Annual Report (10-k)

Date : 07/10/2019 @ 5:42PM
Source : Edgar (US Regulatory)
Stock : Vilacto Bio Inc. (PC) (VIBI)
Quote : 0.0001  0.0 (0.00%) @ 4:35PM

Annual Report (10-k)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the fiscal year ended March 31, 2019
   
[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
   
  For the transition period from _________ to ________
   
  Commission file number: 000-55023

 

Vilacto Bio Inc.
(Exact name of registrant as specified in its charter)


 

Nevada 46-3883208
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
   

Fabriksvej 48

4700 Naestved, Denmark

 

_____

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number: +16468937895

 

 

 
Securities registered under Section 12(b) of the Exchange Act:

 

Title of each class Name of each exchange on which registered
None not applicable
 

Securities registered under Section 12(g) of the Exchange Act:

 

Title of each class  
Common Stock, par value $0.001  

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

 

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.

 

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X]

Emerging Growth Company [X]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $8,565,000

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 1,917,431,324 shares as of June 19, 2019

 

   

 

TABLE OF CONTENTS

 

 

    Page

PART I

 

Item 1. Business 3
Item 1A. Risk Factors 5
Item 2. Properties 11
Item 3. Legal Proceedings 11
Item 4.

Mine Safety Disclosures

11

 

PART II

 

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities 12

  

Item 6. Selected Financial Data 15
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 16
Item 8. Financial Statements and Supplementary Data 17
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 18
Item 9A. Controls and Procedures 18
Item 9B. Other Information 18

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance 19
Item 11. Executive Compensation 21
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 22
Item 13. Certain Relationships and Related Transactions, and Director Independence 23
Item 14. Principal Accountant Fees and Services 24

 

PART IV

 

Item 15. Exhibits, Financial Statement Schedules 25

 

  2  

 

PART I

Item 1. Business

 

We are a biotech company based in Denmark that has acquired a license to a patented molecule, known as the Lactoactive molecule, which has in numerous studies demonstrated above average effect in treating conditions such as inflammatory diseases, diabetics, psoriasis, and skin issues in different levels. We aim to further develop our Lactoactive molecule for the purpose of increasing the quality of our retail and medical skin cream products as well as developing products for medical applications.

 

We are currently marketing a line of our skin care products on our website at www.vilacto.com. These products include, lotions, skin care creams and gels, lip balms, foot creams and oils, and similar items. We have entered into an affiliate network program with Rakuten / LinkShare, whereby other websites in the industry will post links to our website.

 

We signed a license agreement with have Carmen Electra endorse our skin care products. On August 29, 2017, we signed an agreement with Rakuten Super Logistics (known as RSL) to handle our inventory, fulfillment and shipment. In June 2017, we upgraded our production facility to included additional storage containers, improved mixing machines and upscale filtration units. We have also attended skin care products to market our products to the industry.

 

On April 4, 2017, we entered into a license agreement (the “License Agreement”) with Pharma GP ApS. (“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 USD$ 10,000 per month.

Under the License Agreement, we have the ability to sublicense to third parties under the royalty arrangement described above.

 

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, 2018, 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.

 

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.”

 

  3  

 

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. Interest is due and payable on a semiannual basis with the first payment due on January 1, 2019, which we failed to pay, 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 the current and future assets of the 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.

 

We intend to focus on our new pharmaceutical product, LACTOACTIVE iTHER®, as another potential revenue stream for the company along with its Vilact® brand of skin creams. LACTOACTIVE iTHER® is a new LACTOACTIVE variant that combines potent immune-system enhancement with a proven nanoparticle drug delivery system.

 

Our own research suggests that LACTOACTIVE iTHER® could contribute significantly to emerging therapies for treating a number of diseases, including cancer, immunodeficiency disorders, osteoarthritis, psoriasis, thrombocytopenia and vitiligo. The product is currently in the development stage and has not been approved for use by the FDA or any foreign agency.

 

Competition

 

The market for skincare/cosmeceuticals is highly competitive with many established manufacturers, suppliers and distributors engaged in all phases of the business. Competitive factors in our market include:

 

§ product efficacy and uniqueness;
§ brand awareness and recognition, product quality, reliability of performance and convenience of use;
§ cost effectiveness;
§ breadth of product offerings;
§ sales and marketing capabilities and methods of distribution;
§ resources devoted to product education and technical support; and
§ speed of introducing new competitive products and existing product upgrades.

 

We face and will continue to face intense competition. A number of our competitors have far greater research and development and marketing capabilities and far greater financial resources than we do. These competitors may have developed, or could in the future develop, new technologies that compete with our products or render our products obsolete. We are also likely to encounter increased competition as we enter new markets and as we attempt to further penetrate existing markets. Some of our competitors have, in the past, and may, in the future, compete by lowering prices on their products. We may respond by lowering our prices, exiting the market or competing by investing in the development of new, improved products.

Approximately 400 companies compete in the U.S. cosmeceutical industry, divided fairly evenly among chemical and end-use product segments. The seven largest producers of cosmeceutical products are Johnson & Johnson, Procter & Gamble, L’Oreal, Allergan, Avon, Estee Lauder and Medicis. These companies control more than 60% of the U.S. cosmeceutical market. Our products also compete with similar products sold in prestige locations, such as department stores, high-end specialty retailers, door-to-door, by television and infomercials or mail-order or telemarketing by representatives of direct sales companies.

 

  4  

 

Government Regulation

 

Cosmetic and Skin Care Regulation

 

Depending upon product claims and formulation, skin care products may be regulated as cosmetics, drugs, devices, or combination cosmetics and drugs. We currently only market cosmetic skin care products and are evaluating entry into the pharmaceutical market. The FDA has authority to regulate cosmetics marketed in the United States under the FDCA and the Fair Packaging and Labeling Act (“FPLA”) and implementing regulations. The Federal Trade Commission (the “FTC”) regulates the advertising of cosmetics under the FTCA.

 

The FDCA prohibits the marketing of adulterated and misbranded cosmetics. Cosmetic ingredients must also comply with the FDA’s ingredient, quality, and labeling requirements and the FTC’s requirements pertaining to truthful and non-misleading advertising. Cosmetic products and ingredients, with the exception of color additives, are not required to have FDA premarket approval. Manufacturers of cosmetics are also not required to register their establishments, file data on ingredients, or report cosmetic-related injuries to the FDA.

 

We will be responsible for substantiating the safety and product claims of the cosmetic products and ingredients before marketing. The FDA or FTC may disagree with our characterization of one or more of the skin care products as a cosmetic or the product claims. This could result in a variety of enforcement actions which could require the reformulation or relabeling of our products, the submission of information in support of the product claims or the safety and effectiveness of our products, or more punitive action, all of which could have a material adverse effect on our business. If the FDA determines we have failed to comply with applicable requirements under the FDCA or FPLA, it can impose a variety of enforcement actions from public warning letters, injunctions, consent decrees, and civil penalties to seizure of our products, total or partial shutdown of our production, and criminal prosecutions. If any of these events were to occur, it could materially adversely affect us. If the FTC determines we have failed to substantiate our claims, it can pursue a variety of actions including disgorgement of profits, injunction from further violative conduct, and consent decrees.

 

Environmental Laws

 

We are not subject to any significant or material environmental regulation in the normal operation of our business.

 

Employees

 

We currently have three employees.

 

Item 1A. Risk Factors

 

Any investment in our common stock involves a high degree of risk. Investors should carefully consider the risks described below and all of the information contained in this annual report on Form 10-K before deciding whether to purchase our common stock. Our business, financial condition or results of operations could be materially adversely affected by these risks if any of them actually occur.

 

Risks Related to Our Financial Condition and our Business

 

Our investors may lose their entire investment because our financial status creates a doubt whether we will continue as a going concern.

 

Our auditors, in their opinion dated July 1, 2019 have stated that currently we do not have sufficient cash nor do we have a significant source of revenues to cover our operational costs and allow us to continue as a going concern.  We seek to raise operating capital to implement our business plan in an offering of our common stock.  Our company's plan specifies a minimum amount of $50,000 in additional operating capital to operate for the next twelve months. However, there can be no assurance that such offering will be successful. You may lose your entire investment

 

  5  

 

Our failure to raise additional capital or generate cash flows necessary to expand our operations could reduce our ability to compete successfully and adversely affect our results of operations.

 

We need to raise additional funds to achieve our future strategic objectives, and we may not be able to obtain additional debt or equity financing on favorable terms, if at all. If we engage in debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, force us to maintain specified liquidity or other ratios or restrict our ability to pay dividends or make acquisitions. If we need additional capital and cannot raise it on acceptable terms, we may not be able to, among other things:

 

§ launch, develop and enhance our existing products;
§ continue to expand our product base, sales and/or marketing efforts;
§ hire, train and retain employees; or
§ respond to competitive pressures or unanticipated working capital requirements.

 

Our inability to do any of the foregoing could reduce our ability to compete successfully and adversely affect our results of operations.

 

If our products are not deemed desirable and suitable for purchase and we cannot establish a customer base, we may not be able to generate sufficient revenues, which would result in a failure of the business and a loss of any investment one makes our company.

 

The acceptance of our products is critically important to our success. We cannot be certain that the products that we will be offering will be appealing and as a result there may not be any demand for these products and our sales could be limited and we may never realize any significant revenues. In addition, there are no assurances that if we alter or change the products we offer in the future that the demand for these new products will develop and this could adversely affect our business and any possible revenues.

