Attached files
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE YEAR ENDED MAY 31, 2015
EXCHANGE ACT OF 1934 FOR THE YEAR ENDED MAY 31, 2015
Commission file number 000-54093
NEXT GALAXY CORP.
(Exact Name of Small Business Issuer as specified in its charter)
NEVADA
(State or other Jurisdiction of Incorporation or Organization)
1680 Michigan Avenue, Suite 700
Miami Beach, FL 33139
(Address of principal executive offices)
(877) 407-9797
(Issuer's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
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Securities registered pursuant to section 12(g) of the Act:
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None
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Common Stock
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES [ ] NO [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act: YES [ ] NO [X]
Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (SS 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 if the Exchange Act.
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Large Accelerated Filer
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Accelerated Filer
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Non-accelerated Filer (Do not check if smaller reporting company)
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Smaller Reporting Company
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[X]
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES [ ] NO [X]
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of November 30, 2014 - $10,967,538
As of August 28, 2015, 156,803,649 shares of the registrant's common stock were outstanding.
The sole purpose of this Amendment to the Registrant's Annual Report on Form 10-K for the year ended May 31, 2015 is to furnish the Interactive Data File exhibits pursuant to Rule 405 of Regulation S-T. No other changes have been made to this Form 10-K and this Amendment has not been updated to reflect events occurring subsequent to the filing of this Form 10-K.
TABLE OF CONTENTS
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Page
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Business.
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3
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Risk Factors.
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7
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Unresolved Staff Comments.
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8
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Properties.
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8
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Legal Proceedings.
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8
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Mine Safety Disclosures.
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8
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8
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Market Price for the Registrant's Common Equity, Related Stockholders Matters and
Issuer Purchases of Equity Securities.
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8
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Selected Financial Data.
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9
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Management's Discussion and Analysis of Financial Condition and Results of Operation.
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9
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Quantitative and Qualitative Disclosures About Market Risk.
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13
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Financial Statements and Supplementary Data.
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13
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Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
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28
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Disclosure Controls and Procedures.
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28
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Other Information.
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29
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29
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Directors, Executive Officers and Corporate Governance.
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29
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Executive Compensation.
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33
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
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34
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Certain Relationships and Related Transactions, and Director Independence.
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35
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Principal Accounting Fees and Services.
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35
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Exhibits and Financial Statement Schedules.
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36
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38
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39
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On June 19, 2014, we entered into an IP Asset Purchase Agreement (the "Agreement") with Mary Spio ("Spio") to acquire certain assets (the "IP Assets") owned by her in consideration of 55,000,000 restricted shares of our common stock. The IP Assets are used in developing a method and apparatus for facilitating social contact in a network of users.
On June 19, 2014, we completed the Agreement with Spio and exchanged the 55,000,000 restricted shares of our common stock for the IP Assets.
On or about June 19, 2014, as a result of completing our Agreement, we changed the focus of our business from services to the Machine-to-Machine market to a virtual reality company to develop a content distribution platform and hardware for access virtual reality content.
History
We were incorporated under the laws of the State of Nevada on May 6, 2009. We were originally formed with the intent of creating a profitable service for placing Canadian citizens in accounting positions with Canadian corporations. From the date of our incorporation until August 5, 2010, we were in the business of placing Canadian citizens in accounting positions with Canadian accounting firms and corporations located in the Province of Quebec.
On August 5, 2010, we filed a Certificate of Amendment with the State of Nevada, changing our name from "Montreal Services Company" to "iMetrik M2M Solutions Inc." to reflect our new business orientation of the Company to be a solution provider of wireless communication services designed to control and manage the access and use of virtually any asset from "anywhere-to-anywhere" in the world. On November 29, 2012, we changed our name to Wiless Controls Inc. Our shares of common stock are traded on the OTCBB operated by the Financial Industry Regulatory Authority under the symbol "WILS".
On August 19, 2014, we changed our name to Next Galaxy Corp. Our shares of common stock are traded on the OTCQB operated by the Financial Industry Regulatory Authority under the symbol "NXGA" and on June 10, 2015, we changed the focus of our business from services to the machine-to-machine market to a virtual reality company to develop a content distribution platform and hardware for access virtual reality content.
We maintain our statutory registered agent's office at 1000 East William Street, Suite 204, Carson City, Nevada 89701 and our business office is located at 1680 Michigan Avenue, Suite 700, Miami Beach, FL 33139.
During the past few months, we have hired independent contractors that have worked on developing a method and apparatus for facilitating social contact in a network of users. They are to create CEEK, a fully immersive and interactive social virtual reality platform that simulates the communal experience of being at a movie, music concert, sports game, museum, business conference or meeting, spectator event or travel destination.
On June 19, 2014, we entered into an IP Asset Purchase Agreement (the "Agreement") with Mary Spio ("Spio") to acquire certain assets (the "IP Assets") owned by her in consideration of 55,000,000 restricted shares of our common stock. The IP Assets are used in developing a method and apparatus for facilitating social contact in a network of users.
On or about June 19, 2014, as a result of completing our Agreement, we changed the focus of our business from services to the machine-to-machine marketing to a technology solutions company that provides easy and convenient tools and resources for people to meet, communicate and connect through shared interests, events and activities.
On June 19, 2014, Mary Spio was appointed president, principal executive officer and a member of our board of directors.
On June 23, 2014, we completed the Agreement with Mary Spio and exchanged the 55,000,000 restricted shares of our common stock for the IP Assets.
On July 14, 2014, Laurie Clark was appointed Director and Chief Operating Officer.
On August 12, 2014, as a leading technology and content solutions company developing dynamic, innovative experiences for consumers, we announced that Grammy nominated music producer Willie "Bum Bum" Baker through his new production company New Revolt has entered into partnership with us to create a series of reality shows featuring various musical artists for the CEEK platform, a fully immersive social entertainment platform in development for accessing Virtual Reality and Augmented Reality content. The "docu-series" will be shot with 360 cameras to create the most intimate and immersive experience and designed for viewing through Virtual Reality headgear, such as the Oculus Rift.
On August 19, 2014, we changed our name to Next Galaxy Corp. Our shares of common stock are traded on the OTCQB operated by the Financial Industry Regulatory Authority under the symbol "NXGA".
Our auditors have issued a going concern opinion. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have not generated any revenues from our current business since the company's main products– CEEK (VR Content distribution platform) and CEEKARS ( a VR audio headphone and controller) are currently in development. In addition we have sustained losses for the past two years and have a negative working capital at May 31, 2015. We believe the technical aspects of our software are sufficiently developed for our operations. We must raise cash from sources other than operations. Our only other source for cash at this time is investments by others in our company. We must raise cash to continue our project implementation and continue our operations and product development.
If we are unable to attract users of our services, or if we are unable to attract enough clients to utilize our services, we may quickly use up the proceeds from our first offering and will need to find alternative sources, like a second public offering, a private placement of securities, or loans from our officers or others in order for us to maintain our operations. At the present time, we have not made any arrangements to raise additional cash, other than through this offering.
Business Plan
Next Galaxy Corp is a content and technology solutions company developing CEEK – a fully immersive cross platform social virtual reality application for accessing entertainment, experiences and events along with others to share it with. Next Galaxy is leading the Social Virtual Reality revolution.
Next Galaxy aims to be a major industry partner in driving growth of entertainment and branded experiences in the consumer virtual reality market.
CEEK provides an easy and convenient social virtual entertainment platform for people to meet, communicate and connect through shared experiences. Ceek simulates the communal experience of attending live events with others from anywhere at anytime.
CEEK is ushering in a new era in entertainment, virtual reality and social networking with a blend of live, virtual and actual event offerings. And best of all, the CEEK platform will be available for use be it on a pc, tablet or other mobile device. CEEK is the key to unlocking virtual worlds around you.
Groups of individuals will have the option to experience live events in the virtual setting together. Viewers experiencing an event from different locations may verbally share observations about what is happening on the field or stage, as if seated next to one another. They may also choose to look at each other during the event. Such features serve to simulate the communal experience of attending live events with friends.
With the CEEK platform, consumers will gain easy access to an unprecedented selection of compelling live entertainment experiences without leaving the home. The individual will be able to experience a sought-after event in a highly immersive setting even when tickets to the actual event are sold out or unaffordable, or travel to the venue is impractical. By removing economic, physical, and geographical constraints, the CEEK augmented reality platform will present previously unimaginable entertainment opportunities to broad audiences.
Entities and individuals engaged in providing live entertainment – television networks, promoters, venue owners, musicians, athletes, sports leagues – will also realize substantial benefits. Ticket sales will no longer be limited by venue capacity or geography. The compelling nature of the augmented reality medium will create entirely new sources of pay-per-view revenue. Advertising revenue per impression will be greater, due to the vastly enhanced ability to target individual consumers with precision.
CEEK will provide live events in partnership with various participants in the live entertainment value chain. In general, other entities will be responsible for ticket sales, advertising sales, production, event marketing, and other activities that are integral to putting on events for live and television audiences. CEEK will be responsible for all activities specific to capturing and delivering the event to the virtual reality audience.
Wherever you are, whatever you like and whoever you're CEEKing, we can help you find and connect with the people, places and the opportunities that are perfect for you.
