NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH ENDED JUNE 30, 2021 AND 2020

(US$)

(UNAUDITED)

NOTE 1 – BASIS OF OPERATIONS AND GOING CONCERN AND GOING CONCERN

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, 2021 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 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 located at 4 Nancy Court, Suite 4, Wappingers Falls, NY 12590. 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.”), 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. The Company converted this provisional patent application into a U.S. Non-Provisional Patent Application March 17, 2021.

On March 17, 2021, the Company converted its U.S. Provisional Patent Application (filed on March 17, 2020) to a U.S. Non-Provisional Patent Application. This non-provisional patent application relates to the Company’s proposed pharmaceutical cannabinoid chewing gum delivery system for treatment of nausea derived from active chemotherapy treatment.

Also on March 17, 2021, the Company filed an additional U.S. Provisional Patent Application relating to alternative pharmaceutical cannabinoid delivery systems.

On March 17, 2021, the Company filed an International Patent Application under the Patent Cooperation Treaty (“PCT”), a cooperative agreement entered into by more than 130 countries with the purpose of bringing international conformity to the filing and preliminary evaluation of patent applications. This application relates to the Company’s proposed pharmaceutical cannabinoid chewing gum delivery system being developed to treat nausea derived from active chemotherapy treatment.

The PCT application is published by the International Bureau at the World Intellectual Property Organization (“WIPO”), based in Geneva, Switzerland, in one of the ten “languages of publication”: Arabic, Chinese, English, French, German, Japanese, Korean, Portuguese, Russian, and Spanish.

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH ENDED JUNE 30, 2021 AND 2020

(US$)

(UNAUDITED)

NOTE 1 – BASIS OF OPERATIONS AND GOING CONCERN (CONTINUED)

NATURE OF BUSINESS (CONTINUED)

Tauriga Pharma Corp. (Continued)

Currently, the pharmaceutical grade version of Tauri-Gum^TM is in the pre-IND stage of development. The development team is working on several parallel workstreams, including:

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. The Company no longer maintains an office in this region.

Chief Medical 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 assisted the Company in the development of the Company’s proposed pharmaceutical grade version of Tauri-Gum™. In addition, Dr. Aqua helped to 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 provided by Dr. Aqua, and pursuant to the terms of the Agreement, the Company issued Dr. Aqua (i) upon entry into the Agreement 750,000 shares of restricted common stock, (ii) 750,000 shares of restricted common stock which were issued in equal monthly instalments of 62,500 shares beginning August 15, 2020 thru the expiration date, 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 June 30, 2021, the Company issued 1,375,000 restricted shares of its common stock to Dr. Aqua valued at $54,313 ($0.0395 per share). Subsequent to June 30, 2021, Dr. Aqua was issued 125,000 restricted shares of its common stock valued at $4,938 ($0.0395 per share). As of this report date, the Company is current negotiating the renewal of this agreement.

NFTauriga Corp.

Effective April 14, 2021, the Company formed NFTauriga Corp. in the State of Nevada, as a wholly owned subsidiary. The Company is the sole holder of total authorized 100 shares having a par value of $0.00001. The Company’s Chief Executive Officer, Seth M. Shaw is the initial sole member of the board of directors, to serve until a qualified successor is duly elected. Mr. Shaw will also serve as the Chief Executive Officer and Secretary. The registered office of NFTauriga Corp. in the State of Delaware shall be at 1013 Centre Road, Suite 403-B, Wilmington, DE 19805 in the County of New Castle. The name of its registered agent at such address is Vcorp Services, LLC. NFTauriga Corp. will have the same fiscal year and principal executive office and the Company.

Master Services Agreement

On December 16, 2020, the Company 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. Ms. Giannone has over 25 years’ experience effectively leading companies through the drug and medical device development process. On December 23, 2020, the Company funded the initial consulting fees associated with this Agreement, in the amount of $67,500, exclusive of out-of-pocket reimbursable expenses. The Company has paid additional fees, effected through change orders to the original contract, in the amount of $85,000. These additional fees were for pharmaceutical testing and market research. 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. As of June 30, 2021, $31,059 of contract payments were recorded as prepaid expense for services yet to be rendered.

