Company Quick10K Filing
Gala Pharmaceutical
Price0.00 EPS-0
Shares108 P/E-0
MCap0 P/FCF-0
Net Debt0 EBIT-3
TEV0 TEV/EBIT-0
TTM 2019-05-31, in MM, except price, ratios
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GLAG 10Q Quarterly Report

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Securities
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 exhibit31-1.htm
EX-32.1 exhibit32-1.htm

Gala Pharmaceutical Earnings 2016-05-31

Balance SheetIncome StatementCash Flow
0.4-0.3-1.0-1.6-2.3-3.02012201420172020
Assets, Equity
0.1-0.4-0.8-1.3-1.7-2.22012201420172020
Rev, G Profit, Net Income
0.30.20.1-0.1-0.2-0.32012201420172020
Ops, Inv, Fin

10-Q 1 glag-20160331_10q.htm GALA GLOABAL INC., 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[x]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended May 31, 2016

 

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT

 

For the transition period from _________ to _________

 

Commission File Number: 333-172744

 

GALA GLOBAL INC.

(Name of Small Business Issuer in its charter)

   
Nevada 42-1771014
(state or other jurisdiction of incorporation or organization) (I.R.S. Employer I.D. No.)
   

 2780 South Jones Blvd. #3725

Las Vegas, Nevada 89146

(Address of principal executive offices)

 

(775) 321-8238

Issuer’s telephone number

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was require 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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [ ] No [x] 

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

As of July 12, 2016 the registrant had 136,922,353 shares of common stock outstanding.

 

 

 

 

GALA GLOBAL INC.

 

Condensed Consolidated Financial Statements

(unaudited)

 

For the Three and Six Month Periods Ended May 31, 2016 and 2015

 

Condensed Consolidated Balance Sheets (unaudited) F-1
Condensed Consolidated Statements of Operations (unaudited) F-2
Condensed Consolidated Statements of Stockholders’ Deficit (unaudited) F-3
Condensed Consolidated Statements of Cash Flows (unaudited) F-4
Notes to the Condensed Consolidated Financial Statements (unaudited) F-5

 

 1 

 

  

GALA GLOBAL INC.

Condensed Consolidated Balance Sheets

(unaudited)

 

   May 31,
2016
$
  November 30,
2015
$
       
ASSETS          
           
Current assets          
           
Cash   2,073    1,804 
Inventory   2,241    2,701 
Inventory deposits   4,800    —   
Prepaid expenses – related parties   5,365    2,917 
           
Total assets   14,479    7,422 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
Current liabilities          
           
Accounts payable and accrued liabilities   13,446    28,050 
Accounts payable and accrued liabilities – related party   70,335    130,061 
Due to related parties   249,335    255,295 
Loan payable   45,000    —   
Loans payable - related parties   10,200    58,005 
           
Total liabilities   388,316    471,411 
           

STOCKHOLDERS’ DEFICIT

 

          
           

Preferred stock

Authorized: 10,000,000 shares with a par value of $0.001 per share

          
Issued and outstanding: 500,000 and nil shares, respectively.   500    —   
           

Common stock

Authorized: 500,000,000 shares with a par value of $0.001 per share

          
Issued and outstanding: 136,922,353 and 130,047,353 shares, respectively.   136,922    130,047 
           
Additional paid-in capital   651,183    472,501 
           
Accumulated Deficit   (1,162,442)   (1,066,537)
           
Total stockholders’ deficit   (373,837)   (463,989)
           
Total liabilities and stockholders’ deficit   14,479    7,422 

  

(The accompanying notes are an integral part of these condensed consolidated unaudited financial statements)

  

F-1 

 

  

GALA GLOBAL INC.

Condensed Consolidated Statements of Operations

(unaudited)

 

   Three months
ended
May 31,
2016
$
  Three months
ended
May 31,
2015
$
  Six months
ended
May 31,
2016
$
  Six months
ended
May 31,
2015
$
             
Operating expenses                    
                     
Bad debt   —      7,182    —      7,182 
Consulting fees   —      (17,500)   17,500    170,500 
Consulting fees – related party   8,907    12,500    15,365    51,950 
General and administrative   17,568    36,166    29,487    35,429 
General and administrative – related party   9,000    22,500    18,000    45,000 
Option expense on failed property acquisition - related party   —      35,500    —      46,000 
Rent   15,000    —      15,000    —   
                     
Total operating expenses   50,475    96,348    95,352    356,061 
                     
Loss before other expenses   (50,475)   (96,348)   (95,352)   (356,061)
                     
Other income                    
                     
Interest expense   (237)   —      (553)   —   
                     
Net loss   (50,712)   (96,348)   (95,905)   (356,061)
 Net loss per share, basic and diluted   (0.00)*   (0.00)*   (0.00)*   (0.00)*
 Weighted average common shares outstanding   136,922,353    124,205,860    136,062,978    122,189,180 

 

‘* denotes a loss of less than $(0.01).

