(The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements)
(The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements)
(The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements)
Notes to the Condensed Consolidated Financial
Statements
For the Nine Months Ended August 31, 2018
and 2017
(unaudited)
|
1.
|
Organization and Nature of Operations
|
Gala Pharmaceutical Inc. (formerly
Gala Global 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 provides consulting on testing lab
designs and SOPs.
Going Concern
These condensed 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 August 31, 2018, the Company has a working capital deficit
of $1,245,557, an accumulated deficit of $4,907,251, and has a convertible debenture that is currently in default. Refer to Note
6. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and
its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable
operations from the Company’s future operations. These factors raise substantial doubt regarding the Company’s ability
to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and
classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable
to continue as a going concern.
|
2.
|
Summary of Significant Accounting Policies
|
|
(a)
|
Basis of Presentation
|
The 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.
|
(b)
|
Principles of Consolidation
|
These consolidated financial
statements include the accounts of the Company and its subsidiaries, 51% of Gala Pharmaceuticals California, Inc. (“Gala
California”) from February 7, 2018 (date of incorporation) and 100% of Gala Labs, Inc. from July 11, 2018 (date of incorporation)
as well as Cannabis Ventures, Inc. (USA) and Cannabis Ventures Inc. (Canada) from June 26, 2014 (date of incorporation) until the
sale of those subsidiaries on June 20, 2018. Refer to Note 3. 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 Nine Months Ended August 31, 2018
and 2017
(unaudited)
|
2.
|
Summary of Significant Accounting Policies
(continued)
|
|
(c)
|
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 nine months ended August 31, 2018 are not necessarily indicative
of the results that may be expected for the year ended November 30, 2018. 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, 2017 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)
|
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. For the three and nine months ended August 31, 2018, the
Company had 5,920,263 and 4,893,819 (three and nine months ended August 31, 2017 - 823,671 and 484,246) potentially issuable shares
from an outstanding convertible note.
|
(f)
|
Revenue Recognition Policy
|
The Company recognizes and accounts
for revenue in accordance with ASC 605 as a principal on the sale of goods.
Pursuant to ASC
605,
Revenue Recognition,
revenue is recognized when persuasive evidence of an arrangement exists, delivery has
occurred, the amount is fixed and determinable, risk of ownership has passed to the customer and collection is reasonably assured.
The Company considered ASC 605-45,
Principal Agent Considerations
, and determined that the Company acts as a principal in
its revenue-earnings activities as they are responsible for the production of goods purchased by the customer, can determine the
pricing costs, goods purchased are paid directly by the Company, and has a credit risk with respect to collection of amounts owed
by its customers.
GALA PHARMACEUTICAL INC.
Notes to the Condensed Consolidated Financial
Statements
For the Nine Months Ended August 31, 2018
and 2017
(unaudited)
2.
Summary of Significant Accounting Policies
(continued)
|
(g)
|
Fair Value Measurements
|
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.
The Company’s financial
instruments consist principally of cash, accounts receivable, accounts payable and accrued liabilities, loans payable, amounts
due to and from related parties, liabilities for shares issuable – related party, and convertible debentures. Pursuant to
ASC 820, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active
markets for identical assets. We believe that the recorded values of all of our 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 August 31, 2018, on a recurring basis:
|
|
Level 1
$
|
|
|
Level 2
$
|
|
|
Level 3
$
|
|
|
Total gains
and (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities
|
|
|
67,800
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(4,000
|
)
|
Derivative liabilities
|
|
|
–
|
|
|
|
–
|
|
|
|
(832,531
|
)
|
|
|
(588,364
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
67,800
|
|
|
|
–
|
|
|
|
(832,531
|
)
|
|
|
(592,364
|
)
|
The following table represents
assets and liabilities that are measured and recognized in fair value as of November 30, 2017, on a recurring basis:
|
|
Level 1
$
|
|
|
Level 2
$
|
|
|
Level 3
$
|
|
|
Total gains
and (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
|
–
|
|
|
|
–
|
|
|
|
(453,005
|
)
|
|
|
(277,578
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
–
|
|
|
|
–
|
|
|
|
(453,005
|
)
|
|
|
(277,578
|
)
|
GALA PHARMACEUTICAL INC.