Overview
On or about June 19, 2014, as a result of completing our Agreement, we changed the focus of our business from services to the Machine-to-Machine market to a virtual reality company to develop a content distribution platform and hardware for access virtual reality content.
Geographical market
We promote our services in North America. We intend to expand our operations to other geographical areas as we generate additional adequate revenues.
Market
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The global marketplace is the general marketplace
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The ability to recognize and capitalize on trends before others see them for competitive advantage.
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Augmented and Virtual Reality is ushering in a new era of mass media consumption and changing the way we will communicate in the future.
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We are currently developing CEEK – a cross platform social application for accessing VR and AR enabled content on mobile devices, personal computers and consoles. We are aiming to become a major industry partner in driving growth of entertainment, virtual tourism and retail experiences in the consumer virtual reality market.
Website
We created and are maintaining a website which allows us to market our services on the Internet.
Competition
The market we will be entering is one without definite competition boundaries. We will be competing with consoles, mobile and internet platforms that offer video content such as movies, concerts, TV shows, including iConcerts, Netflix, Hulu, Vevo.
The following are the major barriers to our market that allow us an advantage over our competitors:
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Existing Content – Software for re-purposing to VR format;
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Format – Software and hardware for encoding and indexing existing content to VR format;
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Input Device & Abstraction – Cross-Platform Software to play VR Content with Mobile and PC; and,
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Original Content – once users experience content with platform, it becomes difficult to watch same content any other way.
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Regulations
Our services and technologies are subject to federal, state, provincial and local laws and regulations concerning business activities in general.
Our operations will be affected from time to time in varying degrees by domestic and foreign political developments, federal and state laws.
In Quebec we will be subject to the Civil Code of Quebec. There are no Canadian regulations pertaining to our business with which we need to comply other than registering provincially as a foreign corporation. We are not obligated to register as a foreign corporation until we initiate operations. We have registered as a foreign corporation in the Province of Quebec.
Employees and employment agreements
We are a development stage company and currently have two full-time employees.
At present, we have two consulting agreements in place. During the fiscal year ended May 31, 2014, we signed a Consulting Agreement with Jean-Paul Langlais pursuant to which, Mr. Langlais was providing sales, marketing, corporate development and management consulting services relating to the corporate activities of our Company. The "Engagement Period" is for one year. The agreement is renewable for a one year period. During the fiscal year ended May 31, 2014, we signed a Consulting Agreement with Michel St-Pierre pursuant to which, Mr. St-Pierre was providing the services to serve in the capacity of President and Chief Executive Officer of our company. The "Engagement Period" is for one year. The agreements have been renewed in August 2015 for a one year period.
We presently do not have pension, health, annuity, insurance, stock options, profit sharing or similar benefit plans; however, we may adopt plans in the future. There are presently no personal benefits available to our officers and directors. Mr. St-Pierre handles our administrative duties.
Our Current Operations
During the past few months, we have hired independent contractors that have worked on developing a method and apparatus for facilitating social contact in a network of users. They are to create CEEK, a fully immersive and interactive social virtual reality platform that simulates the communal experience of being at a movie, music concert, sports game, museum, business conference or meeting, spectator event or travel destination.
On June 19, 2014, we entered into an IP Asset Purchase Agreement (the "Agreement") with Mary Spio ("Spio") to acquire certain assets (the "IP Assets") owned by her in consideration of 55,000,000 restricted shares of our common stock. The IP Assets are used in developing a method and apparatus for facilitating social contact in a network of users.
On or about June 19, 2014, as a result of completing our Agreement, we changed the focus of our business from services to the machine-to-machine marketing to a technology solutions company that provides easy and convenient tools and resources for people to meet, communicate and connect through shared interests, events and activities.
On June 19, 2014, Mary Spio was appointed president, principal executive officer and a member of our board of directors.
On August 19, 2014, we changed our name to Next Galaxy Corp. Our shares of common stock are traded on the OTCQB operated by the Financial Industry Regulatory Authority under the symbol "NXGA".
On June 23, 2014, we completed the Agreement with Mary Spio and exchanged the 55,000,000 restricted shares of our common stock for the IP Assets.
On July 28, 2014, we entered into an agreement with EON Reality to acquire certain equipment that will allow us to create CEEK - a fully immersive and interactive social reality platform that simulates the communal experience of being at a movie, music concert, sporting event, museum, business conference or meeting, spectator event or travel destination.
On July 14, 2014, Laurie Clark was appointed Director and Chief Operating Officer.
On August 12, 2014, as a leading technology and content solutions company developing dynamic, innovative experiences for consumers, we announced that Grammy nominated music producer Willie "Bum Bum" Baker through his new production company New Revolt has entered into partnership with us to create a series of reality shows featuring various musical artists for the CEEK platform, a fully immersive social entertainment platform in development for accessing Virtual Reality and Augmented Reality content. The "docu-series" will be shot with 360 cameras to create the most intimate and immersive experience and designed for viewing through Virtual Reality headgear, such as the Oculus Rift.
In September, 2014, we announced the release of a first of its kind virtual reality audio headset – Ceekars™. Ceekars™ is the world's first integrated Virtual Reality (VR) audio headset specifically optimized to work with the Oculus Rift and other head mounted VR devices that lack audio to provide dynamic, reactive sound in parallel with immersive video, completing the ultimate VR experience.
On December 7, 2014, we have signed a Business Partnership Agreement with Annex Telecom Co., Ltd, one of South Korea's top Mobile Virtual Network Operators (MVNO). Per the agreement, Next Galaxy and Annex Telecom will work together to create and distribute Virtual Reality (VR) concerts and experiences for use with devices such as the Samsung Gear VR and Oculus Rift via the CEEK Platform. Annex Telecom will also provide celebrity talent affiliations for production and marketing of VR Concerts.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
None.
We do not own any real estate. We do not plan on investing in real estate in the near future. The Company believes that its current office facilities will be sufficient for the foreseeable future.
We are not presently a party to any litigation.
None.
| ITEM 5. | MARKET PRICE FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. |
Market Information
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Fiscal Year – 2015
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High Bid
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Low Bid
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Fourth Quarter: 3/1/15 to 5/31/15
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0.13
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0.046
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Third Quarter: 12/1/14 to 2/28/15
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0.22
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0.03
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Second Quarter: 9/1/14 to 11/30/14
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0.25
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0.15
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First Quarter: 6/1/14 to 8/30/14
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0.25
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0.02
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Fiscal Year – 2014
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High Bid
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Low Bid
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Fourth Quarter: 3/1/14 to 5/31/14
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0.11
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0.006
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Third Quarter: 12/1/13 to 2/28/14
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0.006
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0.0014
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Second Quarter: 9/1/13 to 11/30/13
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0.016
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0.002
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First Quarter: 6/1/13 to 8/30/13
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0.03
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0.015
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Our shares of common stock are traded on the OTCPink operated by the Financial Industry Regulatory Authority (FINRA) under the symbol "NXGA". The shares trading of our common stock began on July 6, 2010.
Holders
As of August 27, 2015, we had sixty three stockholders of record.
Dividends
We have never declared or paid cash dividends. There are currently no restrictions which limit our ability to pay dividends in the future.
Securities authorized for issuance under equity compensation plans
We have no equity compensation plans at the present time.
Section 15(g) of the Securities Exchange Act of 1934
Our company's shares are covered by Section 15(g) of the Securities Exchange Act of 1934, as amended that imposes additional sales practice requirements on broker/dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses). For transactions covered by the Rule, the broker/dealer must make a special suitability determination for the purchase and have received the purchaser's written agreement to the transaction prior to the sale. Consequently, the Rule may affect the ability of broker/dealers to sell our securities and also may affect your ability to sell your shares in the secondary market.
Section 15(g) also imposes additional sales practice requirements on broker/dealers who sell penny securities. These rules require a one page summary of certain essential items. The items include the risk of investing in penny stocks in both public offerings and secondary marketing; terms important to in understanding of the function of the penny stock market, such as "bid" and "offer" quotes, a dealers "spread" and broker/dealer compensation; the broker/dealer compensation, the broker/dealers duties to its customers, including the disclosures required by any other penny stock disclosure rules; the customers rights and remedies in causes of fraud in penny stock transactions; and, the FINRA's toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.
The application of the penny stock rules may affect your ability to resell your shares.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Operations
The following discussion of the financial condition and results of our operations should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K for the year ended May 31, 2015 (this "Report"). This report contains certain forward-looking statements and our future operating results could differ materially from those discussed herein. Certain statements including, without limitation, statements containing the words "believes", "anticipates," "expects" and the like, constitute "forward-looking statements". Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We disclaims any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments.
During the past few months, we have hired independent contractors that have worked on developing a method and apparatus for facilitating social contact in a network of users. They are to create CEEK, a fully immersive and interactive social virtual reality platform that simulates the communal experience of being at a movie, music concert, sports game, museum, business conference or meeting, spectator event or travel destination.
On June 19, 2014, we entered into an IP Asset Purchase Agreement (the "Agreement") with Mary Spio ("Spio") to acquire certain assets (the "IP Assets") owned by her in consideration of 55,000,000 restricted shares of our common stock. The IP Assets are used in developing a method and apparatus for facilitating social contact in a network of users.
