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~~May 2831, 2019

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

For the transition period from _________ to _________

Commission File Number: ~~333~~ 000-~~172744~~55998

GALA PHARMACEUTICAL INC.

(Name of Small Business Issuer in its charter)

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

18881 Von Karman Ave. Suite 1440

Irvine, CA 92612

(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 ahas ~~large~~submitted ~~accelerated~~electronically ~~filer,~~every Interactive anData ~~accelerated~~File ~~filer,~~required ato ~~non-accelerated~~be ~~filer,~~submitted ~~smaller~~pursuant ~~reporting~~to ~~company,~~Rule or405 anof ~~emerging~~Regulation ~~growth~~S-T ~~company~~(§232. ~~See~~405 ~~the~~of ~~definitions~~this ofchapter) ~~“large~~during ~~accelerated~~the preceding ~~filer,”~~12 ~~“accelerated~~months ~~filer”,~~(or ~~“smaller~~for ~~reporting~~such ~~company”, and~~shorter ~~“emerging~~period ~~growth~~that ~~company”~~the inregistrant ~~Rule~~was ~~12b-2~~required ofto ~~the~~submit ~~Exchange~~such ~~Act~~files). Yes þ No o

~~Large~~Indicate by check mark whether the registrant is a large accelerated filer, oan ~~Accelerated~~accelerated filer, oa ~~Non~~non-accelerated filer, oa ~~Smaller~~smaller reporting company, þor ~~Emerging~~an emerging growth company. See othe definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

IfLarge anaccelerated ~~emerging~~filer ~~growth~~o ~~company,~~Accelerated ~~indicate~~filer ~~by check~~o ~~mark~~Non-accelerated iffiler ~~the~~o ~~registrant~~Smaller ~~has~~reporting ~~elected~~company ~~not~~þ toEmerging ~~use~~Growth ~~the~~Company ~~extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act.~~ o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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~~July 1819, 2019, the registrant had ~~107~~118,~~672~~022,976 shares of common stock outstanding.

GALA PHARMACEUTICAL INC.

Table of Contents

PART I – FINANCIAL INFORMATION 4 Item 1. Financial Statements (unaudited) 4 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18 Item 3. Quantitative and Qualitative Disclosures About Market Risk 22 Item 4. Controls and Procedures 22 PART II – OTHER INFORMATION 24 Item 1. Legal Proceedings 24 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Securities 24 Item 3. Defaults Upon Senior Securities 2425 Item 4. Mine Safety Disclosures 2425 Item 5. Other Information 2425 Item 6. Exhibits 2425 SIGNATURES 2526

GALA PHARMACEUTICAL INC.

~~(formerly~~Consolidated ~~Gala~~Financial ~~Global Inc.)~~Statements

~~Condensed~~For ~~Consolidated~~the ~~Financial~~Six ~~Statements~~Months Ended May 31, 2019

(unaudited)

For the Period Ended February 28, 2019

Condensed Consolidated Balance Sheets (unaudited)	4
Condensed Consolidated Statements of Operations (unaudited)	5
Condensed Consolidated Statements of Stockholders’ Deficit (unaudited)	6
Condensed Consolidated Statements of Cash Flows (unaudited)	7
Notes to the Condensed Consolidated Financial Statements (unaudited)	8

PART I -– FINANCIAL INFORMATION

Item 1 - Financial Statements

GALA PHARMACEUTICAL INC.

Condensed Consolidated Balance Sheets

	February 28, 2019 $			November 30, 2018 $
	May 31, 2019 $			November 30, 2018 $
	(unaudited)
ASSETS
Current assets
Cash		~~179~~37,~~293~~252			116,198
Inventory		–			–
Prepaid expenses		–			–
Prepaid expenses – related parties		27,000			69,000
Marketable securities		3728,~~200~~800			41,800
Total current assets		~~243~~93,~~493~~052			226,998
Equipment, net of accumulated depreciation		39292,~~140~~552			35,160
Total assets		~~282~~385,~~633~~604			262,158
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued liabilities		9785,~~206~~547			82,275
Accounts payable and accrued liabilities – related party		4282,~~201~~642			49,761
Deferred rent		29,096			29,096
Due to related parties		~~176~~182,~~188~~397			203,688
Loans payable		4240,~~000~~275			42,000
Loans payable – related parties		5,764			5,764
Warrant liability		565,~~882~~884			5,694
Convertible note, net of discount of $282,026 and $76,903, respectively		240,628			244,477
Convertible note, net of discount of $425,060 and $76,903, respectively		275,594			244,477
Derivative liabilities		~~994~~2,~~126~~697,193			458,109
Total liabilities		13,~~633~~464,~~091~~392			1,120,864
Organization and nature of operations (Note 1)
Commitments and contingencies (Note 12)
Subsequent events (Note 13)
STOCKHOLDERS’ DEFICIT
Preferred stock Authorized: 10,000,000 shares with a par value of $0.001 per share Issued and outstanding: 500,000 and nil shares, respectively		500			500
Preferred stock authorized: 10,000,000 shares with a par value of $0.001 per share issued and outstanding: 500,000 and nil shares, respectively		500			500
Common stock Authorized: 500,000,000 shares with a par value of $0.001 per share Issued and outstanding: 95,197,976 and 92,011,666 shares, respectively		95,198			92,012
Common stock authorized: 500,000,000 shares with a par value of $0.001 per share issued and outstanding: 107,672,976 and 92,011,666 shares, respectively		107,673			92,012
Additional paid-in capital		4,~~352~~692,~~635~~859			4,290,722
Deferred compensation		(74,486	)		(117,021	)
Share subscriptions received		7,000			–
Deficit		(5,654,618	)		(5,077,446	)
Deferred compensation		(31,952	)		(117,021	)
Total stockholders’ deficit attributable to Gala Pharmaceutical Inc.		(1,280,771	)		(811,233	)
Deficit		(7,767,420	)		(5,077,446	)
Non-controlling interest		(69,687	)		(47,473	)
Total stockholders’ deficit attributable to Gala Pharmaceutical Inc.		(2,991,339	)		(811,233	)
Total liabilities and stockholders’ deficit		282,633			262,158
Non-controlling interest		(87,448	)		(47,473	)
Total liabilities and stockholders’ deficit		385,604			262,158

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

GALA PHARMACEUTICAL INC.

