NEVADA
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000-28107
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88-0399260
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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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o
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Written communications pursuant to Rule 425 under the Securities Act
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o
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act
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o
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
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o
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
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Only German manufactured e-cigarette.
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Manufactured to pharmaceutical standards (GMP 2000 Standard).
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Flavoring is produced by world-renowned flavoring company Wild Flavors.
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World-wide Product Liability Insurance (such insurance not always available for competitors due to unreliable product standards).
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Approved by independent laboratories, doctors and professors (certified in Germany)
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Stylish design with both “disposable” and “premium” products.
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The pharmaceutical nicotine is ultrapure.
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Allows for individual dosing.
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No smoke is inhaled which can reduce diseases related to tobacco-burning and inhalation.
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No disruption and inconveniences to non-smokers.
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Snoke is a premium lifestyle product with a sophisticated design.
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Snoke is available in a “Premium” rechargeable product and a “Disposable” product.
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Snoke is considered to be an alternative to conventional tobacco cigarettes.
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Snoke provides authentic smoking pleasure without the harmful toxins given off by burning tobacco and tar.
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Certified natural and nature-identical flavours provide a great tasting product that is completely “Made in Germany.”
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Snoke Flavor Caps (SNO-Caps) are available with nicotine and without nicotine in 12 different flavors.
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All SNO-Caps are filled with German pharmaceutical grade products.
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Snoke is produced in recognized German laboratories and dispensed by pharmacists that are compliant with DIN ISO 9001:2000 and GMP 2000 quality standards.
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The Snoke product can be used anywhere and everywhere, even in places where conventional cigarettes are banned such as work, travel or leisure.
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Snoke “Premium” e-cigarette;
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Carrying case;
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Replacement battery;
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Wall charger (110V);
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USB-adapter;
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5 SNO-Caps.
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the levying of substantial and increasing tax and duty charges;
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restrictions or bans on advertising, marketing and sponsorship;
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the display of larger health warnings, graphic health warnings and other labeling requirements;
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restrictions on packaging design, including the use of colors and generic packaging;
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restrictions or bans on the display of tobacco product packaging at the point of sale, and restrictions or bans on cigarette vending machines;
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requirements regarding testing, disclosure and performance standards for tar, nicotine, carbon monoxide and other smoke constituents levels;
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requirements regarding testing, disclosure and use of tobacco product ingredients;
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increased restrictions on smoking in public and work places and, in some instances, in private places and outdoors;
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elimination of duty free allowances for travelers; and
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encouraging litigation against tobacco companies.
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competition;
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ability to anticipate and adapt to a competitive market;
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ability to effectively manage expanding operations; amount and timing of operating costs and capital expenditures relating to expansion of our business, operations, and infrastructure; and
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dependence upon key personnel to market and sell our services and the loss of one of our key managers may adversely affect the marketing of our services.
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liabilities that substantially exceed our product liability insurance, which we would then be required to pay from other sources, if available;
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an increase of our product liability insurance rates or the inability to maintain insurance coverage in the future on acceptable terms, or at all;
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damage to our reputation and the reputation of our products, resulting in lower sales;
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regulatory investigations that could require costly recalls or product modifications;
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litigation costs; and
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the diversion of management’s attention from managing our business.
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established a Tobacco Products Scientific Advisory Committee to, among other things, evaluate the issues surrounding the use of menthol as a flavoring or ingredient in cigarettes and issue a nonbinding recommendation to the FDA regarding menthol by March 23, 2011;
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grants the FDA the regulatory authority to consider and impose broad additional restrictions through a rule making process, including a ban on the use of menthol in cigarettes;
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requires larger and more severe health warnings, including graphic images, on packs, cartons and advertising;
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bans the use of descriptors on tobacco products, such as “low tar” and “light”;
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requires the disclosure of ingredients, additives and constituents to consumers;
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requires pre-market approval by the FDA of all new products, including substantially equivalent products;
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requires pre-market approval by the FDA for claims made with respect to reduced risk or reduced exposure products;
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allows the FDA to require the reduction of nicotine or any other compound in cigarettes;
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allows the FDA to mandate the use of reduced risk technologies in conventional cigarettes;
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allows the FDA to place more severe restrictions on the advertising, marketing and sales of cigarettes; and
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permits possible inconsistent state and local regulation of the advertising or promotion of cigarettes by providing an exception to certain federal preemption of such regulation.
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Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;
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Level 2 - Observable Inputs other than quoted prices included in level 1 that are observable for the asset or liability either directly or indirectly; and
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Level 3 - Inputs that are not based on observable market data.
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a)
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Exclusive Distribution Agreement
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b)
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Operating Lease - Vehicle
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2012 | $ | 2,394 | ||
2013 | 9,576 | |||
2014 | 3,990 | |||
15,960 |
c)
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Operating Lease-Premises
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d)
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Letter of Intent
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Name of Beneficial Owner
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Number of Common Shares
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Percentage Owned
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Danny Yuranyi
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15,300,000
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24.70%
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Credifinance Capital Corp.
(5)
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11,300,000
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18.24%
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Graham Simmonds
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525,000
(6)
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0.85%
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Ernest “Ernie” Eves
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300,000
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0.48%
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Ashish Kapoor
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300,000
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0.48%
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Carrie J. Weiler
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100,000
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0.16%
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Stanley D. Robinson
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60,000
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0.10%
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Directors and Executive Officers as a group
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16,585,000
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26.77%
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(1)
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This table is based upon 61,944,433 shares issued and outstanding as of November 21, 2012.
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(2)
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Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting and investment power with respect to the shares. Shares of Common Stock subject to options or warrants currently exercisable or exercisable within 60 days are deemed outstanding for computing the percentage of the person holding such options or warrants, but are not deemed outstanding for computing the percentage of any other person.
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(3)
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To the best of our knowledge, except as otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares of our common stock beneficially owned by such person.
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(4)
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The mailing address of each of the individuals and entities listed above is c/o Gilla Inc., 112 North Curry Street, Carson City, Nevada 89703.
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(5)
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Credifinance Capital Corp., a party related to the former Chief Executive Officer, has optioned the 11,300,000 shares to Snoke Investment Corporation, an arm’s length party.