 

If demand for the products that we plan to offer slows, then our business would be materially affected.

 

Demand for products, which we intend to sell, depends on many factors, including:

 

§ the economy, and in periods of rapidly declining economic conditions, customers may defer luxury purchases or may choose alternate products;
§ the competitive environment in the skin care sector may force us to reduce prices below our desired pricing level or increase promotional spending;
§ our ability to anticipate changes in consumer preferences and to meet customers’ needs for skin care products in a timely cost-effective manner;
§ our ability to maintain efficient, timely and cost-effective production and delivery of the products and services; and,
§ our ability to identify and respond successfully to emerging trends in the skin care and personal care industries.

 

For the long term, demand for the products we plan to offer may be affected by:

 

§ the ability to establish, maintain and eventually grow market share in a competitive environment;
§ our ability to deliver our products in the markets we intend to service, changes in government regulations, currency fluctuations, natural disasters, pandemics and other factors beyond our control may increase the cost of items we purchase, create communication issues or render product delivery difficult which could have a material adverse effect on our sales and profitability; and
§ restrictions on access to North American markets and supplies.

 

All of these factors could result in immediate and longer term declines in the demand for the products that we plan to offer, which could adversely affect our sales, cash flows and overall financial condition.

 

  6  

 

Because we are new in the marketplace, we may not be able to compete effectively and increase market share.

 

Our current and potential competitors may have longer operating histories, significantly greater resources and name recognition, and a larger base of customers than we have. Our competitors may also be able to adopt more aggressive pricing policies and devote greater resources to the development, marketing and sale of their products and services than we can. To be competitive, we must continue to invest significant resources in sales and marketing. We may not have sufficient resources to make these investments or to develop the technological advances necessary to be competitive, which in turn will cause our business to suffer and restrict our profitability potential.

 

Because we rely on third parties to manufacture our products, we are subject to factors outside of our control to meet our standards or timelines.

 

Our products are expected to be manufactured by third third-party manufacturing companies on a purchase order. We will be dependent on the timeliness and effectiveness of our third-part manufacturers’ efforts.

 

Failure or lack of reliability in the manufacture of our products is likely to result in loss of business. Among other risks:

 

§ Our products may fail to provide the expected results;
§ We may experience limited availability of quality ingredients for manufacturing;
§ We may experience poor quality manufacturing;
§ Our products may have new competition from other companies attempting to duplicate our formulas; and
§ Our customers could experience results different from our test results.

 

Like other retailers, distributors and manufacturers of skin care and personal care products, we face an inherent risk of exposure to product liability claims in the event that the use of the products that we sell results in injury.

 

We may be subjected to various product liability claims, including claims that the products we sell contain contaminants, are improperly labeled or include inadequate instructions as to use or inadequate warnings concerning side effects and interactions with other substances. In addition, we may be forced to defend lawsuits. We cannot predict whether product liability claims will be brought against us in the future or the effect of any resulting adverse publicity on the business. Moreover, we may not have adequate resources in the event of a successful claim against us. The successful assertion of product liability claim against us could result in potentially significant monetary damages. In addition, interactions of the products with other similar products, prescription medicines and over-the-counter drugs have not been fully explored.

 

We may also be exposed to claims relating to product advertising or product quality. People may purchase our products expecting certain physical results, unique to skin care and personal care products. If they do not perceive expected results to occur, certain individuals or groups of individuals may seek monetary retribution.

 

If our products become contaminated, our business could be seriously harmed.

 

We have adopted various quality, environmental, health and safety standards. However, our products may still not meet these standards or could otherwise become contaminated. A failure to meet these standards or contamination could occur in our operations or those of our bottlers, manufacturers, distributors or suppliers. Such a failure or contamination could result in expensive production interruptions, recalls and liability claims. Moreover, negative publicity could be generated even from false, unfounded or nominal liability claims or limited recalls. Any of these failures or occurrences could negatively affect our business and financial performance.

 

Our business may be adversely affected by unfavorable publicity within the skin care markets.

 

Management believes that the skin care market and personal care markets are significantly affected by national media attention. As with any retail provider, future scientific research or publicity may not be favorable to the industry or to any particular product, and may not be consistent with earlier favorable research or publicity. Because of our dependence on consumers’ perceptions, adverse publicity associated with illness or other adverse effects resulting from the use of our products or any similar products distributed by other companies and future reports of research that are perceived as less favorable or that question earlier research, could have a material adverse effect on our business, financial condition and results of operations. We are highly dependent upon consumers’ perceptions of the safety and quality of the products as well as similar products distributed by other companies. Thus, the mere publication of reports asserting that skin care or personal care products may be harmful or questioning their efficacy could have a material adverse effect on our business, financial condition and results of operations, regardless of whether such reports are scientifically supported or whether the claimed harmful effects would be present at the dosages recommended for such products.

 

  7  

 

As we intend to conduct international business transactions, we will be exposed to local business risks in different countries, which could have a material adverse effect on our financial condition or results of operations.

 

We intend to promote and sell our products internationally. Our international operations will be subject to risks inherent in doing business in foreign countries, including, but not necessarily limited to:

 

§ new and different legal and regulatory requirements in local jurisdictions;
§ potentially adverse tax consequences, including imposition or increase of taxes on transactions or withholding and other taxes on remittances and other payments by subsidiaries;
§ risk of nationalization of private enterprises by foreign governments;
§ legal restrictions on doing business in or with certain nations, certain parties and/or certain products; and,
§ local economic, political and social conditions, including the possibility of hyperinflationary conditions and political instability.

 

We may not be successful in developing and implementing policies and strategies to address the foregoing factors in a timely and effective manner in the locations where we will do business. Consequently, the occurrence of one or more of the foregoing factors could have a material adverse effect on our base operations and upon our financial condition and results of operations.

 

Since our products will be available over the Internet in foreign countries and we plan to have customers residing in foreign countries, foreign jurisdictions may require us to qualify to do business in their country. We will be required to comply with certain laws and regulations of each country in which we conduct business, including laws and regulations currently in place or which may be enacted related to Internet services available to the residents of each country from online sites located elsewhere.

 

Because of the nature of our products, we may be subject to government regulations or laws that increase our costs of operations or decrease our ability to generate income.

 

Any failure by us, or by any third party that may manufacture or market our products, to comply with the law, including statutes and regulations administered by the FDA or other U.S. or foreign regulatory authorities, could result in, among other things, warning letters, fines and other civil penalties, suspension of regulatory approvals and the resulting requirement that we suspend sales of our products, refusal to approve pending applications or supplements to approved applications, export or import restrictions, interruption of production, operating restrictions, closure of the facilities used by us or third parties to manufacture our product candidates, injunctions or criminal prosecution. Any of the foregoing actions could have a material adverse effect on our business.

 

Our commercial success depends significantly on our ability to develop and commercialize our potential products without infringing the intellectual property rights of third parties.

 

Our commercial success will depend, in part, on operating our business without infringing the patents or proprietary rights of third parties. Third parties that believe we are infringing on their rights could bring actions against us claiming damages and seeking to enjoin the development, marketing and distribution of our products. If we become involved in any litigation, it could consume a substantial portion of our resources, regardless of the outcome of the litigation. If any of these actions are successful, we could be required to pay damages and/or to obtain a license to continue to develop or market our products, in which case we may be required to pay substantial royalties. However, any such license may not be available on terms acceptable to us or at all. Ultimately, we could be prevented from commercializing a product or forced to cease some aspect of our business operations as a result of patent infringement claims, which would harm our business.

 

  8  

 

The implementation of our business plan relies on our ability to manage growth. If we are not able to manage the growth, our business plan may not be successfully implemented.

 

We expect to expand our operations by increasing our sales and marketing efforts, research and development activities, and escalating our services. The anticipated growth could place a significant strain on our management, and operational and financial resources. Effective management of the anticipated growth shall require expanding our management and financial controls, hiring additional appropriate personnel as required, and developing additional expertise by existing management personnel. However, there can be no assurances that these or other measures we may implement shall effectively increase our capabilities to manage such anticipated growth or to do so in a timely and cost-effective manner. Moreover, management of growth is especially challenging for a company with a short revenue generating history and limited financial resources, and the failure to effectively manage growth could have a material adverse effect on our operations.

 

Our success depends on continuing to hire and retain qualified personnel, including our director and officers and our technical personnel.  If we are not successful in attracting and retaining these personnel, our business will suffer.

 

Our success depends substantially on the performance of our management team and key personnel. Currently, we have one employee, our CEO Gert Andersen. Due to the specialized technical nature of our business, we are particularly dependent on our technical personnel. Our future success will depend on our ability to attract, integrate, motivate and retain qualified technical, sales, operations, and managerial personnel, as well as our ability to successfully implement a plan for management succession. Competition for qualified personnel in our business areas is intense, and we may not be able to continue to attract and retain key personnel. In addition, if we lose the services of any of our management team or key personnel and are not able to find suitable replacements in a timely manner, our business could be disrupted and we may incur increased operating expenses.

 

If we are unable to attract new distributors and customers, or if our existing distributors and customers do not purchase additional products, the growth of our business and cash flows will be adversely affected.

