Attached files

file filename
EX-10.2 - LETTER OF INTENT - GILLA INC.glla_ex102.htm
EX-10.4 - RESOLUTIONS FOR NEW BOARD - GILLA INC.glla_ex104.htm
EX-10.7 - NEW LOAN AGREEMENT - GILLA INC.glla_ex107.htm
EX-99.2 - CONSOLIDATED FINANCIALS - GILLA INC.glla_ex992.htm
EX-10.9 - SUBSCRIPTION AGREEMENT - GILLA INC.glla_ex109.htm
EX-10.6 - TERMINATION OF LOAN AGREEMENT - GILLA INC.glla_ex106.htm
EX-99.1 - INTERIM CONSOLIDATED FINANCIALS - GILLA INC.glla_ex991.htm
EX-10.8 - CONVERTIBLE CREDIT NOTE - GILLA INC.glla_ex108.htm
EX-10.5 - LOAN AGREEMENT - GILLA INC.glla_ex105.htm
EX-10.1 - SHARE PURCHASE AGREEMENT - GILLA INC.glla_ex101.htm
EX-10.10 - DISTRIBUTION AGREEMENT - GILLA INC.glla_ex1010.htm
8-K - CURRENT REPORT - GILLA INC.glla_8k.htm
EX-10.3 - UNANIMOUS CONSENT FOR CURRENT BOARD - GILLA INC.glla_ex103.htm
EXHIBIT 99.3
 
Unaudited Pro Forma Condensed Financial Statements
As of September 30, 2012 and
For the Year Ended December 31, 2011 & the Nine Months Ended September 30, 2012
 
On November 21, 2012, Gilla Inc. (“Gilla” or the “Company” or the “Registrant”) merged with Snoke Distribution Canada Ltd., a corporation existing under the laws of Ontario (“Snoke Distribution”).  Pursuant to the merger, the Registrant acquired all of the outstanding common shares of Snoke Distribution through the issuance of common shares of the Registrant to the shareholders of Snoke Distribution.

As a result of the Merger and pursuant to the Resolutions, Snoke Distribution has become a wholly-owned subsidiary of the Registrant and the Registrant issued shares of its common stock to shareholders of Snoke Distribution at a rate of 1 share of the Registrant’s common stock for each Snoke Distribution common share. Immediately prior to the Merger, the Registrant had 29,477,766 shares of common stock outstanding.

Following the Merger, the Registrant has 59,244,433 shares of common stock outstanding after the share exchange and the issuance of 29,766,667 common shares to the shareholders of Snoke Distribution, which included a private placement of $141,000 into Snoke Distribution.

At closing, the Registrant also closed a private placement of $135,000 at a price of $0.05 per Gilla common share, each entitled to a half warrant to purchase one common share at an exercise price of $0.10 per common share for a period of six months following the Merger. The private placement resulted in the issuance of 2,700,000 shares and 1,350,000 warrants of the Registrant’s common stock from treasury. Following the Merger and the private placement, the Registrant has 61,944,433 shares of common stock outstanding.

The accompanying unaudited pro forma condensed financial statements have been prepared to present the balance sheet and statements of operations of the Company to indicate how the consolidated financial statements of the Company might have looked like if the share exchange with Snoke Distribution and transactions related to the share exchange had occurred as of the beginning of the periods presented.

The transaction has been accounted for as a reverse merger, and Snoke Distribution is the acquiring company on the basis that Snoke Distribution’s senior management became the entire senior management of the merged entity and there was a change of control of the Company. In accordance with Accounting Standards Codification (“ASC”) 805-10-40, Business Combinations; Reverse Acquisitions, Snoke Distribution was the acquiring entity for accounting purposes. While the transaction is accounted for using the purchase method of accounting, in substance the transaction was a recapitalization of the Snoke Distribution’s capital structure.

 
1

 
 
GILLA, INC.
Unaudited Pro Forma Condensed Balance Sheet
September 30, 2012

   
Historical
   
Pro Forma
 
   
Snoke Distribution
 (note 3)
   
Gilla, Inc.
   
