UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended December 31, 2017
[  ]	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
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)	(IRS Employer Identification No.)
Fabriksvej 48 4700 Naestved, Denmark
(Address of principal executive offices)
+1 (646) 893-7895
(Registrant’s telephone number)
_______________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark 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. 

[X] Yes [ ] 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).  [X] Yes [ ] No

 

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

 

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

 

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 [X] No

 

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 90,000,000 common shares as of February 13, 2018

 

 

TABLE OF CONTENTS
		Page
PART I – FINANCIAL INFORMATION
Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	7
Item 4:	Controls and Procedures	7
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	8
Item 1A:	Risk Factors	8
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	8
Item 3:	Defaults Upon Senior Securities	8
Item 4:	Mine Safety Disclosures	8
Item 5:	Other Information	8
Item 6:	Exhibits	8

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Our financial statements included in this Form 10-Q are as follows:

 

F-1	Balance Sheets as of December 31, 2017 (unaudited) and March 31, 2017;
F-2	Statements of Operations for the three and nine months ended December 31, 2017 and 2016 (unaudited);
F-3	Statements of Cash Flows for the nine months ended December 31, 2017 and 2016 (unaudited); and
F-4	Notes to Financial Statements.

 

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended December 31, 2017 are not necessarily indicative of the results that can be expected for the full year.

 

 

VILACTO BIO INC.

BALANCE SHEETS

(UNAUDITED)

 

		December 31, 2017			March 31, 2017
ASSETS
Current assets
Cash		$	7,319		$	22,020
Accounts receivable			70			—
Inventory			133,876			—
Prepaid expenses			65,000			225
Total current assets			206,265			22,245
Intangible assets, net			911			—
Total assets			207,176			22,245
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued liabilities		$	24,453		$	9,223
Due to related parties			252,249			711
Loans			174,000			22,500
Loans from related parties			32,608			32,608
Total current liabilities			483,310			65,042
Total liabilities			483,310			65,042
Stockholders' equity (deficit)
Common stock; $0.001 par value; 1,125,000,000 shares authorized; 90,000,000 and 90,000,000 shares issued and outstanding as of December 31, 2017 and  March 31, 2017, respectively			90,000			90,000
Additional paid-in capital			(22,000)			(22,000)
Accumulated earnings (deficit)			(344,134)			(110,797)
Total stockholders' equity (deficit)			(276,134)			(42,797)
Total liabilities and stockholders' equity (deficit)		$	207,176		$	22,245

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

 

VILACTO BIO INC.

STATEMENT OF OPERATIONS

(UNAUDITED)

 

		For the Three Months Ended								For the Nine Months Ended
		December 31, 2017				December 31, 2016				December 31, 2017				December 31, 2016
Revenues		$	322			$	—			$	322			$	—
Cost of revenues			103				—				103				—
Gross profit			219				—				219				—
Operating expenses
Royalty expense			30,000				—				90,000				—
Professional fees			22,247				1,765				57,029				7,595
General and administrative expenses			46,784				1,002				81,037				3,169
Depreciation expense			9				—				9				—
Total operating expenses			99,040				2,767				228,075				10,764
Loss from operations			(98,821	)			(2,767	)			(227,856	)			(10,764)
Other income (expense)
Interest expense			(2,625	)			—				(5,481	)			—
Total other income (expense)			(2,625	)			—				(5,481	)			—
Net income (loss)		$	(101,446	)		$	(2,767	)		$	(233,337	)		$	(10,764)
Basic income (loss) per common share		$	(0.00	)		$	(0.00	)		$	(0.00	)		$	(0.00)
Basic weighted average common shares outstanding			90,000,000				90,000,000				90,000,000				90,000,000

 

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

  

VILACTO BIO INC.

STATEMENT OF CASH FLOWS

(UNAUDITED)

 

		For the Nine Months Ended
		December 31, 2017			December 31, 2016
Cash Flows from Operating Activities
Net loss		$	(233,337)		$	(10,764)
Adjustments to reconcile net loss to net cash provided by operating activities:
Contributed capital			—			—
Depreciation and amortization			9			—
Changes in assets and liabilities
Increase (decrease) in accounts receivable			(70)
(Increase) decrease in prepaid expense			(64,775)			(106)
(Increase) decrease in inventory			(133,876)			—
Increase (decrease) in accounts payable			211,379			(200)
Net cash from operating activities			(220,670)			(11,070
Cash Flows from investing
Purchase of intangible assets			(920)			—
Net cash used in investing activities			(920)			—
Cash Flows from Financing Activities
Proceeds from promissory notes			151,500			—
Advance from related parties			55,389			11,022
Net cash from financing activities			206,889			11,022
Net increase (decrease) in Cash			(14,701)			(48)
Beginning cash balance			22,020			482
Ending cash balance		$	7,319		$	434
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.

