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EX-99.1 - PRESS RELEASE - GILLA INC. | glla_ex991.htm |
8-K - CURRENT REPORT - GILLA INC. | glla_8k.htm |
Exhibit 99.2
GILLA AGREES TO ACQUIRE LEADING CANADIAN VAPING
COMPANY
TORONTO, CANADA – (May 5th,
2017) - Gilla
Inc. (“Gilla” or the “Company”)
(OTCQB: GLLA), the fast-growing designer, manufacturer and marketer
of E-liquid for vaporizers, announced today that the Company has
entered into a letter of intent (the “LOI”) to acquire
all of the issued and outstanding shares of Vape Brands
International Inc. (“VBI”), a Toronto, Canada based
manufacturer and distributor of E-liquid products.
Acquisition Highlights
●
VBI generated
E-liquid sales and co-pack manufacturing revenue of over $1.4
million Canadian Dollars (“CDN”) for fiscal 2016 and
currently has a revenue run-rate of approximately CDN $2.0 million
per year.
●
Gilla’s
broad portfolio of E-liquid brands will be immediately available
through VBI’s extensive distribution network of over 500 vape
shops across Canada.
●
Adding VBI’s
4 brands, including the award-winning Moshi and Ohana E-liquid
lines, to the Gilla portfolio and providing those brands access to
Gilla’s global distribution network should generate
significant incremental revenues.
●
The acquisition
will provide Gilla with a state-of-the-art manufacturing facility
located in Canada’s Greater Toronto Area. The 13,000 sq. ft.
facility features a fully automated E-liquid manufacturing line, a
certified ISO 8 clean room, and capacity to produce up to 1.2
million E-liquid bottles per month. The facility is also stage 1
ISO 9001 certified with stage 2 set to be completed in June of
2017.
●
Gilla will also
retain all management expertise of VBI, including its CEO and
founder Beju Lakhani, a founding director of the Canadian Vape
Association.
●
The acquisition is
expected to be immediately accretive and will lead to a number of
operational and cost-saving synergies.
“VBI
is a tremendous addition to the Gilla group and will firmly
entrench us and our brands into the Canadian vape industry,”
stated Graham Simmonds, Chairman and CEO of Gilla. He continued,
“This acquisition provides us with a state-of-the-art
manufacturing facility, significant operational synergies and cost
reductions, and the addition of four strong brands to our global
portfolio. Furthermore, Beju is a welcome addition to our
management team as he has deep roots within the Canadian vape
industry and his product and industry knowledge is second to
none.”
“We
couldn't be happier to be joining the Gilla family,” stated
Beju Lakhani, CEO and founder of VBI. “Bringing Gilla's suite
of brands to the Canadian market and extending VBI's brands through
Gilla's distribution network makes for a natural fit between the
two companies to grow substantially as one. On a personal level,
working with the Gilla team is an incredible opportunity. By
combining Gilla’s global reach with our manufacturing
capabilities and access to Canadian distribution, we will position
Gilla as a primary leader in the global vape
market.”
Transaction Details
●
Pursuant to the LOI
and in consideration for the acquisition, the Company shall pay to
the vendors of VBI an estimated total purchase price of
$3,011,8031 (the “Total
Purchase Price”), payable as follows:
o
2,500,000 common
shares of the Company issued on closing (the “Common
Shares”), having an estimated value of $350,000 based on the
Company’s current stock price of $0.14 per
share;
o
Warrants
exercisable for the purchase of 2,000,000 common shares of the
Company issued on closing (the “Warrants”), having an
estimated value of $260,753 based on the Company’s current
stock price of $0.14 per share. The Warrants shall be exercisable
for a period of twenty-four months from the closing date at a price
of $0.20 per share, such Warrants vesting in four equal tranches
every six months from closing;
o
A total of CAD
$550,000 (USD $401,0501) in vendor
take-back loans (the “VTB”). The VTB shall be
non-interest bearing, unsecured and due over twenty-four months
from the closing date. The Company shall be required to pay monthly
principal repayments in arrears of CAD $20,000 in each of the first
five months from closing and CAD $11,111 thereafter until maturity.