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH ENDED JUNE 30, 2021 AND 2020

(US$)

(UNAUDITED)

NOTE 1 – BASIS OF OPERATIONS AND GOING CONCERN (CONTINUED)

COMPANY PRODUCTS

Tauri-Gum^TM

In late December 2018, the Company entered into a “Manufacturing Agreement” with Maryland based chewing gum manufacturer, Per Os Biosciences LLC (“Per Os Bio”) to launch a white label line of CBD infused chewing gum under the brand name Tauri-Gum^TM.

The Manufacturing Agreement with Per Os Bio to produce Tauri-Gum^TM initially consisted of 10mg of CBD isolate for its inaugural mint flavor. This proprietary CBD Gum will be manufactured under U.S. Patent # 9,744,128 (“Method for manufacturing medicated chewing gum without cooling”). Each production batch is tested by a 3rd Party for CBD label content, THC content (0%), and clear for microbiology. The retail packaging consists of an 8-piece blister card labeled with lot number and expiration date.

In October 2019, we also filed trademark applications for the above-referenced marks in each of the European Union and Canada. The Company received notice of allowance from the European Union Intellectual Property Office granting the Company its trademark registration for Tauri-Gum™ (E.U. Trademark # 018138334) on February 18, 2020.

During fiscal year 2020, the Company commenced development of a cannabigerol “CBG” isolate infused version of Tauri-Gum™ introducing Peach-Lemon flavor (containing 10mg CBG per piece) and Black Currant Flavor (containing 15mg of CBG per piece).

During fiscal year 2021, the Company developed an Immune Booster version of Tauri-Gum™ chewing gum. This product contains 60mg of Vitamin C and 10mg of Elemental Zinc per piece. This product does not contain any phytocannabinoids (i.e., CBD or CBG).

During late fiscal year 2021, the Company enhanced its original Tauri-Gum™ formulation by increasing the infusion concentrations of both its Cannabidiol (“CBD”) and Cannabigerol (“CBG”) Tauri-Gum™ products to 25mg per piece of chewing gum (previous concentration was 10mg for the Pomegranate, Blood Orange, Mint, and Peach-Lemon flavors and 15mg for the Black Currant flavor). Additionally, the Company increased its Tauri-Gum™ product offerings to 9 SKUs. The new offerings being introduced are Cherry-Lime Rickey flavored Caffeine infused chewing gum, an 8-piece blister pack of containing 50mg of caffeine per piece and Golden Raspberry flavored Vitamin D3 infused chewing gum, containing 2,000 IU (50 micrograms) of Vitamin D3 per piece. Through its October 2020 partnership with Think Big LLC (the Company founded by the son of late iconic U.S. rap artist, NOTORIOUS BIG aka “Frank White”), the Company is also offering 2 limited edition Licensed Tauri-Gum™/Frank White products: Honey-Lemon flavored chewing gum (containing: 15mg CBD, 15mg CBG, 5mg Vitamin C, 10mg Zinc per piece) and Mint flavor (25mg CBD per piece).

Delta 8 Version of Tauri-Gum™

During March 2021, the Company developed a Delta-8-Tetrahydrocannabinol (“Delta-8-THC” or “Delta-8”) infused version of Tauri-Gum™. The Company is focused on expanding both its product offerings and revenue opportunities, in a manner that is ethical, innovative, and fully compliant with Federal laws & regulations. Due to strong indications of demand, the Company has completed a double production run of its Evergreen Mint flavor, Delta 8 THC infused (10mg per piece of chewing gum), Version of Tauri-Gum™.

All of the CBD/CBG Tauri-Gum^TM skus are made in the USA, formulations are allergen free, gluten free, vegan, kosher certified (K-Star), Halal certified (Etimad), non-GMO, vegan incorporated by a proprietary lab-tested manufacturing process.

See our “Risk Factors” contained in our Annual Report dated March 31, 2021 filed with the Securities and Exchange Commission on June 29, 2021, including with respect, but not limited, to Federal laws and regulations that govern CBD and cannabis.

