NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – ORGANIZATION AND GOING CONCERN
Vitalibis is a socially conscious brand focused on people,
products and the planet. We are a seller of phyto-cannabinoid rich (PCR) hemp products, along with personal care and
nutritional products. We leverage our proprietary technology platform to maximize our innovative micro-influencer sales model,
which fosters engaged customer connections.
Vitalibis (the “Company”) was formed on
April 11, 2014, as a Nevada corporation, under the name of Crowd 4 Seeds, Inc.
On January 9, 2017, the Company filed with Secretary
of State of Nevada an Amendment to our Articles of Incorporation to change our name to Sheng Ying Entertainment Corp. On April
24, 2017, the Financial Industry Regulatory Authority (“FINRA”) approved the name change. The Company’s common
stock symbol was also changed from CWWD to SALL, effective April 25, 2017.
On January 18, 2018, our Board of Directors approved
an agreement and plan of merger to merge with and into our wholly-owned subsidiary, Vitalibis, Inc., a Nevada corporation, thereby
changing our name from Sheng Ying Entertainment Corp. to Vitalibis, Inc. Vitalibis, Inc. was formed solely to effect the change
of name and conducted no operations.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. The Company has suffered recurring losses and generated negative cash
flows from operations since inception. Due to these conditions, it raised substantial doubt about its ability to continue as a
going concern. The financial statements do not include any adjustments that may result should the Company be unable to continue
as a going concern.
NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of presentation
The unaudited interim financial statements have been
prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements
and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission.
Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United
States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited
financial statements contain all the adjustments necessary (consisting only of normal recurring adjustments) to present the financial
position of the Company as of June 30, 2018 and the results of operations and cash flows for the periods presented. The results
of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the operating results for the
full fiscal year. These financial statements should be read in conjunction with the financial statements and related notes thereto
included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. Notes to the financial statements
which would substantially duplicate the disclosure contained in the audited financial statements for the most recent year ended
December 31, 2017 have been omitted.
Stock-based Compensation
In the second quarter of 2018 the Company elected
to adopt ASU 2018-07 which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under
the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments
granted to employees. ASU 2018-07 requires an entity to use a modified retrospective transition approach, with a cumulative-effect
adjustment to retained earnings as of the beginning of the fiscal year. Upon adoption the Company recorded an adjustment to the
first quarter of 2018 of $188,165.
Inventories
Inventory is manufactured at third party facilities.
Inventories are stated at the lower of cost or net realizable value, using the first-in, first-out method. The Company reviews
its inventory for obsolescence and any inventory identified as obsolete is reserved or written off. The Company’s determination
of obsolescence is based on assumptions about the demand for its products, product expiration dates, estimated future sales, and
management’s future plans.
As of June 30, 2018 and December 31, 2017 inventory
consists of the following components:
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
Raw materials and supplies
|
|
$
|
28,806
|
|
|
$
|
–
|
|
Finished products
|
|
|
44,593
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Total inventory
|
|
$
|
73,399
|
|
|
$
|
–
|
|
Revenue Recognition
The Company recognizes revenue in accordance with
ASC Topic 606, Revenue from Contracts with Customers, which was adopted on January 1, 2018. All revenue is recognized when
the performance obligations under a contract are satisfied. Product sales are recognized when the products are delivered and title
passes to the customer. Net revenues comprise gross revenues less customer discounts and allowances, actual and expected returns.
Shipping charges billed to members are included in net sales. Various taxes on the sale of products and enrollment packages to
members are collected by the Company as an agent and remitted to the respective taxing authority. These taxes are presented on
a net basis and recorded as a liability until remitted to the respective taxing authority.
Deferred Revenue
The Company may at times receive payment by credit card at the time customer places an order. Amounts received for undelivered
product are considered a contract liability and are recorded as deferred revenue. As of June 30, 2018 and December 31, 2017 the
Company had no deferred revenue.
Cost of Sales
Cost of sales includes all of the costs to manufacture
the Company’s products. Products are manufactured for the Company by third-party contractors, such costs represent the amounts
invoiced by the contractors. Additionally, shipping costs are included in Cost of Sales in the Statements of Operations.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include
advertising and promotional costs and research and development costs. Also included in Selling, general and administrative expenses
are share-based compensation, certain warehousing fees, non-manufacturing overhead, personnel and related expenses, rent on operating
leases, and professional fees.