On or about June 19, 2014, as a result of completing our Agreement, we changed the focus of our business from services to the machine-to-machine marketing to a technology solutions company that provides easy and convenient tools and resources for people to meet, communicate and connect through shared interests, events and activities.
On June 19, 2014, Mary Spio was appointed president, principal executive officer and a member of our board of directors.
On June 23, 2014, we completed the Agreement with Mary Spio and exchanged the 55,000,000 restricted shares of our common stock for the IP Assets.
On July 14, 2014, Laurie Clark was appointed Director and Chief Operating Officer.
On July 28, 2014, we entered into an agreement with EON Reality to acquire certain equipment that will allow us to create CEEK - a fully immersive and interactive social reality platform that simulates the communal experience of being at a movie, music concert, sporting event, museum, business conference or meeting, spectator event or travel destination.
On August 12, 2014, as a leading technology and content solutions company developing dynamic, innovative experiences for consumers, we announced that Grammy nominated music producer Willie "Bum Bum" Baker through his new production company New Revolt has entered into partnership with us to create a series of reality shows featuring various musical artists for the CEEK platform, a fully immersive social entertainment platform in development for accessing Virtual Reality and Augmented Reality content. The "docu-series" will be shot with 360 cameras to create the most intimate and immersive experience and designed for viewing through Virtual Reality headgear, such as the Oculus Rift.
On August 19, 2014, we changed our name to Next Galaxy Corp. Our shares of common stock are traded on the OTCQB operated by the Financial Industry Regulatory Authority under the symbol "NXGA".
On August 12, 2014, as a leading technology and content solutions company developing dynamic, innovative experiences for consumers, we announced that Grammy nominated music producer Willie "Bum Bum" Baker through his new production company New Revolt has entered into partnership with us to create a series of reality shows featuring various musical artists for the CEEK platform, a fully immersive social entertainment platform in development for accessing Virtual Reality and Augmented Reality content. The "docu-series" will be shot with 360 cameras to create the most intimate and immersive experience and designed for viewing through Virtual Reality headgear, such as the Oculus Rift.
In September, 2014, we announced the release of a first of its kind virtual reality audio headset – Ceekars™. Ceekars™ is the world's first integrated Virtual Reality (VR) audio headset specifically optimized to work with the Oculus Rift and other head mounted VR devices that lack audio to provide dynamic, reactive sound in parallel with immersive video, completing the ultimate VR experience.
On December 7, 2014, we have signed a Business Partnership Agreement with Annex Telecom Co., Ltd, one of South Korea's top Mobile Virtual Network Operators (MVNO). Per the agreement, Next Galaxy and Annex Telecom will work together to create and distribute Virtual Reality (VR) concerts and experiences for use with devices such as the Samsung Gear VR and Oculus Rift via the CEEK Platform. Annex Telecom will also provide celebrity talent affiliations for production and marketing of VR Concerts.
Results of Operations
For the Twelve Month Period ended May 31, 2015
Overview
We incurred net losses of $4,016,649 for the year ended May 31, 2015 as compared to net losses of $364,539 for the year ended May 31, 2014.
There has been an increase of $2,665,432 in general and administrative expenses, a decrease in changes in value of derivative liability of $605,777, an increase of $606,312 in research and development expenses and an increase in interest expenses of $222,381 mainly attributable to the interest expense resulting from derivative liabilities.
For the year ended May 31, 2015, the Company spent $73,583 in professional fees, $292,000 in salary, $1,833,000 in consulting. For the year ended May 31, 2014, the Company spent $48,000 in professional fees, $192,000 in salary.
Revenue
For the years ended May 31, 2015 and 2014 we had no revenues.
General and Administration
For the year ended May 31, 2015, we incurred general and administration expenses from continuing operations of $2,670,422 and $4,990 for last year, an increase of 534% from last year. The increase was due primarily to an increase of $1,831,214 in consulting fees, an increase in travel expenses of $140,000 and an increase of $25,583 in professional fees.
Interest
For the year ended May 31, 2015, we incurred interest expense of $422,554 compared to $200,173 for last year. The increase of 111% was caused by increased borrowings and interest expense recorded upon issuance of convertible debt in which the debt discount related to the conversion feature recorded as a derivative exceed the face value of the note.
Liquidity and Capital Resources
At May 31, 2015, we had $42,775 in cash, as opposed to $7,047 in cash at May 31, 2014. Total cash requirements for operations for the twelve month period ended May 31, 2015 was $1,211,639. As a result of its new business plan, management estimates that cash requirements through the end of the fiscal year ended May 31, 2016 will be between $500,000 to $2,000,000. As of the date of this Report, we do not have available resources sufficient to cover the expected cash requirements through the end of the first quarter of 2016 or the balance of the year. As a result, there is substantial doubt that we can continue as an ongoing business without obtaining additional financing. Management's plans for maintaining our operations and continued existence include selling additional equity securities and borrowing additional funds to pay operational expenses. There is no assurance we will be able
to generate sufficient cash from operations, sell additional shares of Common Stock or borrow additional funds. Our inability to obtain additional cash could have a material adverse effect on our financial position, results of operations and our ability to continue our existence. If our losses continue and we are unable to secure additional financing, we may ultimately be required to seek protection from creditors under applicable bankruptcy laws.
At May 31, 2015, we had total assets of $4,932,309. This was an increase of $4,925,262 as compared to total assets of $7,047 at May 31, 2014. The increase was primarily attributable to In Process Research and Development and Intangible Asset acquisitions.
At May 31, 2015, we had total liabilities of $2,189,699. This was an increase of $682,198, or 45%, as compared to total liabilities of $1,507,501 at May 31, 2014. The net increase was attributable to an increase in note payable and derivative liabilities.
During the year ended May 31, 2015 we received loans from Michel St-Pierre, a shareholder, in the amount of $38,935. These loans carried an interest of 10% and is payable on demand.
Our financial condition raises substantial doubt about our ability to continue as a going concern. Management's plan for our continued existence includes selling additional stock through private placements and borrowing additional funds to pay overhead expenses while maintaining marketing efforts to raise our sales volume. Our future success is dependent upon our ability to achieve profitable operations, generate cash from operating activities and obtain additional financing. There is no assurance that we will be able to generate sufficient cash from operations, sell additional shares of common stock or borrow additional funds. Our inability to obtain additional cash could have a material adverse effect on our financial position, results of operations and our ability to continue as a going concern.
This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this Memorandum. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.
We have only had operating losses which raise substantial doubts about our viability to continue our business and our auditors have issued an opinion expressing the uncertainty of our Company to continue as a going concern. If we are not able to continue operations, investors could lose their entire investment in our Company.
Limited Operating History
We have a history of operating losses, and may continue to incur operating losses. We experienced losses from Inception. With respect to the audited year ending May 31, 2015, we incurred losses of $4,016,649 (compared with losses of $364,539 for the same period last year). We had negative working capital for the year ending May 31, 2015 of $1,621,209, (compared with negative working capital of $1,500,454 for the same period last year), and a stockholders' equity of $2,742,610 as of May 31, 2015 compared with a stockholders' deficiency of $1,500,454 as of May 31, 2014. All of these developments raise substantial doubt about our ability to continue as a going concern. As a result of these losses and the losses incurred as of May 31, 2015, our auditors issued an opinion in their audit report for the year ended May 31, 2015 expressing uncertainty about the ability of our Company to continue as a going concern. This means that there is substantial doubt whether we can continue as an ongoing business without additional financing and/or generating profits from our operations. Presently, the monthly negative cash flow amounts to $150,000 and our available cash cannot sustain current operations for more than one month. In order to we want to sell additional shares of common stock or borrow additional funds and generate sufficient cash from operations to support our company for the next twelve months.
We have no operations upon which to base an evaluation of our performance. We were previously engaged in the business of bringing services to the Machine-to-Machine market (Machine-to-Machine (M2M) which refers to technologies that allows both wireless and wired systems to communicate with other devices of the same ability. We were never retained by anyone to provide such services. Accordingly, we have very limited business operating history. In June, 2014 we entered into an IP Asset Purchase Agreement with Mary Spio to acquire certain assets owned by her in consideration of 50,000,000 restricted shares of our common stock. The IP Assets are used in developing a method and apparatus for facilitating social contact in a network of users.
Contractual Obligations
The Company is not party to any contractual obligations other than indicated in Note 6,7 and 8.
Off Balance Sheet Arrangements
We have no off balance sheet arrangements other than as described above.
We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder's equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
|
Index
|
|
|
14
|
|
|
15
|
|
|
16
|
|
|
17
|
|
|
18
|
|
|
19
|
|
Paritz & Company, P.A.
|
15 Warren Street, Suite 25
Hackensack, New Jersey 07601
(201)342-7753
Fax: (201) 342-7598
|
To the Board of Directors and Stockholders of
Next Galaxy Corp.