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(6)
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Includes 450,000 shares owned by The Woodham Group Inc.
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Name
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Age
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Position
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Ernest “Ernie” Eves
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66
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Chairman of the Board of Directors and Chair of all Board Committees
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Graham Simmonds
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39
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Director and Chief Executive Officer
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Danny Yuranyi
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55
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Director, President and Chief Operating Officer
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Stanley D. Robinson
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62
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Director
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Ashish Kapoor
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35
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Chief Financial Officer
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Carrie J. Weiler
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53
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Corporate Secretary
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Name/Title
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Year
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Salary
$
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Bonus
$
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Other Annual Compensation
$
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Restricted Option Stocks/ Payouts Awarded
#
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Ernest “Ernie” Eves
(1)
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Chairman of the Board of Directors and
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2011
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- | - | - | - | |||||||||||||
Chair of all Board Committees
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2010
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- | - | - | - | |||||||||||||
Graham Simmonds
(1)
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Director and Chief Executive Officer
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2011
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- | - | - | - | |||||||||||||
2010
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- | - | - | - | ||||||||||||||
Danny Yuranyi
(1)
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Director, President and Chief Operating
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2011
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- | - | - | - | |||||||||||||
Officer
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2010
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- | - | - | - | |||||||||||||
Stanley D. Robinson
(1)
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Director
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2011
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- | - | - | - | |||||||||||||
2010
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- | - | - | 60,000 | ||||||||||||||
Ashish Kapoor
(1)
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Chief Financial Officer
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2011
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- | - | - | - | |||||||||||||
2010
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- | - | - | - | ||||||||||||||
Carrie J. Weiler
(1)
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Corporate Secretary
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2011
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- | - | - | - | |||||||||||||
2010
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- | - | - | - | ||||||||||||||
Georges Benarroch
(2)
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Prior Director, CEO and President
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2011
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- | - | - | - | |||||||||||||
2010
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- | - | - | 2,060,000 | ||||||||||||||
Daniel Barrette
(2)
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Prior Director and COO
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2011
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- | - | - | - | |||||||||||||
2010
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24,000 | - | - | 1,640,000 | ||||||||||||||
Linda Kent
(2)
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Prior Director, Corporate Secretary and
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2011
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- | - | - | - | |||||||||||||
Treasurer
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2010
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- | - | - | 60,000 |
(1)
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There are no agreements with respect to the compensation of executives and directors. As of the date of this Report, the Company has not entered into employment agreements with any of the Company’s new officers and directors; however, the Company has agreed that for the time being, Graham Simmonds, Danny Yuranyi and Ashish Kapoor shall accrue consideration at a rate of $10,000 per month. Carrie Weiler shall accrue consideration at a rate of $2,500 per month. Such consideration shall be paid at a later date.
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(2)
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In conjunction with the Merger, George Bennarroch (former President and Director), Daniel Barrette (former Chief Operating Officer and Director) and Linda Kent (former Corporate Secretary and Director) each tendered their resignations as Directors and Officers of Gilla, effective as of November 15, 2012.
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2010
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HIGH
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LOW
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Fourth Quarter
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$ | 0.11 | $ | 0.03 | ||||
2011 | HIGH | LOW | ||||||
First Quarter
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$ | 0.05 | $ | 0.03 | ||||
Second Quarter
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$ | 0.05 | $ | 0.02 | ||||
Third Quarter
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$ | 0.05 | $ | 0.03 | ||||
Fourth Quarter
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$ | 0.035 | $ | 0.035 | ||||
2012 | HIGH | LOW | ||||||
First Quarter
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$ | 0.12 | $ | 0.0036 | ||||
Second Quarter
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$ | 0.006 | $ | 0.005 | ||||
Third Quarter
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$ | 0.0095 | $ | 0.0095 |
(a)
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Financial Statements of Business Acquired
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●
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Audited financial statements of Snoke Distribution Canada Ltd. for the period from November 29, 2011 (Date of Incorporation) to March 31, 2012
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Unaudited consolidated financial statements of Snoke Distribution Canada Ltd. as of September 30, 2012
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(
b)
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Pro forma financial information
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Unaudited Consolidated Profoma Balance Sheet as of September 30, 2012 for Gilla Inc. and its subsidiaries
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Unaudited Consolidated Proforma Income Statement for the year ended December 31, 2011 for Gilla Inc. and period of inception to March 31, 2012 for Snoke Distribution Canada Ltd.
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Unaudited Consolidated Proforma Income Statement for the 9 months ending September 30, 2012 for Gilla Inc. and 6 months ending September 30, 2012 for Snoke Distribution Canada Ltd.
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(c)
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Exhibits
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EXHIBIT
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DESCRIPTION
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3(i)(a)
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Articles of Incorporation of Osprey Gold Corp. (1)
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3(i)(b)
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Articles of Amendment changing name to Osprey Gold Corp. (2)
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3(ii)
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Bylaws of Osprey Gold Corp. (1)
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10.1
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Share Purchase Agreement, by and among the Company and Credifinance Capital Corp., dated as June 22, 2012.
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10.2
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Letter of Intent, by and among the Company and Snoke Distribution Canada Ltd., dated as June 25, 2012.
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10.3
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Unanimous Consent for the Current Board, dated as of November 15, 2012.
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10.4 |
Unanimous Consent for the New Board, dated as of November 15, 2012.
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10.5 |
Loan Agreement, by and among the Company and Credifinance Capital Corp., dated as of April 15, 2011.
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10.6 |
Loan Termination Agreement, by and among the Company and Credifinance Capital Corp., dated as of November 15, 2012.
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10.7 |
New Loan Agreement, by and among the Company and Credifinance Capital Corp., dated as of November 15, 2012.
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10.8 |
6% Convertible Revolving Credit Note, by and among the Company and Credifinance Capital Corp., dated as of November 15, 2012.
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10.9 |
Gilla Inc. Private Placement Subscription Agreement, dated as of November 15, 2012.
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10.10 |
Exclusive Distribution Agreement, by and among Snoke Distibution Canada Ltd. and Ecoreal GmbH & Co. KG, dated as of November 24, 2011.
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99.1 |
Audited financial statements of Snoke Distribution Canada Ltd. for the period from November 29, 2011 (Date of Incorporation) to March 31, 2012.