Condensed Consolidated Statements of Operations

(unaudited)

	Three months ended February 28, 2019 $			Three months ended February 28, 2018 $
	Three months ended May 31, 2019 $			Three months ended May 31, 2018 $			Six months ended May 31, 2019 $			Six months ended May 31, 2018 $
Revenue	–	–		–	4,675			–			4,675
Cost of revenue	–	–		–	3,216			–			3,216
Gross Profit		–			–1,459			–			1,459
Operating expenses
Consulting fees		55205,~~690~~500			~~115~~135,~~343~~235			261,190			250,578
Consulting fees – related party		89168,137			~~320~~101,~~192~~840			257,274			422,032
Depreciation		210,~~723~~810			2,~~730~~724			13,533			5,454
General and administrative		3876,~~666~~890			36109,~~263~~068			115,556			145,331
General and administrative – related party		161,~~397~~603			6024,~~515~~890			18,000			85,405
Rent		2819,050			1310,~~185~~418			47,100			23,603
Total operating expense		~~230~~481,~~663~~990			~~548~~384,~~228~~175			712,653			932,403
Loss before other income (expense)		(~~230~~481,~~663~~990	)		(~~548~~382,~~228~~716	)		(712,653	)		(930,944	)
Other income (expense)
Change in fair value of derivative liabilities		(~~353~~1,~~949~~525,067	)		~~(111,519~~329	)		(1,879,016	)		(111,190	)
Interest expense		(2757,~~007~~631	)		(1815,~~238~~769	)		(84,638	)		(34,007	)
Gain (loss) on settlement of debt		16(36,~~833~~225	)		~~94,743~~–			(19,392	)		94,743
Unrealized loss on marketable securities		(4,600	)		–
Settlement expense		(21,250	)		–			(21,250	)		–
Total other income (expense)		(368,723	)		(35,014	)
Unrealized loss on marketable securities		(8,400	)		–			(13,000	)		–
Net loss		(599,386	)		(583,242	)
Total other income (expense)		(1,648,573	)		(15,440	)		(2,017,296	)		(50,454	)
Less: loss attributed to non-controlling interest		22,214			–
Net loss		(2,130,563	)		(398,156	)		(2,729,949	)		(981,398	)
Net loss to Gala Pharmaceutical Inc.		(577,172	)		(583,242	)
Less: loss attributed to non-controlling interest		17,761			4,410			39,975			4,410
Net loss per share, basic and diluted		(0.01	)		(0.01	)
Net loss to Gala Pharmaceutical Inc.		(2,112,802	)		(393,746	)		(2,689,974	)		(976,988	)
Weighted average common shares outstanding, basic and diluted		94,133,908			40,202,240
Net loss per share, basic and diluted		(0.02	)		(0.01	)		(0.03	)		(0.02	)
Weighted average common shares outstanding, basic and diluted		103,642,813			53,204,863			98,940,607			46,774,994

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

GALA PHARMACEUTICAL INC.

Condensed Consolidated Statements of Changes in Stockholders’ Deficit

For the period from December 1, 2017 to ~~February~~May 2831, 2019

(unaudited)

~~Preferred stock~~

Preferred stock

~~Common stock~~

Common stock

~~Additional paid-in~~

~~Common Stock~~

Additional paid-in

~~Deferred~~

~~Non~~Common ~~controlling~~Stock

Deferred

Non controlling

~~Shares~~

~~Par Value~~

Par Value

~~Shares~~

~~Par value~~Shares

~~capital~~

Par value

~~Issuable~~

capital

~~Compensation~~

~~Interest~~Issuable

~~Deficit~~

Compensation

~~Total~~

Interest

Deficit

Total

Balance, November 30, 2017

~~500,000~~

500,000

~~500~~

500

~~35,701,590~~

35,~~702~~701,590

~~2,417,400~~

35,702

~~25,000~~

2,417,400

~~(165,853~~

)

–25,000

~~(3,218,569~~

)(165,853

)

~~(905,820~~

)

–

(3,218,569

)

(905,820

)

Shares issued for cash

–

~~27,250,000~~

27,250,000

~~492,750~~

27,250

–

492,750

–

~~520,000~~

–

520,000

Shares issued for settlement of debt

–

~~4,143,409~~

4,143,409

~~365,989~~

4,143

–

365,988

–

~~370,131~~

–

370,131

Shares issued for consulting services

–

~~11,500,000~~

11,500,000

~~548,500~~

11,500

~~(25,000~~

)

548,500

–

–(25,000

)

–

~~535,000~~

–

535,000

Shares issued for consulting services – related party

–

~~13,416,667~~

13,~~417~~416,667

~~466,083~~

13,417

–

466,083

–

~~479,500~~

–

479,500

Deferred compensation

–

~~48,832~~

–

48,832

~~48,832~~

–

48,832

Net loss for the year

–

~~(47,473~~–

)

~~(1,858,877~~

)–

~~(1,906,350~~

)

(47,473

)

(1,858,877

)

(1,906,350

)

Balance, November 30, 2018

~~500,000~~

500,000

~~500~~

500

~~92,011,666~~

92,~~012~~011,666

~~4,290,722~~

92,012

–

4,290,722

~~(117,021~~

)

~~(47,473~~–

)

~~(5,077,446~~

)(117,021

)

~~(858,706~~

)

(47,473

)

(5,077,446

)

(858,706

)

Shares issued for services

–

2,000,000

2,000

37,000

–

39,000

Shares issued for cash

–

1,500,000

1,500

28,500

–

30,000

Shares issued for conversion of debt

1,186,310

1,186

24,913

–

26,099

Shares issued for services

–

8,500,000

8,500

230,000

–

238,500

Deferred compensation

–

42,535

–

42,535

Shares issued for settlement expense

–

2,750,000

2,750

82,500

–

85,250

Net loss for the period

–

(22,214

)

(577,172

)

(599,386

)

Shares issued for conversion of debt

2,911,310

2,911

61,137

–

64,048

Balance, February 28, 2019

500,000

500

95,197,976

95,198

4,352,635

–

(74,486

)

(69,687

)

(5,654,618

)

(1,350,458

)

Share subscriptions received

–

7,000

–

7,000

Deferred compensation

–

85,069

–

85,069

Net loss for the period

–

(39,975

)

(2,689,974

)

(2,729,949

)

Balance, May 31, 2019

500,000

500

107,672,976

107,673

4,692,859

7,000

(31,952

)

(87,448

)

(7,767,420

)

(3,078,788

)

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

GALA PHARMACEUTICAL INC.