We have audited the accompanying balance sheets of Next Galaxy Corp (formerly known as Wiless Controls, Inc.) (the "Company") as of May 31, 2015 and 2014, and the related statements of operations, stockholders' equity (deficiency), and cash flows for each of the years in the two year period ended May 31, 2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Next Galaxy Corp (formerly known as Wiless Controls, Inc.) as of May 31, 2015 and 2014, and the results of its operations and its cash flows for each of the years in the two year period ended May 31, 2015, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company reported net loss of $3,971,976 from continuing operations for the year ended May 31, 2015 and $63,457 for the year ended May 31, 2014. The Company had no revenue for the years ended May 31, 2015 and 2014.The Company also has a negative working capital of $1,621,209 at May 31, 2015. These factors, among others, raise substantial doubt regarding the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty
/s/ Paritz & Company, P.A
Hackensack, NJ
September 15, 2015
NEXT GALAXY CORP.
(Formerly known as WILESS CONTROLS INC)
May 31,
|
2015
|
2014
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT ASSETS
|
||||||||
|
Cash
|
$
|
42,775
|
$
|
7,047
|
||||
|
Prepaid expenses
|
489,534
|
-
|
||||||
|
TOTAL CURRENT ASSETS
|
$
|
532,309
|
$
|
7,047
|
||||
|
OTHER ASSETS
|
||||||||
|
Intangible asset (note 4)
|
140,000
|
-
|
||||||
|
In Process Research and development (note 4)
|
4,260,000
|
-
|
||||||
|
4,400,000
|
-
|
|||||||
|
TOTAL CURRENT ASSETS AND TOTAL ASSETS
|
$
|
4,932,309
|
$
|
7,047
|
||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
|
||||||||
|
CURRENT LIABILITIES:
|
||||||||
|
Customer deposit
|
50,000
|
-
|
||||||
|
Notes payable-stockholders (note 8)
|
99,953
|
1,024,372
|
||||||
|
Notes payable (note 6)
|
250,000
|
-
|
||||||
|
Current portion of Convertible Notes payable, net of debt discount (note 7)
|
115,463
|
-
|
||||||
|
Derivative liabilities
|
1,168,015
|
-
|
||||||
|
Accrued expenses- Related party (note 11)
|
158,656
|
162,698
|
||||||
|
Accrued expenses and other current liabilities (note 5)
|
311,431
|
320,431
|
||||||
|
TOTAL CURRENT LIABILITIES
|
$
|
2,153,518
|
$
|
1,507,501
|
||||
|
Convertible Notes payable, net of debt discount (note 7)
|
36,181
|
-
|
||||||
|
TOTAL CURRENT LIABILITIES
|
$
|
2,189,699
|
$
|
1,507,501
|
||||
|
STOCKHOLDERS' EQUITY (DEFICIENCY)
|
||||||||
|
Common stock
500,000,000 shares authorized, par value $0.00001, 156,746,210
and 66,146,442 respectively issued and outstanding
|
$
|
1,569
|
$
|
661
|
||||
|
Additional paid in capital
|
9,297,952
|
1,039,147
|
||||||
|
Accumulated Deficit
|
(6,556,911
|
)
|
(2,540,262
|
)
|
||||
|
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY)
|
$
|
2,742,610
|
$
|
(1,500,454
|
)
|
|||
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
|
$
|
4,932,309
|
$
|
7,047
|
||||
"See notes to financial statements"
NEXT GALAXY CORP.
(Formerly known as WILESS CONTROLS INC)
For the years ended May 31, 2015 and 2014
|
Shares
|
Common stock
|
Additional
Paid in
Capital
|
Accumulated
Deficit
|
Total
|
||||||||||||||||
|
May 31, 2013
|
64,700,659
|
$
|
647
|
$
|
1,027,161
|
$
|
(2,175,723
|
)
|
$
|
(1,147,915
|
)
|
|||||||||
|
Debt conversion into common shares
|
1,445,783
|
14
|
11,986
|
12,000
|
||||||||||||||||
|
Net Loss
|
0
|
0
|
0
|
(364,539
|
)
|
(364,539
|
)
|
|||||||||||||
|
May 31, 2014
|
66,146,442
|
$
|
661
|
$
|
1,039,147
|
$
|
(2,540,262
|
)
|
$
|
(1,500,454
|
)
|
|||||||||
|
Shares issued for services
|
20,838,235
|
210
|
2,152,172
|
2,152,382
|
||||||||||||||||
|
Shares issued for IP Asset Purchase
|
55,000,000
|
550
|
4,399,450
|
4,400,000
|
||||||||||||||||
|
Related Party. Debt conversion into common shares
|
14,761,533
|
148
|
1,707,183
|
1,707,331
|
||||||||||||||||
|
Net Loss
|
(4,016,649
|
)
|
(4,016,649
|
)
|
||||||||||||||||
|
May 31, 2015
|
156,746,210
|
$
|
1,569
|
$
|
9,297,952
|
$
|
(6,556,911
|
)
|
$
|
2,742,610
|
||||||||||
"See notes to financial statements"
NEXT GALAXY CORP.
(Formerly known as WILESS CONTROLS INC)
For the years ended May 31,
|
2015
|
2014
|
|||||||
|
Revenue
|
-
|
-
|
||||||
|
Operating Expenses :
|
||||||||
|
General and administrative
|
2,670,422
|
4,990
|
||||||
|
Research and development
|
606,312
|
-
|
||||||
|
Total Operating Expenses
|
3,276,734
|
4,990
|
||||||
|
Loss from operations
|
(3,276,734
|
)
|
(4,990
|
)
|
||||
|
Other Income/(Expenses)
|
||||||||
|
Extinguishment of debt
|
(201,849
|
)
|
-
|
|||||
|
Changes in fair value of derivative liabilities
|
(464,071
|
)
|
141,706
|
|||||
|
Gain on Settlement of Debt
|
393,232
|
-
|
||||||
|
Interest related party
|
(6,901
|
)
|
(88,373
|
)
|
||||
|
Interest
|
(415,653
|
)
|
(111,800
|
)
|
||||
|
Total other Income/(Expenses)
|
(695,242
|
)
|
(58,467
|
)
|
||||
|
Loss from continuing operations before provisions for income taxes
|
(3,971,976
|
)
|
(63,457
|
)
|
||||
|
Provision for taxes
|
-
|
-
|
||||||
|
Loss from continuing operations
|
(3,971,976
|
)
|
(63,457
|
)
|
||||
|
Net Loss from discontinued operations, net of taxes
|
(44,673
|
)
|
(301,082
|
)
|
||||
|
Net Loss
|
(4,016,649
|
)
|
(364,539
|
)
|
||||
|
Loss per common share - continuing operations
|
(0.03
|
)
|
(0.01
|
)
|
||||
|
Loss per common share - discontinued operations
|
(0.00
|
)
|
(0.00
|
)
|
||||
|
Loss per common share
|
$
|
(0.03
|
)
|
$
|
(0.01
|
)
|
||
|
Average weighted number of shares
|
144,720,170
|
65,961,703
|
||||||
"See notes to financial statements"
NEXT GALAXY CORP.
(Formerly known as WILESS CONTROLS INC)
For the years ended May 31,
|
2015
|
2014
|
|||||||
|
Cash Flow from Operating activities:
|
||||||||
|
Net loss
|
$
|
(4,016,649
|
)
|
$
|
(364,539
|
)
|
||
|
Adjustment to reconcile net loss to net cash used in operating activities
|
||||||||
|
Gain on Settlement of Debt
|
(393,232
|
)
|
||||||
|
Extinguishment of debt
|
201,849
|
-
|
||||||
|
Loss on derivatives liability at market
|
464,071
|
(141,706
|
)
|
|||||
|
Non-cash interest
|
376,588
|
63,120
|
||||||
|
Shares issued for Consulting expense
|
582,073
|
-
|
||||||
|
Amortization prepaid expenses
|
203,274
|
-
|
||||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Loss on Write-off of Inventories
|
-
|
21,740
|
||||||
|
Increase in prepaid expenses
|
(62,500
|
)
|
-
|
|||||
|
Customer deposit
|
50,000
|
-
|
||||||
|
Increase in accrued expenses and other current liabilities
|
1,382,887
|
281,365
|
||||||
|
Net cash used in operating activities
|
$
|
(1,211,639
|
)
|
$
|
(140,020
|
)
|
||
|
Cash Flow from Financing activities:
|
||||||||
|
Proceeds of notes payable stockholder
|
518,367
|
230,389
|
||||||
|
Proceeds of notes payable
|
729,000
|
(85,500
|
)
|
|||||
|
Net cash provided by financing activities
|
$
|
1,247,367
|
$
|
144,889
|
||||
|
Increase in cash
|
35,728
|
4,869
|
||||||
|
Cash- beginning of year
|
7,047
|
2,178
|
||||||
|
Cash - end of year
|
$
|
42,775
|
$
|
7,047
|
||||
|
Supplemental Disclosure of Cash Flow information
|
||||||||
|
Conversion of current liabilities to common stock
|
$
|
364,546
|
$
|
-
|
||||
|
Conversion of notes payable to common stock
|
$
|
-
|
$
|
12,000
|
||||
|
Derivative liabilities recognized as Debt discount
|
$
|
410,952
|
$
|
(63,120
|
)
|
|||
|
Conversion of notes payable stockholders to common stock
|
$
|
1,342,785
|
$
|
-
|
||||
|
Stock issued for acquisition In Process Research & development and intangible asset
|
$
|
4,400,000
|
||||||
"See notes to financial statements"
NEXT GALAXY CORP.
