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EX-31 - CALA CORP	cert311.htm
EX-32 - CALA CORP	cert321.htm

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ______________

COMMISSION FILE NUMBER: 000-15109

CALA CORPORATION
(Exact name of Registrant as Specified in Its Charter)

Oklahoma	73-1251800
(State or Other Jurisdiction of Incorporation)	(I.R.S. Employer or Organization Identification No.)

1314 Texas Street, Suite 400, Houston, TX 77002
(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number: (713) 302-8689

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.005 Par Value

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed 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) been subject to such filing requirements for the past 90 days. Yes No X .

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation 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 of the Exchange Act.
Large accelerated filer □ Accelerated filer□
Non-accelerated filer □ (Do not check if smaller reporting company 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 No X .

The Registrant’s revenues for the fiscal year ended December 31, 2008 was zero. The aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 30, 2008 $ 733,374 As of April 20, 2010, the Registrant had 320,866,147 shares of common stock issued and outstanding.

Transitional Small Business Disclosure Format (check one): Yes No X .

Page 1

TABLE OF CONTENTS

PART I

Item 1. Business	3
Item 1A. Risk Factors	4
Item 2. Property	7
Item 3. Legal Proceedings	8
Item 4. Submission of Matters to a Vote of Security Holders	8

PART II

Item 5. Market for Common Equity and Related Stockholder Matters	8
Item 6. Selected Financial Data	9
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
Item 8. Financial Statements	12
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	12
Item 9A. Controls and Procedures	12
Item 9B. Other Information	12

PART III

Item 10. Directors, Executive Officers, Promoters and Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act	12
Item 11. Executive Compensation	14
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	14
Item 13. Certain Relationships and Related Transactions and Director Independence	15
Item 14. Principal Accountant Fees and Services	15

PART IV

Item 15. Exhibits, Financial Statement Schedules	16
Signatures	17

Page 2

PART I.
ITEM 1. BUSINESS.

Cala Corporation (formerly Magnolia Foods, Inc.) was incorporated on September 13, 1985 under the laws of the State of Oklahoma. The Registrant's sole industry segment was the business of owning, operating, licensing and joint venturing restaurants. In addition, the Registrant operated restaurants under lease which were discontinued during the year. Currently, the Registrant is in the development stage of building an underwater resort and casino.


Business Development.

The Registrant has designed an undersea resort. The Registrant, through the expertise of Mr. Ray Francis has solved the naval engineering problems originally presented by the project. Mr. Francis, brings to the table over 40 years of maritime experience that is second to none in the maritime industry. Mr. Francis talents allow for a design that benefits the customer’s safety, maximizes the openness and space of the facility, and maintains the primary focus of human contact with marine life. This coupled with Joseph Cala’s knowledge and experience in the hospitality industry, along with eight years of intensive study and seemingly endless trial and error, enabled the Registrant to finalize two naval engineered designs for the Undersea Resort and Residence. The Registrant engaged Mr. Clive Jones, a former senior executive with Economic Research Associates, to help with business development. Mr. Jones has over 40 years of experience in worldwide leisure travel and tourism development, and he was the visionary behind of many landmark resorts and theme parks. In addition, the Company is working with prestigious maritime companies such as Stodga of Poland and FinCantieri of Italy.

The Registrant plans to build the first UnderSea Resort & Casino, the first Undersea Residence, and the first Residence Fractional Ownership. The development will be the residence and the fractional ownership, and the project will be financed from pre-selling individual units. Management believes that the project has a great chance of success. The Registrant is in discussions with members of the timeshare and fractional unit industry to explore the possibility of a partnership or contractual arrangement with the Registrant. The undersea residences have the entire ocean available with no purchase costs, and without the limitations of land. According to the Future Timeshare Buyers 2004 Market Profile, 13.4 million adults are interested in purchasing some form of timeshare during the next two years. The next generation of owners is well educated and the highest concentration of interest in purchasing is among GenXers. In addition, the study documents that prospective owners are experienced and enthusiastic travelers.

The Registrant completed the design phase of development and is seeking financing to begin the construction phase of the project. Included in the financing stage is the concept of pre-selling the vessels prior to the beginning of construction. As of this date the Registrant does not have any commitments for financing or purchase of any units. The Registrant initiated a contract with a shipyard for building the units.

Management believes that the project has a great chance of success however; there can be no assurance that (i) such individual unit or fractional ownership will be sold or significant revenue will be generated, and (ii) anticipated costs will not be significantly exceeded by actual costs incurred.

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The Registrant owns no patents or trademarks, and has no employees.

ITEM 1A RISK FACTORS

Risk Factors Connected with Plan of Operation.

(a) Limited Prior Operations, History of Operating Losses, and Accumulated Deficit May Affect Ability of Registrant to Survive.

The Registrant has had limited prior operations to date. Since the Registrant’s principal activities recently have been limited to seeking new business ventures, it has no recent record of any revenue-producing operations. Consequently, there is only a limited operating history upon which to base an assumption that the Registrant will be able to achieve its business plans. In addition, the Registrant has only limited assets. As a result, there can be no assurance that the Registrant will generate significant revenues in the future; and there can be no assurance that the Registrant will operate at a profitable level. Accordingly, the Registrant’s prospects must be considered in light of the risks, expenses and difficulties frequently encountered in connection with the establishment of a new business.

The Registrant incurred General and Administrative expenses of $234,762 for the year ending 2008 and $694,705 for the year ending 2007. Stock for services consisted of zero and $332,000 of the total general and administrative expense for the years ending 2008 and 2007, respectively. Officers salary of $150,000 and legal and accounting of $46,235 were the major components of G&A during the year ended 2008 while consulting expense of $64,241 and legal and accounting of $62,932 were the other major components for the year ending 2007.

The Registrant has incurred net losses: $1,114,398 for the fiscal year ended December 31, 2008 and $721,403 for the fiscal year ended December 31, 2007. The Registrant’s current liabilities exceed its current assets by $320,590 as of December 31, 2008 and $184,366 as of December 31, 2007. At December 31, 2008, the Registrant had an aggregate accumulated deficit and accumulated deficit during the development stage of $13,722,590 ($11,886,789 and $1,835,801, respectively). This raises substantial doubt about the Registrant’s ability to continue as a going concern.

As a result of the fixed nature of many of the Registrant’s expenses, the Registrant may be unable to adjust spending in a timely manner to compensate for any unexpected delays in the development and marketing of the Registrant’s products or any capital raising or revenue shortfall. Any such delays or shortfalls will have an immediate adverse impact on the Registrants business, operations and financial condition.

(b) Need for Additional Financing May Affect Operations and Plan of Business.