 

To increase our revenues and cash flows, we must regularly add distributors and customers and sell additional products to our existing distributors and customers. If we are unable to sell our products to customers that have been referred to us, unable to generate sufficient sales leads through our marketing programs, or if our existing or new distributors and customers do not perceive our products to be of sufficiently high value and quality, we may not be able to increase sales and our operating results would be adversely affected. In addition, if we fail to sell new products to existing distributors and customers or new distributors and customers, our operating results will suffer, and our revenue growth, cash flows and profitability may be materially and adversely affected.

 

Key management personnel may leave us, which could adversely affect our ability to continue operations.

 

We are entirely dependent on the efforts of our management because of the time and effort that they devote to us. They are in charge of overseeing all development strategies, supervising any/all future personnel, and the implementation of our business plan. Their loss, or other key personnel in the future, could have a material adverse effect on our business, financial condition and results of operations.

 

Risks Related to Our Securities

 

If a market for our common stock does not develop, shareholders may be unable to sell their shares.

 

Our common stock is quoted under the symbol “VIBI” on the OTCQB operated by OTC Markets Group, Inc, an electronic inter-dealer quotation medium for equity securities. We do not currently have an active trading market. There can be no assurance that an active and liquid trading market will develop or, if developed, that it will be sustained.

 

Our securities are very thinly traded. Accordingly, it may be difficult to sell shares of our common stock without significantly depressing the value of the stock. Unless we are successful in developing continued investor interest in our stock, sales of our stock could continue to result in major fluctuations in the price of the stock.

 

  9  

 

Our common stock price may be volatile and could fluctuate widely in price, which could result in substantial losses for investors.

 

The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including:

 

  • technological innovations or new products and services by us or our competitors;
  • government regulation of our products and services;
  • the establishment of partnerships with other technology companies;
  • intellectual property disputes;
  • additions or departures of key personnel;
  • sales of our common stock
  • our ability to integrate operations, technology, products and services;
  • our ability to execute our business plan;
  • operating results below expectations;
  • loss of any strategic relationship;
  • industry developments;
  • economic and other external factors; and
  • periodtoperiod fluctuations in our financial results.

Because we have nominal revenues to date, you should consider any one of these factors to be material. Our stock price may fluctuate widely as a result of any of the above.

 

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

 

We have not paid cash dividends in the past and do not expect to pay cash dividends in the future on our common stock. Any return on investment may be limited to the value of our common stock.

 

We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. The payment of cash dividends on our common stock will depend on earnings, financial condition and other business and economic factors at such time as the board of directors may consider relevant. If we do not pay cash dividends, our common stock may be less valuable because a return on your investment will only occur if its stock price appreciates.

 

As a new investor, you will experience substantial dilution as a result of future equity issuances.

 

In the event we are required to raise additional capital it may do so by selling additional shares of common stock thereby diluting the shares and ownership interests of existing shareholders.

 

Because we are subject to the “Penny Stock” rules, the level of trading activity in our stock may be reduced.

 

The Securities and Exchange Commission has adopted regulations which generally define "penny stock" to be any listed, trading equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules which may increase the difficulty Purchasers may experience in attempting to liquidate such securities.

 

  10  

 

Provisions in the Nevada Revised Statutes and our Bylaws could make it very difficult for an investor to bring any legal actions against our directors or officers for violations of their fiduciary duties or could require us to pay any amounts incurred by our directors or officers in any such actions.

 

Members of our board of directors and our officers will have no liability for breaches of their fiduciary duty of care as a director or officer, except in limited circumstances, pursuant to provisions in the Nevada Revised Statutes and our Bylaws as authorized by the Nevada Revised Statutes. Specifically, Section 78.138 of the Nevada Revised Statutes provides that a director or officer is not individually liable to the company or its shareholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or officer unless it is proven that (1) the director’s or officer’s act or failure to act constituted a breach of his or her fiduciary duties as a director or officer and (2) his or her breach of those duties involved intentional misconduct, fraud or a knowing violation of law. This provision is intended to afford directors and officers protection against and to limit their potential liability for monetary damages resulting from suits alleging a breach of the duty of care by a director or officer. Accordingly, you may be unable to prevail in a legal action against our directors or officers even if they have breached their fiduciary duty of care. In addition, our Bylaws allow us to indemnify our directors and officers from and against any and all costs, charges and expenses resulting from their acting in such capacities with us. This means that if you were able to enforce an action against our directors or officers, in all likelihood, we would be required to pay any expenses they incurred in defending the lawsuit and any judgment or settlement they otherwise would be required to pay. Accordingly, our indemnification obligations could divert needed financial resources and may adversely affect our business, financial condition, results of operations and cash flows, and adversely affect prevailing market prices for our common stock.

 

Item 2. Properties

Currently, we do not own any real estate. Our executive offices are at Fabriksvej 48 4700 Naestved, Denmark. Our license partner, Pharma GP, has allowed us to use this space free of charge through June 30, 2018. We are currently paying $3,000 per month for the property.

Item 3. Legal Proceedings

 

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

 

Item 4. Mine Safety Disclosures

 

N/A

 

  11  

 

PART II

 

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Our common stock is quoted under the symbol “VIBI” on the OTCQB operated by OTC Markets Group, Inc.  Only a limited market exists for our securities. There is no assurance that a regular trading market will develop, or if developed, that it will be sustained. Therefore, a shareholder may be unable to resell his securities in our company.

 

The following tables set forth the range of high and low bid prices for our common stock for the each of the periods indicated as reported by the OTCQB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

 

Fiscal Year Ending March 31, 2019
Quarter Ended   High $   Low $
  March 31, 2019       .03       .0014  
  December 31, 2018       .575       .0159  
  September 30, 2018       .64       .23  
  June 30, 2018       .38       .20  

 

 

Fiscal Year Ending March 31, 2018
Quarter Ended   High $   Low $
  March 31, 2018       .70       .20  
  December 31, 2017       2.13       .25  
  September 30, 2017       1.39       .67  
  June 30, 2017       .71       .15  

 

On June 28, 2019, the last reported sale price of our common stock as reported on the OTCQB was $0.0003per share.

 

Penny Stock

 

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.

 

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.

 

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.

 

These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.

 

  12  

 

Holders of Our Common Stock

 

As of June 19, 2019, we had 1,917,431,324 shares of our common stock issued and outstanding, held by 7 shareholders of record, with others holding shares in street name.

 

Dividends

 

There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend:

 

1.       we would not be able to pay our debts as they become due in the usual course of business, or;

2.       our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.

 

We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.

 

Recent Sales of Unregistered Securities

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.

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.

On March 20, 2019, the Company issued a total of 40,909,089 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 13,636,363 shares. The shares were valued at $0.0022 per share or $90,000 which was recorded as professional fees expense.

 

The following table presents a summary of the Company’s debt conversions associated with its convertible notes during the year ended March 31, 2019:

 

 

Date of conversion   Effective conversion price   Principal and interest converted   Shares issued upon conversion of debts
11/20/2018       0.0300       5,996       200,000
11/23/2018       0.0600       6,000       100,000
11/26/2018       0.0455       6,370       140,000
12/4/2018       0.0182       10,920       600,000
12/7/2018       0.0132       33,100       2,500,000
12/11/2018       0.0331       13,240       400,000
12/20/2018       0.0145       7,250       500,000
1/4/2019       0.0030       7,500       2,500,000
1/7/2019       0.0060       4,800       800,000
1/10/2019       0.0075       15,000       2,000,000
1/18/2019       0.0060       4,800       800,000
1/23/2019       0.0075       21,063       2,808,401
1/24/2019       0.0075       15,771       2,102,777
1/29/2019       0.0053       6,384       1,200,000
1/29/2019       0.0043       10,675       2,500,000
1/30/2019       0.0045       15,000       3,333,333
2/6/2019       0.0014       2,880       2,000,000

 

  13  

  

2/6/2019       0.0018       7,385       4,102,778
2/6/2019       0.0013       8,288       6,400,000
2/7/2019       0.0018       11,540       6,411,111
2/7/2019       0.0018       5,699       3,165,833
2/8/2019       0.0018       11,366       6,314,194
2/11/2019       0.0018       8,026       4,458,889
2/12/2019       0.0014       5,760       4,000,000
2/12/2019       0.0013       9,639       7,650,000
2/13/2019       0.0018       14,491       8,050,556
2/13/2019       0.0018       9,513       5,284,722
2/14/2019       0.0018       15,573       8,651,667
2/19/2019       0.0018       14,817       8,231,667
2/19/2019       0.0014       9,216       6,400,000
2/19/2019       0.0018       10,586       5,881,172
2/21/2019       0.0018       15,557       8,642,778
2/21/2019       0.0014       14,137       10,116,215
2/21/2019       0.0013       10,836       8,600,000
2/26/2019       0.0015       11,953       8,243,268
2/27/2019       0.0011       6,480       6,000,000
2/27/2019       0.0014       10,608       7,577,379
2/28/2019       0.0008       8,131       10,100,000
3/4/2019       0.0012       13,809       12,007,730
3/5/2019       0.0012       14,046       12,213,852
3/5/2019       0.0008       9,821       12,200,000
3/5/2019       0.0012       13,837       12,032,165
3/6/2019       0.0009       12,880       14,000,000
3/6/2019       0.0011       13,816       12,014,009
3/8/2019       0.0007       10,000       15,231,130
3/8/2019       0.0011       10,633       9,246,374
3/11/2019       0.0008       13,765       17,100,000
3/13/2019       0.0006       1,813       2,931,643
3/13/2019       0.0012       8,092       7,036,426
3/14/2019       0.0012       15,000       13,043,478
3/18/2019       0.0009       17,620       19,152,700
3/18/2019       0.0011       20,258       17,630,730
3/19/2019       0.0008       16,100       20,000,000
3/20/2019       0.0012       24,136       20,987,826
3/20/2019       0.0011       15,000       14,285,714
3/22/2019       0.0008       16,088       19,152,700
3/25/2019       0.0011       19,258       18,340,504
3/26/2019       0.0010       18,671       17,781,905
3/26/2019       0.0007       18,375       25,000,000
3/27/2019       —         15,029       —  
Total             $ 724,396       480,155,626

 

Securities Authorized for Issuance under Equity Compensation Plans

 

On November 15, 2018, our Board of Directors adopted a 2018 Incentive Plan (the “Plan”) The Plan is designed to attract, retain and motivate employees, officers, directors, consultants, agents, advisors and independent contractors of our company by providing them the opportunity to acquire a proprietary interest in our company and to align their interests and efforts to the long-term interests of our stockholders, which provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, performance shares and performance units, and stock awards our officers, directors or employees of, as well as advisers and consultants.