Notes to the Condensed Consolidated Financial
Statements
For the Nine Months Ended August 31, 2018
and 2017
(unaudited)
2. Summary of Significant Accounting
Policies
(continued)
|
(h)
|
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.
On June 20,
2018, the Company approved the sale of its wholly-owned subsidiaries, Cannabis Ventures, Inc. (USA) and Cannabis Ventures, Inc.
(Canada) including any and all of its rights, title and interest in exchange for 2,000,000 common shares of Greengro Technologies
Inc., a company with common shareholders, at the fair value of $71,800, which has been recorded as a gain on sale of subsidiaries
since the subsidiaries had no assets or liabilities.
Deferred compensation
is comprised of common shares issued to officers and directors of the Company for compensation services. As at August 31, 2018,
deferred compensation of $125,000 (November 30, 2017 - $165,854) was recorded within shareholders’ equity. During the nine
months ended August 31, 2018, the Company recorded an additional $172,500 (August 31, 2017 - $520,000) of deferred compensation
costs and recorded an expense of $213,353 (August 31, 2017 - $210,777) of deferred compensation costs to the consolidated statement
of operations.
|
|
|
Cost
$
|
|
|
Accumulated amortization
$
|
|
|
August 31,
2018
$
|
|
|
November 30,
2017
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery
|
|
|
|
51,449
|
|
|
|
13,566
|
|
|
|
37,883
|
|
|
|
46,060
|
|
As at November
30, 2017, the Company had accumulated amortization of $6,808. During the three months ended August 31, 2018, the Company recorded
$2,723 (August 31, 2017 - $nil) of amortization expense. During the nine months ended August 31, 2018, the Company recorded $8,177
(August 31, 2017 - $nil) of amortization expense.
|
6.
|
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 limited by a conversion floor price of $0.05
per share.
|
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, and the debenture is
currently in default. As at August 31, 2018, the carrying value of the convertible debenture was $257,261 (November 30, 2017 -
$353,629).
GALA PHARMACEUTICAL INC.
Notes to the Condensed Consolidated Financial
Statements
For the Nine Months Ended August 31, 2018
and 2017
(unaudited)
|
6.
|
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. During
the three and nine month period ended August 31, 2018, the Company recorded accretion expense of $435 (2017 - $nil). As at August
31, 2018, the carrying value of the convertible debenture was $435.
|
(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 $).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. During
the three and nine month period ended August 31, 2018, the Company recorded accretion expense of $185 (2017 - $nil). As at August
31, 2018, the carrying value of the convertible debenture was $185.
The Company records the fair
value of the conversion price of the convertible debentures, as disclosed in Note 6, 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 three months ended August 31, 2018, the Company recorded a loss on the change in fair value of the derivative liability of
$477,174 (August 31, 2017 - $197,308). During the nine months ended August 31, 2018, the Company recorded a loss on the change
in fair value of the derivative liability of $588,364 (August 31, 2017 - $207,340). As at August 31, 2018, the Company had a derivative
liability of $803,301 (November 30, 2017 - $453,005).
|
Balance, November 30, 2017
|
$
|
453,005
|
|
Adjustment for conversion
|
|
(208,838)
|
|
Change in fair value
|
|
588,364
|
|
|
|
|
|
Balance, August 31, 2018
|
|
832,531
|
GALA PHARMACEUTICAL INC.