The working capital requirements associated with any adopted plan of business of the Registrant may be significant. The Registrant anticipates, based on currently proposed assumptions relating to its operations (including with respect to costs and expenditures and projected cash flow from operations), that it must seek financing to continue its operations (an amount which is as yet to be determined). However, such financing, when needed, may not be available, or on terms acceptable to management. The ability of the Registrant to continue as a going concern is dependent on additional sources of capital and the success of the Registrant’s business plan. The Registrant’s independent accountant audit report included in this Form 10-K includes a substantial doubt paragraph regarding the Registrant’s ability to continue as a going concern.

Page 4

If funding is insufficient at any time in the future, the Registrant may not be able to take advantage of business opportunities or respond to competitive pressures, or may be required to reduce the scope of its planned product development and marketing efforts, any of which could have a negative impact on its business, operating results and financial condition. In addition, insufficient funding may have a material adverse effect on the company’s financial condition, which could require the company to:

 curtail operations significantly;

 sell significant assets;

 seek arrangements with strategic partners or other parties that may require the company to relinquish significant rights to products, technologies or markets; or

 explore other strategic alternatives including a merger or sale of the company. To the extent that the Registrant raises additional capital through the sale of equity or convertible debt securities, the issuance of such securities will result in dilution to existing stockholders. If additional funds are raised through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on the Registrant’s operations. Regardless of whether the Registrant’s cash assets prove to be inadequate to meet the Registrant’s operational needs, the Registrant may seek to compensate providers of services by issuance of stock in lieu of cash, which will also result in dilution to existing shareholders.

The Registrant’s success is dependent upon the hiring and retention of key personnel. None of the officers or directors has any employment or non-competition agreement with the Registrant. Therefore, there can be no assurance that these personnel will remain employed by the Registrant. Should any of these individuals cease to be affiliated with the Registrant for any reason before qualified replacements could be found, there could be material adverse effects on the Registrant’s business and prospects.

In addition, all decisions with respect to the management of the Registrant will be made exclusively by the officers and directors of the Registrant. Investors will only have rights associated with stockholders to make decisions which affect the Registrant. The success of the Registrant, to a large extent, will depend on the quality of the directors and officers of the Registrant. Accordingly, no person should invest in the shares unless he is willing to entrust all aspects of the management of the Registrant to the officers and directors.

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(d) Potential Conflicts of Interest May Affect Ability of Officers and Directors to Make Decisions in the Best Interests of Registrant.

The officers and directors have other interests to which they devote time, either individually or through partnerships and corporations in which they have an interest, hold an office, or serve on boards of directors, and each will continue to do so notwithstanding the fact that management time may be necessary to the business of the Registrant. As a result, certain conflicts of interest may exist between the Registrant and its officers and/or directors which may not be susceptible to resolution.

In addition, conflicts of interest may arise in the area of corporate opportunities which cannot be resolved through arm’s length negotiations. All of the potential conflicts of interest will be resolved only through exercise by the directors of such judgment as is consistent with their fiduciary duties to the Registrant. It is the intention of management, so as to minimize any potential conflicts of interest, to present first to the board of directors to the Registrant, any proposed investments for its evaluation.

(e) Limitations on Liability, and Indemnification, of Directors and Officers May Result in Expenditures by Registrant.

The Registrant’s Certificate of Incorporation contain provisions to eliminate, to the fullest extent permitted by the Oklahoma Corporation Law, as in effect from time to time, the personal liability of directors of the Registrant for monetary damages arising from a breach of their fiduciary duties as directors. The Certificate of Incorporation and the Amended and Restated By-Laws of the Registrant include provisions to the effect that the Registrant may, to the maximum extent permitted from time to time under applicable law, indemnify any director, officer, or employee to the extent that such indemnification and advancement of expense is permitted under such law, as it may from time to time be in effect. Any limitation on the liability of any director, or indemnification of directors, officer, or employees, could result in substantial expenditures being made by the Registrant in covering any liability of such persons or in indemnifying them.

(f) Absence of Cash Dividends May Affect Investment Value of Registrant’s Stock.

The board of directors does not anticipate paying cash dividends on the common stock for the foreseeable future and intends to retain any future earnings to finance the growth of the Registrant’s business. Payment of dividends, if any, will depend, among other factors, on earnings, capital requirements and the general operating and financial conditions of the Registrant as well as legal limitations on the payment of dividends out of paid-in capital.

(g) Non-Cumulative Voting May Affect Ability of Some Shareholders to Influence Mangement of Registrant.

Holders of the shares of common stock of the Registrant are not entitled to accumulate their votes for the election of directors or otherwise. Accordingly, the holders of a majority of the shares present at a meeting of shareholders will be able to elect all of the directors of the Registrant, and the minority shareholders will not be able to elect a representative to the Registrant’s board of directors.

Page 6

(h) No Assurance of Continued Public Trading Market and Risk of Low Priced Securities May Affect Market Value of Registrant’s Stock.

There has been only a limited public market for the common stock of the Registrant. The common stock of the Registrant is currently quoted on the Pink Sheets LLC. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations as to the market value of the Registrant’s securities. In addition, the common stock is subject to the low-priced security or so called “penny stock” rules that impose additional sales practice requirements on broker-dealers who sell such securities. The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure in connection with any trades involving a stock defined as a penny stock (generally, according to recent regulations adopted by the U.S. Securities and Exchange Commission (“SEC”), any equity security that has a market price of less than $5.00 per share, subject to certain exceptions), including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith. The regulations governing low-priced or penny stocks sometimes limit the ability of broker-dealers to sell the Registrant’s common stock and thus, ultimately, the ability of the investors to sell their securities in the secondary market.

(i) Failure to Maintain Market Makers May Affect Value of Registrant’s Stock.

If the Registrant is unable to maintain a Financial Industry Regulatory Authority member broker/dealers as market makers, the liquidity of the common stock could be impaired, not only in the number of shares of common stock which could be bought and sold, but also through possible delays in the timing of transactions, and lower prices for the common stock than might otherwise prevail. Furthermore, the lack of market makers could result in persons being unable to buy or sell shares of the common stock on any secondary market. There can be no assurance the Registrant will be able to maintain such market makers.

(j) Sale of Shares Eligible For Future Sale Could Adversely Affect the Market Price.

All of the shares of common stock that are currently held, directly or indirectly, by significant shareholders of the Registrant as shown in the chart under Part III, Item 11 of this Form 10-K, have been issued in reliance on the private placement exemption under the Securities Act of 1933. Such shares will not be available for sale in the open market without separate registration except in reliance upon Rule 144 under the Securities Act of 1933. In general, under Rule 144 a person, or persons whose shares are aggregated, who has beneficially owned shares acquired in a non-public transaction for at least one year, including persons who may be deemed affiliates of the Registrant, as defined, would be entitled to sell within any three-month period a number of shares that does not exceed 1% of the then outstanding shares of common stock, provided that current public information is then available. If a substantial number of the shares owned by these shareholders were sold under Rule 144 or a registered offering, the market price of the common stock could be adversely affected.