 

  14  

 

This plan has not yet been adopted by the shareholders of the Company.

 

We reserved 9,850,000 shares of common stock under the Plan.

 

On December 28, 2018, our Board of Directors approved an issuance of 2,000,000 shares as compensation to each of our Directors under the Plan for a total of 6,000,000 shares issued. We have 3,850,000 shares remaining under the Plan.

 

Item 6. Selected Financial Data

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

 

Results of Operations for the Years Ended March 31, 2019 and 2018

 

Revenues

 

We earned revenues of $4,894 for the year ended March 31, 2019, as compared with revenues of $1,429 for the year ended 2018. We can provide no assurance that we will generate sufficient revenues from our skin care business to sustain a viable business operation.

 

Expenses

 

We incurred operating expenses in the amount of $970,890 for the year ended March 31, 2019, as compared with $382,391 for the same period ended 2018. Our operating expenses for the year ended March 31, 2019 mainly consisted of professional fees of $582,097, general and administrative expenses of $299,781, royalty expense of $80,000 and depreciation and amortization expense of $9,012, as compared with professional fees of $153,104, royalty expense of $120,000 and general and administrative expenses of $109,263 for the year ended March 31, 2018.

 

Other Expenses

 

We had other expenses of $5,884,092 for the year ended March 31, 2019, as compared with other expenses of $511,572 for the year ended March 31, 2018. Our other expenses for the year ended March 31, 2019 mainly consisted of loss on acquisition of related party assets of $3,242,070, loss on derivative liability of $1,465,183 and interest expense of $1,133,221. Our other expenses for the year ended March 31, 2018 consisted of loss on derivative liability of $467,237 and interest expense of $44,335. 

 

  15  

 

Net Loss

 

We incurred a net loss in the amount of $6,854,131 for the year ended March 31, 2019, as compared with a net loss of $893,117 for the same period ended 2018. Our losses for each period are attributable to operating expenses together with a lack of any significant revenues. 

 

Liquidity and Capital Resources

 

As of March 31, 2019, we had total current assets of $376,286. Our total current liabilities as of March 31, 2019 were $3,960,386. As a result, we had a working capital deficit of $3,584,100 as of March 31, 2019.

 

Operating activities used $601,153_in cash for the year ended March 31, 2019, as compared with $338,008 in cash for the same period ended 2018. Our net loss was the main reason for our negative operating cash flow in both periods.

 

Investing activities used $40,686 in cash for the year ended March 31, 2019, as compared with $920 in cash used for the same period ended 2018. The purchase of fixed and intangible assets were the main reason for our negative investing cash flow in 2019.

 

Financing activities provided $750,290 for the year ended March 31, 2019, as compared with $465,675 for the same period ended 2018. Our positive cash flow from financing activities for the years ended March 31, 2019 and 2018 was mainly the result of proceeds from convertible promissory notes, promissory notes and related party advances.

 

The terms of the convertible promissory notes are contained in our footnotes to financial statements.

 

Despite the short term loans, we have insufficient cash to operate our business at the current level for the next twelve months and insufficient cash to achieve our business goals. The success of our business plan beyond the next 12 months is contingent upon us obtaining additional financing. We intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund our capital expenditures, working capital, or other cash requirements. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.

 

Going Concern

 

The accompanying financial statements have been prepared in conformity with generally accepted accounting principle, which contemplate our continuation as a going concern. However, we have limited revenues as of March 31, 2019. We currently have negative working capital, and have not completed our efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.

 

Management anticipates that we will be dependent, for the near future, on additional investment capital to fund operating expenses. We intend to position the company so that we may be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that we will be successful in this or any of our endeavors or become financially viable and continue as a going concern.

 

Critical Accounting Policies

 

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

 

Our critical accounting policies are set forth in Note 2 to the financial statements.

 

Recently Issued Accounting Pronouncements

 

We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.

 

Off Balance Sheet Arrangements

 

As of March 31, 2019, there were no off balance sheet arrangements.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

 

A smaller reporting company is not required to provide the information required by this Item.

 

  16  

 

Item 8. Financial Statements and Supplementary Data

 

Index to Financial Statements Required by Article 8 of Regulation S-X:

 

Consolidated Financial Statements:
 
F-1 Reports of Independent Registered Public Accounting Fir ms
F-3 Balance Sheets as of March 31, 2019 and 201 8
F-4 Statements of Operations for the years ended March 31, 2019 and 2018
F-5 Statement of Stockholders’ Equity  for the years ended March 31, 2019 and 2018
F-6 Statements of Cash Flows for the years ended March 31, 2019 and 201 8
F-7 Notes to Financial Statements

 

  17  

 

 

Boyle CPA, LLC

Certified Public Accountants & Consultants

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and

Board of Directors of Vilacto Bio Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheet of Vilacto Bio Inc. (the “Company”) as of March 31, 2019, the related statements of operations, stockholders’ deficit, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2019, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Basis of Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing and opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

 

As discussed in Note 2 to the financial statements, the Company’s cumulative net losses, recurring operating losses and working capital deficiency raise substantial doubt about its ability to continue as a going concern for a period of one year from the issuance of the financial statements. Management’s plans are also described in Note 2. The financial statements do not include adjustments that might result from the outcome of this uncertainty.

 

/s/ Boyle CPA, LLC

 

We have served as the Company’s auditor since 2019

 

Bayville, NJ

July 10, 2019

 

  F- 1  

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Board of Directors and Stockholders of

Vilacto Bio Inc

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheet of Vilacto Bio Inc (the “Company”) as of March 31, 2018 and the related statements of operations, stockholders’ equity/(deficit), and cash flows for the year ended March 31, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2018, and the results of its operations and its cash flows for the year ended March 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has minimal revenues, has negative working capital at March 31, 2018, has incurred recurring losses and recurring negative cash flow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty .

 

 

/s/ AMC Auditing

 

AMC Auditing
We have served as the Company’s auditor since 2017

Las Vegas, Nevada

July 31, 2018 

 

  F- 2  

 

 VILACTO BIO INC.

BALANCE SHEETS

(AUDITED)

 

    March 31, 2019   March 31, 2018
ASSETS        
Current assets              
Cash   $ 257,218     $ 148,767
Accounts receivable     23       36
Inventory     119,045       100,413
Prepaid expenses     —         59,658
Total current assets     376,286       308,874
               
Fixed assets, net     11,302       —  
Intangible assets, net     150,080       896
               
Total assets     537,668       309,770
               
LIABILITIES AND STOCKHOLDERS' DEFICIT              
Current liabilities              
Accounts payable and accrued liabilities   $ 76,023     $ 35,780
Due to related parties     176,026       240,952
Convertible loans     274,688       32,607
Derivative liabilities     1,227,041       729,737
Loans     174,000       174,000
Loans from related parties     2,032,608       32,608
Total current liabilities     3,960,386       1,245,684
               
Total liabilities     3,960,386       1,245,684
               
Stockholders' equity (deficit)              
Preferred stock; $0.001 par value; 10,000,000 shares authorized; 3,000,000 and 0 shares issued and outstanding as of March 31, 2019 and  March 31, 2018, respectively     3,000       —  
Common stock; $0.001 par value; 4,000,000,000 shares authorized; 597,064,715 and 90,000,000 shares issued and outstanding as of March 31, 2019 and  March 31, 2018, respectively     597,065       90,000
Stock payable     15,029       —  
Additional paid-in capital     3,820,233       (22,000)
Accumulated earnings (deficit)     (7,858,045 )     (1,003,914)
Total stockholders' equity (deficit)     (3,422,718 )     (935,914)
               
Total liabilities and stockholders' equity (deficit)   $ 537,668     $ 309,770

 

 The accompanying notes are an integral part of these financial statements.

 

  F- 3  

 

 VILACTO BIO INC.

