these machines in any locations, and no revenue has been generated through the Blink contract. The Company has decided to abandon this business line, and therefore, we have reclassified these assets as held for sale.

 

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 nine months ended December 31, 2020, the Company recognized net sales of $215,113 and a gross profit of $35,284, compared to net sales of $201,881 and a gross profit of $35,719 for the same period during the same period in the prior year. At December 31, 2020, the Company had a working capital surplus of $922,687 compared to a working capital deficit of $334,832 for the year ended March 31, 2020. The improvement is largely resultant from increased inventory levels and an increase in value of trading securities. Although the Company has a working capital surplus, there is no guarantee that this will continue therefore it still believes that there is uncertainty with respect to continuing as a going concern.

 

On July 1, 2019, months after the NYC Department of Heath announced a ban on cannabidiol in foods and beverages (mainly focused on restaurants and baked goods), the result of which was that 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 due to the recent regulatory regime for cannabinoid products implemented by the NYDPH, the New York City Council will remove the current CBD ban and implement regulations surrounding CBD products in a logical and prompt manner. The Company believes it is well positioned under the current regulatory structure, 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 0.3% or less THC content. Subsequent to the balance sheet date, the State of New York has determined that it is allowable to sell CBD Infused Edible products in the forms of both food and drink (inclusive of chewing gum). It was also determined that no time can CBD be sold in products that contain either alcohol or tobacco. Additionally, the State of New York also said that NO CBD product may be sold if it contains more than 0.3% (1/333rd by Composition) THC. No Individual food or beverage product may contain more than 25mg of Hemp-Extracted Cannabinoids (“CBD” or “CBG”) per serving. Food and drink infused with CBD and Other Hemp Extracts must be packaged by the manufacturer and extracts cannot be added at the retail level. The Company’s entire product line will comply with these standards.

 

The Company, in the short term, intends to continue funding its operations either through cash-on-hand or through financing alternatives. Management’s plans with respect to this include raising capital through equity markets to fund future operations as well as the possible sale of its remaining marketable securities which had a market value of $1,377,400 at December 31, 2020. In the event the Company cannot raise additional capital to fund and/or expand operations or fails to raise adequate capital and generate adequate sales revenue, or if the regulatory landscape were to become more difficult or result in regulatory enforcement, it could result in the Company having to curtail or cease operations.

 

F-14
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 1 – BASIS OF OPERATIONS (CONTINUED)

 

Going Concern (Continued)

 

Additionally, even if the Company does raise sufficient capital to support its operating expenses and generate adequate revenues in the short term, there can be no assurances that the revenues will be sufficient to enable it to develop business to a level where it will generate profits and cash flows from operations to achieve profitability thereby eliminating its reliance on alternative sources of funding. Although management believes that the Company continues to strengthen its financial position over time, there is still no guarantee that profitable operations with sufficient cashflow to sustain operations can or will be achieved without the need of alternative financing, which is limited. These matters still raise significant doubt about the Company’s ability to continue as a going concern as determined by management. The Company believes that there is uncertainty with respect to continuing as a going concern until the operating business can achieve sufficient sales to maintain profitable operations and sustain cash flow to operate the Company for a period of twelve months. In the event the Company does need to raise additional capital to fund operations or engage in a transaction, failure to raise adequate capital and generate adequate sales revenues could result in the Company having to curtail or cease operations.

 

Even if the Company does raise sufficient capital to support its operating expenses, acquire new license agreements or ownership interests in life science companies and generate adequate revenues, or the agreements entered into recently are successful, there can be no assurances that the revenues will be sufficient to enable it to develop business to a level where it will generate profits and cash flows from operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern as determined by management. However, the accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

 

In an effort to support the Company’s future capital needs, on January 21, 2020, the Company entered into a $5,000,000 equity line financing agreement with Tangiers, as well as a registration right agreement related thereto. The financing is over a maximum of 36 months. Pursuant to the Registration Rights Agreement, a maximum of 76,000,000 shares of our common stock, par value $.00001 per share that we may sell to Tangiers from time to time will be registered by us on Form S-1 with the Securities and Exchange Commission under the Securities Act of 1933, as amended, for this financing. As a result of the Company’s Collaboration Agreement with Aegea, whereby seventy percent (70%) of the Net Proceeds from the sale of the initial 10,000,000 shares of stock of Tauriga using the ELOC were transferred to and invested in Aegea for the purchase of common stock of Aegea, and forty percent (40%) as amended August 10, 2020 of all subsequent Net Proceeds, this arrangement will provide less capital to ongoing operations. Additionally, the Company has excluded 4,000,000 shares under this agreement to cover liabilities and expenses related to the establishment and maintenance of this agreement. (See earlier in this Note for a more complete description under Investment Agreement and Registration Rights Agreement). As of December 31, 2020, the Company has issued 3,910,000 of the excluded 4,000,000 shares. On January 8, 2021, the Company filed a Post-Effective Amendment to its January 21, 2020 S-1 Investment Agreement and Registration Rights Agreement to terminate the effectiveness of the Registration Statement and to remove from registration all securities registered but not sold under the Registration Statement.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Condensed Consolidated Financial Statements

 

These condensed consolidated financial statements include the accounts and activities of Tauriga Sciences, Inc., its wholly-owned Canadian subsidiary, its wholly-owned subsidiary Tauriga Pharma Corp. (f/k/a Tauriga Biz Dev Corp – or “Tauriga BDC” and referenced herein as Tauriga BDC for contextual purposes only in describing the Blink contractual arrangement) and Tauriga Sciences Limited. All intercompany transactions have been eliminated in consolidation. As of December 31, 2020, there is no activity in any of the Company’s subsidiaries other than Tauriga Pharma Corp. holding the electric car chargers and the leasehold interest in Tauriga Sciences Limited.

 

Segment Information

 

The Company plans to adopt provisions of ASC 280-10 Segment Reporting subsequent to this report date. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making internal operating decisions. The Company and its Chief Operating Decision Makers determined that the Company’s operations consist of two segments: (i) The first division consists of all retail, wholesale and e-commerce product sales of CBD/CBG Tauri-GumTM, Tauri-GummiesTM, and other CBD/CBG products, and (ii) the second segment will be a research and development division that consist of liabilities and results from any activity relative to the progress in the development of the Company’s FDA IND application for Phase II Trial of its proposed pharmaceutical grade version of Tauri-Gum™. The cost basis investment in Aegea has been treated as a non-operating asset and will therefore not be reported as a part of the research and development division. During the nine months ended December 31, 2020 and 2019, all operating revenue and expenses fall under the Gum and Gummies division with the exception of the legal fees in the amount of $2,228 and none, respectively.

 

F-15
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

Revenue Recognition

 

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

 

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

 

On March 29, 2018 the Company, through Tauriga BDC, entered into an independent sales representative agreement with Blink to be a non-exclusive independent sales representative. Under the agreement with Blink, the Company may solicit orders from potential customers for EV charging station placement. On June 29, 2018, the Company purchased four Blink Level 2 - 40” pedestal chargers for permanent placement in a retail location or locations whereby the Company will pay a variable annual fee based on 7% of total revenue per charging unit. The remainder of the proceeds will be split 80/20 between the Company and the host location owner or its assignee. The host location owner will pay for the cost of providing power to these unit as well as installation costs. As of December 31, 2020, we have not installed any of these machines in any locations, and no revenue has been generated through the Blink contract. The Company has decided to abandon this business line, and therefore, we have reclassified these assets as held for sale.

 

The Company recognizes revenue upon the satisfaction of the performance obligation. The Company considers the performance obligation met upon shipment of the product or delivery of the product. For ecommerce orders, the Company’s products are shipped by a fulfillment company and payment is made in advance of shipment either through credit card or PayPal. The Company also delivers the product to its customers that they market to in the metropolitan New York Tri-State area that are not covered under any existing distribution agreements. The Company generally collects payment within 30 to 60 days of completion of its performance obligation, and the Company has no agency relationships. The Company recognized net revenue from operations in the amount of $215,113 during the nine months ended December 31, 2020 compared to $201,881 for the same period in the prior year. All revenue is from the sale of the Company’s Tauri-GumTM product line and there were accounts receivable, net of allowance for doubtful accounts in the amount of $34,017 outstanding for these sales, as of December 31, 2020.

 

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, 2020, the Company has established an allowance for doubtful accounts in the amount of $93,550.

 

Sales Refunds

 

The Company’s refund policy allows customers to return product for any reason except where the customer does not like the taste of the product. The customer has 30 days from the date of purchase to initiate the process. Returns are limited to one return or exchange per customer. Only purchases up to $100 qualify for a refund. Approved return/refund requests are typically processed within 1-2 business days. For product purchases made through a Tauri-GumTM distributor or retailer, the customer is required to work with original purchase location for any return or exchange. The Company has not established a reserve for returns as of December 31, 2020 however will monitor the refunds to estimate whether a reserve will be required.

 

Use of Estimates

 

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

 

F-16
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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, 2020, the Company’s cash on deposit with financial institutions did not exceed the total FDIC insurance limit of $250,000. At December 31, 2020 and March 31, 2020, the Company had a cash balance of $172,658 and $5,348, respectively. The Company’s does not expect, in the near term, for its cash balance to exceed the total FDIC insurance limit of $250,000 for other than very short periods of time where the Company would use such cash in excess of insurance in the very short-term in operating activities. To reduce its risk associated with the failure of such financial institution, the Company holds its cash deposits in more than one financial institution and evaluates at least annually the rating of the financial institution in which it holds its deposits. The Company had no cash equivalents as of December 31, 2020 and March 31, 2020.

 

Investment in Trading Securities

 

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

 

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

 

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, 2020 and March 31, 2020, the Company has not impaired any of their cost method investments.

 

Inventory

 

Inventory consists of finished goods in salable condition stated at the lower of cost or market determined by the first-in, first-out method. The inventory consists of packaged and labeled salable inventory. Shipping of product to finished good inventory fulfilment center is also included in the total inventory cost. Shipping of product upon sale for e-commerce sales is paid by the customer upon ordering for orders of single packs of Tauri-GumTM. For multiple pack or wholesale product orders shipping cost is paid by the Company. As of December 31, 2020, the Company’s inventory on hand had a value of $230,918. The Company has not established any inventory reserve on the Tauri-GumTM as of December 31, 2020.