ITEM 2. PROPERTY. The Registrant maintains an office at 1314 Texas Street, Suite 400, Houston, TX 77002. It currently does not own any equipment at that location.

Page 7

ITEM 3. LEGAL PROCEEDINGS.

In 2003, the Registrant obtained a judgment against I.M.O.I.L, Gisella Manciniand Quirino Caparelli in the amount of $2.7 million. The judgment has not been collected and is not included in the financial statements. During the years ending in 2008 and 2007, the Registrant has not actively pursued the collection of the judgment. The Registrant received the judgment resulting from a lawsuit initiated by the Registrant due to losses incurred from lack of performance by the defendant in a merger agreement with the Registrant. As the defendant is in a foreign jurisdiction the Registrant feels it is unlikely the judgment will be collected without the investment of large legal fees.

The Company is the defendant in a lawsuit filed on February 21, 2008 in Brevard County, Florida Case No: 05-2008-CA-019105 which was brought by the mortgage holder of the property owned by the Company at 13 Main Street Titusville, FL. The matter was heard on March 14, 2008 and the Company was ordered to commence monthly payments of $3,272.32 to the plaintiff beginning on April 16, 2008 and on the same date each month thereafter. The Company did not meet the requirements of the Agreement.

On September 30, 2008, the Company entered into a stipulated settlement agreement with the owner and mortgage holder of the building. An order adopting the stipulation was issued by the Eighth Circuit Court of Brevard County, Florida on October 3, 2008. Under the terms of the agreement the Company was to vacate the building on October 12, 2008 and dismiss any counter claims it has against the mortgage holder of the property. The mortgage holder of the building waived all deficiency against the Company and assumed title of the building.

On January 20, 2009, a complaint was filed against the Company in the Superior Court of California case # CIVWS09-0049 terminating the lease at 500 Bollinger Canyon Way, San Roman, CA due to subleasing the premises without consent of the landlord. A judgment was entered giving the landlord possession of the premises with no monetary amount awarded.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.


PART II.

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Market Information.

The Registrant’s common stock trades on the National Quotation Bureaus’ Pink Sheets (now know as Pink Sheets LLC), where it continues to trade under the symbol “CCAA”. The range of closing prices shown below is as reported by this market. The quotations shown reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions.

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Per Share Common Stock Bid Prices by Quarter For the Fiscal Year Ended on December 31, 2008 ⁽¹⁾

	High	Low
Quarter Ended December 31, 2008	0.006	0.0012
Quarter Ended September 30, 2008	0.007	0.0015
Quarter Ended June 30, 2008	0.012	0.0030
Quarter Ended March 31, 2008	0.020	0.0010

(1) The Registrant’s common stock only traded sporadically during this fiscal year

Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended on December 31, 2007

	High	Low
Quarter Ended December 31, 2007	0.025	0.006
Quarter Ended September 30, 2007	0.029	0.012
Quarter Ended June 30, 2007	0.028	0.017
Quarter Ended March 31, 2007	0.0324	0.019

Holders of Common Equity.

As of December 31, 2008, the Registrant had approximately 515 shareholders of record.


Dividend Information.

The Registrant has not declared or paid a cash dividend to stockholders since it was incorporated. The Board of Directors presently intends to retain any earnings to finance Registrant operations and does not expect to authorize cash dividends in the foreseeable future. Any payment of cash dividends in the future will depend upon the Registrant's earnings, capital requirements and other factors.

Sales of Unregistered Securities.

The Registrant made no sales of unregistered securities (restricted stock) during the year which have not been reported in the 10 Q’s filed for the first three quarters for the year ending December 31, 2008.


ITEM 6. SELECTED FINANCIAL DATA
Not Applicable

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

The following discussion should be read in conjunction with the financial statements of the Registrant and notes thereto contained elsewhere in this report.

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Twelve-Month Plan of Operation.

The Registrant intends to take advantage of any reasonable business proposal presented which management believes will provide the Registrant and its stockholders with a viable business opportunity. The board of directors will make the final approval in determining whether to complete any acquisition, and unless required by applicable law, the articles of incorporation or bylaws or by contract, stockholders' approval will not be sought.

The Registrant designed to build the first UnderSea Resort & Casino, the first Undersea Residence, and the first Residence Fractional Ownership. The first development will be the residence and the fractional ownership, and the project will be financed from pre-selling individual units. The Registrant estimates that the average residential development should generate approximately $600 million of revenue from the sale of the units while the total development cost should be approximately $460 million. This is based on initial estimates of unit costs and revenue generated in the sale of the vessels as it is the intent of the Registrant to build the vessels under the Registrants design for sale to prospective buyers. The Registrant does not initially intend to own any of the vessels being built. Therefore, the management believes that the project has a great chance of success however there can be no assurance that (i) such individual unit or fractional ownership will be sold or significant revenue will be generated, and (ii) anticipated costs will not be significantly exceeded by actual costs incurred. The possibilities in this industry are tremendous, because demand for oceanic properties is the highest it has ever been and the supply is scarce. The undersea residences have the ocean available with no purchase costs, and without the limitations of land.

The Registrant plans to finalize plans for securing the financing and construction of the resort. The beginning of construction is dependent on the Registrant completing its plan of financing and contracting for the construction, both of which will highly impact the Registrants ability to carry out its business plan.

The investigation of business opportunities and the negotiation, drafting, and execution of relevant agreements, disclosure documents, and other instruments will require substantial management time and attention and will require the Registrant to incur costs for payment of accountants, attorneys, and others. If a decision is made not to participate in or complete the acquisition of a specific business opportunity, the costs incurred in a related investigation will not be recoverable. Further, even if an agreement is reached for the participation in a specific business opportunity by way of investment or otherwise, the failure to consummate the particular transaction may result in the loss to the Registrant of all related costs incurred.

Capital Expenditures.

On December 1, 2005, the Registrant purchased a building and land for an aggregate amount of $750,000 of which the Registrant paid $150,000 plus closing costs and a mortgage note of $600,000. The mortgage bears an interest rate of eight (8%) percent with 240 monthly principal and interest payments of $5,020.24 stating on January 16, 2006. The note contains a prepayment penalty of $50,000 if the note is paid prior to December 16, 2007.