STATEMENT OF OPERATIONS

(AUDITED)

 

    For the Years Ended
    March 31, 2019   March 31, 2018
         
Revenues   $ 4,894     $ 1,429
               
Cost of revenues     4,043       583
               
 Gross profit     851       846
               
Operating expenses              
 Royalty expense     80,000       120,000
 Professional fees     582,097       153,104
 General and administrative expenses     299,781       109,263
 Depreciation and amortization expense     9,012       24
Total operating expenses     970,890       382,391
               
Loss from operations     (970,039 )     (381,545)
               
Other income (expense)              
 Gain (loss) on derivative liabilities     (1,465,183 )     (467,237)
 Loss on disposal of assets     (6,118 )     —  
 Loss on acquisition of related party assets     (3,242,070 )     —  
 Loss on debt modification     (37,500 )     —  
 Interest expense     (1,133,221 )     (44,335)
Total other income (expense)     (5,884,092 )     (511,572)
               
Net income (loss)   $ (6,854,131 )   $ (893,117)
               
Basic income (loss) per common share   $ (0.05 )   $ (0.01)
               
Basic weighted average common shares outstanding     127,714,862       90,000,000

 

 The accompanying notes are an integral part of these financial statements.

 

  F- 4  

 

 VILACTO BIO INC.

STATEMENT OF STOCKHOLDERS DEFICIT

(AUDITED)

 

      Preferred Stock       Common Stock                              
      Shares       Amount       Shares       Amount       Additional Paid-in Capital       Stock Payable       Accumulated Deficit       Total Stockholders' Deficit
Balance, March 31, 2017     —         —         90,000,000       90,000       (22,000 )     —         (110,797 )     (42,797)
Net loss     —         —         —         —         —         —         (893,117 )     (893,117)
Balance, March 31, 2018     —         —         90,000,000       90,000       (22,000 )     —         (1,003,914 )     (935,914)
Shares issued to related party to acquire intangible assets     —         —         8,500,000       8,500       1,368,500       —         —         1,377,000
Shares issued upon conversion of debts     —         —         480,155,626       480,156       2,021,142       15,029       —         2,516,327
Shares issued for services     —         —         48,409,089       48,409       425,591       —         —         474,000
Common stock exchanged for preferred stock     3,000,000       3,000       (30,000,000 )     (30,000 )     27,000       —         —         —  
Net loss     —         —         —         —         —         —         (6,854,131 )     (6,854,131)
Balance, March 31, 2019     3,000,000       3,000       597,064,715       597,065       3,820,233       15,029       (7,858,045 )     (3,422,718)

 

 

 The accompanying notes are an integral part of these financial statements.

 

  F- 5  

 

 VILACTO BIO INC.

STATEMENT OF CASH FLOWS

(AUDITED)

 

    For the Years Ended
    March 31, 2019   March 31, 2018
Cash Flows from Operating Activities              
Net income (loss)     (6,854,131)   $ (893,117)
Adjustments to reconcile net loss to net cash provided by operating activities:              
Depreciation and amortization     9,012       24
Loss on acquisition of related party assets     3,242,070       —  
Loss on derivative liability     1,465,183       467,237
Loss on disposal of assets     6,118       —  
Loss on debt modification     37,500       —  
Stock based compensation     474,000       —  
Penalties on convertible debts     120,533       —  
Amortization of debt discount     845,023       32,607
Changes in assets and liabilities              
(Increase) decrease in accounts receivable     13       (36)
(Increase) decrease in prepaid expense     59,658       (59,433)
(Increase) decrease in inventory     (18,632 )     (100,413)
Increase (decrease) in accounts payable     12,500       215,123
Net cash from operating activities     (601,153 )     (338,008)
               
Cash Flows from investing              
Purchase of fixed assets     (19,292 )     —  
Purchase of intangible assets     (21,394 )     (920)
Net cash used in investing activities     (40,686 )     (920)
               
Cash Flows from Financing Activities              
Proceeds from promissory notes     —         151,500
Proceeds from convertible notes, net of debt issuance costs     792,550       262,500
Payments on convertible notes     (60,000 )     —  
Payments on advance from related parties     —         (51,214)
Advance from related parties     17,740       102,890
Net cash from financing activities     750,290       465,676
               
Net increase (decrease) in Cash     108,451       126,748
               
Beginning cash balance     148,767       22,020
               
Ending cash balance   $ 257,218     $ 148,768
               
Supplemental disclosure of cash flow information              
Cash paid for interest   $ —       $ —  
Cash paid for tax   $ —       $ —  

 

The accompanying notes are an integral part of these financial statements.

 

  F- 6  

 

VILACTO BIO INC.

NOTES TO THE FINANCIAL STATEMENTS

MARCH 31, 2019

(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 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. (See Note 6 for additional details)

 

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.”

We plan to use the assets acquired to expand the reach of our opportunities in doing business internationally. 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.

 

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 $7,858,045 since its inception, has incurred recurring operating losses, has negative working capital at March 31, 2019 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.

 

  F- 7  

 

VILACTO BIO INC.

NOTES TO THE FINANCIAL STATEMENTS

MARCH 31, 2019

(AUDITED)

 

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 impairments and estimations of long-lived assets, 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.

 

Revenue Recognition – We recognize revenue in accordance with ASC 606. 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 years ended March 31, 2019 and 2018 the Company reported revenues of $4,894 and $1,429 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 $23 and $36 at March 31, 2019, 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 $257,218 and $148,767 in cash and no cash equivalents as of March 31, 2019, 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 March 31, 2019, the cash balance in excess of the FDIC limits was $4,871. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk in these accounts.

 

  F- 8  

 

VILACTO BIO INC.

NOTES TO THE FINANCIAL STATEMENTS

MARCH 31, 2019

(AUDITED)

 

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).

 

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. On November 15, 2018, our Board of Directors adopted a 2018 Incentive Plan (the “Plan”) The Plan is designed to attract, retain and motivate employees, officers, directors, consultants, agents, advisors and independent contractors of our company by providing them the opportunity to acquire a proprietary interest in our company and to align their interests and efforts to the long-term interests of our stockholders. As of March 31, 2019, the Company has reserved 9,850,000 shares of common stock under the 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.

 

  F- 9  

 

VILACTO BIO INC.

NOTES TO THE FINANCIAL STATEMENTS

MARCH 31, 2019

(AUDITED)

 

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 March 31, 2019, and March 31, 2018, no such reserve had been recorded.

 

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 is effective for fiscal years beginning after December 15, 2018. We will plan to adopt ASU 2018-07 effective April 1, 2019. Upon adoption of the standard is not expected to have an impact on our financial position or results of operations for the years ending March 31, 2019 and 2018.

 

In February 2016, the FASB issued ASU 2016-02, “Leases” (“ASC 842”). The guidance requires lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model and the new revenue recognition standard. Existing sale-leaseback guidance, including guidance for real estate, is replaced with a new model applicable to both lessees and lessors. ASC 842 is effective for fiscal years beginning after December 15, 2018.

 

We will plan to adopt ASC 842 effective April 1, 2019 using the optional transition method of recognizing a cumulative-effect adjustment to the opening balance of retained earnings on April 1, 2019. Therefore, comparative financial information will not be adjusted and will continue to be reported under the prior lease accounting guidance in ASC 840. We plan to elect the transition relief package of practical expedients, and as a result, we will not assess 1) whether existing or expired contracts contain embedded leases, 2) lease classification for any existing or expired leases, and 3) whether lease origination costs qualified as initial direct costs. We will also elect the short-term lease practical expedient by establishing an accounting policy to exclude leases with a term of 12 months or less.

 

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.

 

  F- 10  

 

VILACTO BIO INC.

NOTES TO THE FINANCIAL STATEMENTS

MARCH 31, 2019

(AUDITED)

 

4. INVENTORY

 

Inventory consist of the following as of March 31, 2019 and March 31, 2018:

 

    March 31, 2019   March 31, 2018
Raw materials   $ —       $ —  
Finished Goods     119,045       100,413
 Total   $ 119,045     $ 100,413

 

5. PREPAID EXPENSES

 

Prepaid expenses consist of the following as of March 31, 2019 and March 31, 2018:

 

    March 31, 2019   March 31, 2018
Prepaid Marketing   $ —       $ 59,568
Total prepaid expenses   $ —       $ 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 March 31, 2019 and March 31, 2018:

 

    March 31, 2019   March 31, 2018
Patents and trademarks   $ 135,850     $ 920
Website     21,394       —  
Less: accumulated amortization     (7,164 )     (24)
Intangible assets, net of accumulated amortization   $ 150,080     $ 896

 

Amortization expense for the years ended March 31, 2019 and 2018 was $7,164 and $24, respectively.

 

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.

 

  F- 11  

 

VILACTO BIO INC.

NOTES TO THE FINANCIAL STATEMENTS

MARCH 31, 2019

(AUDITED)

 

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 semiannual 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 the current and future assets of the 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.

 

  F- 12  

 

VILACTO BIO INC.

NOTES TO THE FINANCIAL STATEMENTS

MARCH 31, 2019

(AUDITED)

 

7. CONVERTIBLE NOTES PAYABLE

 

Convertible Notes Payable at consists of the following:   March 31,   March 31,
    2019   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 bears interest at a rate of 12% per annum and matured on November 26, 2018. The net proceeds of the sale of the Auctus Note, after deducting the expenses payable, 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” is 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 March 31, 2019 the note holder had converted $87,352 in Principal and $25,417 in interest and fees into 74,645,400 shares of the Company’s common stock. (See note 9 for additional details.)

 

During the year ended March 31, 2019 the Company recorded interest of $23,597.

 

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 year ended March 31, 2019.

 

$ 80,398   167,750
Unamortized debt discount   -   (147,472)
Total, net of unamortized discount   80,398   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, was due February 23, 2019 and 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 year ended March 31, 2019 the Company incurred additional penalties of approximately $120,533 which were added to the principal total owed under the promissory note.