Condensed Consolidated Statements of Cash Flows

	Three months ended February 28, 2019 $			Three months ended February 28, 2018 $
	Six months ended May 31, 2019 $			Six months ended May 31, 2018 $
Operating activities
Net loss for the year		(~~599~~2,~~386~~729,949	)		(~~583~~981,~~242~~398	)
Adjustments to reconcile net loss to net cash used in operating activities:
Accretion expense		944,~~877~~843			–
Amortization of deferred compensation costs		42,535			120,822
Change in fair value of derivative liability		1,879,016			111,190
Change in fair value of derivative liability		353,949			111,519
Common shares issued for services and compensation – related party		39,000			200,000
Depreciation		2,723			2,730
Common shares issued for services		284,568			586,767
Gain on settlement of debt		(16,833	)		(94,743	)
Common shares issued for settlement expenses		85,250			–
Unrealized loss on marketable securities		4,600			–
Depreciation and amortization		13,533			5,454
Loss (gain) on settlement of debt		19,392			(94,743	)
Unrealized loss on marketable securities		13,000			–
Changes in operating assets and liabilities:
Prepaid expenses		42,000			~~111~~(131,~~735~~631	)
Accounts payable and accrued liabilities		219,~~143~~546			3926,~~565~~902
Accounts payable and accrued liabilities – related party		(732,~~500~~881	)		933,~~015~~867
Warrant liability		60,190			–
Net cash used in operating activities		(~~107~~206,~~702~~730	)		(82243,~~599~~592	)
Investing activities
Purchase of equipment		(6270,~~703~~925	)		–
Net cash used in investing activities		(6270,~~703~~925	)		–
Financing activities
Proceeds from related party operating advances		–15,209			75,000
Proceeds from convertible notes, net		205,000			–
Proceeds from convertible notes		383,000			–
Repayments to related party		(27,500	)		–
Proceeds from share issuances		37,000			200,000
Net cash provided by financing activities		177,500			75,000
Repayments to related party		(36,500	)		–
Increase (decrease) in cash		63,095			(7,599	)
Net cash provided by financing activities		398,709			275,000
Increase (decrease) in cash		(78,946	)		31,408
Cash, beginning of period		116,198			7,767
Cash, end of period		~~179~~37,~~293~~252			~~168~~39,175
1
Supplemental disclosures (Note 11)

~~(The~~Supplemental ~~accompanying~~disclosures ~~notes~~(Note ~~to are an integral part of these condensed consolidated financial statements~~11)

GALA PHARMACEUTICAL INC.

Notes to the Condensed Consolidated Financial Statements

For the period ended ~~February~~May 2831, 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~~May 2831, 2019, the Company has a working capital deficit of $13,~~389~~371,~~598~~ 340 and an accumulated deficit of $57,~~654~~767,~~618~~420. 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 condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities ~~that~~ 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

These ~~consolidated~~condensed ~~financial~~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~~condensed ~~financial~~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.

(c)

Interim Financial Statements

The accompanying unaudited condensed 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 and six months ended May 31, 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 condensed consolidated 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.

GALA PHARMACEUTICAL INC.

Notes to the Condensed Consolidated Financial Statements

For the period ended ~~February~~May 2831, 2019

(unaudited)

Summary of Significant Accounting Policies (continued)

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.

(d)

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 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.

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.

GALA PHARMACEUTICAL INC.

Notes to the Condensed Consolidated Financial Statements

For the period ended ~~February~~May 2831, 2019

(unaudited)

Summary of Significant Accounting Policies (continued)

(e)

Financial Instruments (continued)

The ~~Company’s~~following ~~financial~~table represents ~~instruments~~assets ~~consist principally of cash, marketable securities, accounts payable~~ and ~~accrued~~ liabilities, ~~accounts~~that ~~payable~~are ~~and accrued~~measured ~~liabilities – related parties, loans payable, loans payable – related parties, convertible debt, derivative liabilities,~~ and ~~amounts~~recognized ~~due~~in ~~to related parties. Pursuant to ASC 820, the~~ fair value as of ~~cash~~May is31, ~~determined~~2019, ~~based~~ on ~~“Level 1”~~a ~~inputs,~~recurring 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.basis:

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		28,800		–		–			(13,000	)
Warrant liability		–		–		(65,884	)		–
Derivative liabilities		–		–		(2,697,193	)		(1,879,016	)

Total		28,800		–		(2,763,077	)		(1,892,016	)

	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~~694	)		–
Derivative liabilities		–		–		(458,109	)		(257,861	)
Total		41,800		–		(463,~~804~~803	)		(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~~May 2831, 2019 and November 30, 2018. As at ~~February~~May 2831, 2019, the Company had 60 102,~~532~~042,~~565~~ 669 (November 30, 2018 – 12,~~254~~354,104) potentially issuable shares from outstanding convertible notes and share purchase warrants.

(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.

GALA PHARMACEUTICAL INC.

Notes to the Condensed Consolidated Financial Statements

For the period ended ~~February~~May 2831, 2019

(unaudited)

Summary of Significant Accounting Policies (continued)

(g) ~~Recent~~Recently Adopted Accounting Pronouncements (continued)

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.

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

Deferred compensation is comprised of common shares issued to officers and directors of the Company for compensation services. During the six months ended May 31, 2019, the Company recorded $85,069 (May 31, 2018 - $164,767) of compensation expense and the remaining $31,952 (November 30, 2018 - $117,021) was recorded as deferred compensation within shareholders’ equity.

GALA PHARMACEUTICAL INC.

Notes to the Condensed Consolidated Financial Statements

For the period ended ~~February~~May 2831, 2019

(unaudited)

2. Summary of Significant Accounting Policies (continued)

(g) Recently Adopted Accounting Pronouncements

3. Deferred Compensation

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.

Equipment

	Cost $		Accumulated amortization $			~~February~~May 2831, 2019 $		November 30, 2018 $
Machinery		5174,~~449~~089		19(22,~~012~~073	)		3252,~~437~~016		35,160
Leasehold improvements		6248,~~703~~285		–(7,749	)		6240,~~703~~536		–
		58,152		19,012			39,140		35,160
		322,374		(29,822	)		292,552		35,160

During the three months ended ~~February~~May 2831, 2019, the Company recorded $210,~~723~~810 (~~February~~May 2831, 2018 - $2,~~730~~724) of depreciation expense. During the six months ended May 31, 2019, the Company recorded $13,533 (May 31, 2018 - $5,454) of depreciation expense.

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~~May 2831, 2019, the Company issued 1,186,310 common shares for the conversion of $13,726 of principal balance and $6,274 of ~~accrued~~ accrued interest. As at ~~February~~May 2831, 2019, the carrying value of the convertible debenture was $227,654 (November 30, 2018 - $241,380).

(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 May 31, 2019, the carrying value of the convertible debenture was $15,000 (November 30, 2018 - $1,675) and the unamortized discount on the convertible debenture was $nil (November 30, 2018 - $13,325).