 

 VILACTO BIO INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2017

(UNAUDITED)

 

1. ORGANIZATION AND LINE BUSINESS

 

The Company was originally incorporated under the laws of the state of Nevada on February 25, 2013. The Company is devoting substantially all of its present efforts to establish a new business, and has had no revenues from operations to date.

 

On April 4, 2017, the Company 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.

 

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.

 

The Company also entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Pharma GP and its sole shareholder, 9 Heroes APS, a Denmark corporation (together, “Seller”). In accordance with the terms of the Purchase Agreement, the Company agreed to purchase all of the outstanding shares of Pharma GP for the purchase price (the “Purchase Price”) of $6,000,000, payable as $3,000,000 in cash and the balance in shares of our common stock.

 

The closing of the above transactions was expected to occur by May 31, 2017, but will likely not occur until the Company is able to successfully raise capital for the Purchase Price.

 

2. BASIS OF PRESENTATION AND GOING CONCERN

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.

Going concern – The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred cumulative net losses of $344,134 since its inception and requires capital for its contemplated operational and marketing activities to take place. The Company’s ability to raise additional capital through future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

 

 

 VILACTO BIO INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2017

(UNAUDITED)

 

3. SUMMARY OF SIGNIFICANT POLICIES

 

This summary of significant accounting policies of Vilacto Bio Inc. is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements.

 

Use of estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include estimates used to review the Company’s goodwill, impairments and estimations of long-lived assets, revenue recognition on percentage of completion type contracts, allowances for uncollectible accounts, inventory valuation, and the valuations of non-cash capital stock issuances. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

 

Revenue Recognition – The Company recognizes revenue on arrangements in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” and No. 104, “Revenue Recognition”. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured. For the years ended March 31, 2017 and 2016 the Company reported revenues of $0 and $0, respectively. For the nine months ended December 31, 2017 and 2016 the Company reported revenues of $322 and $0, respectively.

 

Accounts Receivable – Accounts receivable is comprised of uncollateralized customer obligations due under normal trade terms. The Company performs ongoing credit evaluation of its customers and management closely monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The carrying amount of accounts receivable is reviewed periodically for collectability. If management determines that collection is unlikely, an allowance that reflects management’s best estimate of the amounts that will not be collected is recorded. Accounts receivable are presented net of an allowance for doubtful accounts of $0 and $0 at December 31, 2017, and March 31, 2017, respectively.

 

Cash and cash equivalents – For purposes of the statement of cash flows, the Company considers all highly liquid investments and short-term instruments with original maturities of three months or less to be cash equivalents. There was $7,319 and $22,020 in cash and cash equivalents as of December 31, 2017 and March 31, 2017, respectively.

 

Concentration Risk

At times throughout the year, the Company may maintain cash balances in certain bank accounts in excess of FDIC limits. As of December 31, 2017, the cash balance in excess of the FDIC limits was $0. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk in these accounts.

 

 

 VILACTO BIO INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2017

(UNAUDITED)

 

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. As of December 31, 2017, the Company has not implemented an employee stock based compensation plan.

 

Non-Employee Stock Based Compensation – The Company accounts for stock based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in ASC 505-50. The Company may issue compensatory shares for services including, but not limited to, executive, management, accounting, operations, corporate communication, financial and administrative consulting services.

 

Earnings (loss) per share – The Company reports earnings (loss) per share in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 260-10 “Earnings Per Share,” which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive.

 

Long-lived Assets – In accordance with the Financial Accounting Standards Board ("FASB") Accounts Standard Codification (ASC) ASC 360-10, "Property, Plant and Equipment," the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.

 

 

 VILACTO BIO INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2017

(UNAUDITED)

 

Indefinite Lived Intangibles and Goodwill Assets

The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

 

The Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. In accordance with its policies, the Company performed a qualitative assessment of indefinite lived intangibles and goodwill at December 31, 2017, and determined there was no impairment of indefinite lived intangibles and goodwill.