 

Shipping and Handling Costs

The Company’s fulfillment handling costs are provided by independent contractors through fixed fee arrangements which may also include incentives.  These fees also contain a large degree of consultative, administrative and warehousing services as part of the fixed fee. Management believes that due to these factors it is more representative to include these amounts as general and administrative costs instead of cost of goods sold.  For the three and nine months ended December 31, 2020, the Company incurred fulfillment costs in the amount of $25,250 and $64,200 compared to $6,450 and $6,450 in the same period in the prior year.

 

Shipping cost for the Company consists of product movement to and from trade shows, between office locations, mailing of samples and product shipments. The cost of shipping is typically not charged to the customer when they order more than one product from on the website. Customer shipping of large customers wholesale orders are done on a reimbursement basis therefore any shipping revenue and shipping expense are largely recorded as offsetting gross revenues and cost of goods sold. The Company had net shipping expense:

 

   Three Months Ended December 31,   Nine Months Ended December 31, 
   2020   2019   2020   2019 
Shipping revenue  $2,622   $23,913   $4,453   $24,438 
Shipping expense   (5,732)   (25,995)   (17,762)   (28,029)
Net shipping expense  $(3,110)  $(2,082)  $(13,309)  $(3,989)

 

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, 2020 and 2019, basic and fully diluted earnings per share were the same as the Company had losses in this period.

 

F-17
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(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.

 

Impairment of Long-Lived Assets

 

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

 

Research and Development

 

The Company expenses research and development costs as incurred. Research and development costs were $7,173 and $3,852 for the nine months ended December 31, 2020 and 2019, respectively. The Company is continually evaluating products and technologies, and incurs expenses relative to these evaluations, including in the natural wellness space, such as Tauri-Gum™ product development of new flavor formulations and other CBD delivery products, as well as development of a Cannabigerol (“CBG”) Isolate Infused version of its Tauri-Gum™ brand. We also incur expenses relative to collaboration agreements and any activity relative to the progress in the development of the Company’s FDA IND application for Phase II Trial of its proposed pharmaceutical grade version of Tauri-Gum™, as well as intellectual property or other related technologies. As the Company investigates and develops relationships in these areas, resultant expenses for trademark filings, license agreements, website and product development and design materials will be expensed as research and development. Some costs will be accumulated for subsidiaries prior to formation of any new entities.

 

Reclassifications

 

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

 

Fair Value Measurements

 

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

 

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

 

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

 

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

 

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

 

F-18
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Fair Value Measurements (Continued)

 

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 or 20 day trailing period based on the market volume average weighted price. ASC 470-20 defines this as a beneficial conversion feature which that shall be recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value, not to exceed the face value of the note, to additional paid in capital. This segmented value, is to be amortized using the effective interest method over the term of the note.

 

Income Taxes

 

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

 

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

 

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 December 31, 2020.

 

F-19
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Recent Accounting Pronouncements

 

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contract’s in an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU simplifies the diluted net income per share calculation in certain areas. The ASU is effective for annual and interim periods beginning after December 31, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the impact that this new guidance will have on its consolidated financial statements.

 

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

 

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

 

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

 

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

 

Subsequent Events

 

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

 

NOTE 3 - REVENUE

 

The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which the Company adopted simultaneous with the commencement of sales in March 2019. No cumulative adjustment to accumulated deficit was done, and the adoption did not have an impact on our condensed consolidated financial statements, as no material arrangements prior to the adoption were impacted by the new pronouncement.

 

The following table disaggregates the Company’s revenue by sales channel for the nine months December 31:

 

   2020   2019 
Revenue:          
Distributor  $-   $15,592 
E-Commerce   169,428    8,523 
Wholesale   45,685    177,766 
   $215,113   $201,881 

 

F-20
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 3 – REVENUE (CONTINUED)

 

Revenues in the nine months ended December 31, 2020 from largely from its E-Commerce channel. As of December 31, 2020, the Company’s established allowance for doubtful account collectability in the amount of $93,550 was wholly attributable to the Wholesale channel. There were no significant contract asset or contract liability balances for all periods presented. The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

 

Collections of the amounts billed are typically paid by the customers within 30 to 60 days.

 

NOTE 4– INVENTORY

 

Inventory from continuing operations

 

Inventory value by product as of:

 

   December 31, 2020   March 31, 2020 
    (Unaudited)      
CBD/CBG Tauri-GumTM  $                     225,243   $120,480 
Tauri-GummiesTM   -    4,029 
Other Gummies (1)   -    2,425 
Other (2)   5,675    1,776 
Total Inventory  $230,918   $128,710 

 

  (1) This segment of inventory is stock that was purchased in conjunction with Resale Agreement with OG Laboratories, LLC.
     
  (2) Other inventory consists of holiday pouches sold as a bundled of Tauri-GumTM, other CBD products and skin care.

 

At December 31, 2020, there were $21,827 of prepayments on deposit with manufactures of Company products.

 

At March 31, 2020, the Company had deposits to Per Os Bio in the amount of $96,688 for the manufacturing costs of Tauri-GumTM for goods not yet available for sale.

 

NOTE 5– PROPERTY AND EQUIPMENT

 

The Company’s property and equipment is as follows:

 

   December 31, 2020   March 31, 2020   Estimated Life
    (Unaudited)         
Computers, office furniture and other equipment  $62,692   $69,638   3-5 years
Less: accumulated depreciation   (56,813)   (56,160)   
              
Net  $5,879    13,478    

 

During the nine months ended December 31, 2020, the Company purchased office furniture in the amount of $4,138. The furniture will be depreciated over 60 months commencing when it is put into service in the new Company headquarters on January 6, 2021.

 

On June 29, 2018, the Company purchased four Blink Level 2 – 40” pedestal chargers for permanent placement in one or more retail locations whereby the Company would share revenue from these electric car vehicle charging units with such location owner. No depreciation expense has been recorded for the charging units as of December 31, 2020 due to the fact that they have not been placed in service. As of April 1, 2020, these charging units were reclassified as assets held for resale.

 

Depreciation expense for the three and nine months ended December 31, 2020 was $218 and $653 and $232 and $696 for the same periods in the prior year.

 

F-21
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 6 – OPERATING LEASE

 

The Company has adopted ASU No. 2016-02, Leases (Topic 842), as of April 1, 2019 and will account for new leases 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 December 31, 2020 and 2019, the Company recorded a lease expense of $8,062 and $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. During October 2020, the Company terminated this lease and recorded a gain on lease disposal of $750. As of December 31, 2020, as a result of the lease termination the Company had neither an unamortized lease right of use asset or a lease liability associated with this lease.

 

Effective January 6, 2021, the Company moved its corporate headquarters to 4 Nancy Court, Suite 4, Wappingers Falls, New York 12590. The Company’s telephone number remains the same, phone: 917-796-9926. The Company entered into a two-year lease, expiring January 31, 2023. Tenant will pay $19,200 ($1,600 per month) during the first year of the term and $21,000 ($1,750 per month) during the second year of the term. The Company paid $1,600 as a security deposit.

 

Barcelona office

 

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

 

During October 2020, the Company terminated this lease and recorded a gain on lease disposal of $86. As of December 31, 2020, as a result of the lease termination the Company had neither an unamortized lease right of use asset or a lease liability associated with this lease.

 

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, 2020 the Company recorded a lease expense of $8,062. As of December 31, 2020, as a result of the lease terminations the Company had neither an unamortized lease right of use asset or a lease liability associated with this lease.

 

F-22
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 6 – OPERATING LEASE (CONTINUED)

 

The following chart shows the Company’s operating lease cost for the nine months ended December 31, 2020 and 2019:

 

   For the three months ended December 31,   For the nine months ended December 31, 
   2020   2019   2020   2019 
Amortization of right of lease asset  $1,151   $3,453   $8,062   $9,775 
Lease interest cost   109    714    936    1,142 
Total Lease cost  $1,261   $4,168   $8,998   $10,918 

 

As of December 31, 2020, the Company had no leases in force and no lease liability.

 

NOTE 7 – NOTES PAYABLE

 

CONVERTIBLE NOTES

 

      December 31, 2020  

March 31,

2020

 
GS Capital Partners LLC – Mar 2019  (a)   -    175,000 
GS Capital Partners LLC – Jun 2019  (b)   -    60,000 
Odyssey Funding, LLC – Sep 2019  (c)   -    80,000 
BHP Capital NY Inc. – Oct 2019  (d)   -    55,000 
Tangiers Global, LLC – Nov 2019  (e)   -    137,500 
Odyssey Funding, LLC – Dec 2019  (f)   -    100,000 
Jefferson Street Capital LLC – Dec 2019  (g)   -    55,000 
BHP Capital NY Inc. – Jan 2020  (h)   -    44,000 
ADAR Alef, LLC – Jan 2020  (i)   -    44,000 
GS Capital LLC – Jan 2020  (j)   -    110,000 
Tangiers Global, LLC – Feb 2020  (k)   -    65,000 
Crown Bridge Partners, LLC – Feb 2020  (l)   46,458    55,000 
ADAR Alef, LLC – Mar 2020  (m)   -    44,000 
Tangiers Global, LLC – Mar 2020  (n)   -    43,050 
GS Capital Partners, LLC – Apr 2020  (o)   -    - 
ADAR Alef, LLC – Apr – 2020  (p)   -    - 
Tangiers Global, LLC – May 2020  (q)   -    - 
First Fire Investments – May 2020  (r)   -    - 
GS Capital LLC – Jun 2020  (s)   -    - 
Tangiers Global, LLC – Jun 2020  (t)   210,000    - 
Tangiers Global, LLC – Dec 2020  (u)   210,000    - 
Total notes payable and convertible notes     $466,458   $1,067,550 
Less – note discounts      (39,917)   (482,416)
Less – current portion of these notes      (426,541)   (585,134)
Total notes payable and convertible notes, net discounts     $-   $- 

 

F-23
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 7 – NOTES PAYABLE (CONTINUED)

 

(a)

 

On March 14, 2019, the Company entered into a 12-month $300,000 principal face value 8.0% convertible debenture with GS Capital, with a maturity date of March 13, 2020. The GS Capital Note carried a $20,000 original issue discount (OID) and, as such, the initial net proceeds to the Company was $280,000. In connection with this agreement, the Company was obligated to issue 750,000 commitment shares having a value of $142,500 ($0.19 per share) which is reflected as interest expense in the Company’s condensed consolidated statement of operations during the year ended March 31, 2019. These shares were issued on June 20, 2019. The Holder was entitled, at its option, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock at a price for each share of Common Stock equal to 68% of the lowest daily VWAP of the Common Stock as reported on the National Quotations Bureau OTC Markets exchange for the fifteen (15) prior trading days. Due to the discount to market conversion, a beneficial conversion feature was recorded on this note as a discount to the note in the amount of the full-face value of the note which will be amortized over the life of the note. This amortization will be reflected as interest cost ratably over the term of the note. Also, in conjunction with this note, the 213,334 five-year cashless warrants, associated with the June 27, 2017, $80,000 5% one-year note were fully cancelled. As of December 31, 2020, the noteholder fully converted the $300,000 of principal and $26,009 of accrued interest into 14,473,254 shares of the Company’s common stock ($0.0225 per share). Upon conversion, the balance of the share reserve was returned to treasury.