 

(The accompanying notes are an integral part of these condensed consolidated unaudited financial statements)

 

F-2 

 

 

GALA GLOBAL INC.

Consolidated Statements of Changes in Stockholders’ Deficit

(unaudited)

 

   Preferred stock  Common stock  Additional     
   Shares  Par value  Shares  Par value  paid-in capital  Accumulated Deficit  Total
   #  $  #  $  $  $  $
                      
Balance, November 30, 2015   —      —      130,047,353    130,047    472,501    (1,066,537)   (463,989)
                                    
Shares issued for consulting services – related party   —      —      4,375,000    4,375    66,562    —      70,937 
                                    
Shares issued for consulting services   —      —      2,500,000    2,500    40,000    —      42,500 
                                    
Shares issued for conversion of debt   500,000    500    —      —      72,120    —      72,620 
                                    
Net loss for the period   —      —      —      —      —      (95,905)   (95,905)
Balance, May 31, 2016   500,000    500    136,922,353    136,922    651,183    (1,162,442)   (373,837)

  

(The accompanying notes are an integral part of these condensed consolidated unaudited financial statements)

 

F-3 

 

 

GALA GLOBAL INC.

Consolidated Statements of Cash Flows

(unaudited)

 

    For the Six Months Ended May 31,
2016
$
  For the Six Months Ended May 31,
2015
$
       
Operating activities          
           
Net loss   (95,905)   (356,061)
           
Adjustments to reconcile net loss to net cash used in operating activities:          
           
Bad debt provision   —      7,182 
Stock-based compensation   17,500    271,000 
Stock-based compensation – related party   —      76,950 
Shares issued for extension of property option – related party   —      28,000 
           
Changes in operating assets and liabilities:          
Inventory   460    (5,000)
Inventory deposits   (4,800)   —   
Prepaid expenses   —      (125,500)
Prepaid expenses – related party   15,364    —   
Accounts payable and accrued liabilities   10,396    (4,078)
Accounts payable and accrued liabilities – related party   18,214    45,000 
           
Net cash used in operating activities   (38,771)   (62,507)
           
Investing activities          
           
Advances under loan receivable   —      (12,467)
Repayment of note receivable   —      5,285 
         —   
Net cash used in investing activities   —      (7,182)
           
Financing activities          
           
Proceeds from related party debt   —      69,689 
Repayments of related party debt   (5,960)   —   
Proceeds from loan payable   45,000    —   
           
Net cash provided by financing activities   39,040    69,689 
           
Increase in cash   269    —   
           
Cash, beginning of period   1,804    —   
           
Cash, end of period   2,073    —   
           
Non-cash investing and financing activities:          
           
Common shares issued for consulting services   17,500    —   
Common shares issued for payment of outstanding payables   25,000    —   
Common shares issued for intangible assets   —      63,750 
Preferred shares issued to settle related party payables   24,603    —   
Preferred shares issued to settle loans payable related party   47,805    —   
           
Supplemental disclosures:          
           
Interest paid   —      —   
Income tax paid   —      —   

  

(The accompanying notes are an integral part of these condensed consolidated unaudited financial statements)

 

F-4 

 

 

GALA GLOBAL INC.

Notes to the Condensed Consolidated Financial Statements

For the Three and Six months ended May 31, 2016 and 2015

(unaudited)

 

1.Organization and Nature of Operations

 

Gala Global Inc. (the “Company”) was incorporated in the State of Nevada on March 10, 2010. The Company was formed to provide garment tailoring and alteration services.

 

On May 19, 2014, a change in control of the Company occurred when IDG Ventures Ltd. sold all of its 3,547,000 common shares, representing 60.04% of our issued and outstanding common shares, in a private share purchase transaction to Messrs Haas, Lefevre and Naccarato.

