NOTES
TO THE FINANCIAL STATEMENTS
DECEMBER
31, 2018
(UNAUDITED)
1.
ORGANIZATION AND LINE BUSINESS
The
Company was originally incorporated under the laws of the state of Nevada on February 25, 2013. The Company is devoting substantially
all of its present efforts to establish a new business and has had minimal revenues from operations to date.
On
April 4, 2017, the Company entered into a license agreement (the “License Agreement”) with Pharma GP APS, a Company
controlled by our CEO. (“Pharma GP”) and acquired an exclusive license to sell certain cosmetic products or ingredients
covered by United States Patent No. US 8,637,075 in the territory of the United States.
As
a result of the License Agreement, the Company is currently marketing a line of skin care products on its website at www.vilacto.com.
These products include, lotions, skin care creams and gels, lip balms, foot creams and oils, and similar items.
2.
BASIS OF PRESENTATION AND GOING CONCERN
The
accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles
generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read
in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial
Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of financial position and the results of operations for the interim period presented have been
reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected
for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited
financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.
Going
concern
– The accompanying financial statements have been prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred cumulative
net losses of $6,348,019 since its inception and requires capital for its contemplated operational and marketing activities to
take place. The Company’s ability to raise additional capital through future issuances of common stock is unknown. The obtainment
of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition,
ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully
resolve these factors raises substantial doubt about the Company’s ability to continue as a going concern. The financial
statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
3.
SUMMARY OF SIGNIFICANT POLICIES
This
summary of significant accounting policies of Vilacto Bio Inc. is presented to assist in understanding the Company’s financial
statements. The financial statements and notes are representations of the Company’s management, who are responsible for
their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States
of America and have been consistently applied in the preparation of the financial statements.
Use
of estimates
–
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Significant estimates include estimates used to review the Company’s goodwill, impairments and estimations of long-lived
assets, revenue recognition on percentage of completion type contracts, allowances for uncollectible accounts, inventory valuation,
and the valuations of non-cash capital stock issuances. The Company bases its estimates on historical experience and on various
other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
(UNAUDITED)
Revenue Recognition
– Upon adoption of ASC Topic 606, the Company revised its accounting policy on revenue recognition from the policy provided
in the Notes to Consolidated Financial Statements included in our March 31, 2018 10-K. The revised accounting policy on revenue
recognition is provided below.
We recognize revenue
on agreements for the products we sell on a standardized basis for sale to the market at a point in time. We recognize revenue
at the point in time that the customer obtains control of the good. We use proof of delivery for large orders, whereas the delivery
of most of our products is estimated based on historical averages of in-transit periods (i.e., time between shipment and delivery).
In situations where arrangements include
customer acceptance provisions based on seller or customer-specified objective criteria, we recognize revenue when we have concluded
that the customer has control of the goods and that acceptance is likely to occur. We generally do not provide for anticipated
losses on point in time transactions prior to transferring control of the equipment to the customer.
For the nine months
ended December 31, 2018 and 2017 the Company reported revenues of $2,640 and $322 respectively, respectively.
Accounts
Receivable
– Accounts receivable is comprised of uncollateralized customer obligations due under normal trade terms.
The Company performs ongoing credit evaluation of its customers and management closely monitors outstanding receivables based
on factors surrounding the credit risk of specific customers, historical trends, and other information. The carrying amount of
accounts receivable is reviewed periodically for collectability. If management determines that collection is unlikely, an allowance
that reflects management’s best estimate of the amounts that will not be collected is recorded. Accounts receivable are
presented net of an allowance for doubtful accounts of $0 and $36 at December 31, 2018, and March 31, 2018, respectively.
Cash
and cash equivalents
– For purposes of the statement of cash flows, the Company considers all highly liquid investments
and short-term instruments with original maturities of three months or less to be cash equivalents. There was $127,890 and $148,767
in cash and no cash equivalents as of December 31, 2018, and March 31, 2018, respectively.
Concentration
Risk
–
At times throughout the year, the Company may maintain cash balances in certain bank accounts in excess of
FDIC limits. As of December 31, 2018, the cash balance in excess of the FDIC limits was $0. The Company has not experienced
any losses in such accounts and believes it is not exposed to any significant credit risk in these accounts.
Fair
Value of Financial Instruments
– The carrying amounts reflected in the balance sheets for cash, accounts payable and
accrued expenses approximate the respective fair values due to the short maturities of these items. The Company does not hold
any investments that are available-for-sale.
As
required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted
prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly
or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity
to develop its own assumptions.