 

(b) On June 21, 2019, the Company entered into a one year 8% $60,000 Convertible Note with GS Capital Partners, LLC pursuant to the terms of a Securities Purchase Agreement. The GS Capital Note had a maturity date of June 21, 2020 and carried a $5,000 original issue discount (such that $55,000 was funded to the Company on June 21, 2019). The holder was entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of the GS Note then outstanding into shares of the Company’s common stock at a price for each share of common stock equal to 66% of the lowest daily volume weighted average price (VWAP) of the common stock as reported on the National Quotations Bureau OTC Markets exchange, which the Company’s shares are traded or any exchange upon which the common stock may be traded in the future, for the fifteen (15) prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. In connection with the GS Capital Note, the Company issued irrevocable transfer agent instructions reserving 2,650,000 shares of its Common Stock for conversions under this Note equal to two and a half times the discounted value of the Note (the “Share Reserve”) and maintain a 2.5 times reserve for the amount then outstanding. On June 3, 2020, the noteholder converted the entire $60,000 of principal and $4,937 of accrued interest into 3,162,115 shares of common stock ($0.0205 per share) and the balance of the reserved shares were returned to the treasury.

 

(c) On September 13, 2019, the Company entered into a one year 8% $100,000 Convertible Note with Odyssey Funding, LLC (“Investor”) pursuant to the terms of a Securities Purchase Agreement (the “Odyssey Note”). The Odyssey Note has a maturity date of September 13, 2020 and carried a $5,000 original issue discount (such that $95,000 was funded to the Company at closing). The holder was entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of the Odyssey Note then outstanding into shares of the Company’s common stock at a price for each share of common stock equal to 64% of the lowest daily volume weighted average price (VWAP) of the common stock as reported on the National Quotations Bureau OTC Markets exchange, which the Company’s shares are traded or any exchange upon which the common stock may be traded in the future, for the fifteen (15) prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. In connection with the Odyssey Note, the Company issued irrevocable transfer agent instructions reserving 22,727,000 shares (the “Share Reserve”) of its Common Stock for conversions under this Note. As of December 31, 2020, the full principal of $100,000 and accrued interest in the amount of $4,443 of accrued interest as well as $500 in fees were converted into 5,543,332 shares of common stock ($0.0188 per share). Upon conversion, all shares remaining in the Share Reserve were cancelled and returned to the treasury.

 

(d) On October 17, 2019, the Company entered into a Convertible Promissory Note (“BHP Note”), bearing an interest rate of 10% per annum, pursuant to a Securities Purchase Agreement with BHP Capital NY, Inc. dated October 7, 2019. The BHP Note had a maturity date of July 3, 2020 and carried a $5,000 original issue discount (such that $50,000 was funded to the Company on October 8, 2019). The holder was entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of the BHP Note then outstanding into shares of the Company’s common stock at a price for each share of common stock equal to 65% of the lowest daily volume weighted average price (VWAP) of the common stock as reported on the National Quotations Bureau OTC Markets exchange, which the Company’s shares are traded or any exchange upon which the common stock may be traded in the future, for the fifteen (15) prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. Holder was entitled to deduct $500 from the conversion amount in each Notice of Conversion to cover Holder’s deposit fees associated with each Notice of Conversion. The Borrower was required at all times to have authorized and reserved three times the number of shares that would be issuable upon full conversion of the Note (assuming that the 4.99% limitation is not exceeded) in effect, initially 7,000,000 shares. On October 16, 2019, the Company issued 250,000 commitment shares to noteholder, BHP Capital NY, Inc. pursuant to the BHP Note. The shares had a value of $9,750 ($0.039 per share) which was recorded as interest expense on the Company’s condensed consolidated balance sheet. As of December 31, 2020, the noteholder converted the full principal of $55,000, accrued interest in the amount of $2,795 as well as $500 in fees into 3,060,931shares of common stock ($0.0191 per share). Upon conversion, all shares remaining in the Share Reserve were cancelled and returned to the treasury.

 

F-24
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 7 – NOTES PAYABLE (CONTINUED)

 

(e)

 

On November 7, 2019, the Company effectuated a nine-month convertible promissory note with Tangiers Global, LLC (the “Tangiers Note”). The Company received funds in the amount of $125,000 after reduction of the Original Issue Discount of $12,500. The $137,500 face value note matured on August 5, 2020 and bears and interest rate of 10%, guaranteed. The Note holder was entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of the Tangiers Note then outstanding into shares of the Company’s common stock at a price for each share of common stock equal to 66% of the lowest daily volume weighted average price (VWAP) of the common stock as reported on the National Quotations Bureau OTC Markets exchange, which the Company’s shares are traded or any exchange upon which the common stock may be traded in the future, for the twenty (20) prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. Holder may not engage in any “shorting” or “hedging” transaction(s) in the Common Stock of the Company prior to conversion. In connection with the Tangiers Note, the Company issued irrevocable transfer agent instructions reserving 35,000,000 shares (the “Share Reserve”) of its Common Stock for conversions under this Note, which Share Reserve has since been reduced as a result of conversions and other transactions between the parties. As of December 31, 2020, Tangiers fully converted all outstanding principal of $137,500 and accrued interest of $13,750 under this note. Interest on this note was guaranteed and prorated over the term of the note. Note principal and interest totaling $151,250 for 8,839,041 shares (average of $0.017112 per share). As a result, this note is fully repaid and retired and no further obligations or remuneration is due and owing thereunder, and any remaining shares of common stock in the Share Reserve were returned to treasury.
   

(f)

 

On December 18, 2019, the Company entered into a one year 8% $100,000 Convertible Note with Odyssey Capital, LLC (“Odyssey”) pursuant to the terms of a Securities Purchase Agreement (the “Odyssey Note”). The Odyssey Note has a maturity date of December 18, 2020 and carried a $5,000 original issue discount (such that $95,000 was funded to the Company at closing). The Investor was entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of the Odyssey Note then outstanding into shares of the Company’s common stock at a price for each share of common stock equal to 64% of the lowest daily volume weighted average price (VWAP) of the common stock as reported on the National Quotations Bureau OTC Markets exchange, which the Company’s shares are traded or any exchange upon which the common stock may be traded in the future, for the fifteen (15) prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. In connection with the Odyssey Note, the Company issued irrevocable transfer agent instructions reserving 22,084,000 shares (the “Share Reserve”) of its Common Stock for conversions under this Odyssey Note. As of December 31, 2020, the Company fully paid and retired this note including accrued interest $4,252 and a prepayment penalty in the amount of $45,748. Upon full conversion of this note, any shares remaining in the Share Reserve were returned to treasury.

 

(g) On December 26, 2019, the Company entered into a one year 10% $55,000 Convertible Note with Jefferson Street Capital LLC (“Jefferson Street”) pursuant to the terms of a Securities Purchase Agreement (the “Jefferson Street Note”). The Jefferson Street Note had a maturity date of December 26, 2020 and carried a $5,000 original issue discount (such that $50,000 was funded to the Company at closing). The Investor was entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of the Jefferson Street Note then outstanding into shares of the Company’s common stock at a price for each share of common stock equal to 65% of the lowest daily volume weighted average price (VWAP) of the common stock as reported on the National Quotations Bureau OTC Markets exchange, which the Company’s shares are traded or any exchange upon which the common stock may be traded in the future, for the fifteen (15) prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. Commencing on the date which is 180 days following the date of this Jefferson Street Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, this Jefferson Street Note may be converted by Jefferson Street in whole or in part at any time from time to time after the Issue Date as noted in the Jefferson Street Note. In connection with the Jefferson Street Note, the Company was required at all times to have authorized and reserved six times the number of common shares that would be issuable upon full conversion of the Jefferson Street Note in effect, initially reserved at 20,000,000 common shares (the “Share Reserve”) of its Common Stock for conversions under this Jefferson Street Note. Upon full conversion of this note, remaining in the Share Reserve were cancelled. As of December 31, 2020, the noteholder converted the full principal of $55,000 plus accrued interest of $2,750 and $1,000 in fees for 3,095,362 shares of common stock ($0.01898 per share). Upon full conversion of this note, any shares remaining in the Share Reserve were returned to treasury.

 

F-25
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 7 – NOTES PAYABLE (CONTINUED)

 

(h) On January 3, 2020, the Company entered into a one year 2% $44,000 Convertible Promissory Note with BHP Capital NY Inc. (“BHP Capital”) pursuant to the terms of a Securities Purchase Agreement (the “BHP Capital Note”). The BHP Capital Note has a maturity date of January 3, 2021 and carries a $4,000 original issue discount (such that $40,000 was funded to the Company at closing). Subsequent to this note funding, BHP exercised a most favored nations clause increasing this notes interest rate to 8%, based on subsequent notes issued by the Company. BHP has the right from time to time, and at any time after closing, to convert all or any amount of the principal face amount of the BHP Capital Note then outstanding into shares of the Company’s common stock at a price for each share of common stock equal to 65% of the lowest one-day volume weighted average price (VWAP) of the common stock as reported on the National Quotations Bureau OTC Markets exchange, which the Company’s shares are traded or any exchange upon which the common stock may be traded in the future, for the twenty (20) prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. Such conversion shall be effectuated by the Company delivering the shares of common stock to BHP Capital within three (3) business days of receipt by the Company of the notice of conversion. In connection with the BHP Capital Note, the Company issued irrevocable transfer agent instructions pursuant to which the Company is required at all times to have reserved three times the number of shares that would be issuable upon full conversion of the Note (assuming that the 4.99% beneficial ownership limitation is not in effect) (based on the respective Conversion Price of the Note in effect from time to time, initially 14,100,000 shares of its Common Stock (the “Share Reserve”) for conversions under this BHP Capital Note. As of December 31, 2020, the noteholder fully converted the full principal of $44,000 plus accrued interest of $2,290 and $1,000 fees for 3,095,362 common shares ($0.01512 per shares). Upon full conversion of this note, any shares remaining in the Share Reserve were returned to treasury.