 

Business Combinations

The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customer lists, acquired technology, and trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

 

Inventory – Substantially all inventory consists of finished goods and are valued based upon first-in first-out ("FIFO") cost, not in excess of market. The determination of whether the carrying amount of inventory requires a write-down is based on an evaluation of inventory.

 

Income taxes – The Company accounts for its income taxes in accordance with FASB Codification Topic ASC 740-10, “Income Taxes”, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. 

 

Segment Reporting – Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision-making group, in deciding the method to allocate resources and assess performance. The Company currently has one reportable segment for financial reporting purposes, which represents the Company's core business.

 

Recently Issued Accounting Pronouncements –The Company has evaluated the all recent accounting pronouncements through ASU 2018-01, and believes that none of them will have a material effect on the Company's financial position, results of operations or cash flows. 

 

 

 VILACTO BIO INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2017

(UNAUDITED)

 

4. INVENTORY

 

Inventory consist of the following as of December 31, 2017 and March 31, 2017:

 

		December 31, 2017			March 31, 2017
Raw materials		$	—		$	—
Finished Goods			133,876			—
Total		$	133,876		$	—

 

5. LOANS PAYABLE

 

On March 5, 2017, the Company executed a $22,500 promissory note with an investor which bears interest at a rate of 5% per annum and is due within two business days of demand notice. During the nine months ending December 31, 2017 the Company recorded interest of $848.

 

On May 17, 2017, the Company executed a $22,500 promissory note with an investor which bears interest at a rate of 5% per annum and is due within two business days of demand notice. During the nine months ending December 31, 2017 the Company recorded interest of $703.

 

On July 5, 2017, the Company executed a $20,000 promissory note with an investor which bears interest at a rate of 5% per annum and is due within two business days of demand notice. During the nine months ending December 31, 2017 the Company recorded interest of $490.

 

On October 4, 2017, the Company executed a $65,000 promissory note with an investor which bears interest at a rate of 5% per annum and is due within two business days of demand notice. During the nine months ending December 31, 2017 the Company recorded interest of $784.

 

On November 28, 2017, the Company executed a $44,000 promissory note with an investor which bears interest at a rate of 5% per annum and is due within two business days of demand notice. During the nine months ending December 31, 2017 the Company recorded interest of $199.

 

6. STOCKHOLDERS’ EQUITY

 

On March 6, 2017, our board of directors resolved to increase the number of authorized shares of our common stock, par value $0.001, from 75,000,000 shares to 1,125,000,000 shares. Correspondingly, our board of directors affirmed a forward split of 15 for 1 in which each shareholder will be issued 15 common shares in exchange for 1 common share of their currently issued common stock. In accordance with ASC 505-20 all stock-related information presented in these financial statements and accompanying footnotes has been retroactively adjusted to reflect the number of shares resulting from this action.

 

Prior to approval of the forward split, we had a total of 6,000,000 issued and outstanding common shares, par value $0.001. On the effective date of the forward split, we had a total of 90,000,000 issued and outstanding common shares, par value $0.001.

 

Overview

 

The Company is authorized to issue 1,125,000,000 shares of $0.001 par value common stock. All common stock shares have equal voting rights, are non-assessable and have one vote per share. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company.

 

As of December 31, 2017, there were 90,000,000 shares of common stock issued and outstanding.

 

 

 VILACTO BIO INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2017

(UNAUDITED)

 

Stock purchase agreement

On April 19, 2017, we entered into a Stock Purchase Agreement (the “Agreement”) with Pharma GP APS, a Denmark corporation (“Pharma GP”) and its sole shareholder, 9 Heroes APS, a Denmark corporation. In accordance with the terms of the Agreement, we agreed to purchase all of the outstanding shares of Pharma GP for the purchase price (the “Purchase Price”) of $6,000,000.00, payable as $3,000,000.00 in cash and the balance in shares of our common stock.

 

The closing of the above transactions is expected to occur when the company has sufficient funds to do so. The Agreement is conditioned on our paying the Purchase Price, obtaining financing in the amount of $4,000,000.00 for operational expenses, and receiving audited financial statements from Pharma GP, among other conditions as contained in the Agreement.

