LINGERIE FIGHTING CHAMPIONSHIPS, INC. - Quarter Report: 2014 May (Form 10-Q)

f10q0514_calaenergy.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED May 31, 2014

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT FOR THE TRANSITION PERIOD FROM __________ TO __________ COMMISSION FILE NUMBER: 333-148005

CALA ENERGY CORP.

(Exact name of registrant as specified in its charter)

Nevada		20-8009362
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

777 South Post Oak Lane

One Riverway

Suite 1700, PMB #1554

Houston, TX 77056

(Address of principal executive offices, Zip Code)

(281) 667-9360

(Registrant’s telephone number, including area code)

Copies to:

Asher S. Levitsky P.C.

Ellenoff Grossman & Schole LLP

1345 Avenue of the Americas; 11th floor

New York, New York 10105-0302

Phone: (212) 370-1300

Fax: (646) 895-7182

E-mail: alevitsky@egsllp.com

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the 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 o No o

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 (§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). o Yes o No

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 definitions of “large accelerated filer,” ”accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x No o

The number of shares of registrant’s common stock outstanding, as of July 7, 2014: 339,757,357

CALA ENERGY CORP.

Form 10-Q

For the Quarter Ended May 31, 2014

TABLE OF CONTENTS

		Page
PART I. - FINANCIAL INFORMATION
Item 1.	Financial Statements.
	Condensed Consolidated Balance Sheets as of May 31, 2014 (unaudited) and February 28, 2013	2
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended May 31, 2014 and 2013	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended May 31, 2014 and 2013	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	7
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	8
Item 4.	Controls and Procedures.	8

	PART II - OTHER INFORMATION
Item 6.	Exhibits.	9

FORWARD LOOKING STATEMENTS

This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.

Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risks Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our report on Form 10-K for the year ended February 28, 2014, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q and in other reports that we file with the SEC. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.

We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

CALA ENERGY CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS

	May 31, 2014			February 28, 2014
	(Unaudited)
ASSETS
Current assets
Cash	$	18,825		$	35,607

Total current assets		18,825			35,607

Total assets	$	18,825		$	35,607

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Other current liabilities	$	246,850		$	215,400
Total current liabilities		246,850			215,400

Total liabilities		246,850			215,400

Stockholders' deficit
Preferred stock, par value $0.001 per share, 10,000,000 shares authorized; 0 share issued and outstanding,		-			-
Common stock ( 400,000,000 authorized shares, par value $0.001 per share; 339,757,357 shares issued and outstanding)		339,757			339,757
Additional paid in capital		8,182,945			8,182,945
Accumulated deficit		(8,750,727	)		(8,702,495	)

Total stockholders' deficit		(228,025	)		(179,793	)
Total liabilities and stockholders' deficit	$	18,825		$	35,607

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

CALA ENERGY CORP. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
OTHER COMPREHENSIVE LOSS

	Three months ended May 31,
	2014			2013

Revenue	$	-		$	-

Selling, general and administrative expenses		48,232			86,237

Loss from operations		(48,232	)		(86,237	)

Income taxes		-			-

Net Loss	$	(48,232	)	$	(86,237	)

Comprehensive loss	$	(48,232	)	$	(86,237	)

Net loss per share
Net loss per share from continuing operations	$	(0.00	)	$	(0.00	)
Basic and Diluted loss per share	$	(0.00	)	$	(0.00	)

Weighted average common shares outstanding
- Basic and Diluted		339,757,357			194,757,357

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

CALA ENERGY CORP. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three months ended May 31,
	2014			2013

Cash Flows from operating activities:
Net loss	$	(48,232	)	$	(86,237	)
Decrease in liabilities:
Other current liabilities		31,450			17,001

Net cash used in operating activities		(16,782	)		(69,236	)

Cash flows from financing activities:
Repayment of related parties		-			(125,100	)
Proceeds from issuance of common stock		-			200,000
Net cash provided by financing activities		-			74,900

Net increase in cash and cash equivalents		(16,782	)		5,664
Cash, beginning of the period		35,607			5,960

Cash, end of the period	$	18,825		$	11,624

Supplemental disclosures of cash flow information:
Interest paid	$	-		$	-
Income taxes paid	$	-		$	-

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

CALA ENERGY CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2014

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Cala Energy Corp. (the “Company”) is a Nevada corporation incorporated on November 29, 2006 under the name Sparking Events, Inc. The Company’s corporate name was changed to Xodtec Group USA, Inc. in June 2009, Xodtec LED, Inc. in May 2010 and Cala Energy Corp. in September 2013.