Adjustments
   
Notes
   
Combined
 
Assets
                             
Current assets:
                             
                  45,769       c        
                  75,000       d        
Cash and cash equivalents
  $ 230     $ 28     $ (50,000 )     g     $ 71,027  
Deposit for purchase of inventory
    165,013       -       -               165,013  
Total current assets
    165,243       28       70,769               236,040  
                                         
Property and equipment
    975       -       -               975  
                                         
Total assets
  $ 166,218     $ 28     $ 70,769             $ 237,015  
                                         
Liabilities
                                       
Current liabilities
                                       
Accounts payable
  $ 46,572     $ 14,879     $ -             $ 61,451  
Accrued liabilities
    10,171       2,500       -               12,671  
Accrued liabilities, related party
    -       100,000       (100,000 )     f       -  
Accrued interest payable, related party
    -       19,936       (19,936 )     f       -  
Convertible notes payable, related party (net of debt discount)
    -       109,857       (109,857 )     f       -  
Due to related parties
    126,649       -       -               126,649  
Loan from shareholder
    20,082       -       -               20,082  
                      (25,428 )     c          
Loan payable
    344,435       -       (60,000 )     d       259,007  
Total Current Liabilities
    547,909       247,172       (315,221 )             479,860  
                                         
Long-term liabilities
                                       
Derivative liability
    -       90,214       (90,214 )     f       -  
                      225,000       f          
Note payable
    -       -       (50,000 )     g       175,000  
Total long term liabilities
    -       90,214       84,786               175,000  
                                         
Total liabilities
    547,909       337,386       (230,435 )             654,860  
                                         
(Deficiency) in stockholders’ equity
                                       
                      (5,193 )     a          
Common stock, $0.0002 par value,
                    407       b          
300,000,000 shares authorized;
                    467       c          
61,944,433 shares issued and outstanding
    10,273       5,895       540       d       12,389  
Share subscription pending allotment
    62,043               (62,043 )     b       -  
                      5,193       a          
                      61,636       b          
                      (31,024,377 )     e          
                      95,007       f          
                      70,730       c          
Additional paid-in capital
    -       30,681,124       134,460       d       23,773  
Accumulated deficit
    (446,827 )     (31,024,377 )     31,024,377       e       (446,827 )
Accumulated other comprehensive income
    (7,180 )     -       -               (7,180 )
                                         
Total (deficiency) in stockholders’ equity
    (381,691 )     (337,358 )     301,204               (417,845 )
                                         
Total liabilities and (deficiency) in stockholders’ equity
  $ 166,218     $ 28     $ 70,769             $ 237,015  

 
2

 
 
GILLA, INC.
Unaudited Pro Forma Condensed Statement of Operations
For the Nine Months Ended September 30, 2012
 
   
Historical
   
Pro Forma
 
   
Snoke
   
Gilla, Inc.
   
Adjustments
   
Notes
   
Combined
 
                               
                               
Revenue
  $ -     $ -     $ -           $ --  
                                       
Operating expenses
                                     
General and administrative
    344,779       41,960       -             386,739  
Depreciation
    50       -       -             50  
Total operating expenses
    344,829       41,960       -             386,789  
                                       
Loss from operations
    (344,829 )     (41,960 )     -             (386,789 )
                                       
Other income (expenses)
                                     
Gain (loss) on change in fair value of derivative liabilities
    -       (52,350 )     52,350       h       -  
Interest
            (65,321 )     65,321       i          
      (15,054 )             (7,875 )     j       (22,929 )
Total other income (expenses)
    (15,054 )     (117,671 )     109,796               (22,929 )
                                         
Net (loss) before income taxes
    (359,883 )     (159,631 )     109,796               (409,718 )
                                         
Income (tax) benefit
    -       -       -               -  
                                         
Net (loss)
  $ (359,883 )   $ (159,631 )   $ 109,796             $ (409,718 )
                                         
Foreign exchange translation adjustment for the period
    (7,180 )     -       -               (7,180 )
                                         
Comprehensive (loss)
  $ (367,063 )   $ (159,631 )   $ 109,796             $ (416,898 )
                                         
                                         
Net (Loss) per weighted average common share
                                  $ (0.007 )
                                         
Weighted average number of shares outstanding
                                    61,944,433  
 
 
3

 
 
GILLA, INC.
Unaudited Pro Forma Condensed Statement of Operations
For the Year Ended December 31. 2011
 
   
Historical
   
Pro Forma
 
   
Snoke
   
Gilla, Inc.
   