 

On June 26, 2014, the Company had a change in management when Mr. Robert Frei resigned as President and Director of the Company and Mr. Lefevre was appointed as his successor. Concurrent with the change of management, the Company acquired two 100% owned subsidiary companies, Cannabis Ventures Inc (USA), incorporated on February 27, 2014 in the state of Nevada and Cannabis Ventures Inc. (Canada), incorporated on April 9, 2014 in Vancouver, British Columbia. Neither of these subsidiary companies had traded prior to their acquisition by the Company other than as described below.

 

The Company, since its change in management effective June 26, 2014, has expanded into the Hemp and Cannabidiol (“CBD”) industry. The expansion is focusing on the development, research, and commercialization of products derived from the Hemp and Cannabis plant. The Company currently is finalizing its marketing strategy for a new CBD flavored thin-film strip. The film strip delivery system uses a dissolving film strip that is absorbed in the mouth. The film-strip method is an advanced method of providing CBD for dietary supplement. The Company also is seeking acquisition candidates in this area of interest in the nutraceutical and pharmaceutical industries. The Company also plans to enter into the medical marijuana cultivation industry as approved in the United States and Canada to build legalized cultivation operations.

 

The Company’s services include the development of cannabinoid based health and wellness products; the development of medical grade compounds; the licensing of proprietary testing, genetics, labeling and packaging, tracking, production, and standardization methods for the medicinal herb industry.

 

Going Concern

 

These consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As at May 31, 2016, the Company has a working capital deficit of $373,837 and an accumulated deficit of $1,162,442. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

2.Summary of Significant Accounting Policies

 

a)Basis of Presentation

 

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. The Company’s fiscal year end is November 30.

 

b)Principles of Consolidation

 

These consolidated financial statements include the accounts of the Company and its three wholly owned subsidiaries, Cannabis Ventures Inc. (USA), Cannabis Ventures Inc. (Canada), CBD Life, Inc, from the date of their acquisition by the Company effective June 26, 2014. All inter-company transactions and balances have been eliminated on consolidation.

  

F-5 

 

 

 

GALA GLOBAL INC.

Notes to the Condensed Consolidated Financial Statements

For the Three and Six months ended May 31, 2016 and 2015

(unaudited)

 

2.Summary of Significant Accounting Policies (continued)

 

c)Use of Estimates

 

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. The Company regularly evaluates estimates and assumptions related to the recoverability of long-lived assets and investments, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

d)Interim Financial Statements

 

The accompanying unaudited financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In management’s opinion the financial statements include all adjustments (consisting of normal recurring accruals) necessary in order to make the financial statements not misleading. Operating results for the three and six months ended May 31, 2016 are not necessarily indicative of the results that may be expected for the year ended November 30, 2016. For more complete financial information, these unaudited financial statements should be read in conjunction with the audited financial statements for the year ended November 30, 2015 included in our Form 10-K filed with the SEC.

 

e)Inventory

 

Inventory is comprised of Vape Mods purchased for resale, and is recorded at the lower of cost or net realizable value on a first-in first-out basis. The Company establishes inventory reserves for estimated obsolete or unsaleable inventory equal to the difference between the cost of inventory and the estimated realizable value based upon assumptions about future market conditions.

 

f)Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. As of May 31, 2016 and November 30, 2015, there were no cash equivalents.

 

g)Financial Instruments

 

Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, loans payable to related parties, loan payable, and amounts due to related party. The recorded values of all these financial instruments approximate their current fair values because of the short term nature of these financial instruments.

  

F-6 

 

  

GALA GLOBAL INC.

Notes to the Condensed Consolidated Financial Statements

For the Three and Six months ended May 31, 2016 and 2015

(unaudited)

 

2.Summary of Significant Accounting Policies (continued)

  

h)Income Taxes

 

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Accounting for Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. 

 

i)Revenue Recognition

 

The Company earns revenue from the sale of Vape Mods, which are modified electronic cigarettes and vape pens. Revenue will be recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service has been provided, and collectability is assured. The Company is not exposed to any credit risks as amounts are prepaid prior to performance of services.

 

j)Stock-based Compensation

 

The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

 

k)Basic and Diluted Net Loss per Share

 

The Company computes net income (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. No potentially dilutive debt or equity instruments were issued and outstanding during the three and six months ended May 31, 2016 and 2015.

 

l)Reclassifications

 

Prior year amounts have been reclassified to conform to the current period presentation. There were no changes balance sheet, statement of operations or statement cash flow totals.