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99.2 |
Unaudited consolidated financial statements of Snoke Distribution Canada Ltd. as of September 30, 2012.
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99.3 |
Unaudited consolidated proformas for Gilla Inc. and Snoke Distribution Canada Ltd.
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(1) | Incorporated by reference to the Company's Form 10-SB, filed with the U.S. Securities and Exchange Commission on November 15, 1999. |
(2) | Incorporated by reference to the Company's Current Report on Form 8-K, file with the U.S. Securities and Exchange Commission on May 14, 2003. |
GILLA INC.
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Dated: November 28, 2012
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By:
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/s/ J. Graham Simmonds | |
Name: J. Graham. Simmonds | |||
Title: Chief Executive Officer | |||
GILLA INC. | ||
By: | /s/Georges Benarroch | |
Georges Benarroch | ||
CREDIFINANCE CAPITAL CORP.
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By: | /s/Georges Benarroch | |
Georges Benarroch |
1.
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Background of Gilla
: Gilla is a public company and the common shares of Gilla (the “
Gilla Common Shares
”) are listed for trading on the OTC-BB (the "
OTC
") under the symbol GLLA. There are currently 29,477,766 Gilla Common Shares issued and outstanding, and no other securities or shares or options convertible into common shares or other securities.
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2.
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Background of Snoke
: Snoke is a private company incorporated under the laws of Ontario
that has only common shares (the "
Snoke
Common Shares
") issued and outstanding, and no other outstanding stock options, warrants, anti-dilution or other rights to purchase Snoke Common Shares. Snoke has no debt, liabilities or unsecured payables not disclosed in its pro forma financial statements (the “
Snoke Financial Statements
”).
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3.
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Snoke Private Placement
: Prior to the closing the Acquisition (the “
Closing
”), a private placement of common shares of Gilla for gross proceeds of a minimum of $250,000 and a maximum of $500,000 on a best efforts basis (the "
Snoke Private Placement
") is intended to be conducted.
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4.
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Acquisition of Snoke
: At the Closing, Gilla will acquire all of the issued and outstanding Snoke Common Shares, in exchange for 25 million Gilla Common Shares valued at $0.003 per Gilla Common Share. For purposes of such issuance, Snoke shall execute and deliver the form of Regulation S – Rule 903 Acknowledgments and Representations.
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5.
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Board of Directors and Officers
: The parties acknowledge that upon closing of the transaction, the board of Gilla will be revised to consist (effective at the time of the closing of the Acquisition) of six (6) directors as determined by Snoke with the understanding that George Benarroch, Daniel Barrette and Linda Kent will resign. At Closing, the new Board of Directors of Gilla will appoint the officers and management of Gilla.
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6.
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Gilla
Representations and Warranties
: Gilla represents and warrants to Snoke as follows:
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(a)
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Gilla is duly incorporated and is validly subsisting under the laws of Nevada;
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(b)
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Gilla has no subsidiaries;
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(c)
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Gilla is in compliance with all of its obligations as a reporting issuer in the jurisdictions where it is a reporting issuer, including those imposed pursuant to securities legislation, and the regulations and policies thereunder;
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(d)
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Gilla is in compliance with all of the policies of the OTC and the Financial Industry Regulatory Authority (“FINRA”) and is eligible for electronic book-entry delivery and settlement depository services by the Depository Trust Company (“DTC”);
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(e)
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Gilla currently has 29,477,766 Gilla Common Shares issued and outstanding, all of which are validly issued and outstanding as fully paid and non-assessable;
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(g)
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Gilla is not a party to any employment agreements with any of its officers or employees;
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(h)
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the financial statements of Gilla for the period ended December 31, 2011 were true and correct and present fairly in all material respects the financial position of Gilla as at the date thereof and were prepared in accordance with Canadian generally accepted accounting principles consistently applied;
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(i)
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(A) Gilla is a Section 12(g) "reporting issuer" within the meaning of the
U.S. Securities Act of 1933
, as amended (the “
Securities Act
”) and the
Securities Exchange Act of 1934
, as amended (the “
Exchange Act
”) and the respective rules and regulations promulgated thereunder by the United States Securities & Exchange Commission (the “SEC”); (B) neither the SEC nor any securities commission, nor FINRA, nor DTC nor the OTC, has issued any order preventing the Acquisition or cessation of trading of any securities of Gilla; (C) DTC not imposed a chill on the trading of the shares of Common Stock of Gilla; (D) Gilla is in good standing in the state of its incorporation and in each other state and province where it is required to be registered to conduct business; and (E) Gilla is fully compliant as a reporting issuer with the
Securities Act
, the
Exchange Act
and all other applicable national, state and provincial securities laws and regulations, as well as all FINRA OTC policies.
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(j)
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there is no "material fact" or "material change" (as those terms are defined in applicable securities legislation) in the affairs of Gilla that has not been generally disclosed to the public; Gilla has not made any material misstatements or omitted any material information in any filing made with the SEC or in connection with the sale or placement of any of its securities; there are no undisclosed liabilities in any financial statement of Gilla filed with the SEC or in any of the books and records of Gilla which have been delivered to Snoke. All information and materials provided by Gilla to Snoke is true and correct in all respects; and
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(k)
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there is no action, suit, litigation, arbitration, investigation, inquiry or other proceeding in progress, or, to the best of Gilla's knowledge, pending or threatened against or relating to Gilla or its material assets and there is no circumstance, matter or thing known to Gilla which might give rise to any such proceeding or to any governmental investigation relative to Gilla and there is not outstanding against Gilla any judgment, decree, injunction, rule or order of any court, government department, commission, agency or arbitrator.
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7.