Adjustments
   
Notes
   
Combined
 
                               
                               
Revenue
  $ -     $ -     $ -           $ -  
                                       
Operating expenses
                                     
Exploration cost
    -       4,450       -             4,450  
General and administrative
    85,943       74,216       -             160,159  
Depreciation
    200       -       -             200  
Total operating expenses
    86,143       (78,666 )     -             (164,809 )
                                       
Loss from operations
    (86,143 )     (78,666 )                   (164,809 )
                                       
Other income (expenses)
                                     
Gain (loss) on change in fair value of derivative liabilities
    -       441,332       (441,332 )     h       -  
Interest
            (414,790 )     414,790       I          
      (802 )             (10,500 )     j       (11,302 )
Gain on write off of consulting fees
    -       11,500       -               11,500  
Total other income (expenses)
    (802 )     38,042       (37,042 )             198  
                                         
Net (loss) before income taxes
  $ (86,945 )   $ (40,624 )   $ (37,042 )           $ (164,611 )
                                         
Income (tax) benefit
    -       -       -               -  
                                         
Net (loss) and comprehensive (loss)
  $ (86,945 )   $ (40,624 )   $ (37,042 )           $ (164,611 )
                                         
                                         
Net (Loss) per weighted average common share
                                  $ (0.003 )
                                         
Weighted average number of shares outstanding
                                    61,944,433  

 
4

 
 
GILLA, INC.
Notes to Unaudited Condensed Combined Pro Forma Financial Statements
 
1. Basis of Presentation.
 
These unaudited condensed combined pro forma financial Statements have been prepared in order to present combined financial position and results of operations of the Registrant and Snoke Distribution as if the acquisition had occurred as of the beginning of the periods presented.
 
The unaudited pro forma condensed balance sheet has been prepared using the unaudited consolidated balance sheet of the Company and unaudited consolidated balance sheet of Snoke Distrbution as of September 30, 2012. The unaudited pro forma condensed statements of operations dated September 30, 2012, have been prepared using the unaudited historical statements of operations of the Company for the nine month period ended September 30, 2012 and unaudited consolidated statements of operations of Snoke Distribution for the six month period ended September 30, 2012. The unaudited pro forma condensed statements of operations dated December 31, 2011 have been prepared using the audited historical statements of operations of the Company for the year ended December 31, 2011 and audited consolidated statements of operations of Snoke Distribution for the period from inception to March 31, 2012.

The pro forma condensed financial statements should be read in conjunction with  the financial statements of the Company as previously filed and the consolidated financial statements of Snoke Distribution which can be found as attachments to the Form 8-K. These pro forma condensed financial statements are presented for illustrative purposes only and are not intended to be indicative of actual consolidated financial condition and consolidated results of operations had the share exchange been in effect during the periods presented, or of consolidated financial condition or consolidated results of operations that may be reported in the future.
 
2. Adjustments
 
The following pro forma adjustments are incorporated into the condensed combined pro forma balance sheet as of September 30, 2012 and the condensed combined pro forma statement of operations for the periods ended September 30, 2010 and December 31, 2011.
 
a)  
To adjust the share capital of Snoke Distribution from having no par value to having a par value of $0.0002.
 
b)  
To record the issuance of shares relating to the CAD$61,000 share subscription as the shares were issued prior to the merger.
 
c)  
To record the remainder of the CAD$141,000 private placement of Snoke Distribution not previously recorded.  This includes settlements of loans payable in the amount of CAD$25,000 and the receipt of cash in the amount of CAD$45,000.
 
d)  
To record the $135,000 private placement of the Registrant which closed concurrently with the merger, this includes settlements of loans payable in the amount of $60,000 and receipts of cash in the amount of $75,000.
 
e)  
To eliminate the Registrant’s accumulated deficit of $31,024,377.
 
f)  
To eliminate the Registrant’s historical note payable and record the Registrant’s new note payable in the amount of $225,000.
 
g)  
To record the payment of $50,000 made towards the new note payable from the proceeds of the private placement.
 
h)  
To eliminate the loss on change in fair value of derivative liabilities as the derivative liability was eliminated upon the merger.
 
 
5

 
 
i)  
To eliminate the interest in the convertible note payable as the note was eliminated upon the merger and replaced with a new note.
 
j)  
To record the interest on the new note payable of $175,000, interest to accrue at a rate of 6% per annum.
 