 

m)Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

F-7 

 

 

GALA GLOBAL INC.

Notes to the Condensed Consolidated Financial Statements

For the Three and Six months ended May 31, 2016 and 2015

(unaudited)

 

3.Related Party Transactions

 

a)During the three and six months ended May 31, 2016, the Company issued 625,000 shares of common stock with a fair value of $10,625 to the Chief Executive Officer of the Company for services as a director of the Company. During the three and six months ended May 31, 2016, the Company incurred consulting services of $5,313 (2015 - $5,833) and $11,771 (2015 - $5,833), respectively. As at May 31, 2016, the Company had a prepaid expense balance of $1,771 (2015 - $2,917) to the Chief Executive Officer of the Company related to these services.

 

b)At February 29, 2016, the Company issued 625,000 common shares with a fair value of $7,187 to the Chief Financial Officer for Chief Financial Officer consulting services. During the three and six months ended May 31, 2016, the Company incurred consulting services of $3,594 (2015 - $nil). As at May 31, 2016, the Company had a prepaid expense balance of $3,594 (2015 - $nil) to the Chief Financial Officer of the Company related to these services.

 

c)As at May 31, 2016, the Company owed $249,335 (2015 - $255,295) to a company controlled by a significant shareholder of the Company to fund payment of operating expenditures. The amount owed is unsecured, non-interest bearing, and due on demand.

  

d)As at May 31, 2016, the Company owed $10,000 (2015 - $10,000) to a company controlled by a significant shareholder of the Company. The amount due is unsecured, non-interest bearing, and due on demand.

 

e)As at May 31, 2016, the Company owed a $200 (2015 - $200) to the Chief Executive Officer of the Company. The amount due is unsecured, bears interest at 1% per annum, and due 180 days from the date of issuance. As at May 31, 2016, accrued interest of $1 (2015 - $nil) has been included in accounts payable and accrued liabilities.

 

f)As at May 31, 2016, the Company owed $nil (2015 - $42,000) to a significant shareholder of the Company. The amount due was unsecured, bore interest at 3% per annum, and was due 180 days from the date of issuance. As at May 31, 2016, accrued interest of $nil (2015 - $435) was included in accounts payable and accrued liabilities. On January 27, 2016, the Company issued 333,334 shares of preferred stock to the loan holder as a part of settling all of the outstanding debt and accrued interest.

 

g)As at May 31, 2016, the Company owed $nil (2015 - $5,000) to a significant shareholder of the Company. The amount due was unsecured, bears interest at 1% per annum, and due 180 days from the date of issuance. As at May 31, 2016, accrued interest of $nil (2015 - $1) has been included in accounts payable and accrued liabilities – related party. On January 27, 2016, the Company issued 333,334 shares of preferred stock to the loan holder as a part of settling all of the outstanding debt and accrued interest.

 

h)As at May 31, 2016, the Company owed $nil (2015 - $805) to a significant shareholder of the Company. The amount due is unsecured, bore interest at 1% per annum, and was due 180 days from the date of issuance. On January 27, 2016, the Company issued 333,334 shares of preferred stock to the loan holder as a part of settling all of the outstanding debt and accrued interest.

 

i)As at May 31, 2016, the Company owed $70,333 (2015 - $76,500) to a significant shareholder of the Company, which has been recorded in accounts payable and accrued liabilities – related party. The amount is unsecured, non-interest bearing, and due on demand. During the six months ended May 31, 2016, the Company incurred legal fees of $18,000 (2015 - $22,500) to this significant shareholder. On January 27, 2016, the Company issued 166,666 shares of preferred stock to settle outstanding debt owed to the related party of $24,167.

 

F-8 

 

 

GALA GLOBAL INC.

Notes to the Condensed Consolidated Financial Statements

For the Three and Six months ended May 31, 2016 and 2015

(unaudited)

  

4.Loan Payable

 

a)On December 29, 2015, the Company issued a $20,000 promissory note to an unrelated party. Under the terms of the note, the amount due is unsecured, bears interest at 3%, and is due 180 days from the date of issuance.

 

b)On April 19, 2016, the Company issued a $3,000 promissory note to an unrelated party. Under the terms of the note, the amount due is unsecured, bears interest at 3% per annum, and is due 180 days from the date of issuance.

 

c)On April 22, 2016, the Company issued a $22,000 promissory note to an unrelated party. Under the terms of the note, the amount due is unsecured, bears interest at 3% per annum, and is due 180 days from the date of issuance.