Advertising and promotional costs are expensed as
incurred and totaled $16,183 and $0 in the six months ended June 30, 2018 and 2017, respectively. Research and development
costs are expensed as incurred and totaled $1,698 and $0 for the six months ended June 30, 2018 and 2017, respectively.
Website Development Cost
We capitalize certain development costs associated
with internal use software incurred during the application development stage. We expense costs associated with preliminary project
phase activities, training, maintenance and any post-implementation period costs as incurred. Capitalization of qualifying application
development cost begins when management authorized and commits to funding the project and it is probable that the project will
be completed for the function intended. Capitalized internal use software costs are normally amortized over estimated useful lives
ranging from 2 to 5 years once the related project has been completed and deployed for customer use. At the time the software
is considered to have be an indefinite lived asset in which case it is evaluated for impairment at least annually. For the six
months ending June 30, 2018 we have capitalized $99,513 related to software under the criteria discussed in this paragraph. These
cost
are related to the development of our website and
customer portal and have not been placed in service as of June 30, 2018.
NOTE 3 – STOCKHOLDERS’
EQUITY (DEFICIT)
Common Stock
The
Company effected a 2.5 for 1 forward stock split of our
number of authorized
shares of the Common Stock and a corresponding increase in the number of issued and outstanding shares of Common Stock held by
each stockholder of record as of February 8, 2018, the “Effective Date” of the forward split, as set by
the
Financial Industry Regulatory Authority (
“FINRA”
). All shares referenced have been respectively adjusted to
reflect this stock split.
On
the Effective Date, our total authorized shares of Common Stock increased from 45,000,000 to 112,500,000 shares, and our total
issued and outstanding shares of Common Stock increased from 10,804,000 to 27,010,000 shares; the par value of $0.001 remained
the same. Any fractional shares resulting from the split were rounded up to the next whole number. The total authorized shares
of our Preferred Shares was not be affected and remained at 5,000,000.
In
March 2018, the Company issued 200,000 shares of common stock, valued at $200,000, to acquire a license from VOTOCAST, INC,. as
discussed in Note 4. It was determined to be a transaction with an entity under common control and the share issuance was determined
to be a deemed distribution to the related party for the value of the shares in excess of the historical carry over basis of the
asset.
During
the six months ended June 30, 2018, the Company sold 571,000 shares of its restricted common stock at a price of $1.00 per share,
for total net proceeds of $571,000.
During
the six months ended June 30, 2018, the Company issued a total of 950,000 shares of common stock to consultants. In addition,
the Company committed to issue an additional 500,000 of shares that will vest between May 2018 and February 2019. The Company
recorded $878,564 of compensation cost related to these shares.
During the six months ended June 30, 2018, the Company entered
into agreements with consultants to serve on the Advisory Board. The consultants were issued an aggregate total of 30,000 shares
of common stock, valued at $54,000. The shares were recorded as a prepaid expense and will be recognized over the three-month
services period. The agreements will renew on a quarterly basis, unless terminated at any time by either party.
NOTE 4 – TRANSACTION WITH RELATED PARTIES
In
March 2018, the Company entered into an Agreement with VOTOCAST, INC. dba newkleus, a California corporation formed and owned
by Steven Raack, the President, CEO and a Director of the Company. The Company will receive an exclusive license in the cannabis
industry for the state-of-the-art
newkleus
™ technology to (1) facilitate Vitalibis’ micro-influencer sales
model, and (2) enhance and compliment Vitalibis’ social media strategy.
The
Agreement grants Vitalibis™ an exclusive license for the newkleus patent-pending, user-generated content (UGC) technology
for all applications in the cannabis industry. The integration of the newkleus technology allows Vitalibis to create an interactive
digital community, while concurrently acquiring valuable user data and content, all of which Vitalibis anticipates will (1) increase
customer acquisition and retention, and (2) build direct, meaningful and loyal customer relationships.
The
Company paid 200,000 shares upon execution of the agreement and a monthly fee ranging from $0 to $2,000 depending of usage volume.
In addition, newkleus will provide operational and business development consulting services.
During the six months ended June 30,
2018, $200 of cash was contributed to the Company by the Chief Financial Officer to open the Company’s bank account.
NOTE 5 – SUBSEQUENT EVENTS
Subsequent to June 30, 2018, the Company issued a
total of 215,000 shares of its restricted common stock at a price of $1.00 per share, for a total net proceeds of $215,000.