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On July 16, 2006, the mortgage was modified with a principal balance of $592,592.51 extending the mortgage through July 15, 2036. The mortgage was amended to eliminate the prepay penalty of $50,000 in the original mortgage, grant a reduction in the mortgage principal of $100,000 if the mortgage is paid off on or before February 17, 2007 and reduced the interest rate to five and one quarter percent (5.25%). A late fee of five percent (5%) on payment over ten (10) days was added to the mortgage. The prepayment reduction was not realized during the year and has expired.

On September 30, 2008, the Company agreed to vacate the building and return title to the mortgage holder. Upon vacating the building the mortgage holder through a court order relieved the Company of all liabilities connected to the ownership and occupancy of the building. The result of this transaction was a loss on disposal of assets of $121,560.

Critical Accounting Policies.

The SEC has issued Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” (“FRR 60”); suggesting companies provide additional disclosure and commentary on their most critical accounting policies. In FRR 60, the Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, the Registrant’s most critical accounting policies include the use of estimates in the preparation of financial statements. The methods, estimates and judgments the Registrant uses in applying these most critical accounting policies have a significant impact on the results the company reports in its financial statements.

The preparation of these financial statements requires the Registrant to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Registrant evaluates these estimates, including those related to revenue recognition and concentration of credit risk. The Registrant bases its estimates on historical experience and on various other assumptions that is believed to be reasonable under the circumstances, the results of which form the 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.

Forward Looking Statements.

The foregoing plan of operation contains “forward looking statements” within the meaning of Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of the Securities Act of 1934, as amended. The words “believe,” “expect,” “anticipate,” “intends,” “forecast,” “project,” and similar expressions identify forward-looking statements. These are statements that relate to future periods and include, but are not limited to, statements as to the Registrant’s estimates as to the adequacy of its capital resources, its need and ability to obtain additional financing, its operating losses and negative cash flow, and its critical accounting policies. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, those discussed above. These forward-looking statements speak only as of the date hereof. The Registrant expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

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ITEM 8. FINANCIAL STATEMENTS.

Financial statements are audited and included herein beginning on Exhibit 1, page 18 and are incorporated herein by this reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures.

Within the 90 days prior to the end of the period covered by this report, the Registrant carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (“Exchange Act”). This evaluation was done under the supervision and with the participation of the Registrant’s president. Based upon that evaluation, he concluded that the Registrant’s disclosure controls and procedures are not effective in gathering, analyzing and disclosing information needed to satisfy the Registrant’s disclosure obligations under the Exchange Act.

Changes in Disclosure Controls and Procedures.

There were no significant changes in the Registrant’s disclosure controls and procedures, or in factors that could significantly affect those controls and procedures since their most recent evaluation.

ITEM 9B OTHER INFORMATION

None

PART III.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

On February 28, 2006, John Del Fevro resigned as a director of the Registrant. On October 1, 2006, Larry Pfautsch was elected to the board of directors and Robert Mosley resigned. On November 1, 2006, Ray Francis was elected to the board of directors of the Registrant.

The name, age, and respective position of the directors and executive officer of the Registrant are set forth below. The director named below will serve until the next annual meeting of the Registrant’s stockholders or until his successors are duly elected and have qualified. Directors are elected for a term until the next annual stockholders’ meeting. Officers will hold their positions at the will of the board of directors, absent any employment agreement, of which none currently exist or are contemplated. There are no arrangements, agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of the Registrant’s affairs. There are no other promoters or control persons of the Registrant. There are no legal proceedings involving the directors of the Registrant.

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Director and Executive Officer.

Joseph Cala, 48, Director, Chairman and CEO

Mr. Cala has been an international business owner most of his professional life. He began his career at an early age rising to top management positions in some of the most prestigious and luxurious resorts in the world. Mr. Cala, as Chairman & CEO of Cala Corporation has been involved in various ventures such as: Fila Sportswear USA; Mondi Fashions, USA; L'Italiano Restaurants and Weddings in California, Hawaii and Japan, Cala Hotels, Inc. dba Undersea Resort; and Hydrogen Future, Inc.

Larry S. Pfautsch, 60, Director
Mr. Pfautsch is Vice President of Corporate Communications for American Century Investments, a $100 billion asset manager based in Kansas City, Mo. Previously, Mr. Pfautsch was a Partner and Senior Vice President with the international communications and public relations firm of Fleishman Hillard, Inc., where he was a member of the financial communications, investor relations, and corporate reputation management practice groups. He began his career as a newspaper reporter and editor and later worked in corporate communications for a major building materials retailer. He is a U.S. Army veteran and a longtime member of the International Association of Business Communicators.

Mr. Ray Francis, 72, Director

Mr. Francis, President of UnderSea Resort Design, was elected to the Board of Directors of Cala Corporation. Having completed his undersea naval design to the strict maritime rules of Lloyds Register of Shipping, Mr. Francis conducts his day to day operational responsibilities at the UnderSea Resort Headquarters and will commence his role as a director and principal in the Company’s oceanic construction operations.

Compliance with Section 16(a) of the Securities Exchange Act.

Section 16(a) of the Securities Exchange Act of 1934 requires executive officers and directors, and persons who beneficially own more than 10% of any class of the Registrant’s equity securities to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission (“SEC”). Executive officers, directors and beneficial owners of more than 10% of any class of the Registrant’s equity securities are required by SEC regulations to furnish the Registrant with copies of all Section 16(a) forms they file.

Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the registrant under Rule 16a-3(d) during fiscal 2002, and certain written representations from executive officers and directors, the Registrant is unaware of any required reports that have not been timely filed.

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ITEM 11. EXECUTIVE COMPENSATION.

Summary Compensation Table

Name and principal position	Year	Annual compensation			Long-term compensation
		Salary ($)	Bonus ($)	Other annual compensation ($)	Awards		Payouts	All other compen- sation ($)
					Restricted stock award(s) ($)	Securities under- lying options/ SARs (#)	LTIP payouts ($)
Joseph Cala,(1) President	2008 2007 2006	150,000 300,000 352,986	- - -	- - -	- - -	- - -	- - -	- - 16,445

Mr. Cala was appointed a director and president in 1999.