The
three levels of the fair value hierarchy are described below:
Level
1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or
liabilities;
Level
2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially
the full term of the asset or liability;
Level
3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable
(supported by little or no market activity).
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
(UNAUDITED)
Stock-based
compensation
– The Company follows the guidelines in FASB Codification Topic ASC 718-10 “
Compensation-Stock
Compensation,
” which provides investors and other users of financial statements with more complete and neutral financial
information, by requiring that the compensation cost relating to share-based payment transactions be recognized in the financial
statements. That cost will be measured based on the fair value of the equity or liability instruments issued. ASC 718-10 covers
a wide range of share-based compensation arrangements, including share options, restricted share plans, performance-based awards,
share appreciation rights and employee share purchase plans. As of December 31, 2018, the Company has not implemented an
employee stock-based compensation plan.
Non-Employee
Stock Based Compensation
– The Company accounts for stock-based compensation awards issued to non-employees for services,
as prescribed by ASC 718-10, at either the fair value of the services rendered, or the instruments issued in exchange for such
services, whichever is more readily determinable, using the measurement date guidelines enumerated in ASC 505-50. The Company
may issue compensatory shares for services including, but not limited to, executive, management, accounting, operations, corporate
communication, financial and administrative consulting services.
Earnings
(loss) per share
– The Company reports earnings (loss) per share in accordance with Financial Accounting Standards Board’s
(“FASB”) Accounting Standards Codification (“ASC”) 260-10 “
Earnings Per Share,
” which
provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes
no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average common shares
outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings
of an entity. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common
shares are excluded if their effect is anti-dilutive.
Long-lived
Assets
– In accordance with the Financial Accounting Standards Board ("FASB") Accounts Standard Codification
(ASC) ASC 360-10, "Property, Plant and Equipment," the carrying value of intangible assets and other long-lived assets
is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes
impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment
losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.
Derivative
Financial Instruments
– The Company accounts for derivative instruments in accordance with the provisions of ASC 815
- Derivatives Hedging: Embedded Derivatives. ASC 815 establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for hedging activities.
The
Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. Terms in agreements
are reviewed to determine whether or not they contain embedded derivatives that are required under ASC 815 to be accounted for
and separated from the host contract, and recorded on the balance sheet at fair value. The fair value of derivative liabilities
is required to be revalued at each reporting date, with the corresponding changes in fair value recorded in current period operating
results.
Inventory
–
Substantially all inventory consists of finished goods and are valued based upon first-in first-out ("FIFO") cost, not
in excess of market. The cost of our inventory includes the amount we pay to our suppliers to acquire inventory, freight costs
incurred in connection with the delivery of product to our distribution centers. Net realizable value represents the estimated
selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. The Company
evaluates potentially excess and slow-moving inventories on a quarterly basis by evaluating turn rates, inventory levels and other
factors, and records lower of cost or market reserves for such identified excess and slow-moving inventories. As of December 31,
2018, and March 31, 2018, no such reserve had been recorded.
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
(UNAUDITED)
Income
taxes
– The Company accounts for its income taxes in accordance with FASB Codification Topic ASC 740-10, “
Income
Taxes
”, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases
and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Segment
Reporting
– Operating segments are defined as components of an enterprise for which separate financial information
is available and evaluated regularly by the chief operating decision maker, or decision-making group, in deciding the method to
allocate resources and assess performance. The Company currently has one reportable segment for financial reporting purposes,
which represents the Company's core business.
Recently Issued
Accounting Pronouncements
– In June 2018, the FASB issued ASU 2018-07, "Compensation-Stock Compensation (Topic
718): Improvements to Nonemployee Share-Based Payment Accounting," which modifies the accounting for share-based payment awards
issued to nonemployees to largely align it with the accounting for share-based payment awards issued to employees. ASU 2018-07
is effective for us for annual periods beginning October 1, 2019. We do not expect the adoption of the standard will impact our
financial position or results of operations.
The Company has evaluated
all other recent accounting pronouncements, and believes that none of them will have a material effect on the Company's financial
position, results of operations or cash flows.
4.
INVENTORY
Inventory
consist of the following as of December 31, 2018 and March 31, 2018:
|
|
December 31, 2018
|
|
March 31, 2018
|
Raw materials
|
|
$
|
—
|
|
|
$
|
—
|
Finished Goods
|
|
|
121,544
|
|
|
|
100,413
|
Total
|
|
$
|
121,544
|
|
|
$
|
100,413
|
5.