On July 10, 2013, Cala Energy International Corp., a wholly-owned subsidiary of Cala Energy Corp., was organized under the laws of the Nevada.

During September 2013, the Company approved the creation of a subsidiary under the laws of Republic of Indonesia in which the Company would have a 95% interest. As of May 31, 2014, the application is still being reviewed by the Indonesian government.

The consolidated financial statements include the accounts of Cala Energy Corp. and its wholly owned subsidiary, Cala Energy International Corp. (collectively referred as the “Company,” unless the context indicates otherwise). As of May 31, 2014, the Company has no material operating activities.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and are presented in accordance with the requirements of Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these interim financial statements do not include all of the information and notes required by GAAP for complete financial statements. These interim financial statements should be read in conjunction with the consolidation financial statements and notes thereto for the fiscal year ended February 28, 2014 included in the Company’s Form 10-K. In the opinion of management, the interim financial statements included herein contain all adjustments, including normal recurring adjustments, considered necessary to present fairly the Company’s financial position, the results of operations and cash flows for the periods presented. The operating results and cash flows for the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year.

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. As shown in the unaudited condensed consolidated financial statements, during the three months ended May 31, 2014, the Company generated no revenue, incurred an operating loss and a net loss of approximately $48,000. The Company had a negative cash flow in operating activities amounting approximately $17,000 in the three months ended May 31, 2014, and as of May 31, 2014, the Company’s accumulated deficit was approximately $8,750,000, substantially all of which was generated by operations which have been spun off. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.

Segment Information

ASC 280 requires companies to report information about operating segment in interim and annual financial statements. It also requires segment disclosures about products and services geographic and major customers. The Company has determined that it does not have any separately reportable operating segments.

CALA ENERGY CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2014

Net Loss per Share

The Company calculates its basic and diluted earnings per share in accordance with ASC 260. Basic earnings per share are calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share are calculated by adjusting the weighted average outstanding shares to assume conversion of all potentially dilutive warrants and options and convertible securities. Because the Company incurred losses for the three months ended May 31, 2014 and 2013, the number of basic and diluted shares of common stock is the same.

NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS

The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.

NOTE 4 – INCOME TAXES

The Company did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because the Company has experienced operating losses for U.S. federal income tax purposes since inception. When it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANAYLSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the results of our operations and financial condition should be read in conjunction with our financial statements and the related notes, which appear elsewhere in this report. The following discussion includes forward-looking statements. For a discussion of important factors that could cause actual results to differ from results discussed in the forward-looking statements, see “Forward Looking Statements.”

Overview

Prior to July 13, 2012, through our subsidiaries we were engaged in design, marketing and selling of advanced lighting solutions which are designed to use less energy and have a longer life than traditional incandescent, halogen, fluorescent light sources. We were not able to generate profits from this business and, for the several years prior to July 13, 2012, we financed our operations primarily through funds provided by our officers and directors.

On July 13, 2012, pursuant to agreements with one of our former directors, we transferred the stock in our subsidiaries and our 35% ownership in an inactive company to the former director in exchange for cancellation of debt totaling $100,000. As a result of the transfer of the subsidiaries, we were no longer engaged in the lighting solutions business. We transferred the stock of the subsidiaries because we felt that, as a result of our continuing losses and our inability to develop the business as we had planned, it was not in our best interest to continue in this business.

Following the sale of our subsidiaries in the lighting solutions business, we were not engaged in any business activity. We had initially planned to focus on providing an internet based security system to companies that would like to replace security guards with video cameras that are monitored 24/7. Through February 28, 2013, we did not generate any revenue from this new proposed business, and we discontinued our efforts with respect to that business.

Subsequent to February we planned to provide enhanced oil recovery services and supplying materials to existing operators of oil fields in Indonesia. We cannot assure you that we will be able to enter this business, which is subject to numerous regulations and licensing requirements. It will be necessary for us to hire qualified marketing and skilled technical personnel who are familiar with the Indonesian market and the oil recovery business. This industry is highly competitive, and there are companies engaged in this business that are well capitalized and have relationships with oil field owners. There are significant other risks involved in this business. During September 2013, our board of directors approved the creation of subsidiary under the laws of Republic of Indonesia in which we will have a 95% interest. As of July 7, 2014, the application is still being reviewed by the Indonesian government. We cannot assure you that we will be able to develop this business in the manner which we plan or that, if we develop this business, we will be able to generate revenue or profits from its operations. We are also evaluating other potential business activities.