(Formerly known as WILESS CONTROLS INC)
NOTE 1 – NATURE OF BUSINESS
The Company was incorporated under the laws of the State of Nevada on May 6, 2009. The Company's specific goal was to create a profitable service for placing Canadian citizens in accounting positions with Canadian corporations. On November 29, 2012, we changed our name to Wiless Controls Inc. On June 23, 2014, we changed the focus of our business from services to the machine-to-machine market to technology solutions that provide easy and convenient tools and resources for people to meet, communicate and connect through shared interests, events and activities and on August 19, 2014, we changed our name to Next Galaxy Corp. Our shares of common stock are traded on the OTCQB operated by the Financial Industry Regulatory Authority under the symbol "NXGA".
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP).
The Company is considered to be in the development stage as defined in ASC 915 "Development Stage Entities." The Company is devoting substantially all of its efforts to the development of its business plans. The Company has elected to adopt early application of Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements; and does not present or disclose inception-to-date information and other remaining disclosure requirements of Topic 915.
CASH AND CASH EQUIVALENTS
The Company cash balances accounts at institution are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company's accounts at these institutions may, at times, exceed the federally insured limits. The Company has not experienced any losses in such accounts.
We consider all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents.
FAIR VALUE MEASUREMENTS
The Company adopted the provisions of ASC Topic 820, "Fair Value Measurements and Disclosures", which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, including cash and cash equivalents, prepaid expenses, notes payable, and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
| * | level l - quoted prices in active markets for Identical assets or liabilities |
| * | level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable |
| * | level 3 - inputs that are unobservable (for example cash flow modeling inputs based on assumptions) |
The derivative liability in connection with the conversion feature of the convertible debt, classified as a level 3 liability, is the only financial liability measured at fair value on a recurring basis.
The change in the level 3 financial instrument is as follows:
|
Balance May 31, 2014
|
$
|
-
|
||
|
Issued during the year ended
|
703,944
|
|||
|
Converted during the year
|
-
|
|||
|
Change in fair value recognized in operations
|
464,071
|
|||
|
Balance May 31, 2015
|
1,168,015
|
The estimated fair value of the derivative instruments were valued using the Black-Scholes option pricing model, using the following assumptions at December 31, 2014:
|
Estimated Dividends
|
None
|
||
|
Expected Volatility
|
290%
|
||
|
Risk free interest rate
|
0.10% to 0.14%
|
||
|
Expected term
|
0.36 to 2 years
|
||
CONVERTIBLE INSTRUMENTS
The Company evaluates and account for conversion options embedded in convertible instruments in accordance with ASC 815 "Derivatives and Hedging Activities".
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
The Company accounts for convertible instruments (when we have determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: We record when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. Any excess of the derivative instrument over the face value of the note is recorded as interest expense upon inception of the note. The Company recorded $141,348 as interest expense upon the issuance of the notes referred to in Note 6.
The Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities.
The derivative financial instruments consist of embedded derivatives related to features embedded within our convertible debt. The accounting treatment of derivative financial instruments requires that we record the derivatives at their fair values as of the inception date of the debt agreements and at fair value as of each subsequent balance sheet date. Any change in fair value was recorded as non-operating, non-cash income or expense at each balance sheet date.
INCOME TAXES
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, "Income Taxes." Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity's financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.
USE OF ESTIMATES
The preparation of the financial statements in conformity with Generally Accepted Accounting Principles ("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 dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include derivative financial instruments issued in financing transactions, the collectability of accounts receivable and deferred taxes and related valuation allowances. We re-evaluate all of our accounting estimates at least quarterly based on these conditions and record adjustments when necessary.
LOSS PER COMMON SHARE
The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding.
Diluted net loss per common share is computed by dividing the net loss, adjusted on an "as if converted" basis, by the weighted average number of common shares outstanding plus potential dilutive securities.
STOCK BASED COMPENSATION
The Company accounts for stock options and similar equity instruments issued in accordance with ASC 718. Accordingly, compensation costs attributable to stock options or similar equity instruments granted are measured at the fair value at the grant date, and expensed over the expected vesting period. Transactions in which goods or services are received in exchange 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 instruments issued, whichever is more reliably measurable. ASC 718 requires excess tax benefits be reported as a financing cash inflow rather than as a reduction of taxes paid.
ORGANIZATIONAL COSTS
Organizational costs, which relate to the Company start-up organization, are expenses as incurred. Such costs are included in selling, general and administrative costs.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT
Acquired in-process research and development ("IPR&D") that the Company acquired represents the fair value assigned to incomplete research projects which, at the time of acquisition, have not reached technological feasibility. The amounts are capitalized and are accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project, the Company will make a determination as to the then useful life of the intangible asset, generally determined by the period in which the substantial majority of the cash flows are expected to be generated, and begin amortization. The Company tests IPR&D for impairment at least annually, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that the fair value of the IPR&D intangible asset is less than its carrying amount. If the Company concludes it is more likely than not that the fair value is less than the carrying amount, a quantitative test that compares the fair value of the IPR&D intangible asset with its carrying value is performed. If the fair value is less than the carrying amount, an impairment loss is recognized in operating results.
ACQUIRED INTANGIBLES
Acquired intangibles include tradenames and trademarks, which are recorded at fair value, assigned an estimated useful life, and are amortized on a straight-line basis over their estimated useful lives. The Company periodically evaluates whether current facts or circumstances indicate that the carrying values of its acquired intangibles may not be recoverable. If such circumstances are determined to exist, an estimate of the undiscounted future cash flows of these assets, or appropriate asset groupings, is compared to the carrying value to determine whether impairment exists. If the asset is determined to be impaired, the loss is measured based on the difference between the carrying value of the intangible asset and its fair value, which is determined based on the net present value of estimated future cash flows.
NEW ACCOUNTING PRONOUNCEMENTS
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company's accounting and reporting. The Company believes that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations and cash flows when implemented.
In June 2014, FASB issued guidance that eliminates the definition of a development stage entity thereby removing the incremental financial reporting requirements from U.S. GAAP for development stage entities, primarily the presentation of inception to date financial statements. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2014. Early adoption is permitted. The Company elected to adopt the new guidance for development stage entities for the interim period ended June 30, 2014, and accordingly, is no longer presenting the inception-to-date financial information and disclosures formerly required.
In August 2014, FASB issued guidance that requires management to evaluate whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. The new guidance is effective for the annual period ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. Since this guidance primarily
addresses certain disclosures to the financial statements, we anticipate no impact on our financial position, results of operations or cash flows from adopting this standard. The Company is currently in the process of evaluating the additional disclosure requirements of the new guidance and has not determined the impact of adoption on its financial statement disclosures.
NOTE 3 – GOING CONCERN
The Company's financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. The Company reported net loss of $3,971,976 from continuing operations for the year ended May 31, 2015 and $63,457 for the year ended May 31, 2014. The Company had no revenue for the years ended May 31, 2015 and 2014.The Company also has a negative working capital of $1,621,209 at May 31, 2015. These factors among others raise substantial doubt about the Company's ability to continue as a going concern.
Management's plans for the Company's continued existence include selling additional stock and borrowing additional funds to pay overhead expenses.
The Company's future success is dependent upon its ability to achieve profitable operations, generate cash from operating activities and obtain additional financing. There is no assurance that the Company will be able to generate sufficient cash from operations, sell additional shares of common stock or borrow additional funds.
The Company's inability to obtain additional cash could have a material adverse effect on its financial position, results of operations and its ability to continue in existence. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 4 – ASSET PURCHASE AND INTANGIBLE ASSET
On June 23, 2014, the Company entered into a IP Asset Purchase Agreement (the "Purchase Agreement"), with Mary Spio, pursuant to which the Company agreed to purchase certain patents owned and invented by Mrs. Spio (the "Purchased Assets"). Under the terms of the Purchase Agreement and in consideration for the acquisition of the Purchased assets, the Company issued to Mrs. Spio an aggregate of 55,000,000 common shares of the Company. The company accounted for the acquisition in accordance with ASC 805-50-15 as an acquisition of assets rather than a business. The fair value of the assets acquired was based on their relative fair market values on the acquisition date as determined by an appraisal obtained by the Company.
Assets acquired:
Patent # 1; Topic search based method and apparatus for facilitating social contact in a network of users
Patent # 2; watermarking of biometrically authenticated subjects for social networks
CEEK Intellectual Property; CEEK Blended Live Events Entertainment Platform (VR/AR/Realife)
Next Galaxy Media; property and other proprietary rights relating to the project identified as Next Galaxy Media and all activities and developments related.
NOTE 5 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses consisted of the following at May 31:
|
2015
|
2014
|
|||||||
|
Accrued interest
|
$
|
27,276
|
$
|
-
|
||||
|
Accrued compensation
|
96,000
|
24,000
|
||||||
|
Accrued operating expenses
|
188,155
|
296,431
|
||||||
|
$
|
311,431
|
$
|
320,431
|
|||||
NOTE 6 – NOTES PAYABLE
In 2014, the Company received a loan from Bindor LLC in the amount of $50,000, which is outstanding at May 31, 2015. The loan bears interest at 18% and is payable on October 24, 2015 or in the event the Company gets an equity financing that results in gross proceeds of at least $1,000,000.