 

(i) On January 15, 2020, the Company entered into security purchase agreement with Adar Alef, LLC whereby the Company issued an 8% convertible redeemable note in the principal amount of $44,000. The note was funded with net proceeds of $37,800, after the deduction of $4,000 for OID and $2,200 in legal fees. The note has a maturity date of January 15, 2021. The face value amount plus accrued interest under the note are convertible into shares of the Company’s common stock at a price for each share of common stock equal to 65% of the lowest daily VWAP of the common stock as reported on the National Quotations Bureau OTC Markets market on which the Company’s shares are traded or any exchange upon which the common stock may be traded in the future, for the 20 prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. The Company established an initial reserve of 6,296,000 shares of its common stock and at all times reserve a minimum of 4 times the amount of shares required if the note were to fully convert. As of December 31, 2020, the noteholder converted the full principal of $44,000 plus accrued interest of $2,750 and $1,000 in fees for 3,095,362 shares of common stock ($0.01898 per share). The full share reserve was released upon satisfaction of the note and returned to treasury.

 

(j) On January 17, 2020, the Company entered into a one year 8% $110,000 Convertible Note with GS Capital Partners, LLC pursuant to the terms of a Securities Purchase Agreement. The GS Capital Note has a maturity date of January 21, 2021 and carried a $10,000 original issue discount (such that $100,000 was funded to the Company on January 21, 2020). The holder is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of the GS Note then outstanding into shares of the Company’s common stock at a price for each share of common stock equal to 65% of the lowest daily volume weighted average price (VWAP) of the common stock as reported on the National Quotations Bureau OTC Markets exchange, which the Company’s shares are traded or any exchange upon which the common stock may be traded in the future, for the twenty (20) prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. In connection with the GS Capital Note, the Company issued irrevocable transfer agent instructions reserving 5,150,000 shares of its Common Stock for conversions under this Note (the “Share Reserve”) within 5 days from the date of execution and shall maintain a 2.5 times reserve for the amount then outstanding. Upon full conversion or repayment of this Note, any shares remaining in the Share Reserve shall be cancelled. Pursuant to this note, the Company issued to the noteholder 400,000 shares of its restricted common stock as debt commitment shares valued at $20,960 ($0.0524 per share). As of December 31, 2020, the noteholder converted the full principal of $110,000 plus accrued interest of $4,388 for 6,045,769 shares of common stock ($0.01898 per share). Upon full conversion of this note, any shares remaining in the Share Reserve were returned to treasury.
   

(k)

 

On February 7, 2020, the Company effectuated a six-month convertible promissory note with Tangiers Global, LLC (the “Tangiers Note”). The Company received funds in the amount of $60,000 after reduction of the Original Issue Discount of $5,000. The $65,000 face value note matured on August 6, 2020 and bears and interest rate of 2%, guaranteed. This note had a fixed conversion price of $0.03 per share. The Company established an initial reserve of 7,000,000 shares of its common stock and has agreed to reserve a multiple of shares to fully convert under the terms of this note, which Share Reserve has since been reduced as a result of conversions and other transactions between the parties. The Note was retired after the Maturity Date, therefore was subject to the terms hereof and restrictions and limitations contained herein, the Holder had the right, at the Holder’s sole option, to convert in whole or in part the outstanding and unpaid Principal Amount under this Note into shares of Common Stock at the Variable Conversion Price which shall be equal to the lower of: (a) the Fixed Conversion Price or (b) 65% of the lowest volume weighted average price of the Company’s Common Stock during the 20 consecutive Trading Days prior to the date on which Holder elected to convert all or part of the Note. Accrued interest in the amount of $1,300 has been recognized on this note as of December 31, 2020. As of December 31, 2020, the noteholder converted the full principal of $65,000 plus accrued interest of $1,300 for 4,444,891 shares of common stock ($0.014916 per share). Upon full conversion of this note, any shares remaining in the Share Reserve were returned to treasury.

 

F-26
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 7 – NOTES PAYABLE (CONTINUED)

 

(l) Effective February 11, 2020 the Company entered into a one-year 10% convertible promissory note with Crown Bridge Partners, LLC (“Crown”), having a face value of $55,000. The Company received funds in the amount of $50,000 on February 23, 2020, after reduction of the Original Issue Discount of $5,000. The $55,000 face value note matures on February 11, 2021. Crown had the right at any time to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of this note into fully paid and non-assessable shares of common stock. The “Conversion Amount”, with respect to any conversion of this note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at Crown’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at Crown’s option, Default Interest, if any. The Conversion Price shall be the lesser of (i) 65% multiplied by the lowest volume weighted average price on the OTCQB, or applicable trading market during the previous twenty (20) trading day period ending on the latest complete trading day prior to the date of this note or (ii) the variable conversion price which shall mean 65% multiplied by lowest intraday trading price of any market makers for the Common Stock during the twenty (20) trading day period ending on the last complete trading day prior to the conversion date. The Company agreed that during the period the conversion right exists, the Company will reserve from its authorized and unissued common stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of common stock upon the full conversion of this note. The Company was required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the note. The Company, on February 24, 2020, issued 250,000 debt commitment shares in conjunction with this note. The commitment shares had a value of $13,500 ($0.054 per share). The Company, on August 25, 2020 agreed issue 125,000 additional make-whole shares valued at $4,438 ($0.0355). As of December 31, 2020, the noteholder converted $8,543 on note principal including $1,500 of interest for 500,000 shares $0.020085. As of December 31, 2020, this note had accrued interest of $4,053. On January 5, 2021, the Company and the noteholder agreed to fully settle and retire this note for the amount of $75,0000. Along with $46,458 of note principal and $4,053 of accrued interest a prepayment penalty of $24,490 will be recorded as interest expense. Upon full conversion of this note, any shares remaining in the share reserve were returned to treasury.
   
(m)

On March 17, 2020, the Company entered into security purchase agreement with Adar Alef, LLC whereby the Company issued an 8% convertible redeemable note in the principal amount of $44,000. The note was funded with net proceeds of $37,800, after the deduction of $4,000 for OID and $2,200 in legal fees. The note had a maturity date of March 17, 2021. The face value amount plus accrued interest under the note are convertible into shares of the Company’s common stock at a price for each share of common stock equal to 65% of the lowest daily VWAP of the common stock as reported on the National Quotations Bureau OTC Markets market for the 20 prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. The Company established an initial reserve of 7,584,500 shares of its common stock and at all times reserve a minimum of 4 times the amount of shares required if the note were to fully convert. As of December 31, 2020, the noteholder converted $44,000 of note principal and accrued interest of $1,989 for 2,600,620 ($ 0.017684 per share). Upon full conversion of this note, any shares remaining in the share reserve were returned to treasury.

   
(n) On March 23, 2020, the Company effectuated a six-month convertible promissory note with Tangiers Global, LLC. The Company received funds in the amount of $41,000 after reduction of the Original Issue Discount of $2,050. The $43,050 face value note matured on September 23, 2020 and bears an interest rate of 5%, guaranteed. This note has a fixed conversion price of $0.03 per share. The Company agreed that it would at all times reserve and keep available for Tangiers, out of its authorized and unissued Common Stock a multiple of the number of shares of Common Stock as shall be issuable upon the full conversion of this Note. Since this note was not converted as of the maturity date, Tangiers had the right, at its sole option, to convert in whole or in part the outstanding and unpaid Principal Amount under this Note into shares of Common Stock at the Variable Conversion Price which shall be equal to the lower of: (a) the Fixed Conversion Price or (b) 65% of the lowest volume weighted average price of the Company’s Common Stock during the 20 consecutive Trading Days prior to the date on which Tangiers elects to convert all or part of the Note. As of December 31, 2020, the note holder converted $43,050 in note principal and $2,153 of accrued interest for 2,826,923 shares ($0.01599 per share). Upon full conversion of this note, any shares remaining in the share reserve were returned to treasury.
   
(o) On April 17, 2020, the Company entered into a one year 8% $55,000 convertible Note with GS Capital Partners, LLC pursuant to the terms of a Securities Purchase Agreement (“GS Note”). The GS Note had a maturity date of April 17, 2021 and carried a $5,000 original issue discount (such that $50,000 was funded to the Company on April 17, 2020). The holder was entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of the GS Note then outstanding into shares of the Company’s common stock at a price for each share of common stock equal to 65% of the lowest daily volume weighted average price (VWAP) of the common stock as reported on the National Quotations Bureau OTC Markets exchange, which the Company’s shares are traded or any exchange upon which the common stock may be traded in the future, for the twenty (20) prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. In connection with the GS Capital Note, the Company issued irrevocable transfer agent instructions reserving 5,717,000 shares of its common Stock for conversions under this and agreed to maintain a 2.5 times reserve for the amount then outstanding. The Company issued to the noteholder 150,000 shares of its restricted common stock as debt commitment shares valued at $5,000 ($0.03 per share). As of December 31, 2020, this noteholder converted note principal of $55,000 and accrued interest of $2,662 for 4,650,335 shares ($0.01408 per share). Upon full conversion of this note, any shares remaining in the share reserve were returned to treasury.

 

F-27
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 7 – NOTES PAYABLE (CONTINUED)

 

(p) On April 30, 2020, the Company entered into securities purchase agreement with Adar Alef, LLC whereby the Company issued an 8% convertible redeemable note in the principal amount of $44,000. The note was funded with net proceeds of $37,800, after the deduction of $4,000 for OID and $2,200 in legal fees. The note has a maturity date of April 30, 2021. The face value amount plus accrued interest under the note are convertible into shares of the Company’s common stock at a price for each share of common stock equal to 65% of the lowest daily VWAP of the common stock as reported on the National Quotations Bureau OTC Markets market on which the Company’s shares are traded or any exchange upon which the common stock may be traded in the future, for the 20 prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. The Company established an initial reserve of 7,736,000 shares of its common stock and at all times reserve a minimum of 4 times the amount of shares required if the note were to fully convert. As of December 31, 2020, the noteholder converted note principal of $44,000 and accrued interest $1,975 for 3,701,000 shares ($0.01242 per share). Upon full conversion of this note, any shares remaining in the share reserve were returned to treasury.
   
