Current Report Filing (8-k)
August 04 2017 - 4:02PM
Edgar (US Regulatory)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF EARLIEST EVENT REPORTED – July 31, 2017
GILLA INC.
(Exact
Name of Registrant as Specified in its Charter)
NEVADA
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000-28107
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88-0335710
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(State
or other jurisdiction of
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(Commission
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(IRS
Employer
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incorporation)
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File
Number)
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Identification
Number)
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475 Fentress Blvd., Unit L, Daytona Beach, Florida
32114
(Address of principal executive offices)
(416) 843-2881
(Registrant’s
telephone number, including area code)
N/A
(Former
name or former address, if changed since last report)
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
☐
Written
communications pursuant to Rule 425 under the Securities
Act
☐
Soliciting
material pursuant to Rule 14a-12 under the Exchange
Act
☐
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange
Act
☐
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange
Act
Indicate
by check
mark whether the registrant
is an
emerging growth company as defined in in Rule 405 of
the Securities Act of 1933 (§230.405 of this chapter) or Rule
12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of
this chapter).
Emerging
growth company
☐
If an
emerging growth company, indicate by checkmark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.
☐
Item 2.01
Completion of Acquisition or Disposition of Assets.
On July
31, 2017, Gilla Inc. (“Gilla” or the
“Company”) acquired all of the issued and outstanding
shares of Vape Brands International Inc. (“VBI”), a
Canada-based E-liquid manufacturer and distributor, through its
wholly owned subsidiary Gilla Enterprises Inc. (“Gilla
Enterprises”) pursuant to the terms of a share purchase
agreement (the “SPA”), dated July 31,
2017.
Pursuant
to the SPA, the Company paid to the vendors of VBI the following
consideration: (i) 2,500,000 common shares of the Company valued at
$0.14 per share for a total value of $350,000; (ii) warrants for
the purchase of 2,000,000 common shares of the Company exercisable
over twenty-four (24) months at an exercise price of $0.20 per
share from the closing date, such warrants vesting in five (5)
equal tranches every four (4) months following the closing date;
(iii) a total of $550,000 Canadian Dollars (“CAD”) in
non-interest bearing, unsecured vendor-take-back loans due over
twenty-four (24) months, with principal repayments beginning five
(5) months from the closing date until maturity of up to CAD
$25,000 per month; and (iv) an earn-out capped at (a) the total
cumulative amount of CAD $2,000,000; or (b) five (5) years from the
closing date (the “Earn-Out”). The Earn-Out shall be
calculated as: (x) 15% of the gross profit generated in Canada by
VBI’s co-pack and distribution business;(y) 10% of the
revenue generated in Canada by Gilla’s existing E-liquid
brands; and (z) 15% of the revenue generated globally on
VBI’s existing E-liquid brands. Furthermore, the Earn-Out
shall be calculated and paid to the vendors of VBI 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 with the Earn-Out payable to
the vendors in the fifth year repeated and paid to the vendors in
four (4) quarterly payments after the end of the Earn-Out period,
subject to the cumulative limit of the Earn-Out. No Earn-Out shall
be payable to the vendors of VBI if total revenue for the Earn-Out
calculation period is less than $300,000 per quarter. On the
closing date, Gilla Enterprises also entered into an employment
agreement with one of the vendors at a base salary of CAD $155,000
per annum for a minimum term of one (1) year from the closing date
and up to twelve (12) months’ severance in the event of
involuntary termination as a result of a change of
control.
Item 8.01
Other Events.
On
August 3, 2017, the Company issued a press release announcing that
Gilla Enterprises had closed the acquisition of VBI pursuant to the
SPA, dated July 31, 2017.
A copy
of such press release is attached hereto as Exhibit 99.1 and
incorporated herein by reference.
Item 9.01
Financial Statements and Exhibits.
(a)
Financial Statements of Business Acquired
The
financial statements required by this Item, with respect to the
acquired business described in Item 2.01 herein, will be filed as
soon as practicable, and in any event not later than 71 days after
the date on which this Current Report on Form 8-K is required to be
filed pursuant to Item 2.01.
(b)
ProForma Financial Information
The pro
forma financial information required by this Item, with respect to
the acquired business described in Item 2.01 herein, will be filed
as soon as practicable, and in any event not later than 71 days
after the date on which this Current Report on Form 8-K is required
to be filed pursuant to Item 2.01.
(d)
Exhibits
Exhibit No.
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Description
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Press Release dated August 3, 2017
from Gilla Inc.
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SIGNATURES
Pursuant
to the requirements 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.
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GILLA
INC.
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Dated:
August
4, 2017
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By:
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/s/
Graham
Simmonds
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Name:
Graham
Simmonds
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Title:
Chief
Executive Officer
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