 

We currently do not have the money on hand to pay the Purchase Price, and we must obtain additional financing to meet the conditions to close the transaction.

 

The Agreement includes customary representations, warranties and covenants among the parties to each other as of specific dates.

 

The foregoing description of the Agreement is qualified in its entirety by reference to the full text of the Agreement, which is included as an exhibit our Current Report on Form 8-K filed on April 20, 2017 and is incorporated by reference herein.

 

Pharma GP is a manufacturer of skincare products with distribution in several countries. The company’s body and facial creams are designed for moisturizing, skin regeneration, wound healing and a variety of skin issues, such as dry and cracked skin, among other things.

 

In addition, Pharma GP owns patents, trademarks and production facilities for an ingredient designed to be used in pharmaceuticals and medical devices for treating a wide range of issues. Pharma GP currently has skincare products that are available over the counter. However, the company intends to develop, market and sell pharmaceutical skincare products to treat various ailments using its patented technology. Currently, the company has no government approved products, but with the financing, we intend to purchase Pharma GP and focus on those clinical applications. We expect to have more information on the status of the Closing of the Agreement and our new business direction in future filings.

 

7. RELATED PARY TRANSACTIONS

 

On February 21, 2017, Dana Gallovicova, our former CEO agreed to transfer her 75,000,000 shares of common stock in the Company to Gert Andersen pursuant to a Stock Purchase Agreement. Ms. Gallovicova received proceeds of $100,000. The source of the consideration paid to Ms. Gallovicova was the existing funds of the purchaser.

 

Ms. Gallovicova also assigned all of the outstanding debt owed to her by the Company to Mr. Andersen for $32,608. In connection with the debt assignment, Ms. Gallovicova agreed to release the Company from any and all claims. In connection with the assumption of the aforementioned debt the Company executed a promissory note with Mr. Anderson which bears interest at a rate of 10% per annum. During the nine months ending December 31, 2017 the Company recorded interest of $2,457.

 

In connection with the sale of her controlling interest in the company, on February 24, 2017, Ms. Gallovicova appointed Mr. Andersen as our new Director, President, CEO, Secretary and Treasurer and then resigned from all officer and director positions. There were no other arrangements or understandings between Ms. Gallovicova and Mr. Andersen with respect to election of directors or other matters.

 

During the nine months ended December 31, 2017, Gert Anderson, the President and CEO of the Company advanced $55,389 to the Company to pay expenses on behalf of the Company. The advances bear no interest, are unsecured, and due on demand.

 

During the nine months ended December 31, 2017, the Company purchased $134,064 in inventory from Pharma GP APS, a Company controlled by our CEO, which it sells via its online stores.

 

 

 VILACTO BIO INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2017

(UNAUDITED)

 

8. ROYALTY AGREEMENT

 

License agreement

 

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 $10,000 per month. During the nine months ended December 31, 2017, the Company recorded royalty expense of $90,000 related to this agreement.

 

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

 

9. SUBSEQUENT EVENT

 

The Company has evaluated events subsequent to the balance sheet through the issuance date of these financial statements in accordance with FASB ASC 855 and has determined that there are no such events that would require adjustment to, or disclosure in, the financial statements.

 

 

Item 2. 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 effect 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.

Company Overview

 

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 recently 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.

 

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, payable as $3,000,000 in cash and the balance in shares of our common stock.

 

 

The closing of the above transactions was expected to occur by May 31, 2017, but will likely not occur until the Company is able to successfully raise capital for the Purchase Price

 

Pharma GP ApS is a manufacturer of skincare products with distribution in several countries. The company’s body and facial creams are designed for moisturizing, skin regeneration, wound healing and a variety of skin issues, such as dry and cracked skin, among other things.

 

In addition, Pharma GP ApS owns patents, trademarks and production facilities for an ingredient designed to be used in pharmaceuticals and medical devices for treating a wide range of issues. Pharma GP ApS currently has skincare products that are available over the counter, which we are currently marketing under our website. However, the company intends to develop, market and sell pharmaceutical skincare products to treat various ailments using its patented technology. Currently, the company has no government approved products, but with the financing, we intend to purchase Pharma GP ApS and focus on those clinical applications.