In 2015, the Company received a loan from Steel Partners, LLC in the amount of $200,000, which is outstanding at May 31, 2015. The loan bears interest at 10% and is payable on February 25, 2016.
NOTE 7 – NOTES PAYABLE CONVERTIBLE NOTES
During the year ended May 31, 2015, the Company received the proceeds of loans which some are convertible at amount lesser of 60% to 70% of the lowest trading price of 20 to 25 preceding days of the common shares of the Company at the time of conversion and a fixed price, and one is at market price. The loans bear interest at 8% to 12% per annum. The convertible notes become due between October 2015 and April 2016. The amount received during the year ended May 31, 2015 and 2014 are $562,596 and $0, respectively.
|
Loans
|
|||||
|
2015
|
Maturity
|
||||
|
Convertible note 1
|
170,000
|
November, 2015
|
|||
|
Convertible note 4
|
105,000
|
October, 2015
|
|||
|
Convertible note 3
|
84,263
|
April, 2016
|
|||
|
Convertible note 2
|
93,333
|
April, 2017
|
|||
|
Convertible note 5
|
110,000
|
April ,2017
|
|||
|
562,596
|
|||||
The convertible feature of these loans, due to their potential settlement in an indeterminable number of shares of the Company's common stock has been identified as a derivative. The derivative component is fair value at the date of issuance of the obligation and this amount is allocated between the derivative and the underlying obligation. The difference is recorded as a debt discount and amortized over the life of the debt.
The Company has determined that the conversion feature embedded in the notes constitutes a derivative and has been bifurcated from the note and recorded as a derivative liability, with a corresponding discount recorded to the associated debt, on the accompanying balance sheet, and revalued to fair market value at each reporting period
A summary of the amounts outstanding is as follows:
|
Loans
|
Debt discount
|
Balance
May 31,
|
Balance
May 31,
|
|||||||||||||
|
2015
|
2015
|
2015
|
2014
|
|||||||||||||
|
Convertible note 1
|
170,000
|
80,758
|
89,242
|
-
|
||||||||||||
|
Convertible note 2
|
93,333
|
69,900
|
23,433
|
-
|
||||||||||||
|
Convertible note 3
|
84,263
|
72,190
|
12,073
|
-
|
||||||||||||
|
Convertible note 4
|
105,000
|
90,582
|
14,418
|
-
|
||||||||||||
|
Convertible note 5
|
110,000
|
97,522
|
12,748
|
-
|
||||||||||||
|
$
|
562,596
|
$
|
410,952
|
$
|
151,644
|
$
|
-
|
|||||||||
NOTE 8 – NOTES PAYABLE – STOCKHOLDERS'
In 2015, the Company received additional loans from Michel St-Pierre in the amount of $38,935. During the three month period ending August 31, 2014, Michel St-Pierre converted his loans balance of $386,512 into 3,734,581 common shares of Next Galaxy Corp. At May 31, 2015, the loans amounted to $11,515. These loans carry an interest of 10% and are payable on demand.
During the three month period ending August 31, 2014, a stockholder converted his loans balance of $164,140 into 1,585,969 common shares of Next Galaxy Corp. The amount owed to stockholder May 31, 2015 is $4. These loans carry an interest of 10% and are payable on demand.
In 2014, the Company received additional loans from Capex Investments Limited, a shareholder, in the amount of $285,150. During the three month period ending November 30, 2014, Capex Investments Limited converted $418,414 of his loans balance into 4,257,974 common shares of Next Galaxy Corp. During the three month period ending August 31, 2014, Capex Investments Limited converted $328,780 of his loans balance into 3,176,761 common shares of Next Galaxy Corp. In 2014, the Company has entered into an agreement with Capex Investment Limited where Capex Investment took charge of all the assets and liabilities related to services to the machine-to-machine business and granted a reduction of $100,000 of the loans owed to Capex Investment. In 2015, the Company received additional loans from Capex Investments Limited, a shareholder, in the amount of $221,698. The amount owed to Capex Investments Limited at May 31, 2015 is $88,434. These loans carry an interest of 10% and are payable on demand.
The Company has not received any loans from DT Crystal in 2015. During the three month period ending August 31, 2014, DT Crystal converted his loans balance of $44,940 into 434,224 common shares of Next Galaxy Corp. The amount owed to DT Crystal May 31, 2015 is $0. These loans carry an interest of 10% and are payable on demand.
A summary of the amounts outstanding is as follows:
|
Balance
May 31,
|
Balance
May 31,
|
|||||||
|
2015
|
2014
|
|||||||
|
Michel St-Pierre
|
$
|
11,519
|
$
|
386,512
|
||||
|
Stockholder
|
164,140
|
|||||||
|
Capex Investments Limited
|
88,434
|
428,780
|
||||||
|
DT Crystal
|
-
|
44,940
|
||||||
|
$
|
99,953
|
$
|
1,024,372
|
|||||
NOTE 9 – CAPITAL STOCK
The company is authorized to issue 500,000,000 shares of common stock (par value $0.00001) of which 156,746,210 were issued and outstanding as of May 31, 2015.
During the year 2015, the Company issued 20,838,235 for services, 14,761,533 for debt conversion into shares and 55,000,000 for IP asset purchase.
NOTE 10 – INCOME TAXES
The Company recognizes deferred income tax liabilities and assets for the expected future tax consequences of events that have been recognized in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement and income tax purposes under enacted tax laws and rates.
The tax effects of temporary differences that give rise to deferred tax assets are presented below:
|
May 31
|
May 31,
|
|||||||
|
2015
|
2014
|
|||||||
|
Statutory tax rate (including state tax)
|
40.0
|
%
|
40.0
|
%
|
||||
|
Change in Valuation allowance
|
(40.0
|
%)
|
(40.0
|
%)
|
||||
|
Income tax provision
|
0
|
%
|
0
|
%
|
||||
Components of the Company's deferred tax assets are as follows:
|
May 31
|
May 31,
|
|||||||
|
2015
|
2014
|
|||||||
|
Net operating loss carry forward
|
$
|
2,604,688
|
$
|
1,015,897
|
||||
|
Valuation allowance
|
(2,604,688
|
)
|
(1,015,897
|
)
|
||||
|
Deferred tax asset net of valuation allowance
|
$
|
-
|
$
|
-
|
||||
The Company has approximately $6,500,000 of net operating losses ("NOL") carried forward to offset taxable income, if any, in future years which expire commencing in fiscal 2028. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all of the deferred tax asset relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized.
NOTE 11 – RELATED PARTY TRANSACTIONS
Accrued expenses- Related party consists of Accrued compensation. An amount of $192,000 and $96,000 was expensed during the year ended May 31, 2015 and 2014, respectively.
See Note 8 regarding Notes Payable to related parties.
NOTE 12 – DISCONTINUED OPERATIONS (MACHINE-TO-MACHINE BUSINESS)
Effective February 28, 2015, after its change in focus of its business, the Company decided to end its machine-to-machine business. All expenses, which were substantially all general and administrative expenses, related to this business have been classified as loss from discontinued operations on the accompanying statement of operations for the year ended May 31, 2014, which amounted to $301,082, and $44,673 for the year ended May 31, 2015.
NOTE 13 – SUBSEQUENT EVENTS
Management evaluated all activity of the Company through the date the Financial Statements were available to be issued and noted there were no material subsequent events which require recognition or disclosure as of that date.
There have been no disagreements on accounting and financial disclosures from the inception of our company through the date of this Form 10-K. Our financial statements for the period from inception to May 31, 2015, included in this report have been audited by Paritz & Company, PA, as set forth in this annual report.
Limitations on the Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company's principal executive and principal financial officers and effected by the company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
As of May 31, 2015, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses. The matter involving internal controls and procedures that our
management considered to be a material weakness under the standards of the Public Company Accounting Oversight Board was the lack of a functioning audit committee, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures. The aforementioned material weaknesses were identified by our management in connection with the review of our financial statements for the year ended May 31, 2015.
Management believes that the material weakness set forth above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only the management's report in this annual report.
| - | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; |
| - | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and |
CEO and CFO Certifications
Appearing immediately following the Signatures section of this report there are Certifications of the CEO and the CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
Changes in Internal Controls
There were no changes in our internal control over financial reporting during the year ended May 31, 2015 that have affected, or are reasonably likely to affect, our internal control over financial reporting.
None.
The following table presents information with respect to our officers, directors and significant employees as of the date of this Report:
|
Name
|
Age
|
Position
|
|
Mary Spio
|
42
|
President, principal executive officer and director
|
|
6525 Collins Ave
|
||
|
Miami Beach, Florida 33141
|
||
|
Michel St-Pierre
|
53
|
Principal accounting officer, principal financial officer
|
|
941 de Calais Street
|
secretary, treasurer and director
|
|
|
Mont St-Hilaire, Quebec, Canada, J3H 4T7
|
||
|
Laurie Clark
|
56
|
Chief operating officer and director
|
Each director serves until our next annual meeting of the stockholders or unless they resign earlier. The Board of Directors elects officers and their terms of office are at the discretion of the Board of Directors.
Each of our directors serves until his or her successor is elected and qualified. Each of our officers is elected by the board of directors to a term of one (1) year and serves until his or her successor is duly elected and qualified, or until he or she is removed from office. At the present time, members of the board of directors are not compensated for their services to the board.
