UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 2015
o 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)
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| Nevada | 42-1771014 |
| (state or other jurisdiction of incorporation or organization) | (I.R.S. Employer I.D. No.) |
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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 þ No o
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 o Accelerated filer o Non-accelerated filer o Smaller reporting company þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
APPLICABLE ONLY TO CORPORATE ISSUERS
As of April 21, 2015 the registrant had 123,140,000 shares of common stock outstanding.
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GALA GLOBAL INC.
TABLE OF CONTENTS
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| PART I- FINANCIAL INFORMATION |
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| Item 1. |
| Financial Statements (unaudited) |
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| Condensed Balance Sheets |
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| Condensed Statements of Operations |
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| Condensed Statement of Changes in Stockholders’ Deficit |
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| Condensed Statements of Cash Flows |
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| Notes to Financial Statements |
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| Item 2. | Management Discussion & Analysis of Financial Condition and Results of Operations | 12 | ||
| Item 3. |
| Quantitative and Qualitative Disclosures About Market Risk |
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| Item 4. |
| Controls and Procedures |
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| PART II - OTHER INFORMATION |
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| Item 1. |
| Legal Proceedings |
| 17 |
| Item 2. |
| Unregistered Sales of Equity Securities and Use of Proceeds |
| 17 |
| Item 3. |
| Defaults Upon Senior Securities |
| 17 |
| Item 4. |
| Mine Safety Disclosures |
| 17 |
| Item 5. |
| Other information |
| 17 |
| Item 6. |
| Exhibits |
| 18 |
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GALA GLOBAL INC.
Condensed Consolidated Financial Statements
(unaudited)
For the Three Month Periods Ended February 28, 2015 and 2014
| Condensed Consolidated Balance Sheets (unaudited) | 3 |
| Condensed Consolidated Statements of Operations (unaudited) | 4 |
| Condensed Statements of Changes in Stockholders’ Deficit (unaudited) | 5 |
| Condensed Consolidated Statements of Cash Flows (unaudited) | 6 |
| Notes to the Condensed Consolidated Financial Statements (unaudited) | 7 |
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GALA GLOBAL INC.
Condensed Consolidated Balance Sheets
(unaudited)
(The accompanying notes are an integral part of these condensed consolidated unaudited financial statements)
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GALA GLOBAL INC.
Condensed Consolidated Statements of Operations
(unaudited)
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| Three months ended February 28, 2015 $ | Three months ended February 28, 2014 $ |
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| Revenues |
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| – | – |
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| Operating Expenses |
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| Consulting expense |
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| 227,450 | – |
| General and administrative |
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| 21,879 | 5,462 |
| Management fees |
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| – | 3,000 |
| Option expense on proposed property acquisition – related party |
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| 10,500 | – |
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| Total Operating Expenses |
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| 259,829 | 8,462 |
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| Loss Before Other Expense |
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| (259,829) | (8,462) |
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| Interest income |
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| 116 | – |
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| Net Loss |
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| (259,713) | (8,462) |
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| Net Loss per Share – Basic and Diluted |
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| (0.00)* | (0.00)* |
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| Weighted Average Shares Outstanding – Basic and Diluted |
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| 121,227,912 | 118,140,000 |
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‘* denotes a loss of less than $(0.01).
(The accompanying notes are an integral part of these condensed consolidated unaudited financial statements)
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GALA GLOBAL INC.