Significant Accounting Estimates and Policies

The discussion and analysis of our financial condition and results of operations is based upon our financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates including the allowance for doubtful accounts, the salability and recoverability of our products, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition

Our revenue recognition policies are in compliance with ASC 605. Revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. Discounts provided to customers by us at the time of sale are recognized as a reduction in sales as the products are sold. Sales taxes are not recorded as a component of sales.

Income Taxes

We account for income taxes in accordance with ASC 740, Income Taxes, which requires that we recognize deferred tax liabilities and assets 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 the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that some or all of any deferred tax assets will not be realized.

We adopted ASC 740-10-25, Income Taxes-Overall-Recognition, on January 1, 2007, which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax position. We must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. We did not recognize any additional liabilities for uncertain tax positions as a result of the implementation of ASC 740-10-25.

Recent accounting pronouncements

We considered all new accounting pronouncements and have concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.

RESULTS OF OPERATIONS

Three months Ended May 31, 2014 and 2013

We had no revenue for the three months ended May 31, 2014 or 2013. General and administrative expenses, which consisted primarily of professional fees and executive compensation, were approximately $48,000, for the quarter ended May 31, 2014, as compared with approximately $86,000 for the quarter ended May 31, 2013, a decrease of $38,000 or approximately 44.1%. Executive compensation was $30,000 for each of the quarters ended May 31, 2014 and 2013.

As a result of the foregoing, our net loss for the three months ended May 31, 2014 was approximately $48,000, or $0.00 per share (basic and diluted), as compared with a loss of approximately $86,000, or $0.00 per share (basic and diluted), for the three months ended May 31, 2013.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. At May 31, 2014, we had a cash balance of approximately $18,000, representing the balance of the $300,000 proceeds from the sale of stock during the year ended February 28, 2014 after giving effect to the payment of a loan from the chief executive officer of $125,100 and other operating expenses. We had a working capital deficiency of $228,000 at May 31, 2014, as compared with a working capital deficiency of approximately $180,000 at February 28, 2014.

During the three months ended May 31, 2014, we used approximately $17,000 in our operations, which reflected our net loss of approximately $48,000, representing our general and administrative expenses, and an approximately $31,000 decrease in current liabilities. There was no cash flow from financing activities during the quarter ended May 31, 2014.

For the three months ended May 31, 2013, we used approximately $69,000 in our operations, which reflected our net loss of approximately $86,000, representing our general and administrative expenses, and an approximately $17,000 decrease in current liabilities. Cash flow from financing activities was approximately $75,000, consisting of $200,000 proceeds from the sale of stock, net of a payment of the loan to the chief executive officer of $125,100.

We believe that, if we engage in any significant business activities, we will require significant financing for our operations. Because of the absence of both operating activities and an actively traded stock, we may have difficulty raising additional funds through the sale of our equity or debt securities.

The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not required for smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES.

Our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of May 31, 2014.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive and financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures.

Management conducted its evaluation of disclosure controls and procedures under the supervision of our chief executive and financial officer. Based on that evaluation, our chief executive and financial officer concluded that because of the material weaknesses in internal control over financial reporting described below, our disclosure controls and procedures were not effective as of May 31, 2014.

Changes in Internal Controls over Financial Reporting

There were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that occurred during the quarter ended May 31, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We anticipate that, with our proposed entry into a new business, we will seek to implement effective controls over financial reporting, although we recognize that, in view of the small number of employees, segregation of duties may be difficult. As of the date of this report, we have one part-time employee.

PART II - OTHER INFORMATION

ITEM 6. EXHIBITS

Exhibit		Description of the Exhibit

31.1		Rule 13a-14(a)/15d-14(a) certification by the chief executive officer and chief financial officer.
32.1		Section 1350 certification by the chief executive officer and chief financial officer.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Schema
101.CAL		XBRL Taxonomy Calculation Linkbase
101.DEF		XBRL Taxonomy Definition Linkbase
101.LAB		XBRL Taxonomy Label Linkbase
101.PRE		XBRL Taxonomy Presentation Linkbase

SIGNATURES

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

	CALA ENERGY CORP.

Date: July 9, 2014	/s/ Terry Butler
	Terry Butler
	Chief Executive and Financial Officer