Note 3. Foreign Currency Translation
 
The consolidated financial statements of Snoke Distribution, as used to prepare the unaudited condensed pro forma found herein and filed as attachments to the Form 8-K, are presented in Canadian dollars.  As such assets and liabilities have been translated into US dollar at the closing rate at the reporting date. Income and expenses have been translated into the Company’s presentation currency at the average rate over the reporting period. Exchange differences are charged to other comprehensive income.  Please see below for our translation of the balance sheet and income statements of Snoke Distribution into US currency.
 
Snoke Distribution
Condensed Balance Sheet
As at September 30, 2012
 
   
Snoke Distribution
   
Exchange
Rate at September 30, 2012
   
Snoke Distribution
 
   
$Cdn
    1.0171    
$US
 
Assets
                   
Current assets:
                   
Cash and cash equivalents
  $ 226             $ 230  
Deposit for purchase of inventory
    162,239               165,013  
Total current assets
    162,465               165,243  
                         
Property and equipment
    958               975  
                         
Total assets
  $ 163,423             $ 166,218  
                         
Liabilities
                       
Current liabilities
                       
Accounts payable
  $ 45,789             $ 46,572  
Accrued liabilities
    10,000               10,171  
Due to related parties
    124,520               126,649  
Loan from shareholder
    19,744               20,082  
Loan payable
    338,644               344,435  
Total Current Liabilities
    538,697               547,909  
                         
Total liabilities
    538,697               547,909  
                         
(Deficiency) in stockholders’ equity
                       
Share capital, common shares, no par value, unlimited shares authorized, 25,400,000 issued and outstanding
    10,100               10,273  
Share subscription pending allotment
    61,000               62,043  
Accumulated deficit
    (448,154 )             (455,817 )
Accumulated other comprehensive income
    1,780               1,810  
                         
Total (deficiency) in stockholders’ equity
    (375,274 )             (381,691 )
                         
Total liabilities and (deficiency) in stockholders’ equity
  $ 163,423             $ 166,218  
Adjustment to charge exchange difference to other comprehensive income
                 
                   
Accumulated deficit
    (455,817 )     8990       (446,827 )
Accumulated other comprehensive income
    1,810       (8,990 )     (7,180 )
      (454,007 )     -       (454,007 )

 
6

 
 
Snoke Distribution Canada Ltd.
Consolidated Statement of Operations and Comprehensive Loss
For the Six Month Period Ended September 30, 2012
 
   
Snoke Distribution
   
Average Exchange Rate for Period
   
Snoke Distribution
 
   
$Cdn
    0.9978    
$US
 
                     
Revenue
  $ -             $    
                         
Operating expenses
                       
General and administrative
    345,539               344,779  
Depreciation
    50               50  
Total operating expenses
    345,589               344,829  
                         
Loss from operations
    (345,589 )             (344,829 )
                         
Other income (expenses)
                       
Gain (loss) on change in fair value of derivative liabilities
    -                  
Interest
    (15,087 )             (15,054 )
Total other income (expenses)
    (15,087 )             (15,054 )
                         
Net (loss) before income taxes
    (360,676 )             (359,883 )
                         
Income (tax) benefit
    -                  
                         
Net (loss)
  $ (360,676 )           $ (359,883 )
                         
Foreign exchange translation adjustment for the period
    1,780               (7,180 )
                         
Comprehensive (loss)
  $ (358,896 )           $ (367,063 )

 
7

 
 
Snoke Distribution Canada Ltd.
Consolidated Statement of Operations and Comprehensive Loss
For the period from Incorporation (November 29, 2011) to March 31, 2012
 
   
Snoke Distribution
   
Average Exchange Rate for Period
   
Snoke Distribution
 
   
$Cdn
    0.99334    
$US
 
                     
Revenue
  $               $    
                         
Operating expenses
                       
General and administrative
    86,469               85,943  
Depreciation
    202               200  
Total operating expenses
    86,671               86,143  
                         
Loss from operations
    (86,671 )             (86,143 )
                         
Other income (expenses)
                       
Gain (loss) on change in fair value of derivative liabilities
    -               -  
Interest
    (807 )             (802 )
Gain on write off of consulting fees
    -               -  
Total other income (expenses)
    (807 )             (802 )
                         
Net (loss) before income taxes
  $ (87,478 )           $ (86,945 )
                         
Income (tax) benefit
    -               -  
                         
Net (loss) and comprehensive (loss)
  $ (87,478 )           $ (86,945 )
 
 
 
8