Notes to the Condensed Consolidated Financial
Statements
For the Nine Months Ended August 31, 2018
and 2017
(unaudited)
|
7.
|
Derivative Liability
(continued)
|
The following inputs and assumptions
were used to value the convertible debentures outstanding during the period ended August 31, 2018:
|
|
|
|
|
Expected Volatility
|
|
|
|
Risk-free Interest Rate
|
|
|
|
Expected Dividend Yield
|
|
|
|
Expected Life
(in years)
|
|
|
May
15, 2017 convertible debenture:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
at May 15, 2017 (date of issuance)
|
|
|
|
288%
|
|
|
|
1.02%
|
|
|
|
0%
|
|
|
|
0.50
|
|
|
As
at December 7, 2017 (conversion)
|
|
|
|
294%
|
|
|
|
1.67%
|
|
|
|
0%
|
|
|
|
0.98
|
|
|
As
at February 2, 2018 (conversion)
|
|
|
|
301%
|
|
|
|
1.88%
|
|
|
|
0%
|
|
|
|
0.83
|
|
|
As
at February 13, 2018 (conversion)
|
|
|
|
304%
|
|
|
|
1.95%
|
|
|
|
0%
|
|
|
|
0.80
|
|
|
As
at February 26, 2018 (conversion)
|
|
|
|
312%
|
|
|
|
2.03%
|
|
|
|
0%
|
|
|
|
0.76
|
|
|
As
at February 28, 2018 (mark-to-market)
|
|
|
|
312%
|
|
|
|
2.07%
|
|
|
|
0%
|
|
|
|
0.75
|
|
|
As
at May 31, 2018 (mark-to-market)
|
|
|
|
271%
|
|
|
|
2.07%
|
|
|
|
0%
|
|
|
|
0.50
|
|
|
As
at August 31, 2018 (mark-to-market)
|
|
|
|
429%
|
|
|
|
2.11%
|
|
|
|
0%
|
|
|
|
0.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
4, 2018 convertible debenture:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
at June 4, 2018 (date of issuance)
|
|
|
|
296%
|
|
|
|
2.30%
|
|
|
|
0%
|
|
|
|
0.99
|
|
|
As
at August 31, 2018 (mark-to-market)
|
|
|
|
332%
|
|
|
|
2.46%
|
|
|
|
0%
|
|
|
|
0.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
24, 2018 convertible debenture:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
at July 24, 2018 (date of issuance)
|
|
|
|
296%
|
|
|
|
2.42%
|
|
|
|
0%
|
|
|
|
0.85
|
|
|
As
at August 31, 2018 (mark-to-market)
|
|
|
|
332%
|
|
|
|
2.46%
|
|
|
|
0%
|
|
|
|
0.75
|
|
|
8.
|
Related Party Transactions
|
|
(a)
|
As at August 31, 2018, the Company owed $123,367 (November 30, 2017 - $48,367) to a company controlled
by a significant shareholder of the Company to fund payment of operating expenditures. In December 2017, the Company received an
additional $75,000 of financing. The amount owed is unsecured, non-interest bearing, and due on demand.
|
|
(b)
|
As at August 31, 2018, the Company owed $49,000 (November 30, 2017 - $25,000) 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 three and nine months ended August 31, 2018, the Company incurred
$9,000 and $27,000 (August 31, 2017 - $58,911 and $115,432 respectively) of consulting expense relating to services provided to
the Company.
|
|
(c)
|
As at August 31, 2018, the Company owed $5,625 (November 30, 2017 - $5,625) to an officer of the
Company, which has been recorded in accounts payable and accrued liabilities – related parties. The amount owing is unsecured,
non-interest bearing, and due on demand.
|
|
(d)
|
As at August 31, 2018, the Company owed $2,064 (November 30, 2017 - $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 August
31, 2018, accrued interest of $129 (November 30, 2017 - $82) has been included in accounts payable and accrued liabilities - related
parties.
|
|
(e)
|
As at August 31, 2018, the Company owed $49,000 (November 30, 2017 - $1,195) to the Chief Executive
Officer of the Company. During the three and nine months ended August 31, 2018, the Company incurred management salaries of $54,000
and $156,000, respectively (August 31, 2017 - $nil and $nil respectively). During the period ended August 31, 2018, the Company
issued 5,000,000 common shares with a fair value of $200,000 as bonus compensation, and incurred an additional $112,500 for common
shares to be issued as part of his management agreement which has been recorded as deferred compensation.
|
GALA PHARMACEUTICAL INC.