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
From November 30, 2013 to February 28, 2015
(unaudited)
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| Common Stock |
| Additional Paid-In |
| Accumulated |
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| Shares |
| Par Value |
| Capital |
| Deficit |
| Total |
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| Balance – November 30, 2013 - audit | 118,140,000 |
| 118,140 |
| (47,040) |
| (108,196) |
| (37,096) |
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| Forgiveness of related party debt | – |
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| 23,298 |
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| 23,298 |
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| Proceeds from sale of common stock | 1,000,000 |
| 1,000 |
| 99,000 |
| – |
| 100,000 |
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| Net loss for the year | – |
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| (278,875) |
| (278,875) |
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| Balance – November 30, 2014 - audit | 119,140,000 |
| 119,140 |
| 75,258 |
| (387,071) |
| (192,673) |
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| Shares issued for consulting services | 4,000,000 |
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| 223,450 |
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| 227,450 |
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| Net loss for the period | – |
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| (259,713) |
| (259,713) |
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| Balance – February 28, 2015 - unaudited | 123,140,000 |
| 123,140 |
| 298,708 |
| (646,784) |
| (224,936) |
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(The accompanying notes are an integral part of these condensed consolidated unaudited financial statements)
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GALA GLOBAL INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
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| For the Three months Ended February 28, 2015 $ | For the Three Months Ended February 28, 2014 $ |
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| Operating Activities |
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| Net loss for the period | (259,713) | (8,462) |
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| Adjustments to reconcile net loss to net cash used in operating activities: |
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| Shares issued for consulting services | 227,450 | – |
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| Changes in operating assets and liabilities: |
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| Accounts payable and accrued liabilities | (2,538) | 5,358 |
| Accounts receivable | (116) | – |
| Prepaid expense | (3,750) | – |
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| Net Cash Used In Operating Activities | (38,667) | (3,104) |
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| Investing Activities |
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| Advances under loan receivable | (12,467) | - |
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| Net Cash Used in Investing Activities | (12,467) | - |
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| Financing Activities |
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| Proceeds from loan payable – related party | 51,134 | 3,000 |
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| Net Cash Provided By Financing Activities | 51,134 | 3,000 |
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| Decrease in Cash | – | (104) |
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| Cash – Beginning of Period | – | 104 |
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| Cash – End of Period | – | – |
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| Supplemental Disclosures |
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| Interest paid | – | – |
| Income tax paid | – | – |
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(The accompanying notes are an integral part of these condensed consolidated unaudited financial statements)
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GALA GLOBAL INC.
(A Development Stage Company)
Notes to the Condensed Financial Statements
(unaudited)
1.
Organization and Nature of Operations
Gala Global Inc. (“the Company”, “we”, “us” or “our”) was incorporated in the State of Nevada on March 15, 2010 (Inception). 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., the Company’s then controlling shareholder, sold all of its 3,547,000 shares of the Company’s common stock, 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.
Gala Global, Inc. is continuing with its initial business plan to distribute all-natural everyday custom tailored women's clothing products from England. The Company is exploring different hemp alternatives of fabric and materials needed to produce our all new custom designed apparel. Our new products are scheduled for launch in the latter part of 2015.
Gala Global, Inc., 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. GALA Global, Inc. currently markets 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. GALA 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
Gala Global, Inc.’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.
Cannabis Ventures Inc. (USA) (“CVI”)
In September 2014, CVI entered into a promissory note agreement with Globe Farmacy, Inc., an Arizona non-profit corporation (“GFI”), to finance a potential cultivation project. CVI has advanced funds of $189,972 to GFI under the promissory note, which is unsecured, bears interest at 5% per annum, and was due on December 31, 2014. As GFI was delinquent in performing certain obligations under the terms of the promissory note and our ability to recover this advance is currently uncertain, we have a provided in full against the value of this promissory note and recognized an impairment expense of $189,972 effective December 31, 2014. CVI is still pursuing a resolution as of March 31, 2015.
Cannabis Ventures, Inc. (Canada) (“CVI (Canada)”)
In May 2014, CVI (Canada) entered into a contract to acquire certain property in Vancouver, Canada for $600,000 (“the Contract”). It is the Company’s intention to facilitate the cultivation of medical marijuana on the property if it is able to acquire the necessary license from Health Canada. The property is owned personally by a director of CVI (Canada).
In July 2014, CVI (Canada) filed the application with Health Canada for the MMPR License (Marihuana for Medical Purposes Regulations). The response to last round of comments received from Health Canada was received by CVI (Canada) in February 6, 2015. We responded on February 26, 2015 and Health Canada acknowledged receipt on February 27, 2015.
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1.
Organization and Nature of Operations (continued)
The Contract had an initial term of 4 months, expiring August 31, 2014, to give the Company the time to acquire the necessary license from Health Canada. During this four month period, the Company paid the owner of the property a nonrefundable payment of $4,000 a month and this expense has been recognized in our statement of operations.
The Contract had been extended on a month to month basis and as of February 2015, the Company continues to pay the property owner a reduced nonrefundable payment of $2,500 a month while it awaits the determination from Health Canada. There is no guarantee that the property owner will continue to extend the term of the Contract or that the Company will be successful in obtaining a license from Health Canada. Moreover as at the date of this report, the Company does not have the funds to complete the purchase of the property nor is there any guarantee that it will be able to raise the required funding.
On February 25, 2015, Gala Global incorporated CBD Life, Inc., a California corporation. CBD Life, Inc. is a new division whose corporate profile is for branding our CBD products. Gala Global provides committed strategy with our CBD product introduction to deliver innovated new products to the nutritional supplement market. Our CBD Life brands will provide a healthy lifestyle nutraceutical products for consumers. The Company looks to expand its interests in distribution the natural wellness sector. CDB Life division will address the demands in the global dietary supplements market
Going Concern
These 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 November 30, 2014, the Company has not earned revenue, has a working capital deficit of $224,936, and an accumulated deficit of $646,784. 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.