(q) On May 8, 2020, the Company effectuated a six-month fixed convertible promissory note with Tangiers Global, LLC with a total face value of $102,500 containing an original issue discount of $2,500. On May 8, 2020 and June 10, 2020, the Company received funds, on each date, in the amount of $50,000 and recognized original issue discount of $1,250. This note matures on November 8, 2020 and bears an annual interest rate of 5%. This note has a fixed conversion price of $0.03 per share. The Company agreed that it will at all times reserve and keep available for Tangiers, out of its authorized and unissued Common Stock a multiple of the number of shares of Common Stock as shall be issuable upon the full conversion of this Note. Since the Note was not retired on or before the Maturity Date, it was subject to the terms hereof and restrictions and limitations contained herein, the Tangiers had the right, at the its sole option, to convert in whole or in part the outstanding and unpaid Principal Amount under this Note into shares of Common Stock at the Variable Conversion Price which shall be equal to the lower of: (a) the Fixed Conversion Price or (b) 70% of the lowest volume weighted average price of the Company’s Common Stock during the 15 consecutive Trading Days prior to the date on which Tangiers elects to convert all or part of the Note. As of December 31, 2020, the noteholder converted note principal of $102,500 and accrued interest $5,125 for 5,823,864 shares ($0.01848 per share). Upon full conversion of this note, any shares remaining in the share reserve were returned to treasury.

 

(r) On May 18, 2020, the Company entered into a Securities Purchase Agreement (“SPA”) with Firstfire Global Opportunities Fund, LLC (“Firstfire”) pursuant to a convertible promissory note in the principal amount of $88,333, having an original issue discount in the amount of $8,833. On May 24, 2020, the Company received funds in the amount of $75,000 after the deduction of legal fees in the amount of $4,500. This note bears an annual interest rate of 8%. The per share conversion price into which Principal Amount and interest under this Note shall be convertible into shares of Common Stock hereunder shall be equal to 65% multiplied by the average of the two (2) lowest volume weighted average prices of the Common Stock during the fifteen (15) consecutive Trading Day period immediately preceding the date of the respective conversion. The borrower agreed that at all times until the Note is satisfied in full, the borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of a number of Conversion Shares equal to the greater of: (a) 8,500,000 shares of Common Stock or (b) the sum of the number of Conversion Shares issuable upon the full conversion of this Note multiplied by (ii) three and a half (3.5). The Company issued to the noteholder 375,000 shares of its restricted common stock as debt commitment shares valued at $12,075 ($0.0322 per share). As of December 31, 2020, the noteholder converted note principal of $88,333 and accrued interest $3,501 for 6,020,000 shares ($0.015255 per share). Upon full conversion of this note, any shares remaining in the share reserve were returned to treasury.

 

(s) On June 4, 2020, the Company entered into a one year 8% $33,000 convertible Note with GS Capital Partners, LLC (the “GS Note”) pursuant to the terms of a Securities Purchase Agreement (the “SPA”). The GS Note has a maturity date of June 4, 2021 and carried a $3,000 original issue discount (such that $30,000 was funded to the Company on or about June 4, 2020). The holder was entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of the GS Note then outstanding into shares of the Company’s common stock at a price for each share of common stock equal to 65% of the lowest daily volume weighted average price (VWAP) of the common stock as reported on the National Quotations Bureau OTC Markets exchange, which the Company’s shares are traded or any exchange upon which the common stock may be traded in the future, for the twenty (20) prior trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. Accrued but unpaid interest was subject to conversion. In connection with the GS Capital Note, the Company issued irrevocable transfer agent instructions reserving 3,678,000 shares of its common Stock for conversions under this Note (the “Share Reserve”) and shall maintain a 2.5 times reserve for the amount then outstanding. The Company issued to the noteholder 90,000 shares of its restricted common stock as debt commitment shares valued at $3,105 ($0.0345 per share). As of December 31, 2020, the noteholder converted note principal of $33,000 and accrued interest $1,807 for 2,369,458 shares ($0.01469 per share). Upon full conversion of this note, any shares remaining in the share reserve were returned to treasury.

 

F-28
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 7 – NOTES PAYABLE (CONTINUED)

 

(t)

 

On June 24, 2020, the Company effectuated a six-month fixed convertible promissory note with Tangiers Global, LLC with a total face value of $210,000 containing an original issue discount of $10,000. On June 26, 2020, the Company received funds in the amount of $200,000 and recognized original issue discount of $10,000. This note matures on December 24, 2020 and bears an interest rate of 8%, guaranteed. This note has a fixed conversion price of $0.03 per share. The Company agreed that it will at all times reserve and keep available for Tangiers, out of its authorized and unissued Common Stock a multiple of the number of shares of Common Stock as shall be issuable upon the full conversion of this Note. If the Note is not retired on or before the Maturity Date, then at any time and from time to time after the Maturity Date, and subject to the terms hereof and restrictions and limitations contained herein, the Tangiers shall have the right, at the Tangiers’s sole option, to convert in whole or in part the outstanding and unpaid Principal Amount under this Note into shares of Common Stock at the Variable Conversion Price which shall be equal to the lower of: (a) the Fixed Conversion Price or (b) 70% of the lowest volume weighted average price of the Company’s Common Stock during the 15 consecutive Trading Days prior to the date on which Tangiers elects to convert all or part of the Note. As of December 31, 2020, accrued interest was $16,800. During January 2021, the noteholder converted $210,000 of note principal and accrued interest $16,800 for 12,221,861 shares ($0.01856 per share). Upon full conversion of this note, any shares remaining in the share reserve were returned to treasury.
   
(u) On December 21, 2020, the Company effectuated a $210,000 six-month fixed convertible promissory note with Tangiers Global, LLC containing an original issue discount of $10,000. This note matures on June 22, 2021 and bears an interest rate of 8%, guaranteed. This note has a fixed conversion price of $0.03 per share. The Company may redeem the note by paying to Tangiers an amount as follows: (i) if within the first 90 days of the issuance date, then for an amount equal to 110% of the unpaid principal amount so paid of this Note along with any interest that has accrued during that period, and (ii) if after the 91st day, but by the 180th day of the issuance date, then for an amount equal to 120%. After 180 days from the effective date, the Company may not pay this note in cash, in whole or in part without prior written consent by Holder. The Company covenants that it will at all times reserve out of its authorized and unissued Common Stock a multiple of the number of shares of Common Stock as shall be issuable upon the full conversion of this Note. If the Note is not retired on or before the Maturity Date, then at any time and from time to time after the Maturity Date, and subject to the terms hereof and restrictions and limitations contained herein, the Tangiers shall have the right, at the Tangiers’s sole option, to convert in whole or in part the outstanding and unpaid Principal Amount under this Note into shares of Common Stock at the Variable Conversion Price which shall be equal to the lower of: (a) the Fixed Conversion Price or (b) 70% of the lowest volume weighted average price of the Company’s Common Stock during the 15 consecutive Trading Days prior to the date on which Tangiers elects to convert all or part of the Note. If the Company is placed on “chilled” status with the DTC, the discount shall be increased by 10%, i.e., from 30% to 40%, until such chill is remedied. If the Company is not DWAC eligible through their transfer agent and DTC’s FAST system, the discount will be increased by 5%, i.e., from 30% to 35%. In the case of both, the discount shall be a cumulative increase of 15%, i.e., from 30% to 45%. Tangiers may not engage in any “shorting” or “hedging” transaction(s) in the Common Stock of the Company prior to conversion. In the “Event of Default”, defined (i) a default in payment of any amount due hereunder; (ii) a default in the timely issuance of underlying shares, which default continues for 2 Trading Days after the Company has failed to issue shares or deliver stock certificates within the 3rd Trading Day following the Conversion Date; (iii) if the Company does not issue the press release or file the Current Report on Form 8-K; (iv) failure by the Company for 3 days after notice has been received by the Company to comply with any material provision of this Note; (v) any representation or warranty of the Company in this Note that is found to have been incorrect in any material respect when made, including, without limitation, the Exhibits; (vi) failure of the Company to remain compliant with DTC, thus incurring a “chilled” status with DTC; (vii) any default of any mortgage, indenture or instrument which may be issued, or by which there may be secured or evidenced any indebtedness, for money borrowed by the Company or for money borrowed the repayment of which is guaranteed by the Company, whether such indebtedness or guarantee now exists or shall be created hereafter; (viii) if the Company is subject to any Bankruptcy Event; (ix) any failure of the Company to satisfy its “filing” obligations under the Securities Exchange Act of 1934, as amended (the “1934 Act”) and the rules and guidelines issued by OTC Markets News Service, OTC Markets Group, Inc. and their affiliates; (x) failure of the Company to remain in good standing under the laws of its state of domicile; (xi) any failure of the Company to provide the Tangiers with information related to its corporate structure including, but not limited to, the number of authorized and outstanding shares, public float within 1 Trading Day of request by Tangiers; (xii) failure by the Company to maintain the Required Reserve; (xiii) failure of Company’s Common Stock to maintain a closing bid price in its Principal Market for more than 3 consecutive Trading Days; (xiv) any delisting from a Principal Market for any reason; (xv) failure by Company to pay any of its transfer agent fees in excess of $2,000 or to maintain a transfer agent of record; (xvi) failure by Company to notify Tangiers of a change in transfer agent within 24 hours of such change; (xvii) any trading suspension imposed by the United States Securities and Exchange Commission under Sections 12(j) or 12(k) of the 1934 Act; (xviii) failure by the Company to meet all requirements necessary to satisfy the availability of Rule 144 to the Tangiers or its assigns, including but not limited to the timely fulfillment of its filing requirements as a fully-reporting issuer registered with the SEC, requirements for XBRL filings, and requirements for disclosure of financial statements on its website; or (xix) failure of the Company to abide by the Use of Proceeds or failure of the Company to inform the Tangiers of a change in the Use of Proceeds. If an Event of Default occurs, the outstanding Principal Amount of this Note owing in respect thereof through the date of acceleration, shall become, at the Tangiers’s election, immediately due and payable in cash at the “Mandatory Default Amount”. The Mandatory Default Amount means 20% of the outstanding Principal Amount of this Note will be automatically added to the Principal Sum of the Note and tack back to the Effective Date for purposes of Rule 144. Commencing 5 days after the occurrence of any Event of Default that results in the eventual acceleration of this Note, this Note shall accrue additional interest, at a rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law. As of December 31, 2020, this note had accrued interest of $933.