PREPAID EXPENSES
Prepaid
expenses consist of the following as of December 31, 2018 and March 31, 2018:
|
|
December 31, 2018
|
|
March 31, 2018
|
Prepaid Marketing
|
|
$
|
10,684
|
|
|
$
|
59,568
|
Total prepaid expenses
|
|
$
|
10,684
|
|
|
$
|
59,568
|
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
(UNAUDITED)
6.
INTANGIBLE ASSETS
Patents
and trademarks and other intangible assets are capitalized at their historical cost and are amortized over their estimated useful
lives.
Intangible
assets consist of the following as of December 31, 2018 and March 31, 2018:
|
|
December 31, 2018
|
|
March 31, 2018
|
Patents and trademarks
|
|
|
135,850
|
|
|
|
920
|
Website
|
|
|
6,500
|
|
|
|
—
|
Less: accumulated amortization
|
|
|
(2,818
|
)
|
|
|
(24)
|
Intangible assets, net of
accumulated amortization
|
|
|
139,532
|
|
|
|
896
|
Amortization expense for the nine months ended
December 31, 2018 and 2017 was $2,794 and $9, respectively. The Company expects to incur approximately $13,724 in amortization
expense related to its intangible assets on an annual basis over the next 10 years.
On
November 8, 2018, we entered into an Asset Purchase Agreement with 9 Heroes APS, a Denmark corporation that is controlled by our
CEO, Gert Andersen, to purchase certain patents applications and intellectual property. We formed a new wholly owned subsidiary,
Vilacto BioIP, LLC, to hold the assets acquired in the Asset Purchase Agreement.
The
patent applications and intellectual property include the following:
-
United
States Patent Application # 8,637,075 entitled “Colostrum Composition”;
-
European
Patent Application # EP2341916 entitled “Colostrum Composition”;
-
Hong
Kong Patent Application # HK1159997 entitled “Colostrum Composition”; and
-
Canada
Patent Application # 2,773,277 entitled “Colostrum Composition.”
These
patent applications are describing the particle, development and use, of a nanoparticle composition comprised of (1) colostrum
and (2) at least one agent selected from a group of hydrocolloids
,
such as hyaluronic acid, which is useable for a wide
range of applications. We also secured domains names including Lactoactive and Vilact.
In
consideration for the assets, we agreed to pay 9 Heroes APS the purchase price of $3,360,000 USD, payable in an 8% secured promissory
note (the “Note”) with a face amount of $2,000,000 and the balance in our common stock, consisting of 8,500,000 shares
of our common stock. We closed the transaction on November 8, 2018.
In
accordance with US GAAP the Company recorded the assets on the books of the Company at costs basis due to fact that our CEO commonly
controlled both entities involved in the transaction. The difference between the historical costs basis of the assets and the
fair value of the consideration paid has been recorded as a loss on assets acquired from related parties of $3,242,070.
The Note matures in five years from execution. Interest
is due and payable on a semi annual basis with the first payment due on January 1, 2019 and future payments due every six-months
afterwards until maturity. At the sole option of the note holder interest may be converted into the Company’s common stock.
The conversion price shall be equal to the average of the closing market prices for the Company’s common stock on the OTCQB
during the five (5) trading days immediately preceding the due date for such payment. The note is secured by all assets of our
company.
We
plan to use the assets acquired to expand the reach of our opportunities in doing business internationally. We currently only
have a license from Pharma GP to reach customers in the United States. By acquiring these patent applications, we are better presented
as a company with international IP solutions, which we believe will make us more attractive as an international biotech/pharma
company and developer.
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
(UNAUDITED)
7.
CONVERTIBLE NOTES PAYABLE
Convertible Notes Payable at consists of the following:
|
|
December 31, 2018
|
|
|
|
|
|
|
Auctus Fund, LLC
On February 26, 2018, we entered into a Securities Purchase Agreement (the “Auctus SPA”), under which we agreed to sell a 12% convertible promissory note in an aggregate principal amount of $167,750 (the “Auctus Note”) to Auctus Fund, LLC (“Auctus”). The Auctus Note will bear interest at a rate of 12% per annum and will mature on November 26, 2018. The net proceeds of the sale of the Auctus Note, after deducting the expenses payable by were $150,000.
At any time after the issue date of the Auctus Note, Auctus has the option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the Auctus Note into shares of our common stock at the Conversion Price. The “Conversion Price” will be the lesser of (i) the lowest trading price of our common stock during the twenty-five-day trading period prior to the issue date of the Auctus Note and (ii) 50% of the lowest trading price of our common stock during the twenty-five-day trading period prior to the conversion. The Conversion Price is subject to further reduction upon certain events specified in the Auctus Note.