There are no annuity, pension or retirement benefits proposed to be paid to officers, directors, or employees of the Registrant in the event of retirement at normal retirement date as there is no existing plan provided for or contributed to by the Registrant. In addition, no remuneration is proposed to be paid in the future, directly or indirectly, by the Registrant to any officer or director since there is no existing plan as of December 31, 2008 which provides for such payment.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth information regarding the beneficial ownership of shares of the Registrant’s common stock as of March 31, 2010 (320,886,147issued and outstanding) by (i) all stockholders known to the Registrant to be beneficial owners of more than 5% of the outstanding common stock; and (ii) all officers and directors of the Registrant, individually and as a group (each person has sole voting power and sole dispositive power as to all of the shares shown as beneficially owned by them):

Page 14

Title of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Owner	Percent of Class
Common Stock	Joseph Cala 1314 Texas Street Houston, TX 77002	114,042,405	35.5%
Common Stock	Larry Pfautsch 1314 Texas Street Houston, TX 77002	11,500,000	3.6%
Common Stock	Raymond Francis 1314 Texas Street Houston, TX 77002	12,000,000	3.7%
Common Stock	Shares of all directors and executive officers as a group (1 person)	137,542,405	42.8 %

(1) None of these security holders has the right to acquire any amount of the shares within sixty days from options, warrants, rights, conversion privilege, or similar obligations.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Other than as set forth below, during the last two fiscal years there have not been any transaction that have occurred between the Registrant and its officers, directors, and five percent or greater shareholders.

In 2005, the officer of the Registrant was issued 7,000,000 shares to reduce accrued salary of $112,500. On January 2006, an officer of the Registrant returned 300,000 shares of common stock and received $ 15,000 in cash. The shares were cancelled. On August 2006, an officer of the Registrant returned 7,166,425 shares to the Registrant for a note payable of $ 214,993. The shares were cancelled. On November 21, 2006, the Registrant issued an officer of the Registrant 16,611,111 shares of common stock valued at $ 352,986 for salary for the year ended 2006. On February 2, 2007, the Registrant issued 15,000,000 shares of common stock valued at $ 300,000 for salary for the year ended 2007.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Audit Fees.

The aggregate fees billed for each of the last two fiscal years for professional services rendered by De Joya Griffith and Company, LLC for Form 10-K for 2007 was $20,000 and 2008 was $27,000.

Audit-Related Fees.

The aggregate fees billed in each of the last two fiscal years for assurance and related services by De Joya Griffith: $0.

Page 15

Tax Fees.

The aggregate fees billed in each of the last two fiscal years for professional services rendered by De Joya Griffith: $0.

All Other Fees.

The aggregate fees billed in each of the last two fiscal years for products and services provided by De Joya Griffith: $0.

Audit Committee.

The Registrant does not have an audit committee.

PART IV

ITEM 15 EXHIBITS AND REPORTS ON FORM 8-K

Exhibits.

Exhibits included or incorporated by reference herein are set forth under the Exhibit Index.


Reports on Form 8-K.

On February 27, 2007, the Registrant filed an 8-K appointing the accounting firm of the firm De Joya Griffith & Company, LLC, of Henderson, Nevada, as the principal accountant to audit the Registrant's financial statements for the fiscal year of the Registrant ended December 31, 2006.

On March 10, 2008, the Registrant filed an 8-K announcing a contract between the Registrant and Odys Shipyard for building the Undersea vessels. Under the terms of the contract the contract becomes effective when the registrant has place a 50% deposit on the first vessel to be built. The Registrant had 100 days from the date of the contract to make the initial deposit or Odys Shipyard may unilaterally cancel the contract. The Registrant has no financial obligations until the initial payment has been completed. The Registrant has not met its obligations per the contract so the contact could be cancelled by the shipyard.

On November 19, 2008, the Registrant filed an 8-K that the Company had created a new hospitality management division. The new division mission is to sign hospitality management contracts with independent owners.

The Registrant has held discussions and received affirmative agreement with the New York Harbor Department to dock resort ships in the Hudson River. As of this date no written contract has been completed.

Page 16

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: April 23, 2010 By: /s/ Joseph Cala

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated:

Signature	Title	Date
/s/ Joseph Cala Joseph Cala	President (principal financial and accounting officer)/Director	April 23, 2010
/s/ Raymond Francis Raymond Francis	Director	April 23, 2010
/s/ Larry Pfautsch Larry Pfautsch	Director	April 23, 2010

Page 17

CALA CORPORATION

FINANCIAL STATEMENTS AND ACCOMPANYING FOOTNOTES

TABLE OF CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM …….19

BALANCE SHEET……………………………………………………………………. .20

STATEMENTS OF OPERATIONS……………………………………………… ……21

STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)……………………….….22

STATEMENTS OF CASH FLOWS……………………………………………………..23

NOTES TO FINANCIAL STATEMENTS……………………………………………… 25

Page 18

De Joya Griffith & Company, LLC

CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Cala Corp

Houston, TX

We have audited the accompanying balance sheets of Cala Corp (A Development Stage Company) as of December 31, 2008 and 2007, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended and from January 1, 2007 through December 31, 2008. 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 audit.

We conducted our audit 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, based on our audit, the financial statements referred to above present fairly, in all material respects, the financial position of Cala Corp (A Development Stage Company) as of December 31, 2008 and 2007, and the results of its operations and cash flows for the years then ended and from January 1, 2007 through December 31, 2008 in conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the financial statements, the Company has suffered losses from operations and current liabilities exceed current assets, all of which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 4. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ De Joya Griffith & Company, LLC

De Joya Griffith & Company, LLC

Henderson, NV

April 4, 2010

Page 19

CALA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
AS OF DECEMBER 31, 2008 AND 2007
(AUDITED)

ASSETS

	2008	2007
Current assets
Cash	$ --	$ 13,147
Total current assets	--	$ 13,147

Fixed assets, net of accumulated depreciation of $38,712 and $62,022	6,595	583,285
Land	--	150,000
Total fixed assets	6,595	733,285

Other assets
Website development	23,877	--
Development Cost	--	710,206
Total assets	$ 30,472	$ 1,456,637

LIABILITIES AND STOCKHOLDERS’ EQUITY(DEFICIT)

Current liabilities
Accounts payable and accrued expense	$ 49,972	$ 85,864
Notes payable - officer/stockholder	65,419	782
Officer salary payable	133,600	--
Mortgage-current portion	--	39,268
Taxes payable	11,599	11,599
Notes payable	60,000	60,000
Total current liabilities	320,590	197,513

Long term liabilities
Mortgage	--	580,613
Less: Mortgage-current portion	--	(39,268)
Total long term liabilities	--	541,345
Total liabilities	320,590	738,858

Stockholders’ equity(deficit)
Common stock,
$0.005 par value; 400,000,000 shares authorized issued and outstanding 304,866,147 and 294,916,147, respectively:	1,524,329	1,474,579
Additional paid-in capital	11,909,259	11,852,509
Accumulated deficit	(11,886,789)	(11,886,789)
Accumulated deficit during development stage	(1,835,801)	(721,403)
Treasury stock -56,533 shares @cost	(1,116)	(1,116)
Total stockholders’ equity(deficit)	(290,118)	717,779
Total liabilities and stockholders’ equity (deficit)	$ 30,472	$ 1,456,637

