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
|
|
|
|
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|
|
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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
|
|
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|
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|
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Preferred stock
Authorized: 10,000,000 shares with a par value of $0.001 per share
|
|
|
|
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|
|
|
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)
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
|
)
|
|
|
|
|
|
|
|
|
|
|
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|
Other income
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
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)
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)
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
|
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.
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)
|
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.
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.
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.
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)
|
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.
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.
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.
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.
|
GALA
GLOBAL INC.
Notes
to the Condensed Consolidated Financial Statements
For
the Three and Six months ended May 31, 2016 and 2015
(unaudited)
|
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.
|
|
(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.
|
|
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.
|
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.
|
|
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.
|
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
|
|
|
|
—
|
|
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.
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.
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
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.
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.