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH ENDED JUNE 30, 2021 AND 2020

(US$)

(UNAUDITED)

NOTE 1 – BASIS OF OPERATIONS AND GOING CONCERN (CONTINUED)

COMPANY PRODUCTS (CONTINUED)

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), effective June 24, 2020. This Notice of Allowance extends our protective period for this mark until October 2029 and may be extended thereafter for ten-year intervals.

This gelatin free, plant-based, Vegan and Kosher certified formulation contains 24 gummies per jar, 6 of each flavor (cherry, orange, lemon and lime). Each gummy contains 25mg of CBD isolate (600 mg of CBD isolate per jar). These gum drops have been manufactured in the “Nostalgic” 1950s confectionary style. The Company commenced sales of Tauri-Gummies™ in January 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 30mg CBD non-GMO dietary supplement and 100mg CBD scented bath bombs (Mint, Pomegranate, Blood Orange, Black Currant). The Company also offers 100mg CDG infused Peach/Lemon bath bombs as well as a D3 infused Golden Raspberry and Cherry Lime Rickey caffeine infused bath bombs. 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. The Company also offers Tauri-Pet dog food in three flavors (peanut butter, butternut squash and crispy apple. 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.

For a full list of our currently available products please visit our e-Commerce website at https://taurigum.com/.

DISTRIBUTION OF THE COMPANY’S PRODUCTS

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). The Companies further agreed to a 50/50 gross profit split on sales of specially branded product, payable on or before the 15th day of each calendar month for the immediately preceding calendar month. In addition, the Company originally agreed to pay Think BIG, via 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. Subsequently, the parties agreed that the remaining payments would no longer be paid to Think BIG in exchange for the Company funding specially branded inventory printing and product as well as other marketing initiatives.

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH ENDED JUNE 30, 2021 AND 2020

(US$)

(UNAUDITED)

NOTE 1 – BASIS OF OPERATIONS AND GOING CONCERN (CONTINUED)

DISTRIBUTION OF THE COMPANY’S PRODUCTS (CONTINUED)

Think BIG, LLC License Agreement (Continued)

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 agreed to issue each Brand Ambassador 1,500,000 restricted shares of the Company’s common stock, upon execution of the PSA and PSA 2. These shares were issued on December 17,2020. 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. In total, all shares issued and to be issued had a value of $183,600 that will be recognized over the term of the contract. As of this report date, the Company has taken delivery on the initial production run for the co-branded gum.

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. As of June 30, 2021, the Company has recognized no sales under this agreement.

The Company has entered into multiple other arrangements that are more fully described in our periodic and current reports that we have filed with the Securities and Exchange Commission and included in those agreements filed by reference as exhibits thereto.

REGULATORY MATTERS

Food and Drug Administration (“FDA”)

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.

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH ENDED JUNE 30, 2021 AND 2020

(US$)

(UNAUDITED)

REGULATORY MATTERS (CONTINUED)

Food and Drug Administration (“FDA”) (Continued)

FDA Clinical Trial Process – United States Drug Development

Furthermore, with respect to Company’s developing CBG and additional cannabinoid product lines, 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.

In the United States, the FDA regulates drugs, medical devices and combinations of drugs and devices, or combination products, under the FDCA and its implementing regulations. Drugs are also subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include, among other actions, the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, untitled or warning letters, requests for voluntary product recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.

The process required by the FDA before a drug may be marketed in the United States generally involves the following:

● completion of extensive pre-clinical in vitro and animal studies to evaluate safety and pharmacodynamic effects, formulation development, analytical method development, and manufacturing of the active pharmaceutical ingredient (API) and drug product for clinical trials in accordance with applicable regulations, including the FDA’s Current Good Laboratory Practice (cGLP) regulations and Current Good Manufacturing Practice (cGMP) regulations;

● submission to the FDA of an Investigational New Drug (IND) application, which must become effective before human clinical trials may begin;

● performance of adequate and well-controlled human clinical trials in accordance with an applicable IND and other clinical study related regulations, sometimes referred to as Current Good Clinical Practice (cGCPs), to establish the safety and efficacy of the proposed drug for its proposed indication, and API and drug product scale-up for registration batch production and stability;

● submission to the FDA of a New Drug Application (NDA);

● satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with the FDA’s cGMP requirements;

● potential FDA audit of the clinical trial sites that generated the data in support of the NDA; and

● FDA review and approval of the NDA prior to any commercial marketing or sale.