We have the right to prepay the Auctus Note at any time until the 180th calendar day after the issue date of the Auctus Note, in an amount equal to 150% (or 135% if we prepay the Auctus Note on or before the date that is 90 days after the issue date of the Auctus Note) of the outstanding balance of the Auctus Note (including principal and accrued and unpaid interest). We may not prepay the Auctus Note after the 180th calendar day after the issue date of the Auctus Note. We will be subject to a liquidated damages charge of 25% of the outstanding principal amount of the Auctus Note if we effect certain exchange transactions in accordance with, based upon or related or pursuant to Section 3(a)(10) of the Securities Act. In addition, the Auctus Note grants Auctus the right to update the terms of the Auctus SPA and the Auctus Note to incorporate the terms of any future transaction document related to a security issuance by us to a third party that are more favorable to the third party than the terms of the Auctus SPA and the Auctus Note.
Any amounts due and payable to Auctus under the terms of the Auctus Note, including any payment on an event of default, default interest, or agreed upon liquidated damages may, at the Auctus's option, be converted into shares of our common stock at the Conversion Price.
Pursuant to a Registration Rights Agreement, we are required to register 30,000,000 shares into which the Auctus Note may be converted.
As of December 31, 2018, the note holder had converted $13,775 in Principal and $19,115 in interest and fees into 1,140,000 shares of the Company’s common stock. (See note 9 for additional details.)
During the nine months ending December 31, 2018 the Company recorded interest of $16,612.
The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $147,472 during the nine months ended December 31, 2018.
|
|
$
|
167,750
|
Unamortized debt discount
|
|
|
—
|
Total, net of unamortized discount
|
|
|
154,005
|
EMA Financial, LLC
On February 23, 2018 we entered into a Securities Purchase Agreement (“EMA SPA”) with EMA Financial, LLC, a Delaware limited liability company (“EMA”), pursuant to which we issued and sold to EMA a convertible promissory note, dated February 23, 2018 in the principal amount of $125,000 (the “EMA Note”). In connection with the foregoing, we also entered into a Registration Rights Agreement with the Purchaser dated February 23, 2018 (the “Registration Rights Agreement”).
The EMA Note as amended, is due February 23, 2019, bears interest at the rate of 12% per annum. All principal and accrued interest on the EMA Note is convertible into shares of our common stock at the election of EMA at any time at a conversion price equal to the lesser of (i) the trading price for our common stock on the trading day prior to the closing date of the EMA Note, or (ii) a 50% discount to the lowest trading or lowest closing bid price for our common stock during the 25-trading day period immediately prior to conversion. We have no right to prepay the EMA Note more than 180 days after the closing date.
The EMA Note contains customary default events which, if triggered and not timely cured, will result in default interest and penalties. As a result of claimed defaults, the promissory notes discount conversion rate was increased to a 80% discount to the lowest trading or lowest closing bid price for our common stock during the 25-trading day period immediately prior to conversion
On July 6, 2018 the Company executed an amendment to the promissory note to cure certain events of default in which it agreed to increase the principal balance of the note by $37,500 and pay $25,000 in principal to the lender within 5 days of execution of the amendment. The company treated the amendment as a debt modification under ASC 470 and recorded a corresponding loss on debt modification of $37,500.
During the three months ending December 31, 2018 the Company incurred penalties of approximately $120,533 which were added to the principal total owed under the promissory note.
Pursuant to the Registration Rights Agreement, we are required to register 30,000,000 shares into which the EMA Note may be converted.
As of December 31, 2018, the note holder had converted $61,841 in Principal and $6,350 in interest and fees into 8,300,000 shares of the Company’s common stock. (See note 9 for additional details.)
During the nine months ending December 31, 2018 the Company recorded interest of $11,173.
In July 2018, the Company made principal and interest payments of $60,000 on the outstanding convertible note with EMA financial, LLC.
The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $138,936 during the nine months ended December 31, 2018.
|
|
|
176,747
|
Unamortized debt discount
|
|
|
(11,235)
|
Total, net of unamortized discount
|
|
|
165,512
|
|
|
|
|
Adar Bays, LLC July 2, 2018 Secured Convertible Note
On July 2, 2018 we entered into a Secured Convertible note with Adar Bays, LLC (“Adar”) pursuant to which we issued a convertible promissory note, dated July 2, 2018 in the principal amount of $150,000 (the “July 2, 2018 Adar Note”).