The accompanying notes are an integral part to the financial statements

Page 20

CALA CORPORATION
(A DEVELOPMENT-STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007, AND FROM JANUARY 1, 2007 TO DECMBER 31, 2008
(AUDITED)

	2008	2007	January 1, 2007 to December 31, 2008
Income	$ --	$ --	$ --

General and administrative expense	234,762	694,705	929,467
Depreciation and amortization	26,724	24,446	51,170
Total operating expenses	261,486	719,151	980,637

Loss from operations	(261,486)	(719,151)	(980,637)

Other income (expense)
Interest expense	(30,698)	(48,443)	(79,141)
Other income	23,092	50,915	74,007
Impairment loss on fixed asset	(710,205)	(1,612)	(711,817)
Other expense	(13,541)	(3,112)	(16,653)
Loss on disposal of assets	(121,560)	--	(121,560)
Total other income (expense)	(852,912)	(2,252)	(855,164)

Net loss	$ (1,114,398)	$ (721,403)	$ 1,835,801)

Earnings per share:
Net loss per share-basic	$(0.00)	$(0.00)
Weighted average number of shares outstanding-basic	300,554,791	280,079,254

The accompanying notes are an integral part to the financial statements

Page 21

CALA CORPORATION
(A DEVELOPMENT-STAGE COMPANY)
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(AUDITED)

	Common Stock Number Shares	$0.005 Amount	Additional Paid-In Capital	Accumulated Deficit	Development Stage Accumulative Deficit	Stock Subscription	Treasury Shares	Stock	Total Stockholders’ Equity (Deficit)
Balance 12/31/06	249,251,980	1,246,258	$11,133,380	$ (11,886,789)	$ --	(50,000)	$ (56,533)	$ (1,116)	$441,733

Shares issued for cash @ $0.01-.35 per share	13,814,167	69,071	133,379	--	--	--	--	--	202,450

Shares issued for services classified as a capitalized cost @ $0.02 per share	10,600,000	53,000	215,000	--	--	--	--	--	268,000

Shares issued for Services @ $0.02-0.03 per share	1,250,000	6,250	25,750	--	--	--	--	--	32,000

Shares issued for Salaries @ $0.02 per share	15,000,000	75,000	225,000	--	--	--	--	--	300,000

Shares issued in lieu of debt @$0.01 per share	5,000,000	25,000	120,000	--	--	--	--	--	40,000

Allowance for outstanding receivable						50,000			50,000

Net Loss	--	--	--	--	(721,403)	--	--	--	(721,403)

Balance 12/31/07	294,916,147	$ 1,474,579	$11,852,509	$ (11,886,789)	$ (721,403)	$ --	$ (56,533)	$ (1,116)	$ 717,780

Shares issued for cash $0.01 per share	6,950,000	34,750	41,750	--	--	--	--	--	76,500

Stock issued in lieu of Accounts payable	3,000,000	15,000	15,000	--	--	--	--	--	30,000

Net Loss	--	--	--	--	(1,114,398)	--	--	--	(1,114,398)

Balance 12/31/08	304,866,147	$ 1,524,329	$11,909,259	$(11,886,789)	$ (1,835,801)	$ --	$ (56,533)	$ (1,116)	$(290,118)

The accompanying notes are an integral part of the financial statements

Page 22

CALA CORPORATION
(A DEVELOPMENT-STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 AND FROM JANUARY 1, 2007 TO DECEMBER 31, 2008
(AUDITED)

	2008	2007	January 1, 2007 to December 31, 2008
CASH FLOW FROM OPERATING ACTIVITIES
Net loss	$(1,114,398)	$(721,403)	$(1,835,801)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activity
Depreciation and amortization	26,722	24,445	51,167
Impairment on assets	710,205	1,612	711,818
Stock issued for services	--	332,000	332,000
Loss on disposition of assets	121,560	--	121,560
Bad debt expense	--	60,500	60,500
Financing cost	--	105,000	105,000
Change in operating assets and liabilities:
(Increase) in accounts receivable	--	(10,500)	(10,500)
Accounts payable and accrued liabilities	(28,279)	72,865	44,585
Officer salary payable	133,600	--	133,600
Increase (decrease) in taxes payable	--	(28)	(28)
Net cash used in operating activities	(150,590)	(135,509)	(286,099)

CASH FLOW FROM INVESTING ACTIVITIES:
Cash used on development costs	--	(70,001)	(70,001)
Disposal of fixed asset	--	4,832	4,832
Net cash used in investing activities	--	(65,169)	(65,169)

CASH FLOW FROM FINANCING ACTIVITIES:
Proceed from note payable	--	60,000	60,000
Proceeds on notes payable- related party	64,636	(76,173)	(11,537)
Proceeds from issuance of common stock	76,500	202,450	278,950
Payments made on mortgage payable	(3,693)	(8,551)	(12,244)
Net cash provided by financing activities	137,443	177,726	315,169

NET CHANGE IN CASH	(13,147)	(22,952)	(36,099)

CASH AT BEGINNING OF YEAR	13,147	36,099	36,099

CASH AT END OF YEAR	$ --	$ 13,147	$ --

The accompanying notes are an integral part of the financial statements

Page 23

Supplemental schedule of cash flow information:

Interest paid	$ 22,508	$ 29,996	$ 52,504
Income tax	$ -	$ -	$ -


Supplemental schedule of non monetary transactions

Satisfaction of accounts payable with common stock
3,000,000 shares @ $0.01 per share	$ 30,000	$ --	$ 30,000
Satisfaction of note payable with common stock
5,000,000 shares @ $0.01 per share	$ --	$ 145,000	$ 40,000
Shares issued for services classified as a capitalized cost	$ --	$ 268,000	$ 268,000

The accompanying notes are an integral part of the financial statements

Page 24

CALA CORPORATION
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(AUDITED)

NOTE 1: DESCRIPTION OF BUSINESS

Cala Corporation (formerly Magnolia Foods, Inc.) was incorporated on June 13, 1985 under the laws of the State of Oklahoma. The Company's sole industry segment was the business of owning, operating, licensing and joint venturing restaurants. The Company discontinued this line of business on December 31, 2006. The Company is in the development stage of building an underwater resort and casino. The Company became a Development-Stage Company as of January 1, 2007.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Basis - The Company uses the accrual method of accounting.

B. Cash and cash equivalents - The Company considers all short term, highly liquid investments that are readily convertible within three months to known amounts as cash equivalents. Currently, it has no cash equivalents.