Once a pharmaceutical product candidate is identified for development, it enters the pre-clinical testing stage. Pre-clinical tests include laboratory evaluations of product characterization, drug product formulation development and stability, as well as pharmacology and toxicology animal studies. An IND Sponsor must submit the results of the pre-clinical tests, together with manufacturing information, analytical data and any available clinical data or literature, to the FDA as part of the IND. The sponsor must also include a protocol detailing, among other things, the objectives of the initial clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the initial clinical trial lends itself to an efficacy evaluation. Some pre-clinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions related to a proposed clinical trial and places the trial on a clinical hold within that 30-day period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during clinical trials due to safety concerns or non-compliance and may be imposed on all drug products within a certain class of drugs. The FDA also can impose partial clinical holds, for example, prohibiting the initiation of clinical trials of a certain duration or for a certain dose.

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH ENDED JUNE 30, 2021 AND 2020

(US$)

(UNAUDITED)

NOTE 1 – BASIS OF OPERATIONS AND GOING CONCERN (CONTINUED)

REGULATORY MATTERS (CONTINUED)

FDA Clinical Trial Process – United States Drug Development (Continued)

All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. These regulations include the requirement that all research subjects provide informed consent in writing before their participation in any clinical trial. Further, an IRB must review and approve the plan for any clinical trial before it commences at any institution, and the IRB must conduct continuing review and reapprove the study at least annually. An IRB considers, among other things, whether the risks to individuals participating in the clinical trial are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the information regarding the clinical trial and the consent form that must be provided to each clinical trial subject or his or her legal Representative and must monitor the clinical trial until completed.

Each new clinical protocol and any amendments to the protocol must be submitted for FDA review, and to the IRBs for approval. Protocols detail, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined. The phases are described below. For the TAUG Pharma product, however, the safety profile of the API is known, and a Phase 1 program is not expected. Therefore, it is anticipated that that the first-time-in-human (FTIH) study will be a Phase 2 study.

● Phase 1. The product is initially introduced into a small number of healthy human subjects or patients and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion and, if possible, to gain early evidence on effectiveness. In the case of some products for severe or life-threatening diseases, especially when the product is suspected or known to be unavoidably toxic, the initial human testing may be conducted in patients.

● Phase 2. Involves clinical trials in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage and schedule.

● Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit relationship of the product and provide an adequate basis for product labeling.

Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 trials. Companies that conduct certain clinical trials also are required to register them and post the results of completed clinical trials on a government-sponsored database, such as ClinicalTrials.gov in the United States, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events, findings from other studies that suggest a significant risk to humans exposed to the product, findings from animal or in vitro testing that suggest a significant risk to human subjects, and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or Investigator Brochure. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the clinical trial Sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product has been associated with unexpected serious harm to patients. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether a trial may move forward at designated check points based on access to certain data from the study. The clinical trial Sponsor may also suspend or terminate a clinical trial based on evolving business objectives and/or competitive climate.

The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested. Stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH ENDED JUNE 30, 2021 AND 2020

(US$)

(UNAUDITED)

NOTE 1 – BASIS OF OPERATIONS AND GOING CONCERN (CONTINUED)

REGULATORY MATTERS (CONTINUED)

NDA and FDA Review Process

The results of product development, pre-clinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the drug, proposed labeling and other relevant information, are submitted to the FDA as part of an NDA for a new drug, requesting approval to market the product. The submission of an NDA is subject to the payment of a substantial user fee, and the sponsor of an approved NDA is also subject to an annual program user fee; although a waiver of such fee may be obtained under certain limited circumstances. For example, the agency will waive the application fee for the first human drug application that a small business or its affiliate submits for review.