 

F-29
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 7 – NOTES PAYABLE (CONTINUED)

 

OTHER NOTES

 

On October 5, 2020, the Company entered into (i) an Inventory Financing Promissory Note in the aggregate principal amount of $135,000 with Jefferson Street Capital LLC, and (ii) a Securities Purchase Agreement. The note has a maturity date of October 5, 2021, carries a $10,000 original issue discount (and a $3,000 due diligence fee paid to Moody Capital Solutions, Inc., the placement agent on behalf of Jefferson Street), and carries interest on the unpaid principal balance hereof at the rate of ten percent (10%) per annum beginning on the issuance date of October 5, 2020. Any amount of principal or interest on the Note which is not paid when due shall bear interest at the rate of eighteen percent (18%) per annum from the due date thereof until the same is paid or converted in accordance with the terms of the Note. The repayment of the Note shall be in cash in seven equal monthly installments beginning on April 5, 2021 and ending on October 5, 2021, for total repayment with interest in the aggregate amount of $148,500 (assuming no defaults or partial or complete conversions of our Common Stock as a form of repayment). This note may not be converted by noteholder into shares of our Common Stock unless we default in our monthly repayment obligation pursuant to the cash repayment schedule noted above. In the event of a default of the note, noteholder shall have the right to convert all or any part of the outstanding and unpaid amounts into fully paid and non-assessable shares of Common Stock; provided, however, that in no event shall the holder be entitled to convert any portion of the note in excess of that portion of the note upon the conversion of which would result in beneficial ownership by noteholder and its affiliates of more than 4.99% of the outstanding shares of Common Stock (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder. The beneficial ownership limitations noted above may not be waived by noteholder. The conversion price shall equal (subject to customary adjustments for stock splits, stock dividends or rights offerings, recapitalization, reclassifications, extraordinary distributions and similar events) 75% multiplied by the market price, which is defined to mean the lowest one day volume weighted average price of our Common Stock during the ten (10) trading day period ending on the latest complete trading day prior to the conversion date. The note contains a number of default or penalty provisions, including, but not limited to, the following: (a) at any time after October 5, 2020, if in the case that the Company’s Common Stock is not deliverable by DWAC for any reason, an additional 10% discount will apply for all future conversions under all notes. If in the case that the Company’s Common Stock is “chilled” for deposit into the DTC system and only eligible for clearing deposit, an additional 15% discount shall apply for all future conversions under the Note while the “chill” is in effect; (ii) if both the events noted in (i) above were to occur, an additional cumulative 25% discount shall apply; (iii) if the Company ceases to be a reporting company pursuant to the 1934 Act or if the Note cannot be converted into free trading shares after one hundred eighty-one (181) days from the issuance date, an additional 15% discount will be attributed to the conversion price; if the Company ceases to be a reporting company under the 1934 Act, (iv) if, at any time the Borrower does not maintain the Share Reserve (defined below); (v) the Company fails to pay the principal or interest under the Note when due under the terms thereof (including the five (5) calendar day cure period); (vi) a cross-default by the Company of another of its outstanding notes; or (vii) the completion of a reverse stock split while this Note is outstanding (and without consent). Subject to certain exempt issuances by the Company, during the period where any portion of the Note remains outstanding to Jefferson Street, if the Company engages in any future financing transactions with a third party investor, the Company will provide Jefferson Street with written notice thereof promptly but in no event less than 10 days prior to closing any financing transactions, and if applicable, the Company shall adjust the terms of the note to such more favorable terms of a subsequent financing, if any. In connection with the note, the Company issued irrevocable transfer agent instructions reserving 21,000,000 shares of the Company’s Common Stock (“Share Reserve”) for the amount then outstanding. Upon full conversion or repayment of this note, any shares remaining in such share reserve shall be cancelled and placed back into the treasury of the Company and available for issuance at a future date. On October 22, 2020, the Company issued to Jefferson Street 1,250,000 shares of its restricted common stock as debt commitment shares valued at $40,000 ($0.032 per share). At December 31, 2020, the note had accrued interest of $3,218.

 

On November 18, 2020, we consummated an inventory financing transaction and entered into (i) a Promissory Note in the aggregate principal amount of $110,000 (the “Note”) with SE Holdings, LLC, a Nevada limited liability company (“SE”), and (ii) a Securities Purchase Agreement (“SPA”). The Note has a maturity date of September 11, 2021, and carries a $10,000 original issue discount, and carries a guaranteed 12% interest rate on the Note. Any amount of principal or interest on the Note which is not paid when due shall bear interest at the rate of twenty four percent per annum from the due date thereof until the same is paid or converted in accordance with the terms of the Note. Principal payments shall be made in five (5) installments, each in the amount of US$22,500.00 commencing one the fifth monthly anniversary following the issue date and continuing thereafter each thirty (30) days for five (5) months (assuming no defaults or partial or complete conversions of our Common Stock as a form of repayment). This Note may not be converted by SE into shares of our Common Stock unless we default in our monthly repayment obligation pursuant to the cash repayment schedule noted above. In the event of a default of the Note, SE shall have the right to convert all or any part of the outstanding and unpaid amount of the Note into fully paid and non-assessable shares of Common Stock; provided, however, that in no event shall SE be entitled to convert any portion of the Note in excess of that portion of the Note upon the conversion of which would result in beneficial ownership by SE and its affiliates of more than 4.99% of the outstanding shares of Common Stock (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (“1934 Act”), and Regulations 13D-G thereunder. The Note contains a number of additional covenants and other provisions, including default or penalty clauses, cross-default, right to proceeds from other financings, reservation of share requirements and other such provisions, each as set forth in more detail in the Note and SPA. At December 31, 2020, the note had accrued interest of $1,137.

 

F-30
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 7 – NOTES PAYABLE (CONTINUED)

 

During the nine months ended December 31, 2020, the Company issued 75,915,248 shares of common stock to holders of convertible notes to retire $1,243,926 in principal and $78,149 of accrued interest (at an average conversion price of $0.01742 per share) under the convertible notes.

 

During the year ended March 31, 2020, the Company issued 21,295,495 shares of common stock to holders of convertible notes to retire $467,500 and $28,762 of note principal and accrued interest, respectively (average conversion price of $0.0233 per share.)

 

Interest expense for the nine months ended December 31, 2020 was $901,913 compared to $539,955 for the same period in the prior year. Accrued interest at December 31, 2020 and March 31, 2020 was $21,786 and $39,384, respectively.

 

NOTE 8 – RELATED PARTIES

 

On December 26, 2019, Chief Executive Officer, Seth Shaw, deposited $50,159 to be used for operating expenses. This is an interest free loan to the Company.

 

In conjunction with and consideration for a July 22, 2019, 10% convertible note, in the amount of $55,000, under a Securities Purchase Agreement the Company entered into with Jefferson Street Capital, LLC, the Chief Executive Officer had personally guaranteed the prompt, full and complete payment of the outstanding principal amount, accrued and unpaid interest, default interest (if any) and applicable fees (if any), owing by the Company under the note. This personal guaranty was to remain in effect until such time that the Company was able to reserve at least six times the amount of common shares issuable upon full conversion of the note. As a result of the increase in the authorized shares taking effect on September 13, 2019, this personal guaranty was removed and the Company reserved the appropriate amount of shares on October 2, 2019.

 

NOTE 9 – STOCKHOLDERS’ EQUITY (DEFICIT)

 

Common Stock

 

As of December 31, 2020, the Company was authorized to issue 400,000,000 shares of its common stock. As of December 31, 2020 and February 12, 2021 there were 227,291,853 and 263,438,119 shares, respectively of common stock issued and outstanding.

 

On July 26, 2019, the Company’s Board of Directors approved the (i) increase of the authorized common stock of the Company from 100,000,000 shares to 400,000,000 shares; (ii) the filing of both the preliminary and definitive information statements; and (iii) approved the record date of July 29, 2019. The Company’s shareholders approved the increase of the authorized shares to 400,000,000 in its Special Meeting on September 10, 2019 and the State of Florida certified the amendment of our Articles of Incorporation effective on September 13, 2019 to reflect this increase.

 

S-1 Registration Statement and Investment Agreement with Tangiers Global, LLC

 

On March 5, 2020, the Company filed an S-1 Registration Statement pursuant to the January 21, 2020, Investment Agreement and Registration Rights Agreement entered into Tangiers in order to establish a source of funding for our operations. Under the Investment Agreement, Tangiers agreed to provide us with up to $5,000,000 of funding during the period ending three years from the date of this prospectus. From time to time during the period ending three (3) years after this filing, we may, in our sole discretion, deliver a Put Notice to Tangiers. The Put Notice will specify the number of shares of common stock which we intend to sell to Tangiers on a closing date. The closing of a purchase by Tangiers of the shares specified by us in the Put Notice will occur on the date which is no earlier than five and no later than seven Trading Days following the date Tangiers receives the Put Notice. On the closing date we will sell to Tangiers the shares specified in the Put Notice, and Tangiers will pay us an amount equal to the Purchase Price multiplied by the number of shares specified in the Put Notice.

 

The maximum amount of shares of Common Stock that the Company shall be entitled to Put to Tangiers per any applicable Put Notice shall be an amount of shares up to or equal to two hundred percent (200%) of the average of the daily trading volume (U.S. market only) of the Common Stock for the ten (10) consecutive Trading Days immediately prior to the applicable Put Notice Date (the “Put Amount”) so long as such amount is at least Five Thousand Dollars ($5,000) and does not exceed Three Hundred Fifty Thousand Dollars ($350,000), as calculated by multiplying the Put Amount by the average daily VWAP for the ten (10) consecutive Trading Days immediately prior to the applicable Put Notice Date. During the 36-month term of the Investment Agreement, the Company shall not be entitled to submit a Put Notice until after the previous Closing has been completed. Notwithstanding the foregoing, the Company may not deliver a Put Notice on or earlier of the eighth (8th) Trading Day immediately following the preceding Put Notice Date (the “Waiting Period”), unless a written waiver to deliver Put Notice during the Waiting Period is obtained by the Company from the Investor in advance. The number of shares to be sold by Tangiers in this offering will vary from time-to-time and will depend upon the number of shares purchased from us pursuant to the terms of the Investment Agreement. However, 76,000,000 shares of common stock is the maximum number of shares which we may sell to Tangiers under the Investment Agreement.

