NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2018
(AUDITED)
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.
On April 19, 2017, the Company also entered
into a Stock Purchase Agreement (the “Purchase Agreement”) with Pharma GP and its sole shareholder, 9 Heroes APS, a
Denmark corporation controlled by our CEO (together, “Seller”). In accordance with the terms of the Purchase Agreement,
the Company 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 closing of the above transactions will
likely not occur until the Company is able to successfully raise capital for the Purchase Price.
2. BASIS OF PRESENTATION AND GOING CONCERN
The accompanying 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. 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 period presented have
been reflected herein.
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 $1,003,914 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
MARCH 31, 2018
(AUDITED)
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 years ended March 31, 2018 and 2017 the Company reported
revenues of $1,429 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 $36 and $0 at March 31, 2018, and March 31, 2017, 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 $148,767 and $22,020 in cash and cash equivalents as of March
31, 2018 and March 31, 2017, 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 March 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
MARCH 31, 2018
(AUDITED)
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 March 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.
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2018
(AUDITED)
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 determination of whether the carrying amount of inventory requires a write-down is based on an evaluation
of inventory.
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 2018-10, 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 March
31, 2018 and March 31, 2017:
|
|
March 31, 2018
|
|
March 31, 2017
|
Raw materials
|
|
$
|
—
|
|
|
$
|
—
|
Finished Goods
|
|
|
100,413
|
|
|
|
—
|
Total
|
|
$
|
100,413
|
|
|
$
|
—
|
5. PREPAID EXPENSES
Prepaid expenses consist of the following as
of March 31, 2018 and March 31, 2017:
|
|
March 31, 2018
|
|
March 31, 2017
|
Prepaid Royalties
|
|
$
|
59,568
|
|
|
$
|
—
|
Prepaid fees
|
|
|
—
|
|
|
|
225
|
Total prepaid expenses
|
|
$
|
59,568
|
|
|
$
|
225
|
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 March 31, 2018:
|
|
March 31, 2018
|
Patents and trademarks
|
|
$
|
920
|
Less: accumulated depreciation
|
|
|
(24)
|
Intangible assets, net of accumulated depreciation
|
|
$
|
896
|
Amortization expense for the years ended March
31, 2018 and 2017 was $24 and $0, respectively.
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2018
(AUDITED)
7. CONVERTIBLE NOTES PAYABLE
Convertible Notes Payable at consists of the following:
|
|
March 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.
During the year ending March 31, 2018 the Company recorded interest of $1,820.
The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $20,278 during the year ended March 31, 2018.
|
|
$
|
167,750
|
Unamortized debt discount
|
|
|
(147,472)
|
Total, net of unamortized discount
|
|
|
20,278
|
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 year ending March 31, 2018 the Company recorded interest of $1,479.
The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $12,329 during the year ended March 31, 2018.
|
|
|
125,000
|
Unamortized debt discount
|
|
|
(112,671)
|
Total, net of unamortized discount
|
|
|
12,329
|
|
|
|
|
Total
|
|
$
|
32,607
|
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2018
(AUDITED)
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 March 31, 2018:
|
|
Amount
|
Balance March 31, 2017
|
|
—
|
Debt discount originated from derivative liabilities
|
|
|
262,550
|
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
|
The Black-Scholes model utilized
the following inputs to value the derivative liabilities at the date of issuance of the convertible note and at March 31, 2018:
Fair value assumptions – derivative
notes:
|
|
February 23, 2018
|
|
February 26, 2018
|
|
March 31, 2018
|
Risk free interest rate
|
|
2.02%
|
|
2.03%
|
|
|
2.09%
|
Expected term (years)
|
|
1.0
|
|
.75
|
|
|
0.66-.90
|
Expected volatility
|
|
188.62%
|
|
188.72
|
|
|
199.58%
|
Expected dividends
|
|
0
|
|
0
|
|
|
0
|
8. LOANS PAYABLE
On March 5, 2017, the Company executed a $22,500
promissory note with an investor which bears interest at a rate of 5% per annum and is due within two business days of demand notice.
On January 8
th
the note was assigned to a new lender, the terms of the note were unchanged. During the year ending March
31, 2018 the Company recorded interest of $1,125.
On May 17, 2017, the Company executed a $22,500
promissory note with an investor which bears interest at a rate of 5% per annum and is due within two business days of demand notice.
On January 8
th
the note was assigned to a new lender, the terms of the note were unchanged. During the year ending March
31, 2018 the Company recorded interest of $980.
On July 5, 2017, the Company executed a $20,000
promissory note with an investor which bears interest at a rate of 5% per annum and is due within two business days of demand notice.
On January 8
th
the note was assigned to a new lender, the terms of the note were unchanged. During the year ending March
31, 2018 the Company recorded interest of $737.
On October 4, 2017, the Company executed a
$65,000 promissory note with an investor which bears interest at a rate of 5% per annum and is due within two business days of
demand notice. On January 8
th
the note was assigned to a new lender, the terms of the note were unchanged. During the
year ending March 31, 2018 the Company recorded interest of $1,585.
On November 28, 2017, the Company executed
a $44,000 promissory note with an investor which bears interest at a rate of 5% per annum and is due within two business days of
demand notice. On January 8
th
the note was assigned to a new lender, the terms of the note were unchanged. During the
year ending March 31, 2018 the Company recorded interest of $741.
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2018
(AUDITED)
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 March 31, 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 closing of the above transactions is expected
to occur when the company has sufficient funds to do so. The Agreement is conditioned on our paying the Purchase Price, obtaining
financing in the amount of $4,000,000 for operational expenses, and receiving audited financial statements from Pharma GP, among
other conditions as contained in the Agreement.
We currently do not have the money on hand
to pay the Purchase Price, and we must obtain additional financing to meet the conditions to close the transaction.