C. Loss per share - Net loss per share is provided in accordance with Statement of Financial Accounting Standards No. 128 "Earnings Per Share". Basic loss per share reflects the amount of losses for the period available to each share of common stock outstanding during the reporting period, while giving effect to all dilutive potential common shares that were outstanding during the period, such as stock options and convertible securities. As of December 31, 2008 and 2007, the Company had no issuable shares qualified as dilutive. Had there been dilutive securities they would be excluded from the loss per share calculation because their inclusion would be antidilutive.

D. Estimates - The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

E. Stock Based Compensation - Stock based compensation is accounted for using Statement of Financial Accounting Standards No. 123R “ Accounting for Stock-Based Compensation”, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. We determine the value of stock issued at the date of grant. We also determine at the date of grant the value of stock at fair market value or the value of services rendered (based on contract or otherwise) whichever is more readily determinable.

F. Shares Returned to Treasury- In 2006, 33,333 shares were repurchased to treasury for $ 1,000. In 2005, 23,200 shares were purchased for treasury at the cost of $ 116. The repurchased treasurer shares are carried at cost and are held for resale.

Page 25

G. Revenue Recognition- The income received by the Company is rental income from the tenants leasing space in the building owned by the Company which is outside the normal operations of the Company. Rental income is not recognized as revenue by the Company but is a component of Other Income as it is outside the normal revenue producing activity.

H. Property and Equipment-Property and equipment consisting of improvements, equipment and furniture and fixtures are recorded at cost and are depreciated using the straight-line method over the useful estimated life. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals, and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. A summary of estimated useful lives is as follows:

Description	Useful life
Vehicles	5 years
Building	10-40 years

I. The Company accounts for the underwater sea resort and ship development costs in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company reviews its long-lived assets for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used in measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair market value less costs to sell.

J. The accompanying consolidated financial statements have been prepared in accordance with the Statement of Financial Accounting Standards No. 7 "Accounting and Reporting by Development-Stage Enterprises". A development-stage enterprise is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenue there from. Development-stage companies report cumulative costs from the enterprise's inception.

NOTE 3: RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements”. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosure about fair values. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Management believes that the adoption of SFAS No. 157 will not have a material impact on the consolidated financial results of the Company.

In February 2007, the FASB issued Statement No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115" (FAS 159). FAS 159 permits companies to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The provisions of FAS 159 become effective as of the beginning of our 2009 fiscal year. We are currently evaluating the impact that FAS 159 will have on our financial statements.

Page 26

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 which applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. The statement is effective for annual periods beginning after December 15, 2008.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133,” (SFAS “161”) as amended and interpreted, which requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. Disclosing the fair values of derivative instruments and their gains and losses in a tabular format provides a more complete picture of the location in an entity’s financial statements of both the derivative positions existing at period end and the effect of using derivatives during the reporting period. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Early adoption is permitted.

At December 31, 2007, the Company did not have any derivative instruments or hedging activities. Management is aware of the requirements of SFAS 161 and will disclose when appropriate.

In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts – An interpretation of FASB Statement No. 60”. SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities, and requires expanded disclosures about financial guarantee insurance contracts. It is effective for financial statements issued for fiscal years beginning after December 15, 2008, except for some disclosures about the insurance enterprise’s risk-management activities. SFAS 163 requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period beginning after issuance. Except for those disclosures, earlier application is not permitted. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles,” (“SFAS 168”). SFAS 168 replaces FASB Statement No. 162, “The Hierarchy of Generally Accepted Accounting Principles”, and establishes the FASB Accounting Standards Codification (“Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”). SFAS 168 is effective for interim and annual periods ending after September 15, 2009. The Company will begin to use the new Codification when referring to GAAP in its annual report on Form 10-K for the fiscal year ending December 31, 2009. This will not have an impact on the results of the Company

Page 27

NOTE 4: GOING CONCERN

The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has an aggregate deficit and accumulated deficit during the development stage of $13,722,590 ($11,886,789 and $1,835,801, respectively) and has not established revenues sufficient to cover its operating costs. This uncertainty raises substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on additional sources of capital and the success of the Company's plan. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.


NOTE 5: RELATED PARTY TRANSACTIONS

On February 2, 2007 an officer of the Company was issued 15,000,000 of restricted common stock with a value of $300,000 for salary for the year ended 2007.

During the year ended 2007, the Company issued a director of the Company 10,600,000 shares of common stock valued at $268,000 for consulting fees included in Development Costs.

During the year ended December 2008, the Company accrued $150,000 for salary payable to an officer of the Company; $16,400 of the accrued salary has been paid resulting in an outstanding balance of $133,600 as of December 31, 2008.

During the year ended December 31, 2008, an officer advanced additional funds of $64,636 to the Company for debt reduction and operating expenses for an outstanding Notes payable-officer/stockholder balance of $65,419 as of December 31, 2008.

NOTE 6: COMMITMENTS & CONTINGENCIES

On January 9, 2006, the Company entered into a lease at 3160 Danville Blvd. Suite A, Alamo, CA consisting of 4,500 square feet for a restaurant. The duration of the lease is 10 years with a renewable option for 5 more years. The monthly rent on the space is $ 8,500 plus taxes and common area charges. Monthly rental may be adjusted on an annual basis. On August 1, 2006, the Company assigned the lease to a non-affiliated third party but the Company remains liable for the lease until it terminates on January 8, 2016.

Then following is a schedule by year of the future minimum rental payments required under operating leases that have non-cancelable lease terms in excess of one year as of December 31, 2008:

Page 28

2009	102,000
2010	102,000
2011	102,000
2012	102,000
2013	102,000
2014	102,000
2015	102,000
2016	2,267
Total	$ 716,267

On April 10, 2006 the Company entered into a lease consisting of approximately 2,450 square feet for a restaurant at 500 Bollinger Canyon Way, Roman CA. The duration of the lease is 10 years. On August 1, 2006, the Company discontinued its operations in the restaurant business. As a result, the Company assigned the lease to a non-affiliated third party on a sub lease basis. The Company is still fully obligated to the terms of this lease. However, the non affiliated party will assume all payments. Under the terms of the agreement, the sub-lessee pays the monthly lease of $ 5,400 per month for the duration of the lease plus an additional 60 equal monthly installments of $1,500 to the Company. The subleasee terminated payment of the $ 1,500 in August 2008. (See Note 11 – Subsequent Events)

The following is a schedule by year of the future minimum rental payments required under operating leases that have non-cancelable lease terms in excess of one year as of December 31, 2008:

2009	70,296
2010	72,396
2011	74,574
2012	76,812
2013	79,113
2014	81,492
2015	83,937
2016	21,138
Total	$ 559,758

NOTE 7- NOTE PAYABLE

In January 2007, the Company issued a note for $60,000 bearing interest at 10% on the principal and accrued interest compounding monthly. As of December 31, 2008 and December 31, 2007, the outstanding principle balance of the note was $60,000 and $60,000 and had accrued interest of $13,923 and $6,283, respectively. On November 1, 2009 the note holder made demand for payment by December 1, 2009. The note including principal and interest is in default and still outstanding.