The July 2, 2018 Adar Note, is due July 2, 2019, bears interest at the rate of 10% per annum. All principal and accrued interest on the July 2, 2018 Adar Note is convertible into shares of our common stock at the election of Adar six months after the issuance date at a conversion price equal to a 50% discount to the lowest trading or lowest closing bid price for our common stock during the 25-trading day period immediately prior to conversion.
We can pay the note in cash within the first six months of issuance, we have no right to prepay the July 2, 2018 Adar Note six months and one day after issuance.
The July 2, 2018 Adar Note contains customary default events which, if triggered and not timely cured, will result in default interest and penalties.
During the nine months ending December 31, 2018 the Company recorded interest of $8,712.
The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $74,795 during the nine months ended December 31, 2018.
|
|
|
150,000
|
Unamortized debt discount
|
|
|
(75,205)
|
Total, net of unamortized discount
|
|
|
74,795
|
|
|
|
|
GS Capital Partners, LLC Convertible Note
On July 11, 2018 we entered into a Convertible note with GS Capital Bays, LLC (“GS”) pursuant to which we issued a convertible promissory note, dated July 11, 2018 in the principal amount of $110,000 (the “GS Note”).
The GS Note, is due July 11, 2019, bears interest at the rate of 10% per annum. All principal and accrued interest on the GS Note is convertible into shares of our common stock at the election of GS at any time at a conversion price equal to a 50% discount to the lowest trading or lowest closing bid price for our common stock during the 25-trading day period immediately prior to conversion.
We have the right to prepay the GS Note within 60 days of the closing date at a premium of 125% of all amounts owed to GS and at a premium of 135% if prepaid more than 60 but less than 120 days following the closing date, at a premium of 145% if prepaid more than 120 but less than 180 days following the closing date. We have no right to prepay the GS Note more than 180 days after the closing date.
The GS Note contains customary default events which, if triggered and not timely cured, will result in default interest and penalties.
During the nine months ending December 31, 2018 the Company recorded interest of $6,118.
The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $52,137 during the nine months ended December 31, 2018.
|
|
|
110,000
|
Unamortized debt discount
|
|
|
(57,863)
|
Total, net of unamortized discount
|
|
|
52,137
|
|
|
|
|
Eagle Equities, LLC Convertible Note
On July 20, 2018 we entered into a Convertible note with Eagle Equities, LLC (“Eagle”) pursuant to which we issued a convertible promissory note, dated July 20, 2018 in the principal amount of $100,000 (the “Eagle Note”).
The Eagle Note, is due July 20, 2019, bears interest at the rate of 10% per annum. All principal and accrued interest on the Eagle Note is convertible into shares of our common stock at the election of Eagle at any time at a conversion price equal to a 50% discount to the lowest trading or lowest closing bid price for our common stock during the 25-trading day period immediately prior to conversion.
We have the right to prepay the Eagle Note within 90 days of the closing date at a premium of 135% of all amounts owed to GS and at a premium of 150% if prepaid more than 90 but less than 180 days following the closing date. We have no right to prepay the Eagle Note more than 180 days after the closing date.
The Eagle Note contains customary default events which, if triggered and not timely cured, will result in default interest and penalties.
During the nine months ending December 31, 2018 the Company recorded interest of $5,315.
The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $44,932 during the nine months ended December 31, 2018.
|
|
|
100,000
|
Unamortized debt discount
|
|
|
(55,069)
|
Total, net of unamortized discount
|
|
|
44,932
|
|
|
|
|
Adar Bays, LLC July 23, 2018 Secured Convertible Note
On July 23, 2018 we entered into a Secured Convertible note with Adar Bays, LLC (“Adar”) pursuant to which we issued a convertible promissory note, dated July 23, 2018 in the principal amount of $50,000 (the “Adar Note”).
The Adar Note, is due July 23, 2019, bears interest at the rate of 10% per annum. All principal and accrued interest on the Adar Note is convertible into shares of our common stock at the election of Adar at any time at a conversion price equal to a 50% discount to the lowest trading or lowest closing bid price for our common stock during the 25-trading day period immediately prior to conversion.
We have the right to prepay the Adar Note within 90 days of the closing date at a premium of 135% of all amounts owed to Adar and at a premium of 150% if prepaid more than 90 but less than 180 days following the closing date. We have no right to prepay the Adar Note more than 180 days after the closing date.
The Adar Note contains customary default events which, if triggered and not timely cured, will result in default interest and penalties.
During the nine months ending December 31, 2018 the Company recorded interest of $2,616.