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.

GALA PHARMACEUTICAL INC.

Notes to the Condensed Consolidated Financial Statements

For the period ended ~~February~~May 2831, 2019

(unaudited)

Convertible Debentures (continued)

~~(b)~~The Onembedded ~~June~~conversion 6,option qualifies ~~2018,~~for ~~the~~derivative ~~Company~~accounting ~~issued~~under aASC ~~callable~~815-15, ~~secured~~Derivatives ~~convertible~~and ~~note for $15,000~~Hedging. ~~Under~~The ~~the~~fair ~~terms~~value of the ~~note,~~derivative ~~the~~liability resulted ~~amount~~in ~~owing~~a isfull ~~unsecured,~~discount ~~bears~~of ~~interest~~the at$15,000 ~~12%~~based ~~per~~on ~~annum,~~the ~~and~~net isproceeds ~~due~~received onfrom ~~June~~promissory ~~1, 2019~~note. The ~~note~~carrying isvalue ~~also convertible into common shares~~ of the ~~Company~~convertible debenture atwill ~~the~~be ~~lesser~~accreted ~~of:~~over ~~(a)~~the ~~$0.04;~~term ~~or (b) 50%~~ of the ~~lowest~~convertible 3debenture ~~trading~~up ~~prices during the 20 trading days prior~~ to the ~~date~~face value of ~~conversion~~$15,000. ~~Upon~~As ~~default~~at ofMay ~~the~~31, ~~note~~2019, the carrying ~~interest~~value ~~rate~~of ~~will~~the ~~increase~~convertible todebenture was $15%,000 ~~per~~(November ~~annum. In addition to the note~~30, ~~the~~2018 ~~Company~~- ~~also issued 30~~$1,~~000~~089) ~~share~~and ~~purchase~~the ~~warrants~~unamortized ~~which~~discount ~~entitles~~on the ~~note~~convertible debenture ~~holder~~was to$nil ~~acquire~~(November 30,~~000~~ ~~common~~2018 ~~shares~~- at $013,911).~~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).

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 $1550,000. As at ~~February~~May 2831, 2019, ~~the~~ the carrying value of the convertible debenture was $27,~~329~~626 (November 30, 2018 - $333) and the unamortized discount on the convertible debenture was $4742,~~671~~374 (November 30, 2018 - $49,667).

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 May 31, 2019, the carrying value of the convertible debenture was $8,158 (November 30, 2018 - $nil) and the unamortized discount on the convertible debenture was $201,842 (November 30, 2018 - $nil).

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 May 31, 2019, the carrying value of the convertible debenture was $209 (November 30, 2018 - $nil) and the unamortized discount on the convertible debenture was $4,791 (November 30, 2018 - $nil).

On April 22, 2019, the Company issued a callable secured convertible note for $120,000. Under the terms of the note, the amount owing is unsecured, bears interest at 12% per annum, and is due on April 22, 2020. The note is also convertible into common shares of the Company at 50% of the lowest trading price during the 25 trading days prior to the date of conversion. Upon default of the note, the interest rate will increase to 24% 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 $120,000 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 $120,000. As at May 31, 2019, the carrying value of the convertible debenture was $1,560 (November 30, 2018 - $nil) and the unamortized discount on the convertible debenture was $118,440 (November 30, 2018 - $nil).

GALA PHARMACEUTICAL INC.

Notes to the Condensed Consolidated Financial Statements

For the period ended ~~February~~May 2831, 2019

(unaudited)

Convertible Debentures (continued)

eh) On ~~January~~May 307, 2019, the Company issued a callable secured convertible note for $~~210~~58,000. Under the terms of the note, the amount owing is unsecured, bears interest at 810% per annum, and is due on ~~January~~May 307, 2020. The note is also convertible into common shares of the Company at 6261% of the lowest 2 trading ~~prices~~price during the 2015 trading days prior to the date of conversion. Upon default of the note, the interest rate will increase to 1522% 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~~58,000 based on the net proceeds received from promissory note. The carrying value of the ~~convertible~~ convertible debenture will be accreted over the term of the convertible debenture up to the face value of $~~210~~58,000. As at ~~February 28~~May 31, 2019, the carrying value of the convertible debenture was $~~1,307~~387 (November 30, 2018 - $nil) and the unamortized discount on the convertible debenture was $~~208~~57,~~693~~613 (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).

Derivative Liability

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~~May 2831, 2019, the Company recorded a loss on the change in fair value of the derivative liability of $~~353~~1,~~949~~879,016 (~~February~~May 2831, 2018 - $111,~~519~~190). As at ~~February~~May 2831, 2019, the Company had a derivative liability of $~~994~~2,~~126~~697,193 (November 30, 2018 - $458,109).

The following inputs and assumptions were used to value the derivative liabilities outstanding during the periods ended ~~February~~May 2831, 2019 and November 30, 2018, assuming no dividend yield:

	February 28, 2019		November 30, 2018
	May 31, 2019		November 30, 2018
Expected volatility		~~375~~436%		485%
Risk free rate		2.49%		2.52%
Expected life (in years)		0.58		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~~383,~~740~~000
Adjustment for conversion		(22,932	)
Mark to market adjustment		~~224~~1,~~209~~879,016
Balance, February 28, 2019		994,126
Balance, May 31, 2019		2,697,193

Related Party Transactions

(a)

As at May 31, 2019, the Company owed $182,397 (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 May 31, 2019, the Company repaid $36,500 of financing and received $15,209. The amount owed is unsecured, non-interest bearing, and due on demand.

(b)

As at May 31, 2019, the Company owed $61,000 (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 May 31, 2019, the Company incurred $18,000 (May 31, 2018 - $18,000) of consulting expense relating to services provided to the Company.

(c)

As at May 31, 2019, the Company owed $5,625 (November 30, 2018 - $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.

GALA PHARMACEUTICAL INC.

Notes to the Condensed Consolidated Financial Statements

For the period ended ~~February~~May 2831, 2019

(unaudited)

7. Related Party Transactions (continued)

(ad) As at ~~February~~May 2831, 2019, the Company owed $~~176~~2,~~188~~064 (November 30, 2018 - $~~203~~2,~~688~~064) to a ~~company controlled by a~~ significant shareholder of the Company. toThe ~~fund~~amount ~~payment~~is ofunsecured, ~~operating~~bears ~~expenditures.~~interest ~~During~~at 3% per annum, and due 180 days from the ~~period~~date ~~ended~~of ~~February~~issuance. 28As at May 31, 2019, ~~the~~accrued ~~Company~~interest ~~repaid~~of $27160 (November 30,~~500~~ of2018 ~~financing.~~- ~~The~~$129) ~~amount~~has ~~owed~~been isincluded ~~unsecured,~~in ~~non-interest~~accounts ~~bearing,~~payable and ~~due~~accrued onliabilities, ~~demand~~related parties.