 

5.Stockholders’ Equity

 

(a)On December 23, 2015, the Company issued 1,250,000 shares of common stock with a fair value of $25,000 to a consultant pursuant to a consulting agreement dated May 1, 2015.

 

(b)On December 23, 2015, the Company issued 2,500,000 of shares of common stock with a fair value of $39,063 to the Chief Financial Officer and director of the Company pursuant to the agreement dated September 1, 2015. 1,250,000 shares were issued for the consultant’s services as a director, and 1,250,000 shares for services as the Company’s Chief Financial Officer.

 

(c)On December 23, 2015, the Company issued 1,250,000 of shares of common stock with a fair value of $21,250 to the Chief Executive Officer of the Company for the consultant’s services as a director pursuant to the consulting agreement dated September 1, 2015.

 

(d)On December 23, 2015, the Company issued 625,000 of shares of common stock with a fair value of $10,625 to the Chief Executive Officer of the Company for services as the Company’s Chief Executive Officer pursuant to the consulting agreement dated June 29, 2015.

 

(e)On December 23, 2015, the Company issued 1,250,000 of shares of common stock with a fair value of $17,500 to a consultant pursuant to a consulting agreement dated December 14, 2015.

 

(f)On January 27, 2016, the Company issued 500,000 shares of preferred stock to significant shareholders to settle debt of $72,620. Each preferred share is entitled to receive dividends when and if declared by the Company’s board of directors, has 500 to 1 voting power and liquidation rights in the amount of the shares; par value in accordance with the Company’s certificate of designation. Of the 500,000 shares issued, 166,666 shares were issued to a significant shareholder to settle outstanding payables to a significant shareholder of $24,167, and the remaining 333,334 shares are issued to another significant shareholder to settle debts of $42,638, $5,009, and $806 described at Note 5 for a total of $48,453 in outstanding principal and accrued interest.

 

6.Commitments

  

a)On May 1, 2015, the Company entered into a consulting agreement for marketing and promotion services. Pursuant to the agreement, the consultant is to be compensated by being issued 1,250,000 shares of common stock on an annual basis until the agreement is cancelled or terminated. Either party may terminate the agreement by providing written thirty days notice.

 

b)On June 29, 2015, the Company entered into a consulting agreement with the Chief Executive Officer of the Company for consulting services relating to the cannabis industry. Pursuant to the agreement, the Company is to issue 625,000 shares of common stock to the consultant upon execution of the agreement (issued) and every six months thereafter as compensation. Either party may terminate the agreement by providing written thirty days notice.

 

F-9 

 

 

GALA GLOBAL INC.

Notes to the Condensed Consolidated Financial Statements

For the Three and Six months ended May 31, 2016 and 2015

(unaudited)

 

6.Commitments (continued)

  

c)On September 1, 2015, the Company entered into an agreement with the Chief Executive Officer of the Company for assuming the role as Chief Executive Officer. Pursuant to the agreement, the Company is to issue 1,250,000 shares of common stock to the Chief Executive Officer upon execution and every twelve months thereafter. The agreement shall be terminated upon mutual agreement with the Company and the Chief Executive Officer.

 

d)On September 1, 2015, the Company entered into an agreement with the Chief Financial Officer of the Company. Pursuant to the agreement, the Company is to issue 1,250,000 shares of common stock to the Chief Financial Officer upon execution and every twelve months thereafter as compensation for being the Chief Financial Officer. The Company shall also issue an additional 625,000 shares of common stock to the Chief Financial Officer upon execution and every six months as compensation for being a director. The agreement shall be terminated upon mutual agreement with the Company and the Chief Financial Officer.

 

e)On December 14, 2015, the Company entered into a consulting agreement for marketing and promotion services. Pursuant to the agreement, the consultant is to be compensated by being issued 1,250,000 shares of common stock on an annual basis until the agreement is cancelled or terminated. Either party may terminate the agreement by providing written thirty days’ notice.

 

7.Subsequent Events

 

a)On June 3, 2016, the Company issued a $20,000 promissory note to an unrelated party. Under the terms of the note, the amount due is unsecured, bears interest at 3%, and is due 180 days from the date of issuance.

 

F-10 

 

 

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Safe Harbor Statement

 

This report on Form 10-Q contains certain forward-looking statements.  All statements other than statements of historical fact are “forward-looking statements” for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.