The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $22,055 during the nine months ending December 31, 2018.
|
|
|
50,000
|
Unamortized debt discount
|
|
|
(27,945)
|
Total, net of unamortized discount
|
|
|
22,055
|
|
|
|
|
Power UP Lending Group Convertible Note – October 15, 2018
On October 15, 2018 we entered into a Convertible note with Power UP Lending Group LTD (“Power UP”) pursuant to which we issued a convertible promissory note, dated October 15, 2018 in the principal amount of $128,000 (the “Power UP Note”).
The Power UP Note, is due October 15, 2019, bears interest at the rate of 8% per annum. All principal and accrued interest on the Power UP Note is convertible into shares of our common stock 180 days following October 15, 2018 at a conversion price equal to a 37% discount to the lowest trading or lowest closing bid price for our common stock during the 15-trading day period immediately prior to conversion.
We have the right to prepay the Power UP Note within 30 days of the closing date at a premium of 112% of all amounts owed to Power UP and at a premium of 117% if prepaid more than 31 but less than 60 days following the closing date and at a premium of 122% if prepaid more than 61 but less than 90 days following the closing date and at a premium of 127% if prepaid more than 91 but less than 120 days following the closing date and at a premium of 132% if prepaid more than 121 but less than 150 days following the closing date and at a premium of 137% if prepaid more than 151 but less than 180 days following the closing date. We have no right to prepay the Power UP Note more than 180 days after the closing date.
The Power UP Note contains customary default events which, if triggered and not timely cured, will result in default interest and penalties.
During the nine months ending December 31, 2018 the Company recorded interest of $3,002.
The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $27,997 during the nine months ending December 31, 2018.
|
|
|
128,000
|
Unamortized debt discount
|
|
|
(100,003)
|
Total, net of unamortized discount
|
|
|
27,997
|
|
|
|
|
Power UP Lending Group Convertible Note – November 6, 2018
On October 15, 2018 we entered into a Convertible note with Power UP Lending Group LTD (“Power UP”) pursuant to which we issued a convertible promissory note, dated October 15, 2018 in the principal amount of $53,000 (the “Power UP Note-2”).
The Power UP Note-2, is due November 6, 2019, bears interest at the rate of 8% per annum. All principal and accrued interest on the Power UP Note-2 is convertible into shares of our common stock 180 days following October 15, 2018 at a conversion price equal to a 39% discount to the lowest trading or lowest closing bid price for our common stock during the 15-trading day period immediately prior to conversion.
We have the right to prepay the Power UP Note within 30 days of the closing date at a premium of 112% of all amounts owed to Power UP and at a premium of 117% if prepaid more than 31 but less than 60 days following the closing date and at a premium of 122% if prepaid more than 61 but less than 90 days following the closing date and at a premium of 127% if prepaid more than 91 but less than 120 days following the closing date and at a premium of 132% if prepaid more than 121 but less than 150 days following the closing date and at a premium of 137% if prepaid more than 151 but less than 180 days following the closing date. We have no right to prepay the Power UP Note more than 180 days after the closing date.
The Power UP Note contains customary default events which, if triggered and not timely cured, will result in default interest and penalties.
During the nine months ending December 31, 2018 the Company recorded interest of $987.
The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $8,726 during the nine months ending December 31, 2018.
|
|
|
53,000
|
Unamortized debt discount
|
|
|
(44,274)
|
Total, net of unamortized discount
|
|
|
8,726
|
|
|
|
|
Total
|
|
$
|
550,158
|
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
(UNAUDITED)
Derivative
liability
The
Company accounts for the fair value of the conversion features of its convertible debt in accordance with ASC Topic No. 815-15
“Derivatives and Hedging; Embedded Derivatives” (“Topic No. 815-15”). Topic No. 815-15 requires the Company
to bifurcate and separately account for the conversion features as an embedded derivative contained in the Company’s convertible
debt. The Company is required to carry the embedded derivative on its balance sheet at fair value and account for any unrealized
change in fair value as a component of results of operations. The Company values the embedded derivatives using the Black-Scholes
pricing model.