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Snoke Representations and Warranties
: Snoke represents and warrants to Gilla as follows:
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(a)
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Snoke is duly incorporated and is validly subsisting under the laws of Ontario;
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(b)
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other than as disclosed herein, Snoke has no outstanding agreements, options, understandings, warrants, calls, conversion rights, commitments or any rights or privileges of any kind which obligate Snoke to allot or issue any shares in its capital;
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(c)
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Snoke has the sole and exclusive right to all of its assets and technolgy and to conduct its business relating thereto;
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(d)
|
there is no action, suit, litigation, arbitration, investigation, inquiry or other proceeding in progress, or, to the best of Snoke's knowledge, pending or threatened against or relating to Snoke, its subsidiaries or the Snoke Assets, or Snoke’s other material assets and there is no circumstance, matter or thing known to Snoke which might give rise to any such proceeding or to any governmental investigation relative to Snoke and there is not outstanding against Snoke or in respect of the Snoke Assets, any judgment, decree, injunction, rule or order of any court, government department, commission, agency or arbitrator; and
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(e)
|
Snoke has no debt, liabilities, or payables not disclosed in the Snoke Financial Statements.
|
8.
|
Regulatory Requirements
: This agreement is subject to any required regulatory approvals and upon closing, Gilla agrees to file any and all documents required to comply with applicable securities laws.
|
9.
|
Closing
: The parties agree the date of Closing (the "
Closing Date
") will occur on or before July 6, 2012.
|
10.
|
Costs
: The parties agree each party will pay for their own respective costs incurred pursuant to the Acquisition and the other transactions contemplated in this Agreement, whether or not the transactions contemplated herein are completed.
|
11.
|
Due Diligence
: For the purposes of allowing Gilla and Snoke to review the business and affairs of each other so as to enable each other to determine if there are any facts relating to which, if known to the other party, would cause it to elect to not proceed with the Acquisition, Snoke and Gilla hereby permit each other and their auditors and agents to conduct, upon the execution of this Agreement, up to and including the Closing Date, such investigations as each party may deem reasonably necessary or advisable in order to ensure that each of the representations, warranties, covenants and agreements as are required by each party are true and accurate.
|
12.
|
Conditions
: The obligations of the parties to consummate the Acquisition will be subject to the fulfilment of the following conditions:
|
(a)
|
the receipt of all necessary approvals;
|
(b)
|
the latest available financial statements of Gilla are true and correct and have been prepared in accordance with generally accepted accounting principles consistently applied;
|
(c)
|
the audited and pro forma financial statements of Snoke required to complete the Acquisition are delivered to Gilla on or before June 30, 2012 and such financial statements are true and correct and have been prepared in accordance with Canadian generally accepted accounting principles consistently applied and in accordance with applicable requirements of the OTC and the disclosure requirements of applicable securities laws, including, without limitation, all rules and regulations promulgated under the
Exchange Act
;
|
(d)
|
there will be no adverse material change in the business, affairs or operations of Gilla between the date of the latest available financial statements of Gilla and the Closing;
|
(e)
|
there will be no adverse material change in the business, affairs or operations of Snoke between the date of the latest available financial statements of Snoke and the Closing;
|
(f)
|
the review to the sole satisfaction of Snoke of the financial condition, business, properties, title, assets and affairs of Gilla;
|
(g)
|
the review to the sole satisfaction of Gilla of the Snoke Assets and of the financial condition, business, properties, title, assets and affairs of Snoke;
|
(h)
|
the approval of the Acquisition by the board of directors of each of Gilla and Snoke;
|
(i)
|
the Board of Directors of Gilla will consist of the directors as contemplated by paragraph 5;
|
(j)
|
the Snoke Private Placement will have been completed, prior to or concurrently with the Closing;
|
(k)
|
Gilla will not have undertaken any business, other than in connection with the completion of the Acquisition and the entering into of the Formal Agreement; and
|
(l)
|
$50,000 of amounts owed by Gilla to Credifinance Capital Corp. are repaid;
|
(m)
|
All amounts owing to Credifinance Capital Corp. at closing are to be reflected by a new promissory note, with terms acceptable to both parties, at 6% interest payable within 18 months, convertible at $0.01 per share in the event that the note matures and is not repaid within 30 days of maturity;
|
(n)
|
Credifinance Capital Corp. grants to Snoke Investment Corporation an option for eighteen months, at an exercise price of C$0.025 per share, over 11,300,000 Gilla Common Shares, such option to be exercised only when all amounts payable to Credifinance Capital Corp. are repaid (or pro rata to such amounts that are repaid);
|
(o)
|
the Snoke security holders will have received certificates representing the Gilla Common Shares to which they are entitled pursuant to paragraph 4;
|
(p)
|
the representations and warranties contained herein and in the Formal Agreement shall be deemed to have been made again on the Closing Date and shall then be true and correct in all material respects as of that date;
|
(q)
|
no inquiry or investigation (whether formal or informal) in relation to Gilla or Snoke or their directors or officers, shall have been commenced or threatened by any officer or official of the OTC or any securities commission, or similar regulatory body having jurisdiction such that the outcome of such inquiry or investigation could have a material adverse effect on applicable party; and
|
|
(w)
|
each party making available all relevant financial statements, documents, reports, files, books, papers, documents and agreements, and all other relevant information relating to its business, assets, operations, prospects, financial condition and affairs, such that the other party shall satisfactorily complete its due diligence review of such materials on the later of: (i) the date on which the filing statement in respect of the Acquisition is filed on SEDAR in accordance with the policies of OTC; and (i) such other date as agreed to by the parties..
|
13.
|
Confidential Information: The information provided by each of Gilla and Snoke, in any form whether written, electronic or verbal, as to financial condition, business, properties, title, assets and affairs (including any material contracts) as may reasonably be requested by the other party, including information contemplated by paragraph 11, will be kept confidential by each party (the "
Confidential Information
"), other than information that:
|
(a)
|
has become generally available to the public;
|
(b)
|
was available to a party or its representatives on a non-confidential basis before the date of this Agreement; or
|
(c)
|
has become available to a party or its representatives on a non-confidential basis from a person who is not, to the knowledge of the party or its representatives, otherwise bound by confidentiality obligations to the provider of such information or otherwise prohibited from transmitting the information to the party or its representatives.
|
14.
|
Press Releases
: The parties will advise each other, in advance, of any public statement or press release which they propose to make in respect of the Acquisition, provided that no party will be prevented from making any public statement or press release which is required to be made by law or any rule of a stock exchange or similar organization to which it is bound. Upon the execution of this letter agreement, Gilla will issue a Form 8-K as required under the
Exchange Act
.
|
15.
|
Termination
: This Agreement may be terminated in writing at any time by the parties hereto in accordance with the terms contained herein or if closing has not occurred on or before July 13, 2012.
|
16.
|
This Agreement will be governed by the laws of the Province of Ontario and the federal laws of Canada applicable therein.
|
17.
|
This Agreement constitutes an enforceable legal agreement, the consideration for which will be the mutual covenants of the parties contained herein.
|
Yours truly,
|
|||||
GILLA INC. | |||||
|
Per:
|
/s/ Georges Benarroch | |||
Georges Benarroch | |||||
ACKNOWLEDGED AND AGREED TO this
25th
day of
June
, 2012.