 

These forward-looking statements involve significant risks and uncertainties, including, but not limited to, the following: competition, promotional costs, and risk of declining revenues.  Our actual results could differ materially from those anticipated in such forward-looking statements as a result of a number of factors.  These forward-looking statements are made as of the date of this filing, and we assume no obligation to update such forward-looking statements.  The following discusses our financial condition and results of operations based upon our financial statements which have been prepared in conformity with accounting principles generally accepted in the United States.  It should be read in conjunction with our financial statements and the notes thereto included elsewhere herein.

 

The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this Form 10-Q.  The discussions of results, causes and trends should not be construed to imply any conclusion that these results or trends will necessarily continue into the future.

 

RESULTS OF OPERATIONS

 

Working Capital

 

   May 31,
2016
$
  November 30,
2015
$
Current Assets   14,479    7,422 
Current Liabilities   388,316    471,411 
Working Capital (Deficit)   (373,837)   (463,989)

 

Cash Flows

 

   Six months ended May 31,
2016
$
  Six months ended May 31,
2015
$
Cash Flows from (used in) Operating Activities   (38,771)   (62,507)
Cash Flows from (used in) Investing  Activities   —      (7,182)
Cash Flows from (used in) Financing Activities   39,040    69,689 
Net Increase (decrease) in Cash During Period   269    —   

 

 2 

 

 

Operating Expenses

 

Three Months Ended May 31, 2016 and 2015

 

During the three months ended May 31, 2016, the Company incurred operating expenses of $50,475 compared with $96,348 during the three months ended May 31, 2015. The Company recorded $7,182 in bad debts during the three months ended May 31, 2015 due to an uncollectible notes receivable balance. The Company recorded a $17,500 correction of consulting fees during the three months ended May 31, 2015 to reflect the cost of consulting fees incurred during the six months ended May 31, 2015. Consulting fees incurred to related parties for management services decreased by $3,593 due to a reduction in the number of officers and directors compensated. General and administrative expenses decreased by $18,598 due to a general decrease in operating activities. General and administrative expenses charged by related parties decreased $13,500 due to a reduction in the rates charge by the Company’s related party for legal fees. The Company terminated its property acquisition agreement for the British Columbia, Canada property at the end of 2015 resulting in a reduction of $35,500 in option payments from the prior period. The Company entered into a lease for a new facility during the three months ended May 31, 2016 resulting in $15,000 of rent expense.

 

Six Months Ended May 31, 2016 and 2015

 

During the six months ended May 31, 2016, the Company incurred operating expenses of $95,352 compared with $356,061 during the six months ended May 31, 2015. The Company reduced consulting expense by $153,000 during the six months ended May 31, 2016 compared to the six months ended May 31, 2015 due to the Company focusing on the commercialization of products derived from the Hemp and Cannabis plant. Consulting fees incurred to related parties for management services decreased by $36,585 due to a reduction in the number of officers and directors compensated in the during the six months ended May 31, 2016. General and administrative expenses decreased by $5,942 due to a general decrease in operations. General and administrative expenses charged by related parties decreased by $27,000 when compared to the six months ended May 31, 2015 due to a reduction in the rates charge by the Company’s related party for legal fees. The Company terminated its property acquisition agreement for the British Columbia, Canada property at the end of 2015 resulting in a reduction of $46,000 in option payments from the prior period. The Company entered into a lease for a new facility during the three months ended May 31, 2016 resulting in $15,000 of rent expense.

  

Net Loss

 

During the three months ended May 31, 2016, the Company incurred a net loss of $50,712 and a net loss per share of $0.00 compared with a net loss of $96,348 and a net loss per share of $0.00 for the three months ended May 31, 2015 due to the factors discussed above.

 

During the six months ended May 31, 2016, the Company incurred a net loss of $95,352 and a net loss per share of $0.00 compared with a net loss of $356,061 and a net loss per share of $0.00 for the six months ended May 31, 2015 due to the factors discussed above.

 

Liquidity and Capital Resources

 

As of May 31, 2016, the Company has a working capital deficit of $373,837, and an accumulated deficit of $1,162,442. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

 3 

 

 

Cash flow from Operating Activities

 

During the six months ended May 31, 2016, the Company used $38,771 of cash in operating activities compared to the use of $62,507 of cash for operating activities during the six months ended May 31, 2015 for a decrease of $23,736 in cash used in operating activities. The decrease in cash used for operating activities is due to a decrease in the overall operating activity of the Company compared to prior year.