The FDA reviews all NDAs submitted before it accepts them for filing and may request additional information rather than accepting an NDA for filing. The FDA typically decides on accepting an NDA for filing within 60 days of receipt. The decision to accept the NDA for filing means that the FDA has made a threshold determination that the application is sufficiently complete to permit a substantive review. Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act (“PDUFA”), the FDA’s goal to complete its substantive review of a standard NDA and respond to the applicant is ten months from the receipt of the NDA. The FDA does not always meet its PDUFA goal dates, and the review process is often significantly extended by FDA requests for additional information or clarification and may go through multiple review cycles.

After the NDA submission is accepted for filing, the FDA reviews the NDA to determine, among other things, whether the proposed product is safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMPs to assure and preserve the product’s identity, strength, quality and purity. The FDA may refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. The FDA will likely re-analyze the clinical trial data, which could result in extensive discussions between the FDA and us during the review process. The review and evaluation of an NDA by the FDA is extensive and time consuming and may take longer than originally planned to complete, and we may not receive a timely approval, if at all.

Before approving an NDA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMPs. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. In addition, before approving an NDA, the FDA may also audit data from clinical trials to ensure compliance with GCP requirements. After the FDA evaluates the application, manufacturing process and manufacturing facilities, it may issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present form. A Complete Response Letter usually describes all the specific deficiencies in the NDA identified by the FDA. The Complete Response Letter may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant and time-consuming requirements related to clinical trials, nonclinical studies or manufacturing. If a Complete Response Letter is issued, the applicant may either resubmit the NDA, addressing all the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive, and the FDA may interpret data differently than the Sponsor interprets the same data.

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].”

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH ENDED JUNE 30, 2021 AND 2020

(US$)

(UNAUDITED)

NOTE 1 – BASIS OF OPERATIONS AND GOING CONCERN (CONTINUED)

REGULATORY MATTERS

New York State Department of Health (Continued)

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 has submitted its license application with the NYDPH in compliance with this legislation. These regulations are evolving and the NYDPH recently issued a set of regulations to address the use of industrial hemp derived Δ8- Tetrahydrocannabinol (Δ8 THC) and Δ10- Tetrahydrocannabinol (Δ10 THC) in cannabinoid hemp products manufactured and sold in New York.

The product requirements under the current regulations, 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 this report 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

Strategic Marketing and Consulting Agreement with Mayer & Associates

On June 14, 2021, the Company entered into a 12-month Strategic Marketing and Consulting Agreement with Mayer & Associates. Under this agreement the Company will pay $150,000 along with the issuance of 3,500,000 shares of restricted common shares of Company stock. Half of the cash payment ($75,000) was paid upon execution of this agreement and the other half will be paid 90 days thereafter. Upon execution, the Company issued 2,200,000 of the above-mentioned shares. The remaining 1,300,000 above-mentioned shares will be issued 90 days after this contract was executed. Mayer and Associates will provide the Company with opportunities relating to the world of professional sports, with respect to its products and product lines. This includes, but is not limited to, introductions to professional sports leagues, celebrity (professional athletes) influencers/brand ambassadors/brand liaison(s), research and development opportunities, hosting of small periodic events for the Company and a diversified group of high-profile contacts and relationships, use social media exposure, podcasts backing of various elements from professional sports as well as assist the Company in advising of potential merger partners and developing corporate partnering relationships. The Company, at the sole discretion of its board, may pay an additional payment of $75,000 as permitted under this agreement based on performance. This additional payment will be recorded as a contingent liability on the Company condensed consolidated balance sheet until formally authorized by the Company’s board of directors. This agreement is terminable after six months. As of the date of this quarterly report date, the aforementioned shares have been issued.