Snoke Distribution Canada Ltd.
|
|||||
Per: | /s/ Danny Yuranyi | ||||
Danny Yuranyi | |||||
By:
|
/s/ Georges Benarroch | |
Name: | Georges Benarroch | |
By:
|
/s/ Daniel Barrette | |
Name: | Daniel Barrette | |
By:
|
/s/ Linda Kent | |
Name: | Linda Kent | |
By:
|
/s/ Stanley D. Robinson | |
Name: | Stanley D. Robinson |
Shareholder Name | # of Shares | Residential Address |
By: |
/s/ Ernest “Ernie” Eves
|
|
|
||
Name: Ernest “Ernie” Eves
|
|||||
By: |
/s/ Graham Simmonds
|
|
|
||
Name: Graham Simmonds
|
|||||
By: |
/s/ Danny Yuranyi
|
|
|
||
Name: Danny Yuranyi
|
|||||
By: |
/s/ Stanley D. Robinson
|
||||
Name: Stanley D. Robinson |
Company:
|
Gilla, Inc. |
112 North Curry Street
|
|
Carson, Nevada 89703
|
|
Attention: President
|
|
Noteholder: |
Credifinance Capital Corp.
|
1232 North Ocean Way
|
|
Palm Beach FL 33480
|
|
Attention: Georges Benarroch
|
NOTEHOLDER:
CREDIFINANCE CAPITAL CORP.
|
|||
|
By:
|
/s/ Georges Benarroch | |
Name: | Georges Benarroch | ||
Title: | President | ||
COMPANY:
GILLA, INC.
|
|||
By:
|
/s/ Georges Benarroch | ||
Name: | Georges Benarroch | ||
By:
|
/s/ Daniel Barrette
|
||
Name: | Daniel Barrette | ||
By:
|
/s/ Linda Kent | ||
Name: | Linda Kent | ||
By:
|
/s/ Stanley Robinson | ||
Name: | Stanley Robinson |
COMPANY | |||
GILLA, INC. | |||
A Nevada Corporation
|
|||
|
By:
|
/s/ Georges Benarroch | |
Name: Georges Benarroch | |||
Title: President | |||
|
NOTEHOLDER:
|
||
CREDIFINANCE CAPITAL CORP.
|
|||
A Delaware Corporation
|
|||
|
By:
|
/s/ Georges Benarroch | |
Name: Georges Benarroch | |||
Title: President | |||
COMPANY: | |||
GILLA, INC.
|
|||
A Nevada Corporation | |||
|
By:
|
/s/ Danny Yuranyi | |
Name: | Danny Yuranyi | ||
Title: | President & COO | ||
By:
|
/s/ Graham Simmonds | ||
Name: | Graham Simmonds | ||
Title: | CEO |
NOTEHOLDER: | |||
CREDIFINANCE CAPITAL CORP. | |||
A Delaware Corporation | |||
By:
|
/s/ Georges Benarroch | ||
Name: | Georges Benarroch | ||
Title: | President |
$225,000.00 | November 15, 2012 |
COMPANY | |||
GILLA, INC. | |||
A Nevada Corporation
|
|||
|
By:
|
/s/ Danny Yuranyi | |
Name: Danny Yuranyi | |||
Title: President & Chief Operating Officer | |||
By: | /s/ Graham Simmonds | ||
Name: Graham Simmonds | |||
Title: Chief Executive Officer |
|
NOTEHOLDER:
|
||
CREDIFINANCE CAPITAL CORP.
|
|||
A Delaware Corporation
|
|||
|
By:
|
/s/ Georges Benarroch | |
Name: Georges Benarroch | |||
Title: President | |||
Dated: ________________________ | SIGNATURE: | |
________________________________________
(Signature must conform in all respects to name
Of Noteholder as specified in the Note)
________________________________________
(Insert Social Security or Federal Tax I.D.
Number of Noteholder)
IF NOTE IS HELD JOINTLY, BOTH PARTIES
MUST SIGN:
________________________________________
(Signature must conform in all respects to name
Of Noteholder as specified in the Note)
________________________________________
(Insert Social Security or Federal Tax I.D.
Number of Noteholder)
|
|
1.
|
I am over the age of twenty-one years.
|
|
2.
|
I have read and am familiar with the records of the Company, access to which has been afforded to me and which access has preceded the closing under this Agreement and this subscription to the Shares.
|
|
3.
|
The Shares to be acquired herein are solely for my account and for investment and I have no plan, intention, contract, understanding, agreement or arrangement with any person to sell, assign, pledge, hypothecate or otherwise transfer to any person the Shares, or any portion thereof.
|
|
4.
|
I have sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of investments generally and of this investment in the Shares in particular and am able to bear the economic risk of this investment with the full understanding that I can lose my entire investment.
|
|
5.
|
I am in a position with regard to the Company and its officers and directors which, based upon employment, family relationship and economic bargaining power, has enabled me and continues to enable me to obtain information from the Company and its affairs in order to evaluate the merits and risks of this investment in the Shares. I acknowledge that the Company has made available to me and continues to make available to me the opportunity to ask questions of and receive answers from the directors and executive officers of the Company and other persons acting on their behalf concerning the terms and conditions of the offer to me of the Shares and to obtain any additional information concerning the Company to the extent that the directors, executive officers and others possess such information or can acquire it without unreasonable effort or expense so that I can verify the accuracy of the information given to me at the time of the offer and my subscription to the Shares. I acknowledge that I am aware that the Company is not current with its Securities and Exchange Commission filings and that the Company’s financial statements are not current.
|
|
6.