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, Nevada incorporated Cannabis Ventures Inc. (USA) and Vancouver, British Columbia incorporated Cannabis Ventures Inc. (Canada) from the date of their acquisition by the Company effective June 26, 2014 and California incorporated CBD Life, Inc. from the date of its incorporation on February 25, 2015. All inter-company transactions and balances have been eliminated on consolidation.
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 months ended February 28, 2015 are not necessarily indicative of the results that may be expected for the year ended November 30, 2015. 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, 2014 included in our Form 10-K filed with the SEC.
e)
Development Stage Company
The Company is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification and among the additional disclosures required as a development stage company are that its financial statements were identified as those of a development stage company, and that the statements of operations, stockholders’ deficit and cash flows disclosed activity since the date of its inception (March 15, 2010) as a development stage company. The Company has generated no revenue since inception (March 15, 2010) and is still devoting substantially all of its efforts on establishing the business. All losses accumulated since Inception (March 15, 2010) have been considered as part of the Company’s development stage activities. Effective June 10, 2014 FASB changed its regulations with respect to Development Stage Entities and these additional disclosures are no longer required for annual reporting periods beginning after December 15, 2014 with the option for entities to early adopt these new provisions. The Company has elected to early adopt these provisions and consequently these additional disclosures are not included in these financial statements.
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 February 28, 2015 and November 30,, 2014, there were no cash equivalents.
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Summary of Significant Accounting Policies (continued)
g)
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
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. The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, and amounts due to related party. 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 carrying values of the Company’s financial instruments approximate their current fair values because of their nature and the short term maturity dates or durations of these instruments.
h)
Long-Lived Assets
In accordance with ASC 360, “Property Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.
i)
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.
j)
Revenue Recognition
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.
k)
Advertising Costs
The Company’s policy regarding advertising is to expense advertising when incurred. The Company incurred advertising expense of $nil during the three month periods ended February 28, 2015 and 2014.
l)
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.
m)
Comprehensive Loss
ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. For the three months ended February 28, 2015 and 2014, our net loss was identical to our comprehensive loss.
n)
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 months ended February 28, 2015 and 2014.
o) 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.
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3.
Related Party Transactions
a)
During the three month period ended February 28, 2015, the Company received advances of $51,134 (2014 - $3,000) from a shareholder of the Company to fund payment of operating expenditures. The amounts owing are unsecured, non-interest bearing, and due on demand.
b)
During the period ended February 28, 2015, CVI (Canada) entered into a contract to acquire certain property in Vancouver, Canada for $600,000 (“the Contract”). It is the Company’s intention to facilitate the cultivation of medical marijuana on the property if it is able to acquire the necessary license from Health Canada. The property is owned personally by a director of CVI Canada.
c)
During the three month period ended February 28, 2015, the Company paid $10,500 (2014 - $nil) under the term of a contract to purchase property in Vancouver, Canada to a director of CVI.
4.
Loan Receivable
a)
On September 30, 2014, Cannabis Ventures Inc. (USA), a wholly-owned subsidiary of the Company entered into a promissory note agreement with Anthony McDonald (“McDonald”) and Globe Farmacy Inc. (“GFI”), an Arizona non-profit corporation, for $189,972. The amounts owing are unsecured, bears interest at 5% per annum, and is due on December 31, 2014. As of November 30, 2014, the amount receivable was deemed to be uncollectible and a full impairment charge on the loan receivable has been made by the Company. The Company is still pursuing a resolution as of March 31, 2015.
b)
On January 26, 2015, the Company entered into a promissory note agreement with Holy Smokes, LLC for $12,467 to fund putting a security fence around a property Holy Smokes, LLC owns and intends use to grow medical marijuana. Holy Smokes LLC and Gala Global LLC (an entity unrelated to the Company) have jointly applied for grow licenses in the State of Washington. The intention is that upon receiving the grow licenses, Holy Smokes LLC would hire the Company to install the necessary greenhouses and to manage the project once the State of Washington issued the medical marijuana license relating to this property. The Company would also have an option to acquire 50% of Gala Global LLC at that time. To date the state of Washington has not issued the necessary grow licenses and consequently the project has been delayed. The amounts owing the promissory note are unsecured, bear interest at 10% per annum, and are due upon the closing of escrow in conjunction with our proposed transactions with Holy Smokes LLC as described above. In the event that the proposed transactions do not close, the loan will be repaid within 10 days.