 

As of March 31, 2019, the note holder had converted $146,316 in Principal and $16,830 in interest and fees into 115,350,000 shares of the Company’s common stock. (See note 9 for additional details.)

 

During the year ended March 31, 2019 the Company recorded interest of $13,614.

 

In July 2018, the Company made a cash payment of principal and interest of $60,000 on the then outstanding balance.

 

The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $150,171 during the year ended March 31, 2019.

  76,717   125,000
Unamortized debt discount   -   (112,671)
Total, net of unamortized discount   76,717   12,329
         

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 and 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 year ended March 31, 2019 the Company recorded interest of $9,314.

 

As of March 31, 2019, the note holder had converted $150,000 in Principal into 90,272,841 shares of the Company’s common stock. (See note 9 for additional details.)

 

 

The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $150,000 during the year ended March 31, 2019.

 

  -   -
Unamortized debt discount   -   -
Total, net of unamortized discount   -   -
         

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 and 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 year ended March 31, 2019 the Company recorded interest of $7,113

 

As of March 31, 2019, the note holder had converted $92,000 in Principal and $5,733 in interest and fees into 65,369,262 shares of the Company’s common stock. (See note 9 for additional details.)

 

The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $92,000 during the year ended March 31, 2019.

 

 

  18,000   -
Unamortized debt discount   (18,000)   -
Total, net of unamortized discount   -   -
         

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 and 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 year ended March 31, 2019 the Company recorded interest of $5,913.

 

As of March 31, 2019, the note holder had converted $100,000 in Principal and $5,911 in interest and fees into 68,419,200 shares of the Company’s common stock. (See note 9 for additional details.)

 

The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $100,000 during the year ended March 31, 2019.

 

  -   -
Unamortized debt discount   -   -
Total, net of unamortized discount   -   -
         

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 and 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 year ended March 31, 2019 the Company recorded interest of $3,438.

 

The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $34,384 during the year ended March 31, 2019.

 

 

  50,000   -
Unamortized debt discount   (15,616)   -
Total, net of unamortized discount   34,384   -
         

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 and 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 year ended March 31, 2019 the Company recorded interest of $4,685.

 

The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $58,819 during the year ended March 31, 2019.

 

  128,000   -
Unamortized debt discount   (69,181)   -
Total, net of unamortized discount   58,819   -
         

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 and 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 year ended March 31, 2019 the Company recorded interest of $1,684.

 

The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $30,137 during the year ended March 31, 2019.

 

  53,000   -
Unamortized debt discount   (30,137)   -
Total, net of unamortized discount   22,863   -
         

Adar Bays, LLC July 2, 2018 Secured Convertible Note- Back end 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 Back end Note”). On off-setting note was issued by the lender on July 2, 2018, which was released upon funding the July 2, 2018 Adar Back Note on March 2, 2019.

 

The July 2, 2018 Adar Back Note is due July 2, 2019 and 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 year ended March 31, 2019 the Company recorded interest of $941.

 

As of March 31, 2019, the note holder had converted $57,807 in Principal into 51,813,209 shares of the Company’s common stock. (See note 9 for additional details.)

 

The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $57,807 during the year ended March 31, 2019.

 

  92,193   -
Unamortized debt discount   (92,183)   -
Total, net of unamortized discount   -   -
         

Adar Bays, LLC July 23, 2018 Secured Convertible Note – Back End 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 “July 23, 2018 Adar Back End Note”). On off-setting note was issued by the lender on July 2, 2018, which was released upon funding the July 23, 2018 Adar Back Note on March 20, 2019.

 

The July 23, 2018 Adar Back End Note is due July 23, 2019 and 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 year ended March 31, 2019 the Company recorded interest of $151.

 

The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $1,507 during the year ended March 31, 2019.

 

 

  50,000   -
Unamortized debt discount   (48,493)   -
Total, net of unamortized discount   1,507   -
         

Eagle Equities, LLC Convertible Note – Back End 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 Back End Note”). On off-setting note was issued by the lender on July 20, 2018, which was released upon funding the July 20, 2018 Eagle Back End Note on March 20, 2019.

 

The Eagle Back End Note is due July 20, 2019 and 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 year ended March 31, 2019 the Company recorded interest of $240.

 

As of March 31, 2019, the note holder had converted $30,000 in Principal and $29 in interest and fees into 33,072,177 shares of the Company’s common stock. (See note 9 for additional details.)

 

The aggregate issue discount feature has been accreted and charged to interest expenses as a financing expense in the amount of $30,000 during the year ended March 31, 2019.

 

  70,000   -
Unamortized debt discount   (70,000)   -
Total, net of unamortized discount   -   -
         
Total $ 274,688   32,607

 

  F- 13  

 

8. FAIR VALUE OF FINANCIAL INSTRUMENTS AND DERIVATIVE LIABILITIES

The carrying value of cash, accounts payable and accrued expenses, and debt (See Note 7) approximate their fair values because of the short-term nature of these instruments. Management believes the Company is not exposed to significant interest or credit risks arising from these financial instruments. The carrying amount of the Company’s long-term debt is also stated at fair value of $2,000,000 since the stated rate of interest approximates market rates. 

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable.

 

    Level 1  

Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.

 

    Level 2  

Quoted prices for similar assets and liabilities in active markets; quoted prices included for identical or similar assets and liabilities that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. These are typically obtained from readily-available pricing sources for comparable instruments.

 

    Level 3   Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own beliefs about the assumptions that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

  

The following table presents the derivative financial instruments, the Company’s only financial liabilities measured and recorded at fair value on the Company’s balance sheets on a recurring basis, and their level within the fair value hierarchy as of March 31, 2019:

 

    Amount     Level 1     Level 2     Level 3
Embedded conversion derivative liability   $ —       $ —       $ —      $ 1,227,041
Warrant and option derivative liabilities   $ —       $ —       $ —       $ —  
Total   $ —       $ —       $ —      $ 1,227,041

 

The embedded conversion feature in the convertible debt instruments that the Company issued (See Note 7), was convertible at issuance which qualified them as a derivative instrument since the number of shares issuable under the note is indeterminate based on guidance in ASC Topic No. 815-15, “Derivatives and Hedging (“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. This convertible debt tainted all other equity linked instruments including all outstanding non-employee options and warrants on the date that the instrument became convertible. 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.

 

  F- 14  

 

VILACTO BIO INC.

NOTES TO THE FINANCIAL STATEMENTS

MARCH 31, 2019

(AUDITED)

 

The Black-Scholes model utilized the following inputs to value the derivative liabilities at the date of issuance of the convertible note through March 31, 2018 which was the date the derivative liability was terminated:

 

Fair value assumptions:   February 23, 2018 through March 31, 2019
Risk free interest rate     2.02-2.72%
Expected term (years)     0.01-1
Expected volatility     170.90%-249.85%
Expected dividends     0%

 

 

The following table presents a summary of the Company’s derivative liabilities associated with its convertible notes as of March 31, 2019:

 

    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     824,050
Initial loss recorded     755,733
Adjustment to derivative liability due to debt settlement     (1,791,931)
Change in fair market value of derivative liabilities     709,452
Balance March 31, 2019   $ 1,227,041

 

9. 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. All the notes now bear interest at a rate of 5% per annum and are due within two business days of demand notice all other terms we unchanged. During the year ended March 31, 2019 the Company recorded interest of $10,655.

 

10. STOCKHOLDERS’ EQUITY

 

Overview

 

On January 28, 2019, 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 28, 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.

 

  F- 15  

 

VILACTO BIO INC.

NOTES TO THE FINANCIAL STATEMENTS

MARCH 31, 2019

(AUDITED)

 

As of March 31, 2019, the Company is authorized to issue 4,000,000,000 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, 2019, there were 597,064,715 shares of common stock issued and outstanding.

 

As of March 31, 2019, there were 3,000,000 shares of Preferred stock issued and outstanding.

 

Issuance of Preferred stock

On January 28, 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.

 

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, 2018, 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 year ended March 31, 2019 the Company recorded $69,000 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.

 

On March 20, 2019, the Company issued a total of 40,909,089 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 13,636,363 shares. The shares were valued at $0.0022 per share or $90,000 which was recorded as professional fees expense.

 

  F- 16  

 

VILACTO BIO INC.

NOTES TO THE FINANCIAL STATEMENTS

MARCH 31, 2019

(AUDITED)

 

Stock issued upon conversion of debts.