|
I understand that neither the Shares, nor the sale thereof to me has been registered under the Securities Act of 1933, as amended (the "1933 Act"), or under any state securities laws. I further understand that no registration statement has been filed with the United States Securities and Exchange Commission nor with any other regulatory authority and that, as a result, any benefit which might normally accrue to me by an impartial review of such a registration statement by the Securities and Exchange Commission or other regulatory authority will not be forthcoming. I understand that I cannot sell the Shares to be issued to me by the Company unless such sale is registered under the 1933 Act and applicable state securities laws or exemptions from such registration become available. In this connection I understand that the Company has advised its Transfer Agent that the Shares are "restricted securities" under the 1933 Act and that they may not be transferred by me to any person without the prior consent of the Company, which consent of the Company will require an opinion of my counsel to the effect that, in the event the Shares are not registered under the 1933 Act, any transfer as may be proposed by me must be entitled to an exemption from the registration provisions of the 1933 Act. To this end, I acknowledge that a legend to the following effect will be placed upon the certificate representing the Shares and that the Transfer Agent has been advised of such facts:
|
|
7.
|
The subscription made by this Subscription Agreement is subject to acceptance by the Company at its sole discretion, which acceptance shall be evidenced by the Company's signing and delivering to me at the address set forth on the signature page hereof a fully-executed counterpart of this Subscription Agreement. In the event the Company shall reject this subscription, the subscription price for the Shares shall be refunded promptly to me without interest thereon.
|
|
8.
|
You have advised me that the Company is a Nevada corporation which has an authorized capital of 300,000,000 shares of Common Stock, par value $0.0002 per share. As of the date hereof there are approximately 29,477,766 Common Shares of the Company issued and outstanding and zero shares of Preferred Stock issued and outstanding. I understand that the Company has commitments to issue approximately 30,000,000 additional Common Shares upon closing of the acquisition of Snoke Canada Ltd.
|
|
9.
|
The undersigned: (1) is not listed in the Annex to the Executive Order No. 13224 of September 23, 2001 – Blocking Property and Prohibiting Transactions With Persons who Commit, Threaten to Commit or Support Terrorism (the “Executive Order”) or is otherwise subject to the provisions of the Executive Order; (2) is not listed on the “Specially Designated Nationals and Blocked Persons” list maintained by the Office of Foreign Assets Control (“OFAC”) of the United States Department of the Treasury, as updated or amended from time to time, or any similar list issued by OFAC; and (3) does not have any property blocked, or subject to seizure, forfeiture or confiscation, by any order relating to terrorism or money laundering issued by the President, Attorney General, Secretary of State, Secretary of Defense, Secretary of the Treasury or any other U.S. State or Federal governmental official or entity (in any case, a “Restricted Party”).
|
|
10.
|
The funds used by the undersigned exclude any funds received or derived from a Restricted Party or from any person or entity involved in the violation of any U.S. State or Federal law relating to terrorism, including, without limitation: (1) the Executive Order; (2) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56; and (3) the Money Laundering Control Act of 1986, Public Law 99-570.
|
|
11.
|
I have had sufficiently ample time and opportunity to review any and all information pertaining to the Company, together my attorney, accountant, and tax adviser (collectively, the “
Advisers
”) and I have at my own volition determined to proceed with investment in the Shares on the basis of such advice from the Advisors or I have waived review by the Advisors following my own comprehensive assessment of all relevant facts and circumstances. I am not relying on the Company or any of its employees or agents with respect to the legal, tax, economic or any related considerations pertaining to an investment in the Shares and I have only relied upon my own qualified knowledge or the advice of my Advisers in such regard.
|
|
12.
|
In evaluating the suitability of an investment in the Company, I have not relied upon any representation or other information (oral or written) other than as stated herein or as contained in writing in documents delivered to me by an authorized representative of the Company, or in answers furnished in writing to me or to my Advisers in response to questions delivered to the Company.
|
|
13.
|
I am unaware of, I am in no way relying on, and I did not become aware of the Shares through or as a result of, any form of general solicitation or general advertising including, without limitation, any article, notice, advertisement or other communication published in any newspaper, magazine or similar media or broadcast over television or radio and I am not subscribing for the Shares and did not become aware of the Shares through or as a result of any seminar or meeting to which I was invited by, or any solicitation of a subscription by, a person not previously known to me in connection with investments in securities generally.
|
|
14.
|
I am only acquiring the Shares solely for my own account for investment purposes only and not with a view to resale or distribution thereof, in whole or in part. I have no agreement or arrangement with any person to sell or transfer all or any part of the Shares and I have no plans to enter into any such agreement or arrangement.
|
|
15.
|
I have adequate means of providing for my current financial needs and foreseeable contingencies and I have no need for liquidity of my investment in the Shares for an indefinite period of time.
|
|
16.
|
I am an “
accredited investor
” as defined under Rule 501 or Regulation D promulgated under the Securities Act and I am familiar with the legal requirements to be an accredited investor, and I have completed
Exhibit A
attached hereto in such regard.
|
|
17.
|
I represent and warrant to the Company that if my investment is being made through a corporation, limited liability company, partnership or other organization, (i) was not formed for the specific purpose of acquiring the Shares; (ii) it is duly organized, validly existing and in good standing under the laws of the its organization; (iii) the consummation of the transactions contemplated hereby is authorized by, and will not result in a violation of the charter or other organizational documents; (iv) I have full power and authority to execute and deliver this Agreement and all other related agreements or certificates and to carry out the provisions hereof and thereof and to purchase and hold the Shares on behalf of the organization; (v) the execution and delivery of this Agreement has been duly authorized by all necessary action of the organization; and (vi) this Agreement has been duly executed and delivered and is a legal, valid and binding obligation of the organization. The execution and delivery of this Agreement will not violate or be in conflict with any order, judgment, injunction, agreement or controlling document to which the organization is a party or by which it is bound.
|
|
18.
|
I acknowledge that any and all estimates or forward-looking or similar statements have been prepared by the Company in good faith but that the attainment of any such estimates or forward-looking or similar statements cannot be assured or guaranteed by the Company and therefore may not be relied upon in respect of any and all actual outcomes.
|
|
19.