(be) As at ~~February~~May 2831, 2019, the Company owed $523,~~000~~500 (November 30, 2018 - $433,~~000~~500) to a company controlled by 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.~~

(cf) As at ~~February~~May 2831, 2019, the Company owed $~~2,064~~nil (November 30, 2018 - $26,~~064~~560) to athe ~~significant~~Chief ~~shareholder~~Executive Officer of the Company. ~~The~~During ~~amount is unsecured, bears interest at 3% per annum, and due 180 days from~~ the ~~date~~period ofended ~~issuance.~~May ~~As at February 28~~31, 2019, ~~accrued~~the ~~interest~~Company ofincurred $~~144~~163,479 (~~November~~May 3031, 2018 - $~~129~~317,430) ~~has~~of ~~been~~compensation ~~included in accounts payable and accrued liabilities, related parties~~costs.

(dg) As at ~~February~~May 2831, 2019, the Company ~~owed~~prepaid $327,~~500~~000 (November 30, 2018 - $327,~~500~~000) of prepaid rent to a ~~company~~shareholder ~~controlled~~that byholds a49% ~~significant~~interest ~~shareholder~~ of ~~the~~Gala ~~Company~~California. The ~~amount~~amounts owed isare unsecured, non-interest bearing, and due on demand. During the period ended May 31, 2019, the Company paid $45,000 (May 31, 2018 - $nil) of rent to the shareholder.

(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.

Loans Payable

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. In March 2019, the Company issued 1,725,000 at $0.001 per share to settle $1,725 of promissory note. As at ~~February~~May 2831, 2019, the outstanding balance of the promissory note was $2220,~~000~~275 (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~~May 2831, 2019, the outstanding balance of the promissory note was $20,000 (November 30, 2018 - $20,000).

Common Shares

(a) On December 316, 2018, the Company issued 2500,000~~,000~~ common shares ~~with~~to a ~~fair~~non-related ~~value~~party ~~of $39,000~~ for ~~services,~~previous ~~including~~issuances 1,of 500,000 common shares toat a$0.10 ~~director~~per ofshare ~~the~~which ~~Company~~was asrevalued ~~director’s~~to ~~fees~~$0.05 per share.

(b) On ~~January~~December 831, ~~2019~~2018, the Company issued 1,~~186~~500,~~310~~000 common shares with a fair value of $2639,~~099~~000 to ~~settle~~a ~~convertible~~director ~~debentures~~ of ~~$20,000~~the ~~and~~Company ~~derivative~~as ~~liability~~directors ~~of $22,932 resulting in a gain on settlement of debt of $16,833~~fees.

(c)

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.

(d)

On March 19, 2019, the Company issued 1,725,000 common shares with a fair value of $37,950 to settle outstanding loans payable of $1,725 resulting in a loss on settlement of debt of $36,225. Refer to Note 8(a).

(e)

On March 19, 2019, the Company issued 1,000,000 common shares with a fair value of $22,000 for consulting services.

(f)

On March 19, 2019, the Company issued 1,500,000 common shares at $0.02 per share for proceeds of $30,000.

(g)

On April 1, 2019, the Company issued 3,000,000 common shares with a fair value of $75,000 for consulting services.

(h)

On April 5, 2019, the Company issued 2,500,000 common shares with a fair value of $77,500 for consulting services.

(i)

On April 7, 2019, the Company issued 2,750,000 common shares with a fair value of $85,250 for settlement expenses with respect to outstanding litigation against the Company.

GALA PHARMACEUTICAL INC.

Notes to the Condensed Consolidated Financial Statements

For the period ended ~~February~~May 2831, 2019

(unaudited)

10.

Share Purchase Warrants

~~During~~In ~~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

In April 2019, the Company issued 2,000,000 share purchase warrants as part of the issuance of convertible debentures. The fair value of the share purchase warrants was $60,000, calculated using the Black-Scholes option pricing model assuming no expected dividends, volatility of 411%, expected life of 5 years, and a risk free rate of 2.30%.

	Number of warrants		Weighted average exercise price $

Balance, November 30, 2018		160,000		0.01
Issued		2,010,000		0.03

Balance, May 31, 2019		2,170,000		0.03

11.

Supplemental Disclosures

	Three months ended February 28, 2019 $		Three months ended February 28, 2018 $
	Six months ended May 31, 2019 $		Six months ended May 31, 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		15,451		198,557
Common shares issued to settle third party debt		13,726		198,557
Common shares issued for deferred compensation		–		60,000
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		60,190		–
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~~May 2831, 2019

(unaudited)

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		65,160
November 30, 2020		114,941
November 30, 2021		119,538
November 30, 2022		124,320
November 30, 2023		52,644

Total minimum lease payments		476,603

13.

Subsequent Events

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~~May 2831, 2019 with the exception of the following:

(a) On ~~March~~June 1924, 2019, the Company issued 1350,~~500,~~000 common shares to a non-related party for proceeds of $757,000, which was previously received as at May 31, 2019.

(b) On ~~March~~June 1924, 2019, the Company issued 110,000,000 common shares ~~for~~pursuant ~~consulting~~to ~~services~~a revised stock purchase agreement adjusting the stock purchase price to a$0.01 ~~non-related~~per ~~party~~share.

(c) On ~~March~~June 1927, 2019, the Company issued 1a callable secured convertible note for $38,~~725,~~000. Under the terms of the note, the amount owing is unsecured, bears interest at 10% per annum, and is due on May 7, 2020. The note is also convertible into common shares ~~for~~of the Company at 61% of the lowest trading price during the 15 trading days prior to the date of conversion. Upon default of $1the note,~~725~~ ofthe ainterest ~~loan~~rate ~~payable~~will increase to 22% per annum.

(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.

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.

BUSINESS

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

The Company then expanded into the Hemp and Cannabidiol (“CBD”) industry. The expansion focused on the development, research, and commercialization of products derived from the Hemp and Cannabis Plant. At the time GPI was also seeking acquisition candidates in this area of interest in the nutraceutical and pharmaceutical industries.

Gala Pharmaceutical Inc. then hired industry-leading experts in the field of Genomics to utilize their expertise to improve crop yields by utilizing advanced breeding and molecular technologies. The company intended to use proprietary equipment and techniques to ensure the genetic fingerprint of each plant is identical and is cultivated in a controlled environment significantly reducing the variability of each plants yield. It is anticipated that Gala Pharmaceuticals Inc., may at some point provide oversight for the development of fully cGMP production of Active Pharmaceutical Ingredients (API) for use in forecasted clinical trials supporting the safety and efficacy of the various plant extracts.