The
following table presents a summary of the Company’s derivative liabilities associated with its convertible notes as of December
31, 2018:
|
|
Amount
|
Balance March 31, 2017
|
|
$
|
—
|
Debt discount originated from derivative liabilities
|
|
|
262,500
|
Initial loss recorded
|
|
|
170,924
|
Adjustment to derivative liability due to debt settlement
|
|
|
—
|
Change in fair market value of derivative liabilities
|
|
|
296,313
|
Balance March 31, 2018
|
|
$
|
729,737
|
Debt discount originated from derivative liabilities
|
|
|
530,050
|
Initial loss recorded
|
|
|
473,113
|
Adjustment to derivative liability due to debt settlement
|
|
|
(288,950)
|
Change in fair market value of derivative liabilities
|
|
|
192,045
|
Balance December 31, 2018
|
|
$
|
1,635,995
|
The
Black-Scholes model utilized the following inputs to value the derivative liabilities at the date of issuance of the convertible
notes, at March 31, 2018 and at December 31, 2018:
Fair
value assumptions – derivative notes:
|
February
23, 2018
|
February
26, 2018
|
March
31, 2018
|
July
2, 2018
|
July
11, 2018
|
July
20, 2018
|
July
23, 2018
|
October
15, 2018
|
November
6, 2018
|
December
31, 2018
|
Risk
free interest rate
|
2.02%
|
2.03%
|
|
2.09%
|
2.34%
|
2.36%
|
2.41%
|
2.42%
|
2.67%
|
2.72%
|
2.56%
|
Expected
term (years)
|
1.0
|
.75
|
|
0.66
-.90
|
1.0
|
1.0
|
1.0
|
1.0
|
1.0
|
1.0
|
0.01-0.84
|
Expected
volatility
|
188.62%
|
188.72%
|
|
199.58%
|
170.90%
|
171.08%
|
172.31%
|
172.42%
|
198.49%
|
202.93%
|
202.35%
|
Expected
dividends
|
0
|
0
|
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
8.
LOANS PAYABLE
On
January 8, 2018, the Company and four lenders assigned the rights and obligations of a total of $174,500 in promissory notes to
a new lender, the terms of the note were unchanged. The notes bear interest at a rate of 5% per annum and is due within two business
days of demand notice. During the nine months ending December 31, 2018 the Company recorded interest of $7,269.
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
(UNAUDITED)
9.
STOCKHOLDERS’ EQUITY
Overview
As
of December 31, 2018, the Company is authorized to issue 1,125,000,000 shares of $0.001 par value common stock. All common stock
shares have equal voting rights, are non-assessable and have one vote per share. Voting rights are not cumulative and, therefore,
the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company.
As
of December 31, 2018, there were 110,440,000 shares of common stock issued and outstanding.
Termination
of Stock purchase agreement – November 8, 2018
As
previously disclosed, on April 19, 2017, we entered into a Stock Purchase Agreement (the “Purchase Agreement”) with
Pharma GP APS, a Denmark corporation (“Pharma GP”) and its sole shareholder, 9 Heroes APS, a Denmark corporation,
pursuant to which we agreed to purchase all of the outstanding shares of Pharma GP for the purchase price of $6,000,000.00, payable
as $3,000,000.00 in cash and the balance in shares of our common stock.
The
closing of the Purchase Agreement was originally scheduled to occur on May 31, 2017; however, we have been unable to raise money
needed to pay the purchase price under the Purchase Agreement; As a result of the difficulties in raising capital to finance the
Purchase Agreement transaction, the parties have decided to terminate and release each other and otherwise settle, compromise,
dispose of, and release with finality, all claims, demands and causes of action, arising out of the Purchase Agreement dated April
19, 2017.
As
such, on November 8, 2019, the parties entered into a Termination and Release Agreement (the “Termination Agreement”)
to terminate the Purchase Agreement and release each other from the obligations under the Purchase Agreement.
Stock
issued for services.
On
December 3, 2018, the Company issued a total of 1,500,000 shares of the Company’s common stock to a consultant for services
to be rendered over 12 months. The shares were valued at $0.115 per share or $172,500. The Company will record the expense evenly
over the 12 month service period. During the nine months ended December 31, 2018 the Company recorded $13,232 as professional
fees expense.
On
December 11, 2018, the Company issued a total of 6,000,000 shares of the Company’s common stock to three directors of the
Company for services rendered. The shares were evenly distributed and as a result each director received 2,000,000 shares. The
shares were valued at $0.0525 per share or $315,000 which was recorded as professional fees expense.
Stock
issued upon conversion of debts.
On
November 20, 2018, a Lender converted a total of $5,996 of principal, interest and fees associated with a Convertible Promissory
note into 200,000 shares of the Company’s common stock at an effective conversion price of $0.03 per share.
On
November 23, 2018, a Lender converted a total of $6,000 of principal, interest and fees associated with a Convertible Promissory
note into 100,000 shares of the Company’s common stock at an effective conversion price of $0.06 per share.