|
I acknowledge that the Company will compensate authorized organizations with commissions related to Company introductions to investors. Such commissions may be paid by the Company at closing of the investments in the Shares, a cash fee in amounts of up to 10% of the purchase price of the Shares and broker warrants in the amount of 8% of the Shares issued pursuant to the Offering.
|
(a)
|
This Agreement constitutes the entire agreement between the Subscriber and the Company with respect to the subject matter hereof and supersede all prior oral or written agreements and understandings and/or term sheets, if any, relating to the subject matter hereof. The terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only by a written document executed by the party entitled to the benefits of such terms or provisions. Each provision of this Agreement shall be considered separable and, if for any reason any provision(s) hereof are determined to be invalid or contrary to applicable law, such invalidity or illegality shall not impair the operation of or affect the remaining portions of this Agreement. A business day for purposes of this Agreement shall be any day on which the New York Stock Exchange is open for business. Time is of the essence.
|
(b)
|
The Subscriber’s representations and warranties made in this Agreement shall survive the execution and delivery hereof and delivery of the Shares. The Subscriber agrees to indemnify and hold harmless the Company, its officers and directors, employees and its affiliates and their respective successors and assigns and each other person, if any, who controls any thereof, against any loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation commenced or threatened or any claim whatsoever) arising out of or based upon any false representation or warranty or breach or failure by the Subscriber to comply with any covenant or agreement made by the Subscriber herein or in any other document furnished by the Subscriber to any of the foregoing in connection with this transaction.
|
(c)
|
Except as otherwise expressly set forth herein, each of the parties hereto shall pay its own fees and expenses (including the fees of any attorneys, accountants, appraisers or others engaged by such party) in connection with this Agreement and the transactions contemplated hereby whether or not the transactions contemplated hereby are consummated.
|
(d)
|
This Agreement shall not be modified or waived except by a written instrument signed by the party against whom any such modification or waiver is sought.
|
(e)
|
Paragraph titles are for descriptive purposes only and shall not control or alter the meaning of this Agreement as set forth in the text. In the event of any ambiguity this Agreement shall not be construed against the draftsperson.
|
(f)
|
The Subscriber hereby acknowledges and agrees that the subscription hereunder is irrevocable by the Subscriber, except as required by applicable law, and that this Agreement shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives and permitted assigns.
|
(g)
|
This Agreement may be executed in one or more counterparts each of which shall be deemed an original, but all of which shall together constitute one and the same instrument. This Agreement may be delivered by fax, scan or other electronic means which shall be deemed to be an original and shall have the same full force and effect as the original exemplar thereof.
|
SUBSCRIBER: | |
(Signature) | |
(Printed Name) | |
(Address) | |
(Social Security No. - US Citizens) |
GILLA INC.
a Nevada Corporation |
||||
|
By:
|
|||
Graham Simmonds, Chief Executive Officer
|
||||
Date: | , 201_ |
_______ 1.
|
Any bank as defined in section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; any insurance company as defined in section 2(a)(13) of the Securities Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act; any Small Business Investment Corporation licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;
|
_______ 2.
|
_______ 3.
|
_______ 4.
|
_______ 5.
|
_______ 6.
|
_______ 7.
|
Print Name of Subscriber:
|
||
Signature and Date: | ||
Address: | ||
a)
|
"Products" shall mean all products in MANUFACTURER’s product portfolio, as from time to time amended.
|
|
Upon written request of MANUFACTURER to DISTRIBUTOR, MANUFACTURER shall be entitled to demand from DISTRIBUTOR
|
1)
|
That this Agreement shall apply to further products (in which case such products shall also be deemed Products as defined herein), and/or
|
2)
|
That individual product shall no longer be deemed to be Products as defined herein from a certain point in time on, which will be determined by MANUFACTURER.
|
b)
|
"Territory" shall mean the national territory of Canada and the United States of America as well as the first right of refusal for Mexico and the Caribbean.
|
c)
|
"Customers" shall mean both actual as well as prospective buyers of the Products.
|
a)
|
Subject to the terms herein provided, MANUFACTURER hereby appoints DISTRIBUTOR as exclusive DISTRIBUTOR of the Products in the Territory, and DISTRIBUTOR hereby accepts such appointment upon the terms of this agreement. MANUFACTURER shall refrain from appointing any other company or person in order to distribute the Products in the Territory. DISTRIBUTOR is aware that imports into the Territory by third parties may occur and MANUFACTURER shall use its best efforts to stop. This shall not entitle DISTRIBUTOR to infer any rights on MANUFACTURER. MANUFACTURER recruits any customers within the Territory which have not bought the Products from DISTRIBUTOR, MANUFACTURER must offer those customers to DISTRIBUTOR. As consideration, MANUFACTURER and DISTRIBUTOR shall mutually agree on a commission to be paid to MANUFACTURER by DISTRIBUTOR for all sales of the Products made to such customer.
|
b)
|
DISTRIBUTOR shall buy and sell the Products on his own behalf and for his own account.
|
c)
|
DISTRIBUTOR shall not be authorised to act on behalf of or represent MANUFACTURER in any legal relations.
|
d)
|
DISTRIBUTOR shall solely procure Products from MANUFACTURER.
|
a)
|
Deliveries by MANUFACTURER to DISTRIBUTOR will be subject to the “Standard Terms and Conditions” of MANUFACTURER as amended from time to time. The current standard terms and conditions are attached hereto as
|
|
MANUFACTURER shall be entitled to change such terms and conditions at any time but will notify DISTRIBUTOR 6 months before the changed terms and conditions become effective.
|
b)
|
Deliveries will be made after MANUFACTURER has received an advance payment of 50 per cent of the purchase price. The remaining 50 per cent shall be paid by wire transfer upon Distributor taking possession of the goods
|
c)
|
If legally permissible, MANUFACTURER shall be entitled to recommend retail prices in such form that meets legal requirements. DISTRIBUTOR shall discuss the prices for the Products before selling them to its customers. .
|
d)
|
DISTRIBUTOR will book binding orders at the latest three months prior to the delivery date quoted on the order.
|
e)
|
MANUFACTURER is not bound to supply the Products at the time of delivery quoted by the DISTRIBUTOR if the order and time of delivery is accepted by the Manufacturer.