The Company currently has been approved by the City of Long Beach to build a testing Cannabis Lab and the Lab build-out is scheduled to be completed on May 20, 2019. The company intends to provide Testing or Analytical Chemistry tools for chemical, plant, soil, and liquid.

The Company also will provide 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).

RESULTS OF OPERATIONS

Working Capital

	February 28, 2019 $			November 30, 2018 $
	May 31, 2019 $			November 30, 2018 $
Current Assets		~~243~~93,~~493~~052			226,998
Current Liabilities		(13,~~633~~464,~~091~~392	)		(1,120,864	)
Working Capital (Deficit)		(13,~~389~~371,~~598~~340	)		(893,866	)

Cash Flows

	Three months ended February 28, 2019 $			Three months ended February 28, 2018 $
	Six months ended May 31, 2019 $			Six months ended May 31, 2017 $
Cash Flows from (used in) Operating Activities		(~~107~~206,~~702~~730	)		(82243,~~599~~592	)
Cash Flows from (used in) Investing Activities		(6270,~~703~~925	))		–
Cash Flows from (used in) Financing Activities		~~177~~398,~~500~~709			75275,000
Net Increase (decrease) in Cash During Period		63(78,~~095~~946	)		(731,~~599~~408	)

Revenues

During the three and six months ended May 31, 2019, the Company earned $nil revenues compared to revenues of $4,675 from the sale of parts and equipment with a cost of sales of $3,216 for the three and six months ended May 31, 2018.

Operating Expenses

Three Months Ended ~~February~~May 2831, 2019 ~~and~~ and 2018

During the three months ended ~~February 28~~May 31, 2019, the Company incurred operating expenses of $~~230~~481,~~663~~990 compared to operating expenses of $~~548~~384,~~228~~175 during the three months ended ~~February 28~~May 31, 2018. The ~~decrease~~increase in operating ~~expense~~expenses was due to aan increase of $~~290~~136,~~700~~562 ~~decrease~~of in consulting expenses ~~including~~as athe ~~$231,055~~Company incurred ~~decrease~~more ~~to related parties for~~ consulting ~~services.~~costs ~~The~~due ~~Company~~to ~~also~~an ~~had~~increase ~~a decrease~~ in ~~general~~its ~~and~~lab ~~administrative~~activities. ~~expenses~~The ~~of $41,715~~increase ~~including~~was ~~$44,118 to related party expenses~~ offset by ana ~~increase~~decrease in ~~other~~ general and administrative ~~expenses of $2,403~~ ~~from prior year. Rent~~ expense ~~increased~~of $1455,~~865~~465 ~~due~~as to the ~~costs~~Company ~~incurred~~as on the ~~Gala~~Company ~~California~~focused ~~office~~more ~~lease~~on inconsulting ~~fiscal~~costs ~~2019~~and ~~that was~~less ~~not~~on ~~applicable~~day-to-day inoverhead ~~the first quarter of fiscal 2018~~costs.

The Company incurred a net loss of $~~577~~2,~~172~~112,802 during the three months ended ~~February~~May 2831, 2019 compared to a net loss of $~~583~~393,~~242~~746 during the three months ended ~~February~~May 2831, 2018. In addition to operating expenses, the Company recorded a loss of $~~353~~1,~~949~~525,067 for ~~the~~ change in the fair value of ~~the~~ derivative liabilities ~~relating~~ due to the fair value of the beneficial conversion feature ofon the ~~conversion~~Company’s ~~option~~convertible indebentures which fluctuates due to the ~~outstanding~~floating conversion ~~convertible~~rates. ~~note,~~The asCompany ~~well~~also asrecorded interest expense of $2757,~~007~~631 ~~for~~during ~~interest~~the ~~incurred~~three onmonths ~~the~~ended ~~Company’s~~May ~~debts. Furthermore~~31, ~~the~~2019 ~~Company~~compared ~~recorded~~to interest aexpense ~~gain~~ of $1615,~~833~~769 ~~relating to~~during the ~~settlement~~three ofmonths ~~conversion~~ended ofMay ~~outstanding~~31, ~~convertible~~2018 ~~debt~~and ~~during~~ the ~~period.~~increase ~~For~~was ~~the~~due ~~three~~to ~~months~~an ~~ended~~overall ~~February~~increase ~~28,~~of ~~2018,~~convertible notes outstanding during the current period. The Company also recorded a loss ofon $~~111~~36,~~519~~225 for ~~the~~settlement ~~change~~of indebt, ~~fair~~$21,250 ~~value~~ of ~~the~~additional settlement ~~derivative~~expense ~~liabilities~~ relating to the ~~beneficial~~issuance ~~conversion feature~~ of ~~the~~common ~~conversion~~shares ~~option~~to insettle ~~the~~ outstanding ~~convertible~~litigation ~~note~~claims, asand ~~well~~a ~~as interest expense of~~ $188,~~238~~400 ~~for~~loss ~~interest incurred~~ on the change ~~Company’s~~in ~~debts. Furthermore,~~ the ~~Company~~fair ~~recorded~~value ~~a gain~~ of ~~$94,743 relating to~~ the ~~settlement~~Company’s ofholdings ~~conversion~~ of ~~outstanding convertible~~Green ~~debt~~Gro ~~during the period~~Technologies.

Six Months Ended May 31, 2019 and 2018

During the six months ended May 31, 2019, the Company incurred operating expenses of $712,653 compared to operating expenses of $932,403 during the six months ended May 31, 2018. The decrease in operating expenses was due to a decrease of $154,146 of consulting expenses as the Company issued substantially more common shares during the six months ended May 31, 2018 for management and consulting expenses including 5,000,000 common shares issued to the Company’s Chief Executive Officer as a compensation bonus with a fair value of $200,000. The Company also had a decrease in general and administrative expense of $97,180 as the Company preserved available cash flow for the development of its lab activities and less on overhead costs. The decrease was offset by an increase of $23,497 of rent expenses which included rent costs incurred on a new facility for Gala California in preparation for its lab testing activities.