Biographical Information Regarding Officers and Directors
Mary Spio, President, Principal Executive Officer and Director
On July 14, 2014, Mary Spio as President and Chairman of the Board. Since June 19, 2014, Mary Spio has been our president, principal executive officer and a member of our board of directors. Since September 2010, Mrs. Spio has founded and served as president of Next Galaxy Media, where she developed innovative content, campaigns and technology solutions for customers including Microsoft XBOX, Coca Cola, Suncoast Motion Pictures, FYE Stores, Toyota Scion and over 200 radio stations online TV. She created key benchmarks for all campaign metrics to establish formulas to pinpoint ROI. From 2004 to 2010, Mrs. Spio has founded Gen2Media Corp., now Vidaroo Corp., where she served as President and CEO. She launched and sold Vidaroo's online video software solution and services to Media-Buying Agencies, Brands, Music Labels, Movie Studios, Media Companies and Web Publishers Customer and developed and implemented marketing programs and initiatives to grow awareness and presence of Vidaroo's Network.
Michel St-Pierre, Principal Accounting Officer, Principal Financial Officer, Secretary, Treasurer and Director
Mr. St-Pierre has served as president, principal executive officer, principal accounting officer, principal financial officer, secretary, treasurer and sole member of the board of directors since our inception on May 6, 2009. On July 14, 2014, Mr. St-Pierre resigned as our president and principal executive officer. Mr. St-Pierre is a registered chartered accountant in Quebec, Canada. Before working for the Company, Mr. St-Pierre has served as an officer of the Ecolocap Solutions since July 2006. Mr. St-Pierre has served as Chief Financial Officer of a public shell company, Tiger Renewable Energy Limited (formerly known as Tiger Ethanol International Inc. and Arch Management) since January, 2007 and held positions as the Finance Director (comparable to Corporate Treasurer) at SPB Canada Inc. from 2004-2006, Symbior Technologies Inc. from 2003-2004.
Laurie Clark, Chief Operating Officer and Director
On July 14, 2014, Laurie Clark as Director and Chief Operating Officer. She has worked with all areas of the retail supply chain, and has had direct responsibility for all retail merchandising and marketing processes at numerous major retailers including key roles as Staples - Senior Vice President, Trans World Entertainment - Executive Vice President and Musicland Group.
Compliance With Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who beneficially own more than 10% of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than 10% shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based on our review of the copies of such forms we received, we believe that during the fiscal year ended May 31, 2014, all reports were filed.
Conflicts of Interest
There are no conflicts of interest. Further, we have not established any policies to deal with possible future conflicts of interest.
Audit Committee Financial Expert
We do not have an audit committee financial expert. We do not have an audit committee financial expert because we believe the cost related to retaining a financial expert at this time is prohibitive. Further, because we are only beginning our commercial operations, at the present time, we believe the services of a financial expert are not warranted.
Involvement in Certain Legal Proceedings
During the past ten years, Mrs. Spio, Mr. St-Pierre and Mrs. Clark have not been the subject of the following events
| 1. | A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing; |
| 2. | Convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| 3. | The subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities; |
| i) | Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; |
| ii) | Engaging in any type of business practice; or |
| iii) | Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws; |
| 4. | The subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph 3.i in the preceding paragraph or to be associated with persons engaged in any such activity; |
| 5. | Was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; |
| 6. | Was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; |
| 7. | Was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: |
| i) | Any Federal or State securities or commodities law or regulation; or |
| ii) | Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or |
| iii) | Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| 8. | Was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Audit Committee and Charter
We have a separately-designated audit committee of the board. Audit committee functions are performed by our board of directors. None of our directors are deemed independent. All directors also hold positions as our officers. Our audit committee is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engagement by the audit committee. A copy of the audit committee charter is filed as Exhibit 99.2 with our May 31, 2010 annual report on Form 10-K filed with the Securities and Exchange Commission on August 20, 2010.
Code of Ethics
We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. A copy of the code of ethics is filed as Exhibit 14.1 with our May 31, 2010 annual report on Form 10-K filed with the Securities and Exchange Commission on August 20, 2010.
Disclosure Committee and Charter
We have a disclosure committee and disclosure committee charter. Our disclosure committee is comprised of all of our officers and directors. The purpose of the committee is to provide assistance to the Chief Executive Officer and the Chief Financial Officer in fulfilling their responsibilities regarding the identification and disclosure of material information about us and the accuracy, completeness and timeliness of our financial reports. A copy of the disclosure committee charter is filed as Exhibit 99.3 with our May 31, 2010 annual report on Form 10-K filed with the Securities and Exchange Commission on August 20, 2010.
As of August 27, 2015 we had three directors. Mrs. Spio and Mr. St-Pierre is not independent.
Compensation of Officers
Option award compensation is the fair value for stock options vested during the period, a notional amount estimated at the date of the grant using the Black-Scholes option-pricing model. The actual value received by the executives may differ materially and adversely from that estimated. A summary of cash and other compensation paid in accordance with management consulting contracts for our Principal Executive Officer and other executives for the most recent two years is as follows:
Executive Compensation
|
Name and
Principal Position
(a)
|
Year
(b)
|
Salary
(US$)
(c)
|
Bonus
(US$)
(d)
|
Stock
Awards
(US$)
(e)
|
Option
Awards
(US$)
(f)
|
Non-Equity
Incentive Plan
Compensation
(US$)
(g)
|
Nonqualified
Deferred
Compensation
Earnings
(US$)
(h)
|
All Other
Compensation
(US$)
(i)
|
Total
(US$)
(j)
|
|
Mary Spio
|
2015
|
96,000
|
0
|
0
|
0
|
0
|
0
|
0
|
96,000
|
|
President & CEO
|
2014
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
Michel St-Pierre
|
2015
|
96,000
|
0
|
0
|
0
|
0
|
0
|
0
|
96,000
|
|
CFO
|
2014
|
96,000
|
0
|
0
|
0
|
0
|
0
|
0
|
96,000
|
|
Laurie Clark
|
2015
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
Chief Operating Officer
|
2014
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
Jonathan Barratt
|
2015
|
-
|
0
|
0
|
0
|
0
|
0
|
0
|
-
|
|
Chief Technical Officer (resigned 6/01/2014)
|
2014
|
-
|
0
|
0
|
0
|
0
|
0
|
0
|
-
|
|
(1)
|
Mr. St-Pierre has been appointed president and CEO on May 20, 2009. He resigned has President and CEO on June 19, 2014. He remains as CFO.
|
|
(2)
|
Mrs. Spio has been appointed president and CEO on June 19, 2014.
|
|
(3)
|
Mrs. Clark has been appointed COO on July 14, 2014.
|
|
(4)
|
Mr. Barratt has been appointed CTO on July 20, 2011. He resigned as CTO on June 1, 2014.
|
Employment Contracts
During the fiscal year ended May 31, 2011, we signed a Consulting Agreement with Jean-Paul Langlais pursuant to which, Mr. Langlais was providing sales, marketing, corporate development and management consulting services relating to the corporate activities of our Company. The "Engagement Period" is for one year. During the fiscal year ended May 31, 2011, we signed a Consulting Agreement with Michel St-Pierre pursuant to which, Mr. St-Pierre was providing the services to serve in the capacity of President and Chief Executive Officer of our company. The "Engagement Period" is for one year.
Other Executive Officers
During 2015, no employment contracts were entered into with any officers.
Retirement, Resignation or Termination Plans
We sponsor no plan, whether written or verbal, that would provide compensation or benefits of any type to an executive upon retirement, or any plan that would provide payment for retirement, resignation, or termination as a result of a change in control of our company or as a result of a change in the responsibilities of an executive following a change in control of our company.
Directors' Compensation
|
Name
(a)
|
Fees Earned
or
Paid in Cash
(US$)
(b)
|
Stock
Awards
(US$)
(c)
|
Option
Awards
(US$)
(d)
|
Non-Equity
Incentive Plan
Compensation
(US$)
(e)
|
Deferred
Compensation
Earnings
(US$)
(f)
|
All Other
Compensation
(US$)
(g)
|
Total
(US$)
(h)
|
|
Michel St-Pierre
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
Mary Spio
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
Laurie Clark
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
The persons who served as members of our board of directors, including executive officers did not receive any compensation for services as a director for 2015.
Indemnification
Pursuant to the articles of incorporation and bylaws of the corporation, we may indemnify an officer or director who is made a party to any proceeding, including a law suit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in its best interest. In certain cases, we may advance expenses incurred in defending any such proceeding. To the extent that the officer or director is successful on the merits in any such proceeding as to which such person is to be indemnified, we must indemnify him against all expenses incurred, including attorneys fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada.
Regarding indemnification for liabilities arising under the Securities Act of 1933 which may be permitted for directors or officers pursuant to the foregoing provisions, we are informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy, as expressed in the Act and is therefore unenforceable.
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. |
The following table sets forth certain information regarding the beneficial ownership of our common stock as of the date of this Report by (i) each of our directors, (ii) each of our officers named in the Summary Compensation Table, (iii) each person who is known by us to be the beneficial owner of more than five percent of our outstanding common stock, and (iv) all directors and executive officers as a group. Except as otherwise indicated below, each person named has sole voting and investment power with respect to the shares indicated.
