These financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions
to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating
results for the interim period ended September 30, 2018 are not necessarily indicative of the results that can be expected for
the full year.
The accompanying
notes are an integral part of these financial statements.
The accompanying
notes are an integral part of these financial statements.
The accompanying
notes are an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 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 $3,276,082 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
SEPTEMBER 30, 2018
(UNAUDITED)
Revenue
Recognition
– The Company recognizes revenue related to product sales when (i) the seller’s price is substantially
fixed, (ii) shipment has occurred causing the buyer to be obligated to pay for product, (iii) the buyer has economic substance
apart from the seller, and (iv) there is no significant obligation for future performance to directly bring about the resale of
the product by the buyer as required by ASC 605 – Revenue Recognition. Cost of sales, rebates and discounts are recorded
at the time of revenue recognition or at each financial reporting date. For the six months ended September 30, 2018 and 2017 the
Company reported revenues of $1,380
and $0, 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 $143 and $36 at September 30, 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 $143,180 and $148,767 in cash and cash equivalents as of September
30, 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 September 30, 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
SEPTEMBER 30, 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 September 30, 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 September 30, 2018, and March 31,
2018, no such reserve had been recorded.
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 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
–
The Company has evaluated the all recent accounting pronouncements through ASU 2018-18, and believes that none of them will have
a material effect on the Company's financial position, results of operations or cash flows except as discussed below.
Revenue from Contracts with Customers
. In
May 2014, the FASB issued Accounting Standards Update No. 2014-09 (“ASU 2014-09”), which supersedes nearly all existing
revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or
services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for
those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment
and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. Additionally,
the new guidance requires enhanced disclosures about the nature, amount, timing, and uncertainty of revenue and cash flows arising
from customer contracts, including revenue recognition policies to identify performance obligations, assets recognized from costs
incurred to obtain and fulfill a contract, and significant judgments in measurement and recognition.
In July 2015, the FASB made a decision to defer
the effective date of the new standard for one year and permit early adoption as of the original effective date. The
Company has reviewed its revenue streams and does not believe that the adoption of this standard has a material effect on its revenue
recognition in 2017 or 2018.
4. INVENTORY
Inventory consist of the following as of September
30, 2018 and March 31, 2018:
|
|
September
30, 2018
|
|
March
31, 2018
|
Raw
materials
|
|
$
|
—
|
|
|
$
|
—
|
Finished
Goods
|
|
|
99,727
|
|
|
|
100,413
|
Total
|
|
$
|
99,727
|
|
|
$
|
100,413
|
5. PREPAID EXPENSES
Prepaid expenses consist of the following as
of September 30, 2018 and March 31, 2018:
|
|
September 30, 2018
|
|
March 31, 2018
|
Prepaid Marketing
|
|
$
|
27,068
|
|
|
$
|
59,568
|
Total prepaid expenses
|
|
$
|
27,068
|
|
|
$
|
59,568
|
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 September 30, 2018 and March 31, 2018:
|
|
September 30, 2018
|
|
March 31, 2018
|
Patents and trademarks
|
|
|
920
|
|
|
|
920
|
Website
|
|
|
5,000
|
|
|
|
—
|
Less: accumulated depreciation
|
|
|
(552
|
)
|
|
|
(24)
|
Fixed assets, net of accumulated depreciation
|
|
|
5,368
|
|
|
|
896
|
Amortization expense for the six months ended
September 30, 2018 and 2017 was $528 and $0, respectively.
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(UNAUDITED)
7. CONVERTIBLE NOTES PAYABLE
Convertible Notes Payable at consists of the following:
|
|
September 30, 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.
During the six months ending September 30,
2018 the Company recorded interest of $10,093
The aggregate issue discount feature
has been accreted and charged to interest expenses as a financing expense in the amount of $112,447 during the six months ended
September 30, 2018.
|
$
|
167,750
|
Unamortized debt discount
|
|
(35,025)
|
Total, net of unamortized discount
|
|
132,725
|
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 the right to prepay the EMA Note within 90 days of the closing
date at a premium of 135% of all amounts owed to EMA 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 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.
Pursuant to the Registration Rights Agreement, we are required to
register 30,000,000 shares into which the EMA Note may be converted.
During the six months ending September 30,
2018 the Company recorded interest of $5,901.
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.
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 $126,572
during
the six months ended September 30, 2018.
|
|
102,500
|
Unamortized debt discount
|
|
(23,599)
|
Total, net of unamortized discount
|
|
78,901
|
|
|
|
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 six months ending September 30,
2018 the Company recorded interest of $3,699.
The aggregate issue discount feature
has been accreted and charged to interest expenses as a financing expense in the amount of $36,986 during the six months ended
September 30, 2018.
|
|
150,000
|
Unamortized debt discount
|
|
(113,014)
|
Total, net of unamortized discount
|
|
36,986
|
|
|
|
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 six months ending September 30,
2018 the Company recorded interest of $2,441.
The aggregate issue discount feature
has been accreted and charged to interest expenses as a financing expense in the amount of $24,411 during the six months ended
September 30, 2018.
|
|
110,000
|
Unamortized debt discount
|
|
(85,589)
|
Total, net of unamortized discount
|
|
24,411
|
|
|
|
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 six months ending September 30,
2018 the Company recorded interest of $1,973.