The Company incurred a net loss of $2,689,974 during the six months ended May 31, 2019 compared to a net loss of $976,988 during the six months ended May 31, 2018. In addition to operating expenses, the Company recorded interest expense of $84,638, a loss on the change in fair value of derivative liabilities of $1,879,016 relating to the increase in the fair value of the beneficial conversion feature of the Company’s convertible notes payable, a loss on settlement of debt of $19,392, settlement expense of $21,250 relating to the issuance of common shares for the settlement of outstanding litigation against the Company, and an unrealized loss of $13,000 for the fair value of common shares of Green Gro Technologies that is being held by the Company. During the six months ended May 31, 2018, the Company incurred a loss of $111,190 for the change in fair value of the beneficial conversion feature of its convertible notes, $34,007 of interest expense, and a gain on settlement of debt of $94,743. The increase in other expenses was due to a significant increase in the loss on the change in fair value of derivative liabilities due to an increase in the overall convertible notes outstanding which also explains why interest expense was higher in fiscal 2019 compared to fiscal 2018.

Net Loss

During the ~~three~~six months ended ~~February 28~~May 31, 2019, the Company incurred a net loss of $~~577~~2,~~172~~689,974 or $0.0103 loss per share compared to a net loss of $~~583~~976,~~242~~988 and a loss per share of of $0.0102 during the ~~three~~six months ended ~~February~~May 2831, 2018. The increase in the net loss and loss per share amounts were due to ~~greater~~increases in expenditures ~~relating~~and to the ~~fair~~loss ~~value~~in ofthe ~~share-based~~change ~~compensation~~in ~~that~~fair ~~was~~value ~~issued~~of ~~during~~derivative ~~the current period~~liabilities.

Liquidity and Capital Resources

As of ~~February~~May 2831, 2019, the Company has ~~working~~ working capital deficit of $13,~~389~~371,~~598~~340 and an accumulated deficit of $57,~~654~~767,~~618~~420 compared to a working capital deficit of $893,866 and an accumulated deficit of $5,077,446 as at November 30, 2018. The ~~decrease~~increase in working capital deficit was due to ~~the~~an ~~settlement~~ increase of ~~outstanding~~$2,239,084 in ~~convertible~~the ~~notes~~derivative ~~with~~liability due to an increase in the ~~issuance~~volatility of the Company’s common shares, ~~which~~and ~~also~~an ~~led~~increase ~~to a decrease~~ in the ~~derivative liability balance~~face ~~outstanding~~value atof ~~February~~convertible ~~28,~~notes ~~2019~~outstanding. Furthermore, the Company ~~issued~~had ~~common~~a ~~shares~~decrease toof ~~management~~$78,946 ~~and~~of ~~consultants~~cash ofas the Company ~~which was~~used ~~recorded~~cash asfor operating ~~prepaid~~and ~~expense~~investing asactivities ~~the~~at ~~fair~~a ~~value~~greater ofrate than the ~~common~~amounts ~~shares~~that ~~issued~~ were ~~for~~funded ~~services~~by ~~over~~financing aactivities ~~period~~during ~~of 12 months from~~ the ~~date of the agreements~~period.

During the ~~three~~six months ended ~~February 28~~May 31, 2019, the Company issued the following common shares:

(a)

On December 6, 2018, the Company issued 500,000 common shares to a non-related party for previous issuances of 500,000 common shares at $0.10 per share which was revalued to $0.05 per share.

(b) On December 31, 2018, the Company issued 1,500,000 common shares with a fair value of $39,000 to a director of the Company as ~~directors~~director’s fees.

(c)

(d)

On March 19, 2019, the Company issued 1,500,000 common shares for proceeds of $30,000.

(e)

On March 19, 2019, the Company issued 1,725,000 common shares with a fair value of $37,950 for the conversion of $1,725 of outstanding loans payable.

(f)

On March 19, 2019, the Company issued 1,000,000 common shares with a fair value of $22,000 for services.

(g)

On April 1, 2019, the Company issued 3,000,000 common shares with a fair value of $75,000 for services.

(h)

On April 5, 2019, the Company issued 2,500,000 common shares with a fair value of $77,500 for services.

(i)

On April 7, 2019, the Company issued 2,750,000 common shares with a fair value of $85,250 for the settlement of outstanding litigation against the Company.

Cash flow from Operating Activities

During the ~~three~~six months ended ~~February 28~~May 31, 2019, the Company used cash of $~~107~~206,~~702~~730 for operating activities compared to $82243,~~599~~592 during the ~~three~~six months ended ~~February 28~~May 31, 2018. The ~~increase~~ decrease in the ~~cash~~use ~~used~~of cash for operating activities ~~was~~is due to ~~higher~~the ~~operating~~fact ~~expenditures~~that ~~compared~~the toCompany had lower operating expenses during the ~~prior~~current ~~year~~period and allocated some of its limited cash flows for the purchase of equipment which is classified as an investing activity.

Cash flow from Investing Activities

During the ~~three~~six months ended ~~February 28~~May 31, 2019, the ~~there~~Company ~~were~~used $6270,~~703~~925 inof cash for the purchase of equipment and leasehold improvements. inDuring ~~2019~~the ~~and~~six ~~$nil~~months inended May 31, 2018, the Company did not have any investing activities.

Cash flow from Financing Activities

During the ~~three~~six months ended ~~February 28~~May 31, 2019, the Company received $~~177~~398,~~500~~709 of ~~proceeds~~cash from financing activities ~~comprised~~which ofincluded $~~205~~383,000 ~~net~~from ~~proceeds~~the issuance of convertible notes, $37,000 from the issuance of ~~two~~common ~~convertible~~shares, ~~notes~~$15,209 from related parties and offset by ~~repayment~~repayments of $2736,500 to related parties. During ~~compared~~the tosix ~~proceeds~~months ended May 31, 2018, the Company received of$275,000 from financing activities, which included $75,000 from ~~related~~ ~~parties~~related ~~during~~party ~~the~~advances ~~three~~and ~~months~~$200,000 ~~ended~~from ~~February~~the ~~28,~~issuance ~~2018~~of common shares.

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

(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.

Subsequent Events

	(a)	On June 24, 2019, the Company issued 350,000 common shares for proceeds of $7,000.

	(b)	On June 24, 2019, the Company issued 10,000,000 common shares pursuant to a revised stock purchase agreement which revised the purchase price to $0.01 per share of common stock.

(c)

On June 27, 2019, the Company issued a callable secured convertible note for $38,000. Under the terms of the note, the amount owing is unsecured, bears interest at 10% per annum, and is due on May 7, 2020. The note is also convertible into common shares of the Company at 61% of the lowest trading price during the 15 trading days prior to the date of conversion. Upon default of the note, the interest rate will increase to 22% per annum.

Going Concern

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.

Future Financings

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

Critical Accounting Policies

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

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

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes for the reporting period. Significant areas requiring the use of management estimates relate to the valuation of its mineral leases and claims and our ability to obtain final government permission to complete the project.