 

Cash flow from Investing Activities

 

During the six months ended May 31, 2016, the Company used $nil of cash for investing activities compared with $7,182 during the six months ended May 31, 2015. The decrease in the use of cash is due to the fact that the Company had advanced $12,467 to an unrelated party during the period ended May 31, 2015. In the prior year, the Company entered into a promissory note agreement and advanced $12,467 to an unrelated party. The Company received a repayment of $5,285, and deemed the remaining balance to be uncollectible. Consequently, the Company recognized bad debt of $7,182 on the loan receivable for uncollectible principal and interest.

 

Cash flow from Financing Activities

 

During the six months ended May 31, 2016, the Company received $39,040 of cash from financing activities compared with $69,689 during the six months ended May 31, 2015. During the current period, the Company received $45,000 as loans from unrelated parties, offset by $5,960 paid to a related party for amounts owed. During the prior period, the Company received $69,689 in advances from related parties.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

Subsequent Events

 

One June 3, 2016, the Company issued a $20,000 promissory note to an unrelated party. Under the terms of the note, the amount due is unsecured, bears interest at 3%, and is due 180 days from the date of issuance.

 

Going Concern

 

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.

 

Future Financings

 

We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and activities.

 

Critical Accounting Policies

 

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

 4 

 

 

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in note (1) of the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

 

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 amounts reported in the financial statements and accompanying notes for the reporting period. Significant areas requiring the use of management estimates relate to the valuation of its mineral leases and claims and our ability to obtain final government permission to complete the project.

 

Stock-Based Compensation

 

The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

 

Recently Issued Accounting Pronouncements

 

The Company has reviewed all the recently issued, but not yet effective, accounting pronouncements and does not believe that the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations as reported in its financial statements.

 

Contractual Obligations

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 4.  CONTROLS AND PROCEDURES

 

Management's Report on Internal Control over Financial Reporting.

 

Our Internal control over financial reporting is a process that, under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, was designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our trustees; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

 

 5 

 

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that our controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

As management, it is our responsibility to establish and maintain adequate internal control over financial reporting.  As of May 31, 2016, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our internal control over financial reporting using criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").  Based on our evaluation, we concluded that the Company has not maintained effective internal control over financial reporting as of May 31, 2016, based on criteria established in the Internal Control Integrated Framework issued by the COSO.

 

This quarterly report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting.  Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this quarterly report.

 

Evaluation of disclosure controls and procedures.

 

As of May 31, 2016, the Company's chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act.  Based upon the evaluation of these controls and procedures, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of the date of filing this annual report applicable for the period covered by this report.

 

Changes in internal controls.  

 

During the period covered by this report, no changes occurred in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

ITEM 1.  LEGAL PROCEEDINGS

 

As of May 31, 2016 there are no material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we or any of our subsidiaries are a party or of which any of our properties is the subject.  Also, our management is not aware of any legal proceedings contemplated by any governmental authority against us.

 

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS SECURITIES

 

For the six months ended May 31, 2016, 6,875,000 shares of common stock for consulting services, and 500,000 shares of preferred stock were issued for conversion of debt. No unregistered sales of equity securities were completed during the six months ended May 31, 2016.

 

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

  

No senior securities were issued or outstanding during the six months ended May 31, 2016 and 2015.

  

ITEM 4.  MINE SAFETY DISCLOSURES

 

Not applicable to our Company.

 

ITEM 5.  OTHER INFORMATION

 

None noted.

 

 6 

 

 

ITEM 6.  EXHIBITS

 

Exhibit

Number

Exhibit

Description

31.1 Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act 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
EX-101.INS XBRL Instance Document
EX-101.SCH XBRL Taxonomy Extension Schema
EX-101.CAL XBRL Taxonomy Extension Calculation Linkbase
EX-101.LAB XBRL Taxonomy Extension Label Linkbase
EX-101.PRE XBRL Taxonomy Extension Presentation Linkbase
EX-101.DEF XBRL Taxonomy Extension Definition Linkbase

 

 7 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on our behalf by the undersigned thereunto duly authorized.

 

 

     
  GALA GLOBAL INC.
    (REGISTRANT)
   
Date:  July 15, 2016 /s/   Calvin Frye
    Calvin Frye
    Chief Executive Officer, Chief Financial Officer and Director
    (Authorized Officer for Registrant)

   

 8