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH ENDED JUNE 30, 2021 AND 2020

(US$)

(UNAUDITED)

NOTE 1 – BASIS OF OPERATIONS AND GOING CONCERN (CONTINUED)

GOING CONCERN

During the fourth quarter of the year ended March 31, 2019, the Company began sales and marketing efforts for its Mint flavored Tauri-Gum^TM product. During the year ended March 31, 2021, the Company recognized net sales of $285,319 and a gross profit of $122,692. During the three months ended June 30, 2021, the Company recognized net sales of $45,940 and a gross profit of $18,164. At June 30, 2021, the Company had a working capital surplus of $1,286,438 compared to a working capital surplus $1,229,211 for the year ended March 31, 2021. The current position 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 $1,557,222 at June 30, 2021. In the event the Company cannot raise additional capital to fund and/or expand operations or fails to raise adequate capital and generate adequate sales revenue, or if the regulatory landscape were to become more difficult or result in regulatory enforcement, it could result in the Company having to curtail or cease operations.

Additionally, even if the Company does raise sufficient capital to support its operating expenses and generate adequate revenues in the short term, there can be no assurances that the revenues will be sufficient to enable it to develop business to a level where it will generate profits and cash flows from operations to achieve profitability thereby eliminating its reliance on alternative sources of funding. Although management believes that the Company 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 condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These condensed consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH ENDED JUNE 30, 2021 AND 2020

(US$)

(UNAUDITED)

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), NFTauriga Corp. and Tauriga Sciences Limited. All intercompany transactions have been eliminated in consolidation. As of June 30, 2021, there is no activity in any of the Company’s subsidiaries other than Tauriga Pharma Corp.

SEGMENT INFORMATION

The Company has adopted provisions of ASC 280-10 Segment Reporting for the three months ended June 30, 2021 and 2020. 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-Gum^TM, Tauri-Gummies^TM, 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.

Results for the three months ended June 30,

SCHEDULE OF SEGMENT INFORMATION 

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH ENDED JUNE 30, 2021 AND 2020

(US$)

(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 principle 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, 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 June 30, 2021, 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 $33,367 during the three months ended June 30, 2021 and $285,319 during the year ended March 31, 2021. All revenue is from the sale of the Company’s Tauri-Gum^TM product line and there were accounts receivable, net of allowance for doubtful accounts in the amount of $5,403 outstanding for these sales, as of June 30, 2021.

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 June 30, 2021, the Company has established an allowance for doubtful accounts in the amount of $94,659.

SALES REFUNDS

The Company’s refund policy allows customers to return product for any reason except where the customer does not like the taste of the product. The customer has 30 days from the date of purchase to initiate the process. Returns are limited to one return or exchange per customer. Only purchases up to $100 qualify for a refund. Approved return/refund requests are typically processed within 1-2 business days. For product purchases made through a Tauri-Gum^TM distributor or retailer, the customer is required to work with original purchase location for any return or exchange. The Company has not established a reserve for returns as of June 30, 2021 however will monitor the refunds to estimate whether a reserve will be required.

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH ENDED JUNE 30, 2021 AND 2020

(US$)

(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

USE OF ESTIMATES

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

CASH EQUIVALENTS

For purposes of reporting cash flows, cash equivalents include investment instruments purchased with an original maturity of three months or less. At June 30, 2021, the Company’s cash on deposit with financial institutions did not exceed the total FDIC insurance limit of $250,000. At June 30, 2021 and March 31, 2021, the Company had a cash balance of $66,894 and $49,826, 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 June 30, 2021 and March 31, 2021.

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. During the year ended March 31, 2021, the Company has recorded a loss on the impairment on two of its cost method investments in the amount of $244,706. The Company did not record a loss on the impairment on investments for the three months ended June 30, 2021.

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-Gum^TM. For multiple pack or wholesale product orders shipping cost is paid by the Company. As of June 30, 2021, the Company’s inventory on hand had a value of $222,901 compared to $201,372 at March 31, 2021. The Company has not established any inventory reserve on the Tauri-Gum^TM as of June 30, 2021. As of June 30, 2021, the Company had $423,200 in funds paid for inventory not received. The Company experienced Covid-19 related delays in the current production of Tauri-Gum^TM involving a shortage in packaging materials. As of this report date, the Company has taken delivery on $404,250 of gum inventory.

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 months ended June 30, 2021 and 2020, the Company incurred fulfillment costs in the amount of $40,458 and $20,450, respectively.

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.

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH ENDED JUNE 30, 2021 AND 2020

(US$)

(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SHIPPING AND HANDLING COSTS

The Company had net shipping expense:

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.