On
December 4, 2018, a Lender converted a total of $6,370 of principal, interest and fees associated with a Convertible Promissory
note into 140,000 shares of the Company’s common stock at an effective conversion price of $0.0455 per share.
On
December 4, 2018, a Lender converted a total of $10,920 of principal, interest and fees associated with a Convertible Promissory
note into 600,000 shares of the Company’s common stock at an effective conversion price of $0.0182 per share.
On
December 7, 2018, a Lender converted a total of $33,100 of principal, interest and fees associated with a Convertible Promissory
note into 2,500,000 shares of the Company’s common stock at an effective conversion price of $0.0132 per share.
On
December 11, 2018, a Lender converted a total of $13,240 of principal, interest and fees associated with a Convertible Promissory
note into 400,000 shares of the Company’s common stock at an effective conversion price of $0.0331 per share.
On
December 20, 2018, a Lender converted a total of $7,250 of principal, interest and fees associated with a Convertible Promissory
note into 500,000 shares of the Company’s common stock at an effective conversion price of $0.0145 per share.
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
(UNAUDITED)
10.
RELATED PARTY TRANSACTIONS
In
connection with an assumption of the debt agreement the Company executed a $32,608 promissory note with Mr. Anderson which bears
interest at a rate of 10% per annum. During the nine months ending December 31, 2018 the Company recorded interest of $2,725.
During
the nine months ending December 31, 2018, Gert Anderson, the President and CEO of the Company advanced $17,740 to the Company
to pay expenses on behalf of the Company. As of December 31, 2018, $68,106 in advances remain outstanding. The advances bear no
interest, are unsecured, and are due on demand.
On
July 16, 2018 the Company made a payment of $133,284 to Pharma GP, an entity controlled by our CEO to settle amounts owned under
outstanding accounts payable.
11.
ROYALTY AGREEMENT
License
agreement
On
April 4, 2017, we entered into a license agreement (the “License Agreement”) with Pharma GP APS, a Company controlled
by our CEO. (“Pharma GP”) and acquired an exclusive license to sell certain cosmetic products or ingredients covered
by United States Patent No. US 8,637,075 in the territory of the United States.
For
the license, we agreed to pay to GP a royalty of eight percent (8%) on the selling price (irrespective of any taxes, custom duties,
costs of insurance, transportation costs or other costs) for all licensed product we sell in the United States (if in excess of
the agreed minimum royalty) or pay the agreed minimum royalty of $10,000 per month. During the nine months ending December 31,
2018, the Company recorded royalty expense of $70,000 related to this agreement.
Under
the License Agreement, we have the ability to sublicense to third parties under the royalty arrangement described above.
On
November 8, 2018, the Royalty agreement was cancelled as a result of the assets purchase described in Note 6. (See note 6 for
additional details.)
12.
SUBSEQUENT EVENTS
The
Company has evaluated events subsequent to the balance sheet through the issuance date of these financial statements in accordance
with FASB ASC 855 and has determined that there are no such events that would require adjustment to, or disclosure in, the financial
statements except as disclosed below.
On
January 3, 2019, a Lender converted a total of $7,500 of principal, interest and fees associated with a Convertible Promissory
note into 2,500,000 shares of the Company’s common stock at an effective conversion price of $0.003 per share.
On
January 28, 2018, the Company filed a certificate of amendment (the “Amendment”) with the Nevada Secretary of State
to increase the Company’s authorized common stock, par value $0.001 per share, from 1,125,000,000 shares to 4,000,000,000
shares. The Amendment also created a class of 10,000,000 shares of blank check preferred stock, par value $0.001 per share.
On
January 29, 2019, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class
of preferred stock entitled Series A Preferred Stock, consisting of up 3,000,000 shares, par value $0.001. Under the Certificate
of Designation, holders of Series A Preferred Stock will participate on an equal basis per-share with holders of our common stock
in any distribution upon winding up, dissolution, or liquidation. Holders of Series A Preferred Stock are entitled to vote together
with the holders of our common stock on all matters submitted to shareholders at a rate of 1,000 votes for each share held. Holders
of Series A Preferred Stock are entitled to convert each share held for 10 shares of common stock.
On January 29, 2019, we issued to Mr. Gert Andersen
3,000,000 shares of our newly created Series A Preferred Stock in exchange for 30,000,000 shares of common stock held by Mr. Andersen.
On
January 29, 2019, a Lender converted a total of $10,675 of principal, interest and fees associated with a Convertible Promissory
note into 2,500,000 shares of the Company’s common stock at an effective conversion price of $0.0043 per share.