Notes to the Condensed Consolidated Financial
Statements
For the Nine Months Ended August 31, 2018
and 2017
(unaudited)
|
8.
|
Related Party Transactions
(continued)
|
|
(f)
|
In May 2018, the Company issued 1,500,000 common shares with a fair value of $60,000 to a director
of the Company for compensation of services for a period of one year. As at August 31, 2018, an additional 1,500,000 common shares
with a fair value of $112,500 are issuable to the Chief Executive Officer of the Company. As at August 31, 2018, the Company recorded
$125,000 (November 30, 2017 - $165,853) as deferred compensation within shareholders’ equity.
|
|
(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 August 31, 2018, the outstanding balance of the promissory note was $22,000 (November 30, 2017 - $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 August 31, 2018, the outstanding balance of the promissory note was $20,000 (November 30, 2017 - $20,000).
|
|
(a)
|
On December 7, 2017, the Company issued 209,727 common shares with a fair value of $56,773 to settle
convertible debentures of $30,000 and derivative liability of $50,993 resulting in a gain on settlement of debt of $24,220.
|
|
(b)
|
On January 11, 2018, the Company issued 5,000,000 common shares with a fair value of $200,000 to
the Chief Executive Officer of the Company as a performance bonus.
|
|
(c)
|
On February 1, 2018, the Company issued 1,500,000 common shares with a fair value of $60,000 for
consulting services for a period twelve months from the date of issuance.
|
|
(d)
|
On February 2, 2018, the Company issued 3,000,000 common shares, which were issuable at November
30, 2017, for consulting services with a fair value of $300,000.
|
|
(e)
|
On February 2, 2018, the Company issued 618,684 common shares with a fair value of $49,495 to settle
convertible debentures of $30,000 and derivative liability of $43,021 resulting in a gain on settlement of debt of $23,526.
|
|
(f)
|
On February 13, 2018, the Company issued 758,284 common shares with a fair value of $41,478 to
settle convertible debentures of $30,000 and derivative liability of $35,246 resulting in a gain on settlement of debt of $23,768.
|
|
(g)
|
On February 26, 2018, the Company issued 846,860 common shares with a fair value of $50,812 to
settle convertible debentures of $30,000 and derivative liability of $44,041 resulting in a gain on settlement of debt of $23,229.
|
|
(h)
|
On April 6, 2018 the Company cancelled 583,333 common shares which was returned by the former Chief
Executive Officer of the Company.
|
|
(i)
|
On April 18, 2018, the Company issued 5,000,000 common shares for proceeds of $200,000.
|
|
(j)
|
On May 14, 2018, the Company issued 1,500,000 common shares with a fair value of $60,000 to a director
of the Company for consulting services for a period of one year.
|
|
(k)
|
On May 14, 2018, the Company issued 1,500,000 common shares with a fair value of $60,000 for consulting
services to a non-related party.
|
|
(l)
|
On June 19, 2018, 1,500,000 common shares with a fair value of $120,000 to a director of the Company
for consulting services for a period of one year.
|
GALA PHARMACEUTICAL INC.
Notes to the Condensed Consolidated Financial
Statements
For the Nine Months Ended August 31, 2018
and 2017
(unaudited)
|
10.
|
Common Shares
(continued)
|
|
(m)
|
On July 3, 2018, the Company issued 653,125 common shares with a fair value of $71,844 to settle
convertible debentures of $30,000 and derivative liability of $65,537 resulting in a gain on settlement of debt of $23,693.
|
|
(n)
|
On August 28, 2018, the Company issued 500,000 common shares for proceeds of $20,000.
|
|
(o)
|
On August 28, 2018, the Company issued 1,000,000 common shares to a consultant for services with
a fair value of $50,000.
|
|
(p)
|
As at August 31, 2018, the Company received proceeds of $25,000 for the issuance of 2,500,000 common
shares at $0.01 per share.