 

Results of Operation for Three and Nine Months Ended December 31, 2017 and 2016

Revenues

 

We generated limited revenue for the three and nine months ended December 31, 2017 and no revenue in 2016. We have taken steps to further our business plan, including signing a licensing deal with Carmen Electra, expanding our operating facility, launching our e-commerce website, signing a distribution agreement and attending skin care conferences. However, we can provide no assurance that we will generate significant revenues from our skin care business to sustain a viable business operation.

 

Operating Expenses

 

Operating expenses increased to $99,040 for the three months ended December 31, 2017 from $2,767 for the three months ended December 31, 2016. Operating expenses increased to $228,075 for the nine months ended December 31, 2017 from $10,764 for the nine months ended December 31, 2016.

 

Our operating expenses for the three months ended December 31, 2017 consisted of royalty expense of $30,000, professional fees of $22,247 and general and administrative expenses of $46,784. Our operating expenses for the three months ended December 31, 2016 consisted of general and administrative expenses of $1,002 and professional fees of $1,765.

 

Our operating expenses for the nine months ended December 31, 2017 consisted of royalty expense of $90,000, professional fees of $57,029 and general and administrative expenses of $81,037. Our operating expenses for the nine months ended December 31, 2016 consisted of general and administrative expenses of $3,169 and professional fees of $7,595.

 

We expect that our operating expenses will likely increase in future quarters as we ramp up our online retail operations and, if we are able to obtain financing, acquire Pharma GP ApS and commence pharmaceutical applications.

 

Interest Expenses

 

We had interest expenses of $2,625 and $5,481 for the three and nine months ended December 31, 2017, respectively, compared with no interest expenses for the three and nine months ended December 31, 2016. We expect that interest expenses will increase in future quarters as we take on more debt to fund out operations.

 

Net Loss

 

Net loss for the three months ended December 31, 2017 was $101,446 compared to net loss of $2,767 for the three months ended December 31, 2016. Net loss for the nine months ended December 31, 2017 was $233,337 compared to net loss of $10,764 for the nine months ended December 31, 2016. Our losses for each period are attributable to operating expenses together with a lack of any revenues. 

 

 

Liquidity and Capital Resources

 

As of December 31, 2017, we had current assets of $206,265 consisting of cash, inventory and prepaid expenses. Our total current liabilities as of December 31, 2017 were $483,310. We therefore had a working capital deficit of $277,045 as of December 31, 2017.

 

Operating activities used $220,670 in cash for the nine months ended December 31, 2017, as compared with cash used of $11,070 for the same period ended 2016. Our negative operating cash flow for the nine month ended December 31, 2017 was mainly the result of our net loss for the period along with an increase in inventory and prepaid expenses, offset by a decrease in accounts payable.

 

Investing activities used $920 in cash for the nine months ended December 31, 2017, as compared with cash used of $0 for the same period ended 2016. The negative investing cash flow for the nine months ended December 31, 2017 was mainly the result of the purchase of intangible assets.

 

Financing activities provided $206,889 for the nine months ended December 31, 2017, as compared with cash provided of $11,022 for the same period ended 2016. Our positive financing cash flow for the nine months ended December 31, 2017 was mainly the result of proceeds from promissory notes and related party advances.

 

On October 8, 2017, we borrowed $65,000 under promissory note. The note is due on demand has annual interest at 5%. This money is earmarked for our working capital needs.

 

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.

 

Off Balance Sheet Arrangements

 

As of December 31, 2017, there were no off balance sheet arrangements.

 

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 no revenues as of December 31, 2017. We currently have limited 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 3 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.

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

 

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

 

Item 4.  Controls and Procedures

 

Disclosure Controls and Procedures

 

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2017.  This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2017, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of December 31, 2017, our disclosure controls and procedures were not effective: (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.

 

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

 

Our Company plans to take steps to enhance and improve the design of our internal controls over financial reporting.   To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending March 31, 2018: (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 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.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the three months ended December 31, 2017 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

 

 

PART II – OTHER INFORMATION

 

Item 1. 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 1A. Risk Factors

 

See risk factors included in our Annual Report on Form 10-K for 2017.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

N/A

 

Item 5. Other Information

 

None

 

Item 6. Exhibits

 

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, 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 Quarterly Report on Form 10-Q for the quarter ended December 31, 2017 formatted in Extensible Business Reporting Language (XBRL).
	**Provided herewith

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities 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.
Date:	February 14, 2018
By:	/s/ Gert Andersen
	Gert Andersen
Title:	President, Chief Executive Officer, and Director