Furthermore, a total of CAD $385,000 of the VTB shall be
convertible into common shares of the Company at a fixed conversion
price of $0.10 per share prior to each monthly principal repayment
date at the option of the holder; and
o
An earn-out capped
at: (i) the total cumulative amount of CAD $2,000,000; or (ii) five
years from the closing date (the “Earn-Out”). The
Earn-Out shall be calculated as: (a) 10% of the co-pack and
distribution revenue generated in Canada by VBI’s existing
third-party clients; (b) 10% of the revenue generated in Canada by
Gilla’s existing brands; and (iii) 15% of the revenue
generated globally on VBI’s existing brands.
●
The Total Purchase
Price assumes no material change to the purchase price assumptions
as discussed between the parties on VBI’s overall business
operations. Any material change to the purchase price assumptions
prior to the closing date may require adjustments to the Total
Purchase Price.
●
The acquisition is
expected to close on or before May 31st, 2017 and is
subject to usual terms and conditions for transactions of this type
including board approval, confirmatory due diligence of VBI’s
overall business and approval from any applicable regulatory body
or exchange if so required.
Neither
the Common Shares nor the common shares issuable upon exercise of
the Warrants or conversion of the VTB thereof will be registered
under the Securities Act of 1933, as amended, or any state
securities laws and they may not be offered or sold in the United
States absent of registration or an applicable exemption from
registration requirements. All references to dollar amounts in this
press release are in United States Dollars unless stated
otherwise.
About Vape Brands International Inc.
Vape
Brands International Inc. was founded in 2013 and began
manufacturing and distributing the Moshi E-liquid brand. VBI now
has a portfolio of 4 E-liquid brands and has co-pack agreements to
manufacture for an additional 20 E-liquid brands for distribution
across Canada. The company currently operates out of a
state-of-the-art 13,000 sq. ft. facility in Mississauga, Canada and
is committed to providing the highest level of customer service
within the industry.
1 On May
3rd,
2017, the exchange rate for Canadian Dollars in terms of the United
States Dollars as quoted by the Bank of Canada was US $1.00 = CAD
$1.3714.
About Gilla Inc.
Gilla
Inc. manufactures, markets and distributes E-liquid, which is the
liquid used in vaporizers, E-cigarettes, and other vaping hardware
and accessories. E-liquid is heated by the atomizer to deliver the
sensation of smoking. Gilla aims to be a global leader in
delivering the most efficient and effective vaping solutions for
nicotine and cannabis related products. The Company provides
consumers with choice and quality across various categories and
price points. Gilla’s proprietary product portfolio includes
the following brands: Coil Glaze™, Siren, The Drip Factory,
Craft Vapes™, Craft Clouds, Surf Sauce, Vinto Vape, VaporLiq,
Vape Warriors, Vapor’s Dozen, Miss Pennysworth’s
Elixirs, The Mad Alchemist™, Replicant, Enriched CBD and
Crown E-liquid™.
Forward-looking Statements
Note:
This press release contains “forward looking
statements” as defined in the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are based on
currently available competitive, financial and economic data and
management’s views and assumptions regarding future events.
Such forward-looking statements are inherently uncertain. Gilla
Inc. cannot provide assurances that the matters described in this
press release will be successfully completed or that the company
will realize the anticipated benefits of any transaction. Actual
results may differ materially from those projected as a result of
certain risks and uncertainties, including but not limited to:
global economic and market conditions; the war on terrorism and the
potential for war or other hostilities in other parts of the world;
the availability of financing and lines of credit; successful
integration of acquired or merged businesses; changes in interest
rates; management’s ability to forecast revenues and control
expenses, especially on a quarterly basis; unexpected decline in
revenues without a corresponding and timely slowdown in expense
growth; the company’s ability to retain key management and
employees; intense competition and the company’s ability to
meet demand at competitive prices and to continue to introduce new
products and new versions of existing products that keep pace with
technological developments, satisfy increasingly sophisticated
customer requirements and achieve market acceptance; relationships
with significant suppliers and customers; as well as other risks
and uncertainties, including but not limited to those detailed from
time to time in Gilla Inc. SEC filings. Gilla Inc. undertakes no
obligation to update information contained in this release. For
further information regarding risks and uncertainties associated
with Gilla Inc.’s business, please refer to the risks and
uncertainties detailed from time to time in Gilla Inc.’s SEC
filings.
For
more information, please visit gilla.com, or
contact:
Mr. Bradford Long
Investor Relations
T: 1
(888) 994-GLLA (4552)
E:
brad.long@gilla.com