 

F-31
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 9 – STOCKHOLDERS’ EQUITY (DEFICIT)

 

Common Stock (Continued)

 

S-1 Registration Statement and Investment Agreement with Tangiers Global, LLC (Continued)

 

 

Purchase Price means 88% of the lowest VWAP of the Common Stock during the five (5) consecutive Trading Days including and immediately following the applicable to the Put Notice, provided, however, an additional 10% will be added to the discount of each Put if (i) the Company is not DWAC eligible and (ii) an additional 15% will be added to the discount of each Put if the Company is under DTC “chill” status on the applicable Put Notice Date. Principal Market means the NYSE MKT, the Nasdaq Capital Market, the OTC Bulletin Board or the OTC Markets Group, whichever is the principal market on which our common stock is traded. VWAP means a price determined by the daily volume weighted average price of our common stock on the Principal Market as reported by (i) Bloomberg Financial L.P. or (ii) Stock Charts/Quote Media for the ten consecutive Trading Days immediately prior to the date of the delivery of a Put Notice.

 

The S-1 Registration statement became effective March 16, 2020. As of December 31, 2020, the Company has initiated put notices to Tangiers for 13,910,000 shares receiving proceeds in the amount of $400,514.

 

On January 6, 2021, the Company determined to terminate its equity line of credit facility by terminating each of the Investment Agreement and Registration Rights Agreement, and on January 8, 2021 filed a Post-Effective Amendment to its Form S-1 Registration Statement (333-236923) removing from registration all shares of common stock not previously sold thereunder.

 

Fiscal Year 2020

 

During the year ended March 31, 2020, the Company issued 2,450,000 shares under our various distribution agreements, as more fully described in Note 1. Common shares issued had a value of $496,261 ($0.08 to $0.2092 per share).

 

During the year ended March 31, 2020, the Company issued 21,295,495 shares for conversion of debt in the amount of $467,500 as well as accrued interest in the amount of $28,762 ($0.01412 to $0.04725 per share).

 

During the year ended March 31, 2020, the Company issued 250,000 shares issued to Vice President of Distribution and Marketing.

 

During the year ended March 31, 2020, the Company issued 7,100,000 shares issued for services rendered.

 

During the year ended March 31, 2020, the Company issued 2,350,000 shares for debt commitments in the amount of $218,460 ($0.039 to $0.19 per share).

 

During the year ended March 31, 2020, the Company recognized $569,636 in beneficial conversion feature for convertible notes whereby the holder can exercise conversion rights at a discount to the market price.

 

During the year ended March 31, 2020, the Company issued 5,470,286 shares under stock purchase agreements in consideration for $143,420 ($0.02 to $0.07 per share) to accredited investors that are unrelated third parties.

 

On March 27, 2020, the Company entered into a stock purchase agreement with an accredited investor to purchase 200,000 restricted shares of Company’s common stock for $5,000 ($0.025 per share.) As of this report date, these shares have not been issued.

 

Fiscal Year 2021

 

During the nine months ended December 31, 2020, the Company issued 13,910,000 shares pursuant to put notices issued to Tangiers under the equity line of credit facility, with the Company receiving proceeds in the amount of $369,482 ($0.02614 to $0.03344 per share).

 

During the nine months year ended December 31, 2019, the Company issued 75,915,248 shares of common stock to holders of convertible notes to retire $1,243,926 in principal and $78,149 of accrued interest ($0.01242 to $0.02128 per share).

 

During the nine months ended December 31, 2020, the Company issued 6,062,500 shares for services rendered ($0.0306 to $0.050 per share).

 

During the nine months ended December 31, 2020, the Company issued 2,990,000 shares for debt commitments in the amount of $92,219 ($0.028 to $0.0355 per share).

 

During the nine months ended December 31, 2020, the Company recognized $208,806 in beneficial conversion feature for convertible notes whereby the holder can exercise conversion rights at a discount to the market price.

 

F-32
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 9 – STOCKHOLDERS’ EQUITY (DEFICIT)

 

Common Stock (Continued)

 

Fiscal Year 2021 (Continued)

 

During the nine months ended December 31, 2020, the Company issued 15,674,998 shares under stock purchase agreements in consideration for $455,314 ($0.025 to $0.035 per share) to accredited investors that are unrelated third parties.

 

On July 10, 2020, the Company’s Chief Executive Officer purchased 700,000 shares of the Company’s Common Stock for an aggregate purchase price of $35,000, at $0.05 per share.

 

Pursuant to the April 3, 2020, collaboration agreement the Company entered into with Aegea Biotechnologies Inc. (“Aegea”) the Company issued to Aegea 5,000,000 unregistered common shares of Tauriga common stock. The shares were valued at $155,000 ($0.031 per share). For a more complete description of this arrangement please refer to Note 1 to the financial statements under the subheading “Collaboration Agreement with Aegea Biotechnologies Inc.” as well as the agreement exhibits related thereto.

 

In connection with some of the consulting agreements and board advisory agreements the Company has entered into, as the following clauses are part of the compensation arrangements: (a) the consultant will be reimbursed for all reasonable out of pocket expenses and (b) the Company, in its sole discretion, may make additional cash payments and/or issue additional shares of common stock to the consultant based upon the consultant’s performance. The Company recognized $348,470 and $550,823 in stock-based compensation expense related to these agreements in the nine months ended December 31, 2020 and 2019.

 

Warrants for Common Stock

 

The following table summarizes warrant activity for the nine months and year ended December 31, 2020 and March 31, 2020:

 

       Weighted   Average    
       Average   Remaining  Aggregate 
       Exercise   Contractual  Intrinsic 
   Shares   Price   Term  Value 
                
Outstanding at March 31, 2019   1,210,276   $1.2   1.28 Years  $ 
                   
Granted               
Expired   (488,011)   0.75         
Exercised                
Canceled                
                   
Outstanding and exercisable March 31, 2020   722,265   $1.19   0.83 Years  $ 
                   
Granted               
Expired                
Exercised                
Canceled                
                   
Outstanding and exercisable December 31, 2020   722,265   $1.50   0.08 Years  $ 

 

During the year ended March 31, 2020, 488,011 three-year warrants expired which were awarded to investors in conjunction with security purchase agreements. These warrants had a strike price of $0.75.

 

F-33
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 9 – STOCKHOLDERS’ EQUITY (DEFICIT)

 

Common Stock (Continued)

 

Stock Options

 

On February 1, 2012, the Company awarded to each of two executives’, one current and one former, options to purchase 66,667 common shares, an aggregate of 133,334 shares. These options vested immediately and were for services performed.

 

The following table summarizes option activity for the nine months and year ended December 31, 2020 and March 31, 2020:

 

           Weighted    
       Weighted-   Average    
       Average   Remaining  Aggregate 
       Exercise   Contractual  Intrinsic 
   Shares   Price   Term  Value 
                
Outstanding at March 31, 2019   133,334   $7.50   2.85 Years  $ 
                   
Granted                
Expired                
Exercised                
                   
Outstanding at March 31, 2020   133,334   $7.50   1.85 Years  $ 
                   
Granted                
Expired                
Exercised                
                   
Outstanding and exercisable December 31, 2020   133,334   $7.50   1.10 Years  $ 

 

NOTE 10 – PROVISION FOR INCOME TAXES

 

Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.

 

The following table summarizes the significant differences between the U.S. Federal statutory tax rate and the Company’s effective tax rate for financial statement purposes for nine months and year ended December 31, 2020 and March 31, 2020:

 

   December 31, 2020   March 31,2020 
Federal income taxes at statutory rate   21.00%   21.00%
State income taxes at statutory rate   0.00%   0.00%
Temporary differences   17.52%   2.42%
Permanent differences   0.051%   (0.87)%
Impact of Tax Reform Act   0.00%   (0.00)%
Change in valuation allowance   (39.17)%   (22.55)%
Totals   0.00%   0.00%

 

Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carry-forwards are expected to be available to reduce taxable income. As the achievement of required future taxable income is uncertain, the Company recorded a valuation allowance.

 

F-34
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 10 – PROVISION FOR INCOME TAXES (CONTINUED)

 

   As of   As of 
   December 31, 2020   March 31, 2020 
Deferred tax assets:          
Net operating losses before non-deductible items  $4,315,633   $4,269,938 
Loss on disposal of fixed assets   -    613 
Stock-based compensation   402,393    329,214 
Unrealized gains (losses) on investments   159,437    (50,290)
Total deferred tax assets   4,877,463    4,599,765 
Less: Valuation allowance   (4,877,463)   (4,599,765)
           
Net deferred tax assets  $-   $- 

 

At December 31, 2020, the Company had a U.S. net operating loss carry-forward in the approximate amount of $21 million available to offset future taxable income through 2038. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods. The valuation allowance increased by $277,698 in the nine months ended December 31, 2020 and decreased by $657,980 in the year ended March 31, 2020. The net decreases were the result of the tax effects of the Tax Cuts and Jobs Act (the “TCJA”) offset by taxable losses net of timing differences in each of the years.

 

NOTE 11 – INVESTMENTS

 

Trading securities

 

For investments in securities of other companies that are owned, the Company records them at fair value with unrealized gains and losses reflected in other operating income or loss. For investments in these securities that are sold by us, the Company recognizes the gains and losses attributable to these securities investments as realized gains or losses in other operating income or loss on a first in first out basis.

 

Investment in Trading Securities:

 

At March 31, 2020

 

Company    

Beginning

of Period

Cost

   Purchases  

Sales

Proceeds

  

End of

Period

Cost

  

Fair

Value

  

Realized

Gain

(Loss)

  

Unrealized

Gain

(Loss)

 
VistaGen Therapeutics Inc (VTGN)  (a)   287,500    -    -    287,500   $101,200    -    (186,300)
Basanite Inc. (BASA)  (b)   30,000    -    40,000    -    -    10,000    - 
Totals     $317,500   $-   $40,000   $287,500   $101,200   $-   $(186,300)*

 

At December 31, 2020

 

Company    

Beginning

of Period

Cost

   Purchases  

Sales

Proceeds

  

End of

Period

Cost

  

Fair

Value

  

Realized

Gain

(Loss)

  

Unrealized

Gain

(Loss)

 
VistaGen Therapeutics Inc (VTGN)  (a)   287,500    277,500    -    565,500   $1,377,400    -    812,400*

 

*This amount represents the cumulative unrealized loss as of March 31, 2020 and December 31, 2020.

