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8-K - CURRENT REPORT - GILLA INC. | glla_8k.htm |
Exhibit
99.1
GILLA COMPLETES ACQUISITION OF LEADING CANADIAN VAPE
COMPANY
TORONTO, CANADA – (August 3rd,
2017) - Gilla
Inc. (“Gilla” or
the “Company”) (OTCQB: GLLA), the fast-growing
designer, marketer and manufacturer of E-liquid for vaporizers and
developer of cannabis concentrate products, announced today that
the Company’s subsidiary, Gilla Enterprises Inc., has closed
the acquisition of all of the outstanding shares of Vape Brands
International Inc. (“VBI”), a Toronto, Canada-based
manufacturer and distributor of E-liquid products, for a total
purchase price of up to $2,645,0821 as detailed
below. The transaction was first announced by the Company on a
press release dated May 5th,
2017.
Transaction Highlights
●
VBI generated E-liquid sales and co-pack
manufacturing revenue of over CAD $1.4 million (USD $1.1
million1)
for fiscal 2016 and currently has a revenue run-rate of
approximately CAD $2.0 million (USD $1.6 million1)
per year.
●
The
acquisition provides 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
2 ISO 9001 certified and will be utilized to manufacture product
for Gilla’s global customer base.
●
The
Company has acquired 6 brands from VBI to add to Gilla’s
portfolio, including the award-winning Moshi and Ohana E-liquid
lines and the recently launched Crisp E-liquid line.
●
The
Company has also acquired VBI’s extensive international
customer base, as well as its Canadian distribution network
covering over 500 retailers.
●
The
Company has agreed to retain the employees of VBI as well as all
management expertise, including its CEO and founder Beju Lakhani.
Mr. Lakhani has joined the Company as Chief Customer Officer of
Gilla Enterprises Inc. and will be responsible for all aspects of
the customer experience including sales, marketing and product
development.
“We are extremely pleased to be adding VBI’s
Canadian-based manufacturing operations and extensive Canadian
distribution network to Gilla’s already robust international
platform,” stated Graham Simmonds, Chair and CEO of Gilla. He
continued, “This will also allow us to add immediate
incremental revenue as we introduce Gilla’s portfolio of
brands to the existing customer base of VBI. Our integration
process has already begun and we expect to quickly benefit from
both operational and cost-saving synergies. I would like to give a
warm welcome to the employees of VBI and to Beju as he joins our
senior management team with an immediate focus of enhancing our
global sales and marketing platform.”
1 On July 31st,
2017, the exchange rate for Canadian Dollars (“CAD”) in
terms of the United States Dollars (“USD”) as quoted by
the Bank of Canada was USD $1.00 = CAD $1.2485.
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“I am truly excited to see what VBI and Gilla can accomplish
together,” stated Beju Lakhani, CEO and founder of VBI. He
continued, “With a wealth of expertise, a truly global client
base and a portfolio of innovative brands, I feel that we are well
positioned to be one of the fastest growing vapor companies as a
result of bringing together these two industry leading
manufacturers. On a personal note, I am very pleased to be joining
the Gilla team to help lead our growth in the vapor products
industry. The combined talent of both the VBI and Gilla teams is
incredible and it is very exciting to think of what we are capable
of achieving in the future, both in Canada and throughout the
world.”
Transaction Details
Pursuant to the share purchase agreement (the “SPA”),
dated July 31st,
2017, the Company paid to the vendors of VBI the total purchase
price of up to $2,645,0821
as follows:
●
2,500,000
common shares of the Company (the “Common Shares”),
valued at $0.14 per share on closing for a total value of
$350,000;
●
Warrants
exercisable for the purchase of 2,000,000 common shares of the
Company (the “Warrants”), having an estimated value of
$252,631 on issuance. The Warrants are exercisable for a period of
twenty-four months at an exercise price of $0.20 per share, such
Warrants vesting in five equal tranches every four months from
closing;
●
A total of CAD $550,000 (USD
$440,5291)
in vendor take-back loans (the “VTB”). The VTB is
non-interest bearing, unsecured and due over twenty-four months.
The Company shall be required to pay monthly principal repayments
beginning five months from closing until maturity. Furthermore, a
total of CAD $314,923 of the VTB is 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
●
An earn-out capped at: (i) the total cumulative
amount of CAD $2,000,000 (USD $1,601,9221);
or (ii) five years from the closing date (the
“Earn-Out”). The Earn-Out shall be calculated as: (a)
15% of the gross profit generated in Canada by VBI’s co-pack
and distribution business; (b) 10% of the revenue generated in
Canada by Gilla’s existing brands; and (c) 15% of the revenue
generated globally on VBI’s existing brands. Furthermore, the
Earn-Out shall be calculated and paid to the vendors quarterly in
arrears and only as 50% of the aforementioned amounts on
incremental revenue between CAD $300,000 and CAD $600,000 per
quarter and 100% of the aforementioned amounts on incremental
revenue above CAD $600,000 per quarter. No Earn-Out shall be
payable to the vendors if total revenue for the calculation period
is less than the CAD $300,000 threshold.
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.
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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 6 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.
About Gilla Inc.
Gilla Inc. manufactures, markets and distributes E-liquid for use
in vaporizers and develops turn-key vapor and cannabis concentrate
solutions for high terpene vape oils, pure crystalline, high
performance vape pens and other targeted products. Gilla aims to be
a global leader in delivering the most efficient and effective
vaping solutions for nicotine and cannabis related products. The
Company’s multi-jurisdictional, broad portfolio approach
services both the nicotine and cannabis markets with high quality
products that deliver a consistent and reliable user experience.
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 Vapor 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. Graham Simmonds
Chair and CEO
T: 1
(416) 843-2881
E:
graham.simmonds@gilla.com
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