Stock-Based Compensation

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

Derivative Liability

From time to time, the Company may issue equity instruments that may contain an embedded derivative instrument which may result in a derivative liability. A derivative liability exists on the date the equity instrument is issued when there is a contingent exercise provision. The derivative liability is records at is fair value calculated by using an option pricing model such as a multi-nominal lattice model. The fair value of the derivative liability is then calculated on each balance sheet date with the corresponding gains and losses recorded in the consolidated statement of operations.

Beneficial Conversion Features

From time to time, the Company may issue convertible notes that may contain an embedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of the warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method.

Recently Issued Accounting Pronouncements

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

Contractual Obligations

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures. Our Chief Executive Officer and Principal Financial Officer, after evaluating the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q (the "Evaluation Date"), concluded that as of the Evaluation Date, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.

(b) Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting during our most recent fiscal quarter that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Internal Controls

Disclosure controls and procedures, no matter how well designed and implemented, can provide only reasonable assurance of achieving an entity's disclosure objectives. The likelihood of achieving such objectives is affected by limitations inherent in disclosure controls and procedures. These include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures such as simple errors or mistakes or intentional circumvention of the established process.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f). Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission ("2013 COSO Framework").

A material weakness is a deficiency or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Our management concluded we have a material weakness due to lack of segregation of duties and accounting for complex debt and equity transactions. Our size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties within our internal control system. There is mainly one person involved in processing of transactions. Therefore, it is difficult to effectively segregate accounting duties. We have hired an additional administrative person and retained an outside professional firm to assist in the separation of duties on an ongoing basis. The use of the outside firm has proven successful in assisting in the separation of duties. During the year the Company had several audit adjustments related to accounting for complex debt and equity that were deemed material. Management did not have sufficient experience to review these complex debt and equity transactions. As such, we believe this deficiency to have been a material weakness.

However, additional people are not needed to do the administrative work therefore segregation of duties will continue to be an ongoing weakness.

Based on this evaluation and because of the material weaknesses, management has concluded that our internal control over financial reporting was not effective as of ~~February~~May 2831, 2019.

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

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

As of ~~February~~April 2824, 2019, the ~~Company is subject of a~~ civil action relating to a former consultant for a breach of contract. Inwas ~~April 2019, the Company anticipates a settlement agreement of this action~~dismissed. ~~The Company had accrued $64,000 as part of the settlement amount at November 30, 2018~~

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

For the ~~three~~six months ended ~~February~~May 2831, 2019, there were the following equity transactions.

(a) On December 56, 2018, the Company issued 500,000 common shares to a non-related party for ~~proceeds~~previous issuances of 500,000 common shares at $250.10 per share which was revalued to $0.05 per share. (b) On December 31, 2018, the Company issued 1,500,000 common shares for consulting services to a director of the company (c) On January 7, 2019, the Company issued 1,186,310 common shares for the conversion of $20,000 of loan payable

(bd) On ~~December~~ 31March 19, ~~2018~~2019, the Company issued 1,~~500~~725,000 common shares ~~for~~with ~~consulting~~a ~~services~~fair value of $37,950 to settle outstanding loans payable of $1,725 resulting in a ~~director~~loss on settlement of ~~the~~debt ~~company~~of $36,225. Refer to Note 8(a).

(ce) On ~~January~~ 7March 19, 2019, the Company issued 1,~~186~~000,~~310~~000 common shares ~~for~~with ~~the~~a ~~conversion~~fair value of $2022,000 offor ~~loan~~consulting ~~payable~~services.

(df) On ~~February~~ 5March 19, 2019, the Company ~~entered~~issued ~~into a convertible note agreement for $5~~1,500,000. ~~The note is unsecured, bears interest at 12% per annum, and is due on February 5, 2020. The note is convertible into~~ common shares at ~~the lower of: (i)~~ $0.0402 per share; ~~or (ii)~~for ~~50%~~proceeds of ~~the lowest three trading prices in the twenty day trading period leading up to the date of conversion. In addition~~$30, ~~the Company granted 10,~~000 ~~share purchase warrants to the note holder with an exercise price of $0~~.~~01 per share until February 5, 2026~~

(eg) On ~~February~~ 8April 1, 2019, the Company ~~entered~~issued ~~into a convertible note agreement for $210~~3,000~~. The note is unsecured~~,000 ~~bears interest at 8% per annum, and is due on January 30, 2020. The note is convertible into~~ common shares atwith ~~62%~~a offair ~~the~~value ~~average~~of ~~two~~$75,000 ~~lowest~~for ~~trading prices~~consulting ~~in the twenty trading days leading up to the date of conversion~~services.

(h)

On April 5, 2019, the Company issued 2,500,000 common shares with a fair value of $77,500 for consulting services.

(i)

On April 7, 2019, the Company issued 2,750,000 common shares with a fair value of $85,250 for settlement expenses with respect to outstanding litigation against the Company.

(j)

On January 30, 2019, the Company entered into a convertible note agreement for $5,000. The note is unsecured, bears interest at 12% per annum, and is due on February 5, 2020. The note is convertible into common shares at the lower of: (i) $0.04 per share; or (ii) 50% of the lowest three trading prices in the twenty day trading period leading up to the date of conversion. In addition, the Company granted 10,000 share purchase warrants to the note holder with an exercise price of $0.01 per share until February 5, 2026

(k)

On February 8, 2019, the Company entered into a convertible note agreement for $210,000. The note is unsecured, bears interest at 8% per annum, and is due on January 30, 2020. The note is convertible into common shares at 62% of the average two lowest trading prices in the twenty trading days leading up to the date of conversion.

(l)

(m)

On May 7, 2019, the Company issued a callable secured convertible note for $58,000. Under the terms of the note, the amount owing is unsecured, bears interest at 10% per annum, and is due on May 7, 2020. The note is also convertible into common shares of the Company at 61% of the lowest trading price during the 15 trading days prior to the date of conversion. Upon default of the note, the interest rate will increase to 22% per annum.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None noted

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable to our Company.

ITEM 5. OTHER INFORMATION

None noted

ITEM 6. EXHIBITS

Exhibit Number	Exhibit Description
31.1	Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase

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SIGNATURES

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

	GALA PHARMACEUTICAL INC.
		(REGISTRANT)
Date: April 29, 2019	/s/ Maqsood Rehman
Date: July 23, 2019	/s/ Maqsood Rehman
		Maqsood Rehman
		Chief Executive Officer
		(Authorized Officer for Registrant)

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Filing Compare · Gala Pharmaceutical Inc.