The aggregate issue discount feature
has been accreted and charged to interest expenses as a financing expense in the amount of $19,726 during the six months ended
September 30, 2018.
|
|
100,000
|
Unamortized debt discount
|
|
(80,274)
|
Total, net of unamortized discount
|
|
19,726
|
|
|
|
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 six months ending September 30,
2018 the Company recorded interest of $945.
The aggregate issue discount feature
has been accreted and charged to interest expenses as a financing expense in the amount of $9,452 during the six months ended September
30, 2018.
|
|
50,000
|
Unamortized debt discount
|
|
(40,548)
|
Total, net of unamortized discount
|
|
9,452
|
|
|
|
Total
|
$
|
302,201
|
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 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 September 30, 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
|
|
|
349,050
|
Initial loss recorded
|
|
|
409,237
|
Adjustment to derivative liability due to debt settlement
|
|
|
—
|
Change in fair market value of derivative liabilities
|
|
|
1,272,178
|
Balance September 30, 2018
|
|
$
|
2,760,202
|
The Black-Scholes model utilized
the following inputs to value the derivative liabilities at the date of issuance of the convertible notes and at March 31, 2018
and September 30, 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
|
|
September
30, 2018
|
Risk
free interest rate
|
|
|
2.02
|
%
|
|
|
2.03
|
%
|
|
|
2.09
|
%
|
|
|
2.34
|
%
|
|
|
2.36
|
%
|
|
|
2.41
|
%
|
|
|
2.42
|
%
|
|
|
2.59%
|
Expected
term (years)
|
|
|
1.0
|
|
|
|
.75
|
|
|
|
0.66
-.90
|
|
|
|
1.0
|
|
|
|
1.0
|
|
|
|
1.0
|
|
|
|
1.0
|
|
|
|
0.16-0.81
|
Expected
volatility
|
|
|
188.62
|
%
|
|
|
188.72
|
%
|
|
|
199.58
|
%
|
|
|
170.90
|
%
|
|
|
171.08
|
%
|
|
|
172.31
|
%
|
|
|
172.42
|
%
|
|
|
192.16%
|
Expected
dividends
|
|
|
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 six months ending
September 30, 2018 the Company recorded interest of $4,361.
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(UNAUDITED)
9. STOCKHOLDERS’ EQUITY
On March 6, 2017, our board of directors resolved
to increase the number of authorized shares of our common stock, par value $0.001, from 75,000,000 shares to 1,125,000,000 shares.
Correspondingly, our board of directors affirmed a forward split of 15 for 1 in which each shareholder will be issued 15 common
shares in exchange for 1 common share of their currently issued common stock. In accordance with ASC 505-20 all stock-related information
presented in these financial statements and accompanying footnotes has been retroactively adjusted to reflect the number of shares
resulting from this action.
Prior to approval of the forward split, we
had a total of 6,000,000 issued and outstanding common shares, par value $0.001. On the effective date of the forward split, we
had a total of 90,000,000 issued and outstanding common shares, par value $0.001.
Overview
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 September 30, 2018, there were 90,000,000
shares of common stock issued and outstanding.
Stock purchase agreement
On April 19, 2017, we entered into a Stock
Purchase Agreement (the “Agreement”) with Pharma GP APS, a Denmark corporation controlled by our CEO (“Pharma
GP”) and its sole shareholder, 9 Heroes APS, a Denmark corporation controlled by our CEO. In accordance with the terms of
the Agreement, we agreed to purchase all of the outstanding shares of Pharma GP for the purchase price (the “Purchase Price”)
of $6,000,000, payable as $3,000,000 in cash and the balance in shares of our common stock.
The foregoing description of the Agreement
is qualified in its entirety by reference to the full text of the Agreement, which is included as an exhibit our Current Report
on Form 8-K filed on April 20, 2017 and is incorporated by reference herein.
On November 8, 2018, the Company and Pharma
GP APS, a Denmark corporation controlled by our CEO (“Pharma GP”) and its sole shareholder, 9 Heroes APS, a Denmark
corporation controlled by our CEO entered into a release and termination agreement. In accordance with the agreement all parties
are mutually released from there commitments under the April 19, 2017 agreement.
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 six months ending September 30, 2018 the Company recorded interest of $1,635.
During the six months ending September 30,
2018, Gert Anderson, the President and CEO of the Company advanced $14,791 to the Company to pay expenses on behalf of the Company.
As of September 30, 2018, $65,157 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.
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(UNAUDITED)
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 six months ending September 30, 2018 , the Company recorded royalty expense
of $60,000 related to this agreement.
Under the License Agreement, we have the ability
to sublicense to third parties under the royalty arrangement described above.
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.
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.
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.
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(UNAUDITED)
The Power UP Note contains customary default events which, if triggered
and not timely cured, will result in default interest and penalties.
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.
Asset Purchase Agreement – November
8, 2018
Also 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.
The
Note matures in five years from execution, is convertible into common shares equal to the average of the closing market prices
for our common stock on the OTCQB during five (5) trading days immediately preceding the due date for such payment, and 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.