5.
Loan Payable - Related Party
On March 20, 2014, the Company issued a $10,000 promissory note to a shareholder of the Company. Under the terms of the note, the amount is unsecured, non-interest bearing, and due on demand.
6.
Common Shares
a)
On December 2, 2014, the Company issued 1,500,000 shares of common stock with a fair value of $105,000 for consulting services. The fair value of the shares of common stock was calculated based on the closing price of the Company’s common shares on the date of the agreement.
b)
On January 13, 2015, the Company issued 2,000,000 shares of common stock with a fair value of $83,000 for consulting services. The fair value of the shares of common stock was calculated based on the closing price of the Company’s common shares on the date of the agreement.
c)
On December 2, 2014, the Company issued 500,000 shares of common stock with a fair value of $39,450 for consulting services. The fair value of the shares of common stock was calculated based on the closing price of the Company’s common shares on the date of the agreement.
7.
Commitments
a)
In May 2014, CVI (Canada) entered into a contract to acquire certain property in Vancouver, Canada for $600,000 (“the Contract”). It is the Company’s intention to facilitate the cultivation of medical marijuana on the property if it is able to acquire the necessary license from Health Canada. The property is owned personally by a director of CVI (Canada).
In July 2014, CVI (Canada) filed the application with Health Canada for the MMPR License (Marijuana for Medical Purposes Regulations). The response to last round of comments received from Health Canada was received by CVI (Canada) in February 6, 2015. We responded on February 26, 2015 and Health Canada acknowledged receipt on February 27, 2015The Contract had an initial term of 4 months, expiring August 31, 2014, to give the Company the time to acquire the necessary license from Health Canada. During this four month period, the Company paid the owner of the property a nonrefundable payment of $4,000 a month and this expense has been recognized in our statement of operations.
The Contract has now been extended on a month to month basis and the Company continues to pay the property owner a nonrefundable payment of $2,500 a month while it awaits the determination from Health Canada. There is no guarantee that the property owner will continue to extend the term of the Contract or that the Company will be successful in obtaining a license from Health Canada. Moreover as at the date of this report, the Company does not have the funds to complete the purchase of the property nor is there any guarantee that it will be able to raise the required funding.
b)
On January 13, 2015, the Company entered into a consulting agreement with Dignitas Consulting LLC. Pursuant to the agreement, Dignitas Consulting, LLC is to provide the Company with consulting services regarding business development, acquisition strategies, and investor relations. The consultant is to be compensated through the issuance of the Company’s shares as follows:
i.
2,000,000 of the Company’s common stock issued on or about by January 13, 2015
Ii. 2,000,000 of the Company’s common stock issued on or about by May 5, 2015.
The agreement shall be effective during the period January 13, 2015 to October 31, 2015.
8.
Subsequent Events
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to February 28, 2015 to April 20, 2015, the date these condensed consolidated financial statements were issued, and has determined that, other than as disclosed above, it does not have any material subsequent events to disclose in these financial statements.
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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
|
| February 28, 2015 $ | November 31, 2014 $ |
| Current Assets | 16,333 | - |
| Current Liabilities | 241,269 | 192,673 |
| Working Capital (Deficit) | (224,936) | (192,673) |
Cash Flows
|
| Three months ended February 28, 2015 $ | Three months ended February 28, 2014 $ |
| Cash Flows from (used in) Operating Activities | (38,667) | (3,104) |
| Cash Flows from (used in) Investing Activities | (12,467) | - |
| Cash Flows from (used in) Financing Activities | 51,134 | 3,000 |
| Net Increase (decrease) in Cash During Period | - | (104) |
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Revenues
For the three months ended February 28, 2015 and 2014, the Company had $nil for revenue.
Operating Expenses
Operating expenses for the three months ended February 28, 2015 was $259,829 compared with $8,462 for the three months ended February 28, 2014. Please see the below table for an explanation of the variances.
| Three months ending: | February 28, 2015 |
| February 28, 2014 |
| Variance $ |
| Variance % |
|
| Accounting/audit Fees | $13,450 |
| $4,750 |
| $8,700 |
| 183.1% |
|
| Consulting fees * | 227,450 |
| - |
| 227,450 |
| 100.0% |
|
| Management Fees | - |
| 3,000 |
| 3,000 |
| -100.0% |
|
| Outside Service Fees | 1,411 |
| 608 |
| 803 |
| 132.1% |
|
| Land Option (can) | 10,500 |
| - |
| 10,500 |
| 100.0% |
|
| Incorporation, start-up costs for CBD Life Inc. | 7,018 |
| 104 |
| 6,914 |
| 6648.1% |
|
|
| $259,829 |
| $8,462 |
| $273,867 |
| 3236.4% |
|
·
Consulting fees consisted mainly of the fair value of shares for consulting services related to the Company’s planned business objectives, as follows:
Tickertape Consulting and Media for $105,000 for investor relations, Paul Frank for $39,450 for director fees and Dignitas Consulting LLC for $83,000 also for investor relations.