The Agreement includes customary representations,
warranties and covenants among the parties to each other as of specific dates.
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.
Pharma GP is a manufacturer of skincare products
with distribution in several countries. The company’s body and facial creams are designed for moisturizing, skin regeneration,
wound healing and a variety of skin issues, such as dry and cracked skin, among other things.
In addition, Pharma GP owns patents, trademarks
and production facilities for an ingredient designed to be used in pharmaceuticals and medical devices for treating a wide range
of issues. Pharma GP currently has skincare products that are available over the counter. However, the company intends to develop,
market and sell pharmaceutical skincare products to treat various ailments using its patented technology. Currently, the company
has no government approved products, but with the financing, we intend to purchase Pharma GP and focus on those clinical applications.
We expect to have more information on the status of the Closing of the Agreement and our new business direction in future filings.
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2018
(AUDITED)
10. RELATED PARTY TRANSACTIONS
On February 21, 2017, Dana Gallovicova, our
former CEO agreed to transfer her 75,000,000 shares of common stock in the Company to Gert Andersen pursuant to a Stock Purchase
Agreement. Ms. Gallovicova received proceeds of $100,000. The source of the consideration paid to Ms. Gallovicova was the existing
funds of the purchaser.
Ms. Gallovicova also assigned all of the outstanding
debt owed to her by the Company to Mr. Andersen for $32,608. In connection with the debt assignment, Ms. Gallovicova agreed to
release the Company from any and all claims. In connection with the assumption of the aforementioned debt the Company executed
a promissory note with Mr. Anderson which bears interest at a rate of 10% per annum. During the year ending March 31, 2018 the
Company recorded interest of $3,261.
In connection with the sale of her controlling
interest in the company, on February 24, 2017, Ms. Gallovicova appointed Mr. Andersen as our new Director, President, CEO, Secretary
and Treasurer and then resigned from all officer and director positions. There were no other arrangements or understandings between
Ms. Gallovicova and Mr. Andersen with respect to election of directors or other matters.
During the year ending March 31, 2018, Gert
Anderson, the President and CEO of the Company advanced $102,890 to the Company to pay expenses on behalf of the Company. The Company
has repaid $51,214 in advances. As of March 31, 2018, $52,386 in advances remain outstanding. The advances bear no interest, are
unsecured, and are due on demand.
During the year ending March 31, 2018, the
Company purchased $110,680 in inventory from Pharma GP APS, a Company controlled by our CEO, which it sells via its online stores.
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 year ending March 31, 2018, the Company recorded royalty expense of $120,000
related to this agreement.
Under the License Agreement, we have the ability
to sublicense to third parties under the royalty arrangement described above.
12. INCOME TAXES
The Company provides for income taxes under
FASB ASC 740, Accounting for Income Taxes. FASB ASC 740 requires the use of an asset and liability approach in accounting
for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and
tax bases of assets and liabilities and the tax rates in effect currently.
FASB ASC 740 requires the reduction of deferred
tax assets by a valuation allowance, if, based on the weight of available evidence, it is more likely than not that some or all
of the deferred tax assets will not be realized. In the Company’s opinion, it is uncertain whether they will generate sufficient
taxable income in the future to fully utilize the net deferred tax asset. Accordingly, a valuation allowance equal to the deferred
tax asset has been recorded. The total deferred tax asset is $107,332 which is calculated by multiplying a 20% estimated tax rate
by the cumulative net operating loss (NOL) adjusted for the following items:
VILACTO BIO INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2018
(AUDITED)
The components of
the Company's deferred tax asset as of March 31, 2018 and 2017 are as follows:
For the period ended March 31,
|
|
2018
|
|
2017
|
Book loss for the year
|
|
$
|
(893,117)
|
|
$
|
(21,293)
|
Adjustments:
|
|
|
|
|
|
|
Non-deductible portion of meals and entertainment
|
|
|
18
|
|
|
—
|
Non-deductible portion of loss on derivative
|
|
|
467,237
|
|
|
—
|
Non-deductible penalties
|
|
|
—
|
|
|
—
|
Tax loss for the year
|
|
|
(425,862)
|
|
|
(21,293)
|
Estimated effective tax rate
|
|
|
20%
|
|
|
20%
|
Deferred tax asset
|
|
$
|
(85,172)
|
|
$
|
(4,259)
|
As of March 31,
|
|
2018
|
|
2017
|
Deferred tax asset
|
|
$
|
107,332
|
|
$
|
22,160
|
Valuation allowance
|
|
|
(107,332
|
)
|
|
(22,160)
|
Current taxes payable
|
|
|
—
|
|
|
—
|
Income tax expense
|
|
$
|
—
|
|
$
|
—
|
Below is a chart showing the total estimated
corporate federal tax basis net operating loss (NOL) and the year in which it will expire.
Year
|
|
Amount
|
|
Expiration
|
|
2018
|
|
|
$
|
425,862
|
|
|
|
2038
|
|
2017
|
|
|
|
21,293
|
|
|
|
2037
|
|
2016
|
|
|
|
15,564
|
|
|
|
2036
|
|
2015
|
|
|
|
22,438
|
|
|
|
2035
|
|
2014
|
|
|
|
50,947
|
|
|
|
2034
|
|
2013
|
|
|
|
555
|
|
|
|
2033
|
|
Total
|
|
|
$
|
536,659
|
|
|
|
|
The Company plans
to file its U.S. federal return for the year ended March 31, 2018 upon the issuance of this filing. The tax years 2012-2016 remained
open to examination for federal income tax purposes by the major tax jurisdictions to which the Company is subject. No tax returns
are currently under examination by any tax authorities.
13. SUBSEQUENT EVENT
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.