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 months ended June 30, 2021 and 2020, basic and fully diluted earnings per share were the same as the Company had losses in this period.

STOCK-BASED COMPENSATION

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

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

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 its 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.

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH ENDED JUNE 30, 2021 AND 2020

(US$)

(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RESEARCH AND DEVELOPMENT

The Company expenses research and development costs as incurred. Research and development costs were $13,439 and $1,817 for the three months ended June 30, 2021 and 2020, 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.

FAIR VALUE MEASUREMENTS

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

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

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

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

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

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

These 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.

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.

SHARE SETTLED DEBT

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

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH ENDED JUNE 30, 2021 AND 2020

(US$)

(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SHARE SETTLED DEBT (CONTINUED)

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

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

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 June 30, 2021.

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 condensed 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 condensed consolidated financial position and results of operations as a result of this standard.

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH ENDED JUNE 30, 2021 AND 2020

(US$)

(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RECENT ACCOUNTING PRONOUNCEMENTS

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. The Company has adopted this standard as of April 1, 2019 (See Note 7).

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 of this report.

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 net revenue by sales channel for the three months ended June 30:

Revenues from the Company’s E-Commerce channel represented 99.7% of total net sales for the three months ended June 30, 2021 compared to 92.7% for the prior year. As of June 30, 2021, the Company’s had an allowance for doubtful account collectability in the amount of $94,659 which was wholly attributable to the Wholesale channel. There were no significant contract asset or contract liability balances for 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

The following chart is the inventory value by product as of:

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH ENDED JUNE 30, 2021 AND 2020

(US$)

(UNAUDITED)

NOTE 4– INVENTORY (CONTINUED)

At June 30, 2021, there were $417,710 of prepayments on deposit with manufactures of Company products.

NOTE 5– PROPERTY AND EQUIPMENT

The Company’s property and equipment is as follows:

During the year ended March 31, 2021, the Company purchased office furniture in the amount of $8,722 for its new company headquarters in Wappingers Falls, New York. The furniture will be depreciated over 60 months commencing upon occupation of its new Company headquarters on January 6, 2021.

During the three months ended June 30, 2021, the Company purchased computer equipment in the amount of $1,945. This equipment will be depreciated of 36 months.

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 vehicles charging units with such location owner. No depreciation expense has been recorded for the charging units as of June 30, 2021 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 months ended June 30, 2021 and 2020 was $932 and $219, respectively.

NOTE 6 –LEASEHOLD IMPROVEMENTS

Associated with the Company’s January 6, 2021, relocation of its headquarters to Wappingers Falls the Company implemented certain leasehold improvements including signage and a sales display buildout at a total cost of $5,000. The Company has entered a two-year lease with a two-year extension option. The Company expects that it will exercise these two extension options and has chosen to amortize these leasehold improvements over 48 months.

NOTE 7 – 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 January 6, 2021, the Company recorded a net lease right of use asset and a lease liability at present value of approximately $67,938. The Company recorded these amounts at present value, in accordance with the standard, using a discount rate of 8.32% which is representative of the average borrowing rates for outstanding notes issued to non-related parties at the time of the entrance into the lease. The right of use asset is composed of the sum of all lease payments, at present value, and is amortized 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.

TAURIGA SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH ENDED JUNE 30, 2021 AND 2020

(US$)

(UNAUDITED)

NOTE 7 – OPERATING LEASE (CONTINUED)

Wappingers Falls, New York – Corporate headquarters

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 annually ($1,600 per month) during the term of the lease. The Company paid $1,600 as a security deposit as part of this lease. The Company has the option to one two-year extension. The Company expects it will exercise this option. Tenant will pay $21,000 annually ($1,750 per month) during the option term.

For the three months ended June 30, 2021 and 2020, the Company recorded lease expense of $5,025 and $ 3,457, respectively. As of June 30, 2021, the value of the unamortized lease right of use asset is $60,588. As of June 30, 2021, the Company’s lease liability was $61,038.

The following chart shows the Company’s operating lease cost for the three months ended June 30, 2021 and 2020: