(The accompanying notes to are an integral
part of these condensed consolidated financial statements)
(The accompanying notes to are an integral
part of these condensed consolidated financial statements)
(The accompanying notes to are an integral
part of these condensed consolidated financial statements)
(The accompanying notes to are an integral part of these condensed
consolidated financial statements)
Notes to the Condensed Consolidated Financial
Statements
For the period ended February 28, 2019
(unaudited)
|
1.
|
Organization and Nature of Operations
|
Gala Pharmaceutical Inc. (the
“Company” or “GPI”) was incorporated in the State of Nevada on March 10, 2010. The Company provides Testing
or Analytical Chemistry tools for chemical, plant, soil, and liquid composition analysis. GPI provides analysis of compositional
traits for hemp and cannabis products (cannabinoid, terpenes, pesticides, residual solvents and microbial). The analysis is being
done at certified labs with persistent results.
The Company also provides genetic
“fingerprinting” and “sequencing” of various crop species. This fingerprinting allows for storing genetic
fingerprint information into a proprietary database. Customers can access genetic fingerprint data which can be used for predictive
breeding applications and for protecting intellectual property (IP). Additionally, the Company can develop new genetics by using
state of the art breeding technology and provides tissue culture and cloning services. These clones are guaranteed to be disease
free, chemical free and healthy and robust.
Additionally, the Company provides
consulting on testing and manufacturing lab designs and SOPs. The Company provides services to customers for building turnkey
labs, drug formulations and troubleshooting. It has highly qualified professionals to bring productivity and efficiency within
your current resources.
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 February 28, 2019, the Company has a working capital deficit
of $1,389,598 and an accumulated deficit of $5,654,618. 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
|
These consolidated 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 subsidiaries: 51% ownership of Gala Pharmaceutical (California), Inc. (“Gala
California”) from February 7, 2018 (date of incorporation) to current date, and 100% ownership of Cannabis Ventures Inc (USA),
Cannabis Ventures Inc. (Canada), and CBD Life, Inc. until the sale of these subsidiaries on June 20, 2018. All inter-company transactions
and balances have been eliminated on consolidation and the proportionate net income/loss on the 49% non-controlling interest has
been deducted from the Company’s net loss on the consolidated statement of operations commencing with a corresponding entry
within stockholders’ deficit.
GALA PHARMACEUTICAL INC.
Notes to the Condensed Consolidated Financial
Statements
For the period ended February 28, 2019
(unaudited)
|
2.
|
Summary of Significant Accounting Policies
(continued)
|
|
|
(c)
|
Interim Financial Statements
|
The accompanying unaudited consolidated
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 months ended February 28, 2019 are not
necessarily indicative of the results that may be expected for the year ended November 30, 2019. 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, 2018 included in our Form 10-K filed with the SEC.
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 valuation of inventory, valuation of derivative liability and share-based compensation, 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.
|
|
(e)
|
Financial Instruments
|
Pursuant to ASC 820,
Fair
Value Measurements and Disclosures
, an entity is required to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective
evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value
hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs
into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or
liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or
liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices
for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient
volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable
or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or
liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the
fair value of the assets or liabilities.
GALA PHARMACEUTICAL INC.
Notes to the Condensed Consolidated Financial
Statements
For the period ended February 28, 2019
(unaudited)
|
2.
|
Summary of Significant Accounting Policies
(continued)
|
|
|
(e)
|
Financial Instruments (continued)
|
The Company’s financial
instruments consist principally of cash, marketable securities, accounts payable and accrued liabilities, accounts payable and
accrued liabilities – related parties, loans payable, loans payable – related parties, convertible debt, derivative
liabilities, and amounts due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level
1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial
instruments approximate their current fair values because of their nature and respective maturity dates or durations.
The following table represents
assets and liabilities that are measured and recognized in fair value as of February 28, 2019, on a recurring basis:
|
|
|
Level 1
$
|
|
|
Level 2
$
|
|
|
Level 3
$
|
|
|
Total gains and (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities
|
|
|
37,200
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(4,600
|
)
|
|
Warrant liability
|
|
|
–
|
|
|
|
–
|
|
|
|
(5,885
|
)
|
|
|
–
|
|
|
Derivative liabilities
|
|
|
–
|
|
|
|
–
|
|
|
|
(994,126
|
)
|
|
|
(353,949
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
37,200
|
|
|
|
–
|
|
|
|
(1,000,011
|
)
|
|
|
(358,549
|
)
|
The following table represents
assets and liabilities that are measured and recognized in fair value as of November 30, 2018, on a recurring basis:
|
|
|
Level 1
$
|
|
|
Level 2
$
|
|
|
Level 3
$
|
|
|
Total gains and (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities
|
|
|
41,800
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(30,000
|
)
|
|
Warrant liability
|
|
|
–
|
|
|
|
–
|
|
|
|
(5,695
|
)
|
|
|
–
|
|
|
Derivative liabilities
|
|
|
–
|
|
|
|
–
|
|
|
|
(458,109
|
)
|
|
|
(257,861
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
41,800
|
|
|
|
–
|
|
|
|
(463,804
|
)
|
|
|
(287,861
|
)
|
|
|
(f)
|
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 periods ended February 28, 2019 and November 30, 2018. As at February 28, 2019, the Company had
60,532,565 (November 30, 2018 – 12,254,104) potentially issuable shares from outstanding convertible notes and share purchase
warrants.
GALA PHARMACEUTICAL INC.
Notes to the Condensed Consolidated Financial
Statements
For the period ended February 28, 2019
(unaudited)
|
2.
|
Summary of Significant Accounting Policies
(continued)
|
|
|
(g)
|
Recent Accounting Pronouncements
|
In August 2018, the FASB issued
guidance to improve the effectiveness of fair value measurement disclosures by removing or modifying certain disclosure requirements
and adding other requirements. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2019, with early adoption permitted. Certain amendments should be applied prospectively, while all other amendments
should be applied retrospectively to all periods presented. The Company is currently evaluating the impact of the new guidance.
In February 2018, the FASB issued
guidance that permits the Company to reclassify disproportionate tax effects in accumulated other comprehensive income caused by
the Tax Cuts and Jobs Act of 2017 to retained earnings. The guidance is effective for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact
of the new guidance.
In July 2017, the FASB issued
ASU 2017-11 which simplifies the accounting for certain financial instruments with down round features. The new standard will reduce
income statement volatility for companies that issue warrants and convertible instruments containing such features. The guidance
is effective for fiscal years beginning after December 15, 2018 with early adoption permitted. The Company is currently evaluating
the impact of the new guidance.
In June 2016, the FASB issued
a new credit loss standard that replaces the incurred loss impairment methodology in current GAAP. The new impairment model requires
immediate recognition of estimated credit losses expected to occur for most financial assets and certain other instruments. It
is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those annual periods. Early
adoption for fiscal years beginning after December 15, 2018 is permitted. Entities will apply the standard’s provisions as
a cumulative-effect adjustment to retained earnings as of the beginning of the first effective reporting period. The Company is
currently evaluating the impact of the new guidance.
In February 2016, the FASB issued
new lease accounting guidance in ASU No. 2016-02, “
Leases
”. This new guidance was initiated as a joint project
with the International Accounting Standards Board to simplify lease accounting and improve the quality of and comparability of
financial information for users. This new guidance would eliminate the concept of off-balance sheet treatment for “operating
leases” for lessees for the vast majority of lease contracts. Under ASU No. 2016-02, at inception, a lessee must classify
all leases with a term of over one year as either finance or operating, with both classifications resulting in the recognition
of a defined “right-of-use” asset and a lease liability on the balance sheet. However, recognition in the income statement
will differ depending on the lease classification, with finance leases recognizing the amortization of the right-of-use asset separate
from the interest on the lease liability and operating leases recognizing a single total lease expense. Lessor accounting under
ASU No. 2016-02 would be substantially unchanged from the previous lease requirements under GAAP. ASU No. 2016-02 will take effect
for public companies in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early
adoption is permitted and for leases existing at, or entered into after, the beginning of the earliest comparative period presented
in the financial statements, lessees and lessors must apply a modified retrospective transition approach. The Company is currently
evaluating the new guidance and has not determined the impact this standard may have on the consolidated financial statements.
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 PHARMACEUTICAL INC.
Notes to the Condensed Consolidated Financial
Statements
For the period ended February 28, 2019
(unaudited)
|
2.
|
Summary of Significant Accounting Policies
(continued)
|
|
|
(g)
|
Recently Adopted Accounting Pronouncements
|
In January 2016, the FASB issued
new guidance which amends various aspects of the recognition, measurement, presentation, and disclosure of financial instruments.
With respect to the Company’s consolidated financial statements, the most significant impact relates to the accounting for
equity investments (other than those that are consolidated or accounted under the equity method) which will be measured at fair
value through earnings. The new guidance is effective for annual reporting periods, and interim periods within those years beginning
after December 15, 2017, with early adoption permitted only for certain provisions. The amendments should be applied by means of
a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, with other amendments related
specifically to equity securities without readily determinable fair values applied prospectively. The adoption did not have a material
impact on the Company's consolidated financial statements.
Deferred compensation
is comprised of common shares issued to officers and directors of the Company for compensation services. During the three months
ended February 28 2019, the Company recorded $42,535 (February 28, 2018 - $120,822) of compensation expense and the remaining $74,486
(November 30, 2018 - $117,021) was recorded as deferred compensation within shareholders’ equity.
|
|
|
Cost
$
|
|
|
Accumulated amortization
$
|
|
|
February 28,
2019
$
|
|
|
November 30,
2018
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery
|
|
|
51,449
|
|
|
|
19,012
|
|
|
|
32,437
|
|
|
|
35,160
|
|
|
Leasehold improvements
|
|
|
6,703
|
|
|
|
–
|
|
|
|
6,703
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,152
|
|
|
|
19,012
|
|
|
|
39,140
|
|
|
|
35,160
|
|
During the
three months ended February 28, 2019, the Company recorded $2,723 (February 28, 2018 - $2,730) of depreciation expense.
|
5.
|
Convertible Debentures
|
|
|
(a)
|
On May 15, 2017, the Company entered into a promissory note agreement with a non-related party
for proceeds of $280,000, net of an original issuance discount and legal fees of $30,000 which were capitalized and amortized over
the period of the convertible debenture. The promissory note is unsecured, bears interest at 10% per annum, and was due on November
30, 2017. The promissory note is convertible into common shares at the lesser of: (a) $0.35; or (b) 65% of the average of the three
lowest volume weighted average price of the Company’s common shares in the 20 days preceding the notice of conversion.
|
The embedded conversion option
qualifies for derivative accounting under ASC 815-15,
Derivatives and Hedging
. The fair value of the derivative liability
resulted in a full discount of the $250,000 based on the net proceeds received from promissory note. The carrying value of the
convertible debenture will be accreted over the term of the convertible debenture up to the face value of $280,000. On November
30, 2017, a default penalty of $73,629 was applied as the Company defaulted on the convertible debenture. During the period ended
February 28, 2019, the Company issued 1,186,310 common shares for the conversion of $13,726 of principal balance and $6,274 of
accrued interest. As at February 28, 2019, the carrying value of the convertible debenture was $227,654 (November 30, 2018 - $241,380).
GALA PHARMACEUTICAL INC.
Notes to the Condensed Consolidated Financial
Statements
For the period ended February 28, 2019
(unaudited)
|
5.
|
Convertible Debentures
(continued)
|
|
|
(b)
|
On June 6, 2018, the Company issued a callable secured convertible note for $15,000. Under the
terms of the note, the amount owing is unsecured, bears interest at 12% per annum, and is due on June 1, 2019. The note is also
convertible into common shares of the Company at the lesser of: (a) $0.04; or (b) 50% of the lowest 3 trading prices during the
20 trading days prior to the date of conversion. Upon default of the note, the interest rate will increase to 15% per annum. In
addition to the note, the Company also issued 30,000 share purchase warrants which entitles the note holder to acquire 30,000 common
shares at $0.01 per common share for a period of seven years.
|
The embedded conversion option
qualifies for derivative accounting under ASC 815-15,
Derivatives and Hedging
. The fair value of the derivative liability
resulted in a full discount of the $15,000 based on the net proceeds received from promissory note. The carrying value of the convertible
debenture will be accreted over the term of the convertible debenture up to the face value of $15,000. As at February 28, 2019,
the carrying value of the convertible debenture was $5,126 (November 30, 2018 - $1,675) and the unamortized discount on the convertible
debenture was $9,874 (November 30, 2018 - $13,325).
|
|
c)
|
On July 24, 2018, the Company issued a callable secured convertible note for $15,000. Under the
terms of the note, the amount owing is unsecured, bears interest at 12% per annum, and is due on June 1, 2019. The note is also
convertible into common shares of the Company at the lesser of: (a) $0.04; or (b) 50% of the lowest 3 trading prices during the
20 trading days prior to the date of conversion. Upon default of the note, the interest rate will increase to 15% per annum. In
addition to the note, the Company also issued 30,000 share purchase warrants which entitles the note holder to acquire 30,000 common
shares at $0.01 per common share for a period of seven years.
|
The embedded conversion option
qualifies for derivative accounting under ASC 815-15,
Derivatives and Hedging
. The fair value of the derivative liability
resulted in a full discount of the $15,000 based on the net proceeds received from promissory note. The carrying value of the convertible
debenture will be accreted over the term of the convertible debenture up to the face value of $15,000. As at February 28, 2019,
the carrying value of the convertible debenture was $4,175 (November 30, 2018 - $1,089) and the unamortized discount on the convertible
debenture was $10,825 (November 30, 2018 - $13,911).
|
|
d)
|
On November 10, 2018, the Company issued a callable secured convertible note for $50,000. Under
the terms of the note, the amount owing is unsecured, bears interest at 12% per annum, and is due on November 10, 2019. The note
is also convertible into common shares of the Company at the lesser of: (a) $0.04; or (b) 50% of the lowest 3 trading prices during
the 20 trading days prior to the date of conversion. Upon default of the note, the interest rate will increase to 15% per annum.
|
The embedded conversion option
qualifies for derivative accounting under ASC 815-15,
Derivatives and Hedging
. The fair value of the derivative liability
resulted in a full discount of the $50,000 based on the net proceeds received from promissory note. The carrying value of the convertible
debenture will be accreted over the term of the convertible debenture up to the face value of $15,000. As at February 28, 2019,
the carrying value of the convertible debenture was $2,329 (November 30, 2018 - $333) and the unamortized discount on the convertible
debenture was $47,671 (November 30, 2018 - $49,667).
GALA PHARMACEUTICAL INC.
Notes to the Condensed Consolidated Financial
Statements
For the period ended February 28, 2019
(unaudited)
|
5.
|
Convertible Debentures
(continued)
|
|
|
e)
|
On January 30, 2019, the Company issued a callable secured convertible note for $210,000. Under
the terms of the note, the amount owing is unsecured, bears interest at 8% per annum, and is due on January 30, 2020. The note
is also convertible into common shares of the Company at 62% of the lowest 2 trading prices during the 20 trading days prior to
the date of conversion. Upon default of the note, the interest rate will increase to 15% per annum.
|
The embedded conversion option
qualifies for derivative accounting under ASC 815-15,
Derivatives and Hedging
. The fair value of the derivative liability
resulted in a full discount of the $210,000 based on the net proceeds received from promissory note. The carrying value of the
convertible debenture will be accreted over the term of the convertible debenture up to the face value of $210,000. As at February
28, 2019, the carrying value of the convertible debenture was $1,307 (November 30, 2018 - $nil) and the unamortized discount on
the convertible debenture was $208,693 (November 30, 2018 - $nil).
|
|
f)
|
On February 6, 2019, the Company issued a callable secured convertible note for $5,000. Under the
terms of the note, the amount owing is unsecured, bears interest at 12% per annum, and is due on February 5, 2020. The note is
also convertible into common shares of the Company at the lesser of: (a) $0.04; or (b) 50% of the lowest 3 trading prices during
the 20 trading days prior to the date of conversion. Upon default of the note, the interest rate will increase to 15% per annum.
|
The embedded conversion option
qualifies for derivative accounting under ASC 815-15,
Derivatives and Hedging
. The fair value of the derivative liability
resulted in a full discount of the $5,000 based on the net proceeds received from promissory note. The carrying value of the convertible
debenture will be accreted over the term of the convertible debenture up to the face value of $5,000. As at February 28, 2019,
the carrying value of the convertible debenture was $37 (November 30, 2018 - $nil) and the unamortized discount on the convertible
debenture was $4,963 (November 30, 2018 - $nil).
The Company records the fair
value of the conversion price of the convertible debentures, as disclosed in Note 5, in accordance with ASC 815,
Derivatives
and Hedging
. The fair value of the derivative liability is revalued on each balance sheet date or upon conversion of the underlying
convertible debenture into equity with corresponding gains and losses recorded in the consolidated statement of operations. During
the period ended February 28, 2019, the Company recorded a loss on the change in fair value of the derivative liability of $353,949
(February 28, 2018 - $111,519). As at February 28, 2019, the Company had a derivative liability of $994,126 (November 30, 2018
- $458,109).
The following inputs and assumptions
were used to value the derivative liabilities outstanding during the periods ended February 28, 2019 and November 30, 2018, assuming
no dividend yield:
|
|
|
February 28,
2019
|
|
|
November 30,
2018
|
|
|
|
|
|
|
|
|
|
|
Expected volatility
|
|
|
375%
|
|
|
|
485%
|
|
|
Risk free rate
|
|
|
2.49%
|
|
|
|
2.52%
|
|
|
Expected life (in years)
|
|
|
0.5
|
|
|
|
0.5
|
|
A summary of the activity of the derivative liability
is shown below:
|
|
|
$
|
|
|
|
|
|
|
|
Balance, November 30, 2018
|
|
|
458,109
|
|
|
Derivative loss due to new issuances
|
|
|
334,740
|
|
|
Adjustment for conversion
|
|
|
(22,932
|
)
|
|
Mark to market adjustment
|
|
|
224,209
|
|
|
|
|
|
|
|
|
Balance, February 28, 2019
|
|
|
994,126
|
|
GALA PHARMACEUTICAL INC.
Notes to the Condensed Consolidated Financial
Statements
For the period ended February 28, 2019
(unaudited)
|
|
7.
|
Related Party Transactions
|
|
|
(a)
|
As at February 28, 2019, the Company owed
$176,188 (November 30, 2018 - $203,688) to a company controlled by a significant shareholder of the Company to fund payment of
operating expenditures. During the period ended February 28, 2019, the Company repaid $27,500 of financing. The amount owed is
unsecured, non-interest bearing, and due on demand.
|
|
|
(b)
|
As at February 28, 2019, the Company owed
$52,000 (November 30, 2018 - $43,000) to a significant shareholder of the Company, which has been recorded in accounts payable
and accrued liabilities - related parties. The amount owed is unsecured, non-interest bearing, and due on demand. During the period
ended February 28, 2019, the Company incurred $16,397 (February 28, 2018 - $9,000) of consulting expense relating to services provided
to the Company.
|
|
|
(c)
|
As at February 28, 2019, the Company owed
$2,064 (November 30, 2018 - $2,064) to a significant shareholder of the Company. The amount is unsecured, bears interest at 3%
per annum, and due 180 days from the date of issuance. As at February 28, 2019, accrued interest of $144 (November 30, 2018 - $129)
has been included in accounts payable and accrued liabilities, related parties.
|
|
|
(d)
|
As at February 28, 2019, the Company owed
$3,500 (November 30, 2018 - $3,500) to a company controlled by a significant shareholder of the Company. The amount owed is unsecured,
non-interest bearing, and due on demand.
|
|
|
(e)
|
As at February 28, 2019, the Company owed
$nil (November 30, 2018 - $6,560) to the Chief Executive Officer of the Company. During the period ended February 28, 2019, the
Company incurred $89,137 (February 28, 2018 - $7,397) of compensation costs.
|
|
|
(f)
|
As at February 28, 2019, the Company prepaid
$27,000 (November 30, 2018 - $27,000) of prepaid rent to a shareholder that holds 49% interest of Gala California. The amounts
owed are unsecured, non-interest bearing, and due on demand.
|
|
|
a)
|
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.
As at February 28, 2019, the outstanding balance of the promissory note was $22,000 (November 30, 2018 - $22,000).
|
|
|
b)
|
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% per annum, and is due 180 days from the date of issuance.
As at February 28, 2019, the outstanding balance of the promissory note was $20,000 (November 30, 2018 - $20,000).
|
|
|
(a)
|
On December 31, 2018, the Company issued 2,000,000 common shares with a fair value of $39,000 for
services, including 1,500,000 common shares to a director of the Company as director’s fees.
|
|
|
(b)
|
On January 8, 2019, the Company issued 1,186,310 common shares with a fair value of $26,099 to
settle convertible debentures of $20,000 and derivative liability of $22,932 resulting in a gain on settlement of debt of $16,833.
|
GALA PHARMACEUTICAL INC.
Notes to the Condensed Consolidated Financial
Statements
For the period ended February 28, 2019
(unaudited)
|
10.
|
Share Purchase Warrants
|
During the period ended February
28, 2019, the Company issued 10,000 share purchase warrants as part of the issuance of convertible debentures. The fair value of
the share purchase warrants was $190, calculated using the Black-Scholes option pricing model assuming no expected dividends, volatility
of 380%, expected life of 7 years, and a risk free rate of 2.89%.
|
|
|
Number of
warrants
|
|
|
Weighted average
exercise price
$
|
|
|
|
|
|
|
|
|
|
|
Balance, November 30, 2018
|
|
|
60,000
|
|
|
|
0.01
|
|
|
Issued
|
|
|
10,000
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, February 28, 2019
|
|
|
70,000
|
|
|
|
0.01
|
|
|
11.
|
Supplemental Disclosures
|
|
|
|
Three months ended
February 28,
2019
$
|
|
|
Three months ended
February 28,
2018
$
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for consulting services – related party
|
|
|
–
|
|
|
|
200,000
|
|
|
Common shares issued to settle third party debt
|
|
|
13,726
|
|
|
|
198,557
|
|
|
Common shares issued for prepaid services
|
|
|
–
|
|
|
|
335,000
|
|
|
Convertible note accrued interest converted to common stock
|
|
|
6,274
|
|
|
|
32,836
|
|
|
Expenses paid by related parties that increased related party debt
|
|
|
–
|
|
|
|
87,163
|
|
|
Original issue discount
|
|
|
10,000
|
|
|
|
–
|
|
|
Warrants issued with debt
|
|
|
190
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
–
|
|
|
|
–
|
|
|
Income tax paid
|
|
|
–
|
|
|
|
–
|
|
|
|
12.
|
Commitments and Contingencies
|
|
|
(a)
|
On May 1, 2018, Gala California, a 51% owned subsidiary of the Company, entered into a lease agreement
with an individual who holds a 49% interest in Gala California to lease a commercial building in Long Beach, California. Under
the terms of the lease agreement, the Company is committed to the following minimum lease payments:
|
|
Fiscal year ended
|
|
$
|
|
|
|
|
|
|
|
November 30, 2019
|
|
|
83,250
|
|
|
November 30, 2020
|
|
|
114,941
|
|
|
November 30, 2021
|
|
|
119,538
|
|
|
November 30, 2022
|
|
|
124,320
|
|
|
November 30, 2023
|
|
|
52,644
|
|
|
|
|
|
|
|
|
Total minimum lease payments
|
|
|
494,693
|
|
|
|
(b)
|
In April 2019, the Company finalized a settlement agreement with the consultant and the Company
has accrued $64,000 as part of the settlement amount as at February 28, 2019 and November 30, 2018.
|
GALA PHARMACEUTICAL INC.
Notes to the Condensed Consolidated Financial
Statements
For the period ended February 28, 2019
(unaudited)
In accordance with ASC 855,
Subsequent Events, the Company has evaluated subsequent events through to the date of issuance of the financial statements, and
did not have any material recognizable subsequent events after February 28, 2019 with the exception of the following:
|
|
(a)
|
On March 19, 2019, the Company issued 1,500,000 common shares for proceeds of $75,000.
|
|
|
(b)
|
On March 19, 2019, the Company issued 1,000,000 common shares for consulting services to a non-related party.
|
|
|
(c)
|
On March 19, 2019, the Company issued 1,725,000 common shares for the conversion of $1,725 of a loan payable.
|
|
|
(d)
|
On April 1, 2019 the Company issued 1,500,000 common shares for consulting services to a non-related party.
|
|
|
(e)
|
On April 5, 2019, the Company issued 2,500,000 common shares for consulting services to a non-related party.
|
|
|
(f)
|
On April 11, 2019 the Company issued 2,750,000 common shares for a partial settlement of a lawsuit to non-related parties.
|
|
|
(g)
|
On April 12, 2019 the Company issued 1,500,000 common shares for consulting services to a non-related party.
|