|
|
11.
|
Share Purchase Warrants
|
During the nine months ended
August 31, 2018, the Company issued 60,000 share purchase warrants with an exercise price of $0.01 per share for a period of seven
years in conjunction with the issuance of convertible debt. The fair value of the share purchase warrants was $5,694, calculated
using the Black-Scholes model. The fair value of the share purchase warrants was recorded in the consolidated statement of operations
as interest expense.
|
|
|
Number of
warrants
|
|
|
Weighted average exercise price
$
|
|
|
|
|
|
|
|
|
|
|
Balance, November 30, 2017
|
|
|
|
–
|
|
|
|
–
|
|
|
Issued
|
|
|
|
60,000
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, August 31, 2018
|
|
|
|
60,000
|
|
|
|
0.01
|
|
On May 1, 2018, Gala California,
a 51% owned subsidiary of the Company, entered into a commercial lease agreement. Under the terms of the agreement, the Company
will pay annual rental fees of $108,000 commencing on the date of the agreement, for a period of five years with a 4% increase
in rent costs per annum. The Company is committed to the following minimum lease payments:
Fiscal Year
|
$
|
2018
|
27,000
|
2019
|
110,520
|
2020
|
114,940
|
2021
|
119,538
|
2022
|
124,320
|
Thereafter
|
52,634
|
In April 2018, the Company received
notice of a pending lawsuit, filed in the State of California for which the Company was one of several defendants named, citing
breach of contract, conspiracy to commit fraud, and specific performance. The Company’s position is that the claims are without
merit and intends to defend itself and its position in a court of law. As of the date of the filing, the likelihood of loss and
the amount of loss cannot be quantified and as such, no accrual has been made as of August 31, 2018.
GALA PHARMACEUTICAL INC.
Notes to the Condensed Consolidated Financial
Statements
For the Nine Months Ended August 31, 2018
and 2017
(unaudited)
|
14.
|
Supplemental Disclosures
|
|
|
Nine months ended August 31, 2018
$
|
|
|
Nine months ended
August 31,
2017
$
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for consulting services – related party
|
|
|
200,000
|
|
|
|
210,777
|
|
Common shares issued for consulting services
|
|
|
470,000
|
|
|
|
8,852
|
|
Common shares issued for deferred compensation
|
|
|
172,500
|
|
|
|
309,223
|
|
Common shares issued for deposit on intangible assets – related party
|
|
|
–
|
|
|
|
100,000
|
|
Common shares issued for prepaid expenses
|
|
|
–
|
|
|
|
31,148
|
|
Common shares issued for settlement of related party debt
|
|
|
–
|
|
|
|
348,422
|
|
Common shares issued to settle third party debt
|
|
|
270,401
|
|
|
|
34,412
|
|
Common shares issued for deposit on intangible assets
|
|
|
–
|
|
|
|
100,000
|
|
Expenses paid by related parties that increased related party debt
|
|
|
–
|
|
|
|
4,500
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
–
|
|
|
|
–
|
|
Income tax paid
|
|
|
–
|
|
|
|
–
|
|
|
(a)
|
Subsequent to August 31, 2018, the Company issued 2,500,000 common shares at a price of $0.01 per
share for proceeds of $25,000, which was received as of August 31, 2018. Refer to Note 10(o).
|
|
(b)
|
Subsequent to August 31, 2018, the Company issued 1,500,000 common shares with a fair value of
$112,500 to the Chief Executive Officer of the Company for compensation of services for a period of one year, which was recorded
as shares issuable as at August 31, 2018.
|
|
(c)
|
Subsequent to August 31, 2018, the Company issued 13,250,000 common shares at a price of $0.02
per share for proceeds of $265,000.
|
|
(d)
|
Subsequent to August 31, 2018, the Company issued 1,500,000 common shares to a consultant for consulting
services.
|
|
(e)
|
Subsequent to August 31, 2018, the Company issued 1,500,000 common shares to a director of the Company for services.
|