 

The following table presents a summary of the Company’s debt conversions associated with its convertible notes during the year ended March 31, 2019:

 

Date of conversion   Effective conversion price   Principal and interest converted   Shares issued upon conversion of debts
11/20/2018       0.0300       5,996       200,000
11/23/2018       0.0600       6,000       100,000
11/26/2018       0.0455       6,370       140,000
12/4/2018       0.0182       10,920       600,000
12/7/2018       0.0132       33,100       2,500,000
12/11/2018       0.0331       13,240       400,000
12/20/2018       0.0145       7,250       500,000
1/4/2019       0.0030       7,500       2,500,000
1/7/2019       0.0060       4,800       800,000
1/10/2019       0.0075       15,000       2,000,000
1/18/2019       0.0060       4,800       800,000
1/23/2019       0.0075       21,063       2,808,401
1/24/2019       0.0075       15,771       2,102,777
1/29/2019       0.0053       6,384       1,200,000
1/29/2019       0.0043       10,675       2,500,000
1/30/2019       0.0045       15,000       3,333,333
2/6/2019       0.0014       2,880       2,000,000
2/6/2019       0.0018       7,385       4,102,778
2/6/2019       0.0013       8,288       6,400,000
2/7/2019       0.0018       11,540       6,411,111
2/7/2019       0.0018       5,699       3,165,833
2/8/2019       0.0018       11,366       6,314,194
2/11/2019       0.0018       8,026       4,458,889
2/12/2019       0.0014       5,760       4,000,000
2/12/2019       0.0013       9,639       7,650,000
2/13/2019       0.0018       14,491       8,050,556
2/13/2019       0.0018       9,513       5,284,722
2/14/2019       0.0018       15,573       8,651,667
2/19/2019       0.0018       14,817       8,231,667
2/19/2019       0.0014       9,216       6,400,000
2/19/2019       0.0018       10,586       5,881,172
2/21/2019       0.0018       15,557       8,642,778
2/21/2019       0.0014       14,137       10,116,215
2/21/2019       0.0013       10,836       8,600,000
2/26/2019       0.0015       11,953       8,243,268
2/27/2019       0.0011       6,480       6,000,000
2/27/2019       0.0014       10,608       7,577,379
2/28/2019       0.0008       8,131       10,100,000
3/4/2019       0.0012       13,809       12,007,730
3/5/2019       0.0012       14,046       12,213,852
3/5/2019       0.0008       9,821       12,200,000
3/5/2019       0.0012       13,837       12,032,165
3/6/2019       0.0009       12,880       14,000,000
3/6/2019       0.0011       13,816       12,014,009
3/8/2019       0.0007       10,000       15,231,130
3/8/2019       0.0011       10,633       9,246,374
3/11/2019       0.0008       13,765       17,100,000
3/13/2019       0.0006       1,813       2,931,643
3/13/2019       0.0012       8,092       7,036,426
3/14/2019       0.0012       15,000       13,043,478
3/18/2019       0.0009       17,620       19,152,700
3/18/2019       0.0011       20,258       17,630,730
3/19/2019       0.0008       16,100       20,000,000
3/20/2019       0.0012       24,136       20,987,826
3/20/2019       0.0011       15,000       14,285,714
3/22/2019       0.0008       16,088       19,152,700
3/25/2019       0.0011       19,258       18,340,504
3/26/2019       0.0010       18,671       17,781,905
3/26/2019       0.0007       18,375       25,000,000
3/27/2019       —         15,029       —  
Total             $ 724,396       480,155,626

 

18,786,463 shares of common stock were not yet issued on March 27, 2019 conversion. The converted amount is thus included in stock payable at March 31, 2019.

 

  F- 17  

 

VILACTO BIO INC.

NOTES TO THE FINANCIAL STATEMENTS

MARCH 31, 2019

(AUDITED)

 

11. 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 year ended March 31, 2019 the Company recorded interest of $3,261.

 

During the year ended March 31, 2019, 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 March 31, 2019, $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.

 

12. 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 ended March 31, 2019, the Company recorded royalty expense of $80,000 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.)

 

13. INCOME TAXES

 

Significant components of the Company’s deferred tax assets and liabilities for federal and state income taxes as of March 31, 2019 and 2018 are as follows:

 

    March 31,
    2019   2018
Deferred tax assets:              
Net operating loss tax basis   $ 1,077,790     $ 107,332
Provisions and accrued liabilities     —         —  
Deferred tax liabilities:              
Total deferred tax asset     1,077,790       107,332
               
Less valuation allowance     (1,077,790 )     (107,332)
Net deferred tax asset   $ —       $ —  

  

As of March 31, 2019, and 2018, the Company had gross federal net operating loss carryforwards of approximately $1,077,790 and $107,332, respectively. The Company expects the limitation placed on the federal net operating loss carryforwards prior to the ownership change will likely expire unused. As of March 31, 2019, all tax years are open for examination by the taxing authorities.

 

Due to the enactment of the Tax Reform Act of 2017, the corporate tax rate for those tax years beginning with 2018 has been reduced to 21%.

 

  F- 18  

 

VILACTO BIO INC.

NOTES TO THE FINANCIAL STATEMENTS

MARCH 31, 2019

(AUDITED)

 

14. 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.

 

Stock issued upon conversion of debts.

 

The following table presents a summary of the Company’s debt conversions associated with its convertible notes between April 1, 2019 and June 4, 2019:

 

Date of Conversion   Effective conversion price   Principal and interest converted   Shares issued upon conversion of debts
4/1/2019       0.00070       19,366       29,793,253
4/1/2019       0.00050       15,493       29,793,500
4/1/2019       0.00070       19,292       29,680,076
4/2/2019       0.00050       13,423       29,500,000
4/8/2019       0.00060       22,860       35,169,231
4/10/2019       0.00060       10,891       16,755,385
4/10/2019       0.00050       15,925       35,000,000
4/22/2019       0.00100       25,000       25,000,000
4/22/2019       0.00100       25,000       25,000,000
4/23/2019       0.00110       25,000       22,727,273
4/24/2019       0.00100       25,000       26,315,789
4/25/2019       0.00050       19,793       43,500,000
4/26/2019       0.00080       15,000       18,292,683
4/29/2019       0.00050       16,249       30,687,785
4/29/2019       0.00060       13,000       22,087,561
5/1/2019       0.00050       14,400       30,000,000
5/2/2019       0.00040       17,150       49,000,000
5/6/2019       0.00030       17,315       54,110,000
5/8/2019       0.00020       12,985       53,000,000
5/13/2019       0.00020       14,269       59,454,800
5/16/2019       0.00020       10,474       65,465,500
5/20/2019       0.00020       10,600       44,166,667
5/20/2019       0.00020       10,600       44,166,667
5/21/2019       0.00020       10,600       44,166,667
5/22/2019       0.00010       7,245       69,000,000
5/22/2019       0.00020       7,900       43,888,889
5/23/2019       0.00020       8,000       44,444,444
5/28/2019       0.00020       13,311       83,194,900
5/28/2019       0.00020       7,420       41,222,222
5/31/2019       0.00010       7,152       89,403,250
6/4/2019       0.00010       2,336       33,376,857
        Total       453,049       1,267,363,399

 

 

  F- 19  

 

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

 

On January 7, 2019, the Company dismissed AMC Auditing, LLC (the “Former Accountant”) as the Company’s independent registered public accounting firm and on January 7, 2019, the Company engaged Boyle CPA, LLC (the “New Accountant”) as the Company’s independent registered public accounting firm. The engagement of the New Accountant was approved by the Company’s Board of Directors. For more information on the change in accountants, please see our Form 8-K filed with the Securities and Exchange Commission on January 9, 2019.

 

Item 9A. Controls and Procedures

 

As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, being March 31, 2019. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

Based upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this annual report.

 

Management’s Annual Report on Internal Control over Financing Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of March 31, 2019 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of March 31, 2019, our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

 

We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending March 31, 2020: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

 

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to an exemption for non-accelerated filers set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

 

Item 9B. Other Information

 

None

 

  18  

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

 

The following information sets forth the names, ages, and positions of our current directors and executive officers.

 

Name     Age     Positions and Offices Held
Gert Andersen     49     Chief Executive Officer, Principal Executive Officer, Chief Financial Officer, Principal Financial Officer, Principal Accounting Officer, Secretary, Treasurer and Director
Pernille Steenfat     44     Chief Operating Officer
Poul Madsen     56     Chief Scientific Officer

 

Set forth below is a brief description of the background and business experience of each of our current executive officers and directors.

 

Gert Andersen

 

From 2006 to 2017, Mr. Andersen worked for W4P, Pharma GP as Chief Executive Officer.

 

Aside from that provided above, Mr. Andersen does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940.

 

Mr. Andersen is qualified to serve on our Board of Directors because of his management, marketing and business development experience.

 

Penille Steenfat

 

Ms. Steenfat, is a partner at FreeWater ApS since 2007. She has a Bachelor’s of Arts in Business Administration.

 

Aside from that provided above, Ms. Steenfat does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940.

 

Poul Madsen

 

Mr. Madsen is an R&D Manager at Sepcotech since 2016. In 2016, he was Senior Scientific Advisor to Nordetect Sensors. From 2011 to 2016, he was a director at Green Center, Holeby. Madsen has a Ph.D. in developing new biotechnical methods for sugar beet breeding improvement. He has a Master’s degree in Biology from Aarhus University.

 

Aside from that provided above, Mr. Madsen does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940.

 

Term of Office

 

Our Directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board, subject to their respective employment agreements.

 

  19  

 

Significant Employees

 

We have no significant employees other than our officers and directors.

 

Family Relationships

 

Gert Andersen and Penille Steenfat are married. There are no other family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.

 

Involvement in Certain Legal Proceedings

 

During the past 10 years, none of our current directors, nominees for directors or current executive officers has been involved in any legal proceeding identified in Item 401(f) of Regulation S-K, including:

 

1. Any petition under the Federal bankruptcy laws or any state insolvency law filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he or she was a general partner at or within two years before the time of such filing, or any corporation or business association of which he or she was an executive officer at or within two years before the time of such filing;
2. Any conviction in a criminal proceeding or being named a subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
3. Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from, or otherwise limiting, the following activities: i. Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; ii. Engaging in any type of business practice; or iii. Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
4. Being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any type of business regulated by the Commodity Futures Trading Commission, securities, investment, insurance or banking activities, or to be associated with persons engaged in any such activity;
5. Being found by a court of competent jurisdiction in a civil action or by the SEC to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
6. Being found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
7. Being subject to, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: i. Any Federal or State securities or commodities law or regulation; or ii. Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or iii. Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
8. Being subject to, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

  20  

 

Audit Committee

 

We do not have a separately-designated standing audit committee. The entire board of directors performs the functions of an audit committee, but no written charter governs the actions of the board of directors when performing the functions of that would generally be performed by an audit committee. The board of directors approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the board of directors reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor.