Page 29

NOTE 8: LONG TERM DEBT

On July 16, 2006, the Company signed a Mortgage Modification Agreement with a lender on a building. Under the terms of the agreement, the mortgage was modified to extend the maturity date to July 15, 2036, the interest rate was adjusted to 5.25% per annum and the prepayment penalty was removed. If the note was paid in full by February 16, 2007, the note would be reduced by $ 100,000. In addition the interest rate was reduced to 5.25% and a late fee penalty of 5% was added on all payment later than 10 days. The prepayment penalty of $ 50,000 was eliminated.

The Company defaulted on the mortgage and was the defendant in a lawsuit brought by the mortgage holder of the property. The Company was ordered to commence monthly payments of $3,272 to the plaintiff beginning on April 16, 2008 and on the same date each month thereafter. The Company was not able to meet the requirements of the Agreement and on September 30, 2008, the Company agreed to vacate the building and return title to the mortgage holder. Upon vacating the building the mortgage holder through a court order relieved the Company of all liabilities connected to the ownership and occupancy of the building. The transaction resulted in a net loss on disposal of assets totaling $121,560.

The loss on disposal of assets was calculated as follows:

Historical Value-Building		$ 600,000
Historical Value-Land		150,000
Depreciation		(43,910)
Carrying value		706,090
Mortgage debt		584,530

Loss on disposal of assets		$ (121,560)

NOTE 9 - PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2008 and 2007 consisted of the following:

	12/31/08	12/31/07
Building	--	600,000
Vehicles	45,308	45,308
Land	--	150,000
	45,308	795,308
Less accumulated depreciation	(38,713)	(62,023)
	$ 6,595	$733,285


Depreciation expense for the years ended December 31, 2008 and 2007 was $20,599 and $24,446, respectively.

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NOTE 10 – STOCKHOLDERS EQUITY

During the year ending December 31, 2007 the Company issued the following shares of common stock:

13,814,167 shares at $0.01-$0.35 per share with a value of $202,450 for cash
11,850,000 shares at $0.02 - $0.03 per share with a value of $300,000 for service
15,000,000 shares to a related party at $0.02 with a value of $300,000 for officers salary
5,000,000 shares at $0.01 with a value of $40,000 for debt

During the year ending December 31, 2008 the Company issued the following shares of common stock:

6,950,000 at $0.01-$0.02 with a value of $76,500 for cash.
3,000,000 shares at $0.01 with a value of 30,000 for accounts payable

NOTE 11 - INCOME TAXES

The Company accounts for income taxes using the liability method, under which deferred tax liabilities and assets are determined based on the difference 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.

As of December 31, 2008, the Company had net operating loss carryforward of approximately $12,837,578, which expire in varying amounts between 2009 and 2028. Realization of this potential future tax benefit is dependent on generating sufficient taxable income prior to expiration of the loss carryforward. The deferred tax asset related to this potential future tax benefit has been offset by a valuation allowance in the same amount. The amount of the deferred tax asset ultimately realizable could be increased in the near term if estimates of future taxable income during the carryforward period are revised.

Deferred income tax assets of $4,493,152 and $4,103,113 at December 31, 2008 and 2007, respectively were offset in full by a valuation allowance

The components of the Company’s net deferred tax assets, including a valuation allowance, are as follows:

	As of December 31, 2008	As of December 31, 2007
Deferred tax assets:
Net operating loss carryforward	$ 4,493,152	$ 4,103,113
Stock based compensation	335,049	335,049

Total deferred tax assets	4,828,202	4,438,162

Net deferred tax assets before valuation allowance	4,828,202	4,438,162
Less: Valuation allowance	(4,828,202)	(4,438,162)
Net deferred tax assets	$ --	$ --

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A reconciliation between the amounts of income tax benefit determined by applying the applicable U.S. and State statutory income tax rate to pre-tax loss is as follows:

	As of December 31, 2008	As of December 31, 2007
Statutory federal income tax	(35.0%)	(35.0%)
Statutory state income tax	(6.0%)	(6.0%)
Change in valuation allowance on deferred tax assets	41.0%	41.0%
Effective tax rate	0.0%	0.0%

NOTE 12: DEVELOPMENT COSTS

The Company is developing an under sea resort and ship for the recreational use by consumers. The concept is in development stage or as better defined as the “preacquisition phase”. The Company had expensed the development costs through the fiscal year ending December 2005 while in preliminary phase; however, elected to capitalize the costs moving forward in accordance with the preacquisition guidance under statement of Financial Accounting Standard No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects.”

All common costs are allocated to each residential unit benefited and is based on the relative fair value before construction. Construction costs will be allocated to each residential unit on the basis of relative sales value of the unit. The preacquisition phase was completed during the fiscal year ended December 31, 2007. The Company is in the process of finding a buyer and funding the initial construction of a vessel. Once the construction phase has been completed and the residential units are available for sale, the Company planned to allocate all capitalized costs to each residential unit and expense them upon the sale of the residential units.

The Company has incurred the following development costs to date:

Design payments to ship yards	$ 660,205
Engineering of glass design	25,000
Consulting fees to administrator	25,000
Total Development Costs	$ 710,205

As of September 30, 2008, the development costs were impaired as the construction of the undersea ship relating to the development costs has not been contracted or started. The asset, including blueprints and construction plans for the undersea ship are feasible and usable but the economic feasibility of financing the project under the present economic conditions have not allowed the Company to go ahead with the project. The Company will still continue to seek the financing to complete the project and build an undersea ship however, there is no assurance that the Company will be successful in obtaining such needed funds.

As the project has not continued into the construction phase during the year ended December 31, 2008; the Company elected to impair the development costs creating an impairment loss totaling $710,205.

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NOTE 13: SUBSEQUENT EVENTS

On November 11, 2009, the Company issued 16,000,000 shares of common stock to four individuals for services with a total value of $32,000.

The Company evaluated all subsequent events from January 1, 2009 to April 4, 2010 and concluded that there are no significant or material transactions to be reported for the subsequent period.

EXHIBIT INDEX

Number	Description
31	Rule 13a-14(a)/15d-14(a) Certification of Joseph Cala (filed herewith).
32	Section 1350 Certification of Joseph Cala (filed herewith).

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CALA CORP - FORM 10-K - April 23, 2010

Attached files

FORM 10-K

NOTE 1: DESCRIPTION OF BUSINESS

CALA CORP Reports