The percentage of ownership set forth below reflects each holder's ownership interest in the 156,746,210 shares of our common stock outstanding as of August 29, 2015.
Amount and Nature of Beneficial Ownership
|
Name and Address of Beneficial Owner (1)
|
Shares
|
Options/ Warrants
|
Total
|
Percent
|
|
Mary Spio (2)
|
46,600,000
|
0
|
46,600,000
|
29.73%
|
|
Michel St-Pierre (3)
|
32,658,050
|
0
|
32,658,050
|
20.83%
|
|
Laurie Clark
|
300,000
|
0
|
300,000
|
0.01%
|
|
All executive officers and directors as a group (3 persons)
|
79,558,050
|
0
|
79,558,050
|
50.57%
|
|
(1)
|
The mailing address for the listed individual is c/o Next Galaxy Corp, 1680 Michigan Ave., Suite 700, Miami Beach, FL 33139.
|
|
(2)
|
Owner of 5% or more of our common stock. Mrs. Spio, is the President and Chief Executive Officer.
|
|
(3)
|
Owner of 5% or more of our common stock. Mr. St-Pierre, is the Chief Financial Officer.
|
Transactions with Michel St-Pierre
On May 31, 2015, the Company had received loans from Michel St-Pierre, a shareholder, in the amount of $38,935. These loans were received over a one year period. These loans carried an interest of 10% and are payable on demand. The amount owed to stockholder at May 31, 2015 is $11,515.
(1) Audit Fees
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for our audit of annual financial statements and reviews of our interim financial statements included in our Form 10-Q and Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was:
|
2015
|
Paritz & Company, PA
|
$
|
8,065
|
||
|
2014
|
Paritz & Company, PA
|
$
|
20,590
|
(2) Audit-Related Fees
The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported in the preceding paragraph:
|
2015
|
Paritz & Company, PA
|
$
|
0
|
||
|
2014
|
Paritz & Company, PA
|
$
|
0
|
(3) Tax Fees
The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning was:
|
2015
|
Paritz & Company, PA
|
$
|
0
|
||
|
2014
|
Paritz & Company, PA
|
$
|
0
|
(4) All Other Fees
The aggregate fees billed in each of the last two fiscal years for the products and services provided by the principal accountant, other than the services reported in paragraphs (1), (2), and (3) was:
|
2015
|
Paritz & Company, PA
|
$
|
1,328
|
||
|
2014
|
Paritz & Company, PA
|
$
|
0
|
| (5) | Our audit committees pre-approval policies and procedures described in paragraph (c) (7) (i) of Rule 2-01 of Regulation S-X were that the audit committee pre-approves all accounting related activities prior to the performance of any services by any accountant or auditor. |
| (6) | The percentage of hours expended on the principal accountants engagement to audit our consolidated financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountants full time, permanent employees, to the best of our knowledge, was 0%. |
Audit Committee Pre-Approval Policies
Our Audit Committee reviewed the audit and non-audit services rendered by Paritz & Company, P.A. during the periods set forth above and concluded that such services were compatible with maintaining the auditors' independence. All audit and non-audit services performed by our independent accountants are pre-approved by our Audit Committee to assure that such services do not impair the auditors' independence from us.
The following is a complete list of exhibits filed as part of this annual report:
|
Exhibit
|
Incorporated by reference
|
Filed
|
|||
|
Number
|
Document Description
|
Form
|
Date
|
Number
|
herewith
|
|
3.1
|
Articles of Incorporation, as amended
|
S-1
|
6/19/09
|
3.1
|
|
|
3.2
|
Bylaws
|
S-1
|
6/19/09
|
3.2
|
|
|
4.1
|
Stock Certificate
|
S-1
|
6/19/09
|
4.1
|
|
|
10.1
|
Consulting Agreement – Michel St-Pierre
|
10-K
|
8/19/11
|
10.1
|
|
|
10.2
|
Consulting Agreement – Jean-Paul Langlais
|
10-K
|
8/19/11
|
10.2
|
|
|
10.3
|
Manufacturing Agreement with SMT Hautes Technologies
|
10-Q
|
1/14/12
|
10.3
|
|
|
10.4
|
Partnership Agreement with Monnit Corp.
|
10-K
|
8/28/12
|
10.4
|
|
|
10.5
|
License Agreement with iMetrik Global Inc.
|
10-K
|
8/28/12
|
10.5
|
|
|
10.6
|
Loan Agreement with Capex Investment Limited
|
8-K
|
3/28/14
|
10.1
|
|
|
10.7
|
IP Asset Purchase Agreement with Mary Spio
|
8-K
|
6/27/14
|
10.1
|
|
|
14.1
|
Code of Ethics
|
10-K
|
8/20/10
|
14.1
|
|
|
31.1
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
X
|
|||
|
31.2
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
X
|
|||
|
32.1
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Executive Officer
|
X
|
|||
|
32.2
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Financial Officer
|
X
|
|||
|
99.1
|
Audit Committee Charter
|
10-K
|
8/20/10
|
99.2
|
|
|
99.2
|
Disclosure Committee Charter
|
10-K
|
8/20/10
|
99.3
|
|
|
101.INS
|
XBRL Instance Document
|
X
|
|||
|
101.SCH
|
XBRL Taxonomy Extension – Schema
|
X
|
|||
|
101.CAL
|
XBRL Taxonomy Extension – Calculations
|
X
|
|||
|
101.DEF
|
XBRL Taxonomy Extension – Definitions
|
X
|
|||
|
101.LAB
|
XBRL Taxonomy Extension – Labels
|
X
|
|||
|
101.PRE
|
XBRL Taxonomy Extension – Presentation
|
X
|
In accordance with Section 13 or 15(d) of the Securities and Exchange Act, the registrant caused this amended report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 24th day of September 2015.
|
NEXT GALAXY CORP.
|
||
|
BY:
|
MARY SPIO
|
|
|
Mary Spio
|
||
|
President and Principal Executive Officer
|
||
|
BY:
|
MICHEL ST-PIERRE
|
|
|
Michel St-Pierre
|
||
|
Principal Accounting Officer, Principal Financial Officer, Secretary and Treasurer
|
||
In accordance with the Exchange Act, this amended report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dated indicated.
|
Signature
|
Title
|
Date
|
|
MARY SPIO
|
President, Principal Executive Officer and Director
|
September 24, 2015
|
|
Mary Spio
|
||
|
MICHEL ST-PIERRE
|
Principal Accounting Officer, Principal Financial
|
September 24, 2015
|
|
Michel St-Pierre
|
Officer, Secretary, Treasurer and Director
|
|
| LAURIE CLARK |
Chief Operating Officer and Director
|
September 24, 2015
|
|
Laurie Clark
|
|
Exhibit
|
Incorporated by reference
|
Filed
|
|||
|
Number
|
Document Description
|
Form
|
Date
|
Number
|
herewith
|
|
3.1
|
Articles of Incorporation, as amended
|
S-1
|
6/19/09
|
3.1
|
|
|
3.2
|
Bylaws
|
S-1
|
6/19/09
|
3.2
|
|
|
4.1
|
Stock Certificate
|
S-1
|
6/19/09
|
4.1
|
|
|
10.1
|
Consulting Agreement – Michel St-Pierre
|
10-K
|
8/19/11
|
10.1
|
|
|
10.2
|
Consulting Agreement – Jean-Paul Langlais
|
10-K
|
8/19/11
|
10.2
|
|
|
10.3
|
Manufacturing Agreement with SMT Hautes Technologies
|
10-Q
|
1/14/12
|
10.3
|
|
|
10.4
|
Partnership Agreement with Monnit Corp.
|
10-K
|
8/28/12
|
10.4
|
|
|
10.5
|
License Agreement with iMetrik Global Inc.
|
10-K
|
8/28/12
|
10.5
|
|
|
10.6
|
Loan Agreement with Capex Investment Limited
|
8-K
|
3/28/14
|
10.1
|
|
|
10.7
|
IP Asset Purchase Agreement with Mary Spio
|
8-K
|
6/27/14
|
10.1
|
|
|
14.1
|
Code of Ethics
|
10-K
|
8/20/10
|
14.1
|
|
|
31.1
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
X
|
|||
|
31.2
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
X
|
|||
|
32.1
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Executive Officer
|
X
|
|||
|
32.2
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Financial Officer
|
X
|
|||
|
99.1
|
Audit Committee Charter
|
10-K
|
8/20/10
|
99.2
|
|
|
99.2
|
Disclosure Committee Charter
|
10-K
|
8/20/10
|
99.3
|
|
|
101.INS
|
XBRL Instance Document
|
X
|
|||
|
101.SCH
|
XBRL Taxonomy Extension – Schema
|
X
|
|||
|
101.CAL
|
XBRL Taxonomy Extension – Calculations
|
X
|
|||
|
101.DEF
|
XBRL Taxonomy Extension – Definitions
|
X
|
|||
|
101.LAB
|
XBRL Taxonomy Extension – Labels
|
X
|
|||
|
101.PRE
|
XBRL Taxonomy Extension – Presentation
|
X
|
|||
-39-