 

For the fiscal year ending March 31, 2019, the board of directors:

 

  1. Reviewed and discussed the audited financial statements with management, and
  2. Reviewed and discussed the written disclosures and the letter from our independent auditors on the matters relating to the auditor's independence.

Based upon the board of directors’ review and discussion of the matters above, the board of directors authorized inclusion of the audited financial statements for the year ended March 31, 2019 to be included in this Annual Report filed with the Securities and Exchange Commission.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent beneficial shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To the best of our knowledge based solely on a review of Forms 3, 4, and 5 (and any amendments thereof) received by us, no persons have failed to file, on a timely basis, the identified reports required by Section 16(a) of the Exchange Act during fiscal year ended March 31, 2019, other than Forms 4 for Mr. Andersen, which was filed late.

 

Code of Ethics

 

As of the date of this Prospectus, we had not adopted a Code of Ethics. We are a small company with few individuals comprising our board and management, which does not warrant the adoption of a Code of Ethics.

 

Item 11. Executive Compensation

 

The table below summarizes all compensation awarded to, earned by, or paid to our former or current executive officers for the fiscal years ended March 31, 2019 and 2018.

 

SUMMARY COMPENSATION TABLE 
Name and principal position Year Salary ($)

Bonus

($)

 

Stock

Awards

($)

Option

Awards

($)

Non-Equity

Incentive Plan

Compensation

($)

Nonqualified

Deferred

Compensation

Earnings ($)

All Other

Compensation

($)

Total

($)

Gert Andersen Chief Executive Officer, Chief Financial Officer and Director

2019

2018

0

0

0

0

135,000

0

0

0

0

0

0

0

0

0

135,000

0

Penille Steenfat

COO

2019

2018

0

0

0

0

135,000

0

0

0

0

0

0

0

0

0

135,000

0

Poul Madsen

CSO

2019

2018

0

0

0

0

135,000

0

0

0

0

0

0

0

0

0

135,000

0

  

  21  

 

Narrative Disclosure to the Summary Compensation Table

 

We have not entered into any employment agreement or consulting agreement with our executive officers. There are no arrangements or plans in which we provide pension, retirement or similar benefits for executive officers.

 

Our decision to compensate officers depends on the availability of our cash resources with respect to the need for cash to further our business purposes.

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OPTION AWARDS STOCK AWARDS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name

 

 

 

 

 

 

 

 

 

Number of

Securities

Underlying

Unexercised

Options

(#)

Exercisable

 

 

 

 

 

 

 

 

 

Number of

Securities

Underlying

Unexercised

Options

(#)

Unexercisable

 

 

 

 

 

Equity

Incentive

Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options

(#)

 

 

 

 

 

 

 

 

 

 

 

 

Option

Exercise

Price

($)

 

 

 

 

 

 

 

 

 

 

 

 

Option

Expiration

Date

 

 

 

 

 

 

 

Number

of

Shares

or Units

of

Stock That

Have

Not

Vested

(#)

 

 

 

Market

Value

of

Shares

or

Units

of

Stock

That

Have

Not

Vested

($)

 

Equity

Incentive

Plan

Awards:

Number

of

Unearned

Shares,

Units or

Other

Rights

That Have

Not

Vested

(#)

Equity

Incentive

Plan

Awards:

Market or

Payout

Value of

Unearned

Shares,

Units or

Other

Rights

That

Have Not

Vested

(#)

Gert Andersen - - - - - - - - -
Penille Steenfat - - - - - - - - -

Poul Madsen

- - - - - - - - -

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The following table sets forth, as of June 19, 2019, certain information as to shares of our voting stock owned by (i) each person known by us to beneficially own more than 5% of our outstanding voting stock, (ii) each of our directors, and (iii) all of our executive officers and directors as a group.

 

Unless otherwise indicated below, to our knowledge, all persons listed below have sole voting and investment power with respect to their shares of voting stock, except to the extent authority is shared by spouses under applicable law. Unless otherwise indicated below, each entity or person listed below maintains an address of Fabriksvej 48 4700 Naestved, Denmark.

 

The number of shares beneficially owned by each stockholder is determined under rules promulgated by the SEC. The information is not necessarily indicative of beneficial ownership for any other purpose. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting or investment power and any shares as to which the individual or entity has the right to acquire beneficial ownership within 60 days through the exercise of any stock option, warrant or other right. The inclusion in the following table of those shares, however, does not constitute an admission that the named stockholder is a direct or indirect beneficial owner.

 

  22  

 

    Common Stock
Name and Address of Beneficial Owner   Number of Shares
Owned (1)
    Percent of Class (2)
Gert Andersen (3)     99,136,363       5%
Penille Steenfat     15,636,363       *
Poul Madsen     15,636,363       *
All Directors and Executive Officers as a Group (3 persons)     130,409,089       6.5%
5% Holders              
NONE              

 

* Less than 1%

 

(1) Unless otherwise indicated, each person or entity named in the table has sole voting power and investment power (or shares that power with that person’s spouse) with respect to all shares of voting stock listed as owned by that person or entity.

 

(2) Pursuant to Rules 13d-3 and 13d-5 of the Exchange Act, beneficial ownership includes any shares as to which a shareholder has sole or shared voting power or investment power, and also any shares which the shareholder has the right to acquire within 60 days, including upon exercise of common shares purchase options or warrants. The percent of class is based on 1,917,431,324 shares of common stock outstanding as of June 19, 2019.

 

(3) Includes 60,636,363 shares of common stock held in his name, 3,000,000 shares of Series A Preferred Stock held in his name that he may convert into 30,000,000 shares of common stock and 8,500,000 shares of common stock held by 9 Heroes ApS in which he has voting and disposition control.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence

 

Other than the transactions described below and under the heading “Executive Compensation” (or with respect to which such information is omitted in accordance with SEC regulations), for the past two fiscal years there have not been, and there is not currently proposed, any transaction or series of similar transactions to which we were or will be a participant in which the amount involved exceeded or will exceed $120,000, and in which any director, executive officer, holder of 5% or more of any class of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest.

 

On April 4, 2017, we entered into a license agreement (the “License Agreement”) with Pharma GP ApS. (“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. Our officer and director, Gert Andersen is in control of Pharma GP ApS.

 

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 USD 10 per month.

 

Under the License Agreement, we have the ability to sublicense to third parties under the royalty arrangement described above.

 

We also entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Pharma GP ApS and its sole shareholder, 9 Heroes APS, a Denmark corporation (together, “Seller”). In accordance with the terms of the Purchase Agreement, we agreed to purchase all of the outstanding shares of Pharma GP ApS for the purchase price (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;

 

  23  

 

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, 2018, 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.

 

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. Interest is due and payable on a semiannual basis with the first payment due on January 1, 2019, which we failed to make, 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 the current and future assets of the Company.

 

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 year ended March 31, 2019 the Company recorded interest of $3,261.

 

During the year ended March 31, 2019, 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 March 31, 2019, $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.

 

Item 14. Principal Accounting Fees and Services

 

Below is the table of Audit Fees billed by our auditors in connection with the audits of the Company’s annual financial statements for the years ended:

 

Financial Statements for the
Year Ended March 31
  Audit Services   Audit Related Fees   Tax Fees   Other Fees
2019     $ 17,258     $ 0     $ 0     $ 0
2018     $ 11,046     $ 0     $ 0     $ 0

 

  24  

 

  PART IV

 

Item 15. Exhibits, Financial Statements Schedules

 

(a) Financial Statements and Schedules

 

The following financial statements and schedules listed below are included in this Form 10-K.

 

Financial Statements (See Item 8)

 

(b) Exhibits

 

Exhibit Number Description
2.1 Asset Purchase Agreement(3)
3.1 Articles of Incorporation(1)
3.2 Bylaws(1)
3.3 Certificate of Merger(2)
4.1 8% Secured Note(3)
10.1 Termination and Release Agreement, dated November 8, 2018(3)
10.2 2018 Incentive Plan(4)
31.1** Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2** Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1** Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101**   The following materials from the Company’s Annual Report on Form 10-K for the year ended March 31, 2019 formatted in Extensible Business Reporting Language (XBRL).

 

**provided herewith

 

(1) Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-188610), filed with the Commission on May 15, 2013.
(2) Incorporated by reference to the Form 8-K filed on April 5, 2017.
(3) Incorporated by reference to the Registrant’s Registration Statement on Form 8-K filed with the Commission on November 13, 2018.
(4) Incorporated by reference to the Registrant’s Registration Statement on Form 8-K filed with the Commission on November 16, 2018.

 

  25  

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Vilacto Bio Inc.

 

By:  /s/ Gert Andersen

Gert Andersen

President, Chief Executive Officer, Principal Executive Officer and Director

June 10, 2019

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:  /s/ Gert Andersen

Gert Andersen

President, Chief Executive Officer, Principal Executive Officer and Director

June 10, 2019

 

  26  

 

 

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