Net Loss
Net loss for the three months ended February 28, 2015 was $259,713 and loss per share was $nil compared with a net loss of $8,462 and a net loss per share of $nil for the three months ended February 28, 2014 due to the factors discussed above.
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Liquidity and Capital Resources
As of February 28, 2015, the Company has not earned revenue, has a working capital deficit of $224,936, and an accumulated deficit of $646,784. 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.
Cashflow from Operating Activities
During the three months ended February 28, 2015, the Company used $38,667 of cash for operating activities compared to the use of $3,104 of cash for operating activities during the three months ended February 28, 2014 for an increase of $35,563. The increase between the two periods was mainly due to the fact that the Company received financing from loans payable related party for $51,134, a substantial portion of which was used to fund our increasing operating expenditures.
Cashflow from Investing Activities
During the three months ended February 28, 2015, the Company entered into a promissory note agreement with Holy Smokes, LLC for $12,467. The $12,467 was to fund putting a security fence around a property that is intended to be used to grow medical marijuana. On January 26, 2015, the Company entered into a promissory note agreement with Holy Smokes, LLC for $12,467 to fund putting a security fence around a property Holy Smokes, LLC owns and intends use to grow medical marijuana. Holy Smokes LLC and Gala Global LLC (an entity unrelated to the Company) have jointly applied for grow licenses in the State of Washington. The intention is that upon receiving the grow licenses, Holy Smokes LLC would hire the Company to install the necessary greenhouses and to manage the project once the State of Washington issued the medical marijuana license relating to this property. The Company would also have an option to acquire 50% of Gala Global LLC at that time. To date the state of Washington has not issued the necessary grow licenses and consequently the project has been delayed. The amounts owing the promissory note are unsecured, bear interest at 10% per annum, and are due upon the closing of escrow in conjunction with our proposed transactions with Holy Smokes LLC as described above. In the event that the proposed transactions do not close, the loan will be repaid within 10 days.
During the three months ended February 28, 2014, the Company did not have any investing activities.
Cashflow from Financing Activities
During the three months ended February 28, 2015, the Company received $51,134 by way of loans from a related party. By comparison, during the three months ended February 28, 2014, the Company received $3,000 in proceeds from financing activities from loans payable from a related party.
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:
On April 9, 2015 Erland Olson resigned as a Director of Gala Global Inc. He requested that the effective date be January 30, 2015 to coincide with other commitments.
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.
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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.
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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.
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 February 28, 2015, 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 maintained effective internal control over financial reporting as of February 28, 2015, 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 February 28, 2015, 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 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.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of February 28, 2014 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
No unregistered sales of equity securities were completed during the three months ended February 28, 2015 or 2014.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No senior securities were issued or outstanding during the three months ended February 28, 2015 or 2014.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable to our Company.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
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| 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 |
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.
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| GALA GLOBAL INC. | |
|
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| (REGISTRANT) |
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| |
| Date: April 22, 2015 | /s/ George Lefevre | |
|
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| George Lefevre |
|
|
| President, Chief Executive Officer, Chief Financial Officer and Director |
|
|
| (Authorized Officer for Registrant) |
| 18 |
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EXHIBIT 31.1
CERTIFICATION PURSUANT TO
18 U.S.C. ss 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, George Lefevre, certify that:
1. I have reviewed this Annual Report on Form 10-Q of Gala Global Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Date: | April 22, 2015 |
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| |
| /s/ George Lefevre | |
| George Lefevre | |
|
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, George Lefevre, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
the Quarter Report on Form 10-Q of Gala Global Inc. for the quarter ended February 28, 2015 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Gala Global Inc.
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Dated: April 22, 2015 | |||
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| /s/ George Lefevre |
| |
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| George Lefevre | ||
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| President, Chief Executive Officer, Chief Financial Officer, Treasurer and Director | ||
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| (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) | ||
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Summary Of Significant Accounting Policies (Narrative) (Details) (USD $)
|
3 Months Ended | |
|---|---|---|
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Feb. 28, 2015
|
Feb. 28, 2014
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| Summary Of Significant Accounting Policies Narrative Details | ||
| Advertising Costs | ||
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