 

(a) On December 11, 2017 the Company invested $480,000 in the common stock of VistaGen Therapeutics, Inc. (VTGN). The Company purchased 320,000 common shares along with 320,000 five-year warrants with a strike price of $1.50. On March 26, 2018, the Company purchased an additional 10,000 common shares. The investment in the common shares is recorded at fair valve with unrealized gains and losses, reflected in other operating income. The Company’s investment in VTGN has a cost of $490,117, unrealized loss of $183,910 and a fair value of $306,207 at March 31, 2018. During the year ended March 31, 2019, the Company purchased 59,380 shares of VTGN for $61,998 (average price per share of $1.04 per share) in the open market. During the period of June 22, 2018 through August 1, 2018, the Company sold 389,380 shares of VTGN for $517,485 ($1.33 per share) for a realized loss of $34,630. The Company also purchased in a direct offering 230,000 restricted common shares directly from VTGN during the year ended March 31, 2019 for a cost of $287,500. On December 11, 2019, the Company purchased 250,000 three-year restricted warrant at a cost of $0.15 each (total value of $37,500). As of December 31, 2020, the Company has recognized an unrealized gain on these shares in the amount of $59,110, compared to an unrealized loss of $74,301 for the nine months ended December 31, 2019 in VTGN. As December 31, 2019, these shares were on deposit held with a broker. On December 29, 2020, the Company exercised 480,000 of its $0.50 warrants in VTGN. The new cost basis for these warrant shares is the $0.50 paid to covert each warrant in to shares (230,000 shares) as well as an addition $0.15 per share on the purchased options (250,000) shares.

 

F-35
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 11 – INVESTMENTS (CONTINUED)

 

Trading securities

 

(b) On July 5, 2018, the Company purchased 100,000 shares of Basanite Industries Inc. (BASA) (formerly Paymeon, Inc. (PAYM)) for $12,998 ($0.13 per share) in the open market. During July 2018 the Company sold the 100,000 shares for $10,821 ($0.11 per share) for a realized loss of $2,177. On July 9, 2018, the Company purchased 400,000 restricted common shares directly from the Company for $30,000 ($0.075 per share). During the year ended March 31, 2020, the Company sold its 400,000 shares for $40,000 ($0.10 per share) recognizing a profit of $10,000.

 

At December 31, 2020, the Company held warrants for AYTU to purchase 5,555 common shares at a strike price of $10.80 with an expiration of March 6, 2023. The strike price and number of shares were adjusted for the August 10, 2018, 1 for 20 reverse stock-split and again on December 8, 2020, as a result of a 1 for 10 shares held (herein referred to collectively as the “Reverse Stock Split”). All share and per share amounts in this report have been adjusted to reflect the effect of the Reverse Stock Split. At December 31, 2020, these warrants were out of the money by $102.02 per share and are not publicly traded, and the Company has not recognized the value of these warrants as they are not liquid.

 

On December 11, 2019, the Company purchased 250,000 three-year restricted warrant for VTGN at a cost of $0.15 each (total value of $37,500). These warrants have a strike price of $0.50 each. As of December 31, 2020, these warrants were exercised and the resultant shares have a cost basis of $0.65 per share.

 

In addition to the 250,000 VTGN warrants noted above, at December 31, 2020, the Company currently holds warrants for VTGN to purchase 320,000 shares of common stock at a strike price of $1.50 per share with an expiration of December 13, 2022. At December 31, 2020 these warrants were in of the money by $0.44 each. The Company also owned warrants for VTGN to purchase 230,000 shares of common stock at a strike price of $1.50 per share with an expiration of February 28, 2022. On December 4, 2019, VTGN adjusted the strike price of the February 2022 warrants to $0.50 each. As of December 31, 2020, these warrants were exercised and the resultant shares have a cost basis of $0.50 per share. The Company still holds 320,000 total warrants at a strike price of $1.50 per share. Since these are not publicly traded, the Company has not recognized the value of these warrants as they are not liquid.

 

On February 18, 2021, the Company’s board of directors authorized the open market sale of 220,000 of the 710,000 shares it holds in VTGN.  Based on the February 19, 2021 closing price of $2.96 the Company would realize a gain of $376,200. The remaining 490,000 shares would have an unrealized gain of $1,160,400. Based on the February 19, 2021 closing price, the Company would receive proceeds from the sale in the amount of approximately $651,200.  Partial sale proceeds of $480,000 will be used to exercise the Company’s remaining 320,000 warrants at $1.50 per share.

 

Equity investments

 

Honeywood

 

Effective August 1, 2017, the Company entered into a Debt Conversion Agreement in respect to a secured promissory note issued following the unwinding of the Honeywood acquisition (See NOTE 1), whereby the Company agreed to convert the entire principal and accrued but unpaid interest due under the note into a 5% membership interest in Honeywood.

 

The Company made an assessment for impairment of its investment in Honeywood at the entity level. During the relationship between the Company and Honeywood, Honeywood had a working capital deficiency and had a history of operating losses. In accordance with FASB ASC 320-10-35-28, “Investments—Debt and Equity Securities,” a Company may not record an impairment loss on the investment but shall continue to evaluate whether the investment is impaired (that is, shall estimate the fair value of the investment) in each subsequent reporting period until either of the following occurs: (a) the investment experiences a recovery of fair value up to (or beyond) its cost; or (b) the entity recognizes an other-than-temporary impairment loss. At the time of the Debt Conversion Agreement the receivable balance of $199,119 had been fully written off by the Company in a prior period. As a result of this Debt Conversion Agreement, the Company deemed the investment to still have no current value. The Company recorded this investment at $0. Thus, no recovery of bad debt and no impairment will be recognized in this year.

 

Cost investments

 

Aegea Biotechnologies Inc.

 

Pursuant to April 3, 2020, Collaboration Agreement, the Company has invested seventy percent (70%) of the Net Proceeds received from the sale of the initial 10,000,000 shares of stock of Tauriga under the ELOC with Tangiers in Aegea for the development of the Covid Test and used to purchase shares of common stock of Aegea, at a purchase price of $4.00 per share. Please see Note 1, under the subheading “Collaboration Agreement with Aegea Biotechnologies Inc.” Pursuant to the terms of the Collaboration Agreement, following the initial sale of 10,000,000 shares of our common stock under the ELOC, twenty percent (20%) of all subsequent net proceeds from the sale of shares under the ELOC shall be used to purchase additional shares of common stock of Aegea at a purchase price of $4.00 per share. The $4.00 stock price corresponds to a current pre-money valuation of Aegea of $25,000,000 for each tranche of cash, up to the first $2,000,000 of our investment in Aegea. . On January 8, 2021, the Company filed a Post-Effective Amendment to its Registration Statement on Form S-1 following the January 6, 2021 termination of the Investment Agreement and Registration Rights Agreement, effectively removing from registration all shares of common stock registered but not sold under the Registration Statement. The Collaboration Agreement commenced upon signing and will continue indefinitely, unless amended or terminated by mutual written agreement of the parties; however, as a result of the termination of our equity line of credit facility, we are under no obligation to fund or provide further financing to Aegea. As of December 31, 2020, the Company had invested $278,212 in Aegea for 69,553 shares, representing an ownership percentage of 1.03%.

 

F-36
 

 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(UNAUDITED)

(US$)

 

NOTE 11 – INVESTMENTS (CONTINUED)

 

Küdzoo, Inc.

 

As of March 31, 2020, the Company had invested, in a total of $105,600 in Küdzoo, Inc. (“Küdzoo”), a privately held company. Küdzoo is the developer of a mobile application that rewards students for their grades and achievements with deals and opportunities. The investments were recorded at cost and represents 0.2% of the value of Küdzoo based on a pre-money valuation of $10,200,000. The Company had made a total of six investments beginning September 4, 2018 and each were valued at the same pre-money valuation. As of December 31, 2020, the Company owned 1.41% of Küdzoo.

 

The Company tested the investment value for Küdzoo as of March 31, 2020 for impairment. It was noted that the value of the company has maintained its value largely due to the fact that Küdzoo is currently raising money at the same valuation consistent with the Company’s investment, therefore, the Company does not believe there is any impairment of this investment as of March 31, 2020. As of December 31, 2020, there has been no change in this investment.

 

Serendipity

 

On October 31, 2018, the Company invested $35,000 in Serendipity Brands LLC (dba Serendipity Ice Cream Co.) (“Serendipity”), a privately held Company. Serendipity is an ice cream distribution company providing wholesale distribution to retail customers. The investment was recorded at cost and represents 0.24% of the value of Serendipity based on a pre-money valuation of approximately $14 million.

 

The Company tested the investment value for Serendipity as of March 31, 2020 for impairment. It was noted that the value of the company has maintained its value through reviews of their financial performance, therefore, the Company does not believe there is any impairment of this investment as of March 31, 2020.

 

NOTE 12 – FAIR VALUE MEASUREMENTS

 

The following summarizes the Company’s financial assets and liabilities that are measured at fair value on a recurring basis at December 31, 2020 and March 31, 2020:

 

   December 31, 2020 
   Level 1   Level 2   Level 3   Total 
Assets                
Investment-trading securities  $1,377,400   $-   $-   $1,377,400 
Cost method investment – Küdzoo  $-   $-   $105,600   $105,600 
Cost method investment – Serendipity Brands  $-   $-   $35,000   $35,000 
Cost method investment - Aegea Biotechnologies, Inc.  $-   $-   $139,106   $139,106 

 

   March 31, 2020 
   Level 1   Level 2   Level 3   Total 
Assets                
Investment-trading securities  $101,200   $-   $-   $101,200 
Cost method investment – Küdzoo  $-   $-   $105,600   $106,600 
Cost method investment – Serendipity Brands  $-   $-   $35,000   $35,000 

 

NOTE 13 – CONCENTRATIONS

 

During the nine months ended December 31, 2020, we had one supplier for our product CBD/CBG Tauri-GumTM. The Tauri-GumTM product line represents approximately 67.3% of net sales.

 

During the nine months ended December 31, 2019, we have one supplier for our Tauri-GumTM product which accounted for 100% sales for the period.

 

NOTE 14 – SUBSEQUENT EVENTS

 

Subsequent to December 31, 2020, the Company issued additional shares of common stock as follows: (i); 125,000 shares under a consulting