|
f)
|
If MANUFACTURER is in default of delivery for a period of more than 6 weeks, DISTRIBUTOR shall be entitled to cancel in whole or in part the relevant order.
|
g)
|
A delivery date shall be extended if and when MANUFACTURER is unable to observe the delivery date due to untimely or incorrect delivery by its own suppliers. This shall apply under the premise that MANUFACTURER had concluded a corresponding deal with its supplier to cover its supply needs for the specific delivery at the time of the respective Forecast becoming binding.
|
h)
|
MANUFACTURER shall immediately notify DISTRIBUTOR in writing of the new delivery date of the delayed Products and any later changes thereof.
|
i)
|
All deliveries are made EXW (Incoterms 2010) Köln.
|
a)
|
For the assertion of claims based on defect (“
Mängelansprüche”
), DISTRIBUTOR must have complied with its examination and notification obligations arising from section 377 of the German Commercial Code (“
HGB
”). DISTRIBUTOR shall report any apparent defect (“
offensichtlicher Mangel
”) in writing without undue delay and in any case no later than two weeks after receipt of the Products, and shall report any hidden defect in writing without undue delay after detection and in any case no later than two weeks after detection.
|
b)
|
If the Products are defective, MANUFACTURER undertakes, at his own discretion, to supply items free from defects (replacements) or to rectify the defects. In the event of a rectification of defects, MANUFACTURER shall bear all costs required to rectify the defect unless such costs are increased by the fact that the item is delivered to another place than the place of performance. If rectification of defects or replacement fails, DISTRIBUTOR may at its discretion withdraw from the specific contract or reduce the purchase price. Generally DISTRIBUTOR has to accept two replacement or rectification attempts. For the avoidance of doubt, DISTRIBUTOR shall choose the most cost efficient way to send the defective Products back to MANUFACTURER.
|
c)
|
For a period of 1 year from the Delivery Date, in case the Products do not comply with the requirements of this Agreement, DISTRIBUTOR may claim for warranty against MANUFACTURER in accordance with the statutory provisions.
|
d)
|
To the extent MANUFACTURER is liable for damages for any defect (on whatever legal basis, including any damages claim for general breach of contract, breach of any pre-contractual duty, or tortuous claims), such liability for damages shall be limited as stipulated in Clause 5 hereof.
|
a)
|
MANUFACTURER shall be liable for the full extent of damage in the event of intentional behaviour (“
Vorsatz
”) or gross negligence (“
grobe Fahrlässigkeit
”) by MANUFACTURER or its vicarious agents. In addition, MANUFACTURER shall be fully liable in the case of non-observance of guarantees (“
Garantien
”), when taking a procurement risk (“
Beschaffungsrisiko
”) and in case of other definite promises, in the case of culpable injury to life, body and health and under the German Product Liability Act (“
Produkthaftungsgesetz
”). For the avoidance of doubt, product specification shall not constitute a guarantee in the meaning hereof.
|
b)
|
In the case of culpable violation of essential contractual obligations, i.e. principal obligations which enable the proper execution of the contract and upon which DISTRIBUTOR therefore relies and may rely, MANUFACTURER undertakes liability on the merits. MANUFACTURER’s liability shall in this case be limited to damage which is typical for the contract and which can be reasonably foreseen.
|
c)
|
In the cases covered in sub-paragraph b) hereof, MANUFACTURER’s liability shall be limited to a maximum of three times the value of the relevant delivery or in the case of pure financial loss to a maximum of twice the value of the relevant delivery, but in any case to € 5,000 per event of damage and € 25,000 per calendar year.
|
d)
|
As for the rest, any claims on DISTRIBUTOR’s part for direct or indirect damages including loss of profit, loss of business and loss of production (on whatever legal basis including any damages claims for breach of any pre-contractual duty, or tortuous claims) shall be excluded.
|
e)
|
Damage claims of DISTRIBUTOR due to defects shall become time-barred in accordance with Clause 4.c) hereof; this shall not apply to cases covered in sub-paragraph 5.a) hereof, where the statutory provisions of the German Civil Code shall apply. Other damage claims of DISTRIBUTOR shall become time-barred two years after the date on which DISTRIBUTOR obtains, or without the presence of gross negligence would have obtained, knowledge of the facts giving rise to the claim and of the identity of the person or entity causing the damage or loss, however no later than three years after the time of the event causing the damage.
|
f)
|
The above limitation of liability terms shall apply also to any damage claims on DISTRIBUTOR’s part against MANUFACTURER’s statutory representatives, executives (“
leitende Angestellte
”) and vicarious agents (“
Erfüllungsgehilfen
”).
|
g)
|
MANUFACTURER shall put into place a $5,000,000 Product Liability Policy with a recognised Insurance company Naming the DISTRIBUTOR on the policy
|
a)
|
DISTRIBUTOR shall inform MANUFACTURER about the needed extend of labelling of products including packaging and warnings of customers and all other legal requirements which MANUFACTURER will have to obtain in order to get his Products distributed according to the applicable law within the Territory. DISTRIBUTOR shall indemnify and hold harmless MANUFACTURER against any claims from third parties including authorities brought against MANUFACTURER on the grounds that the Products did not contain necessary labelling and warnings.
|
b)
|
DISTRIBUTOR shall be obligated to use his best efforts to diligently and faithfully safeguard the interests of MANUFACTURER in the Territory and to solicit best possible sales volumes with regard to the Products. DISTRIBUTOR shall engage in no acts that jeopardise this objective. In particular, but not limited to the following, DISTRIBUTOR shall
|
1)
|
regularly call on Customers and maintain contact to Customers in every appropriate and purposeful manner;
|
2)
|
pursue all inquiries of Customers and other persons regarding the Products with the aim to close business deals regarding the Products;
|
3)
|
advertise and promote the Products in coordination with MANUFACTURER;
|
4)
|
to the best of his efforts establish the Products and the name MANUFACTURER and its trademarks in the Territory and promote them;
|
5)
|
upon request of and in coordination with MANUFACTURER participate in trade fairs and other sales events where presentation of the Products appears appropriate and shall adequately present the Products at such trade fairs and events;
|
6)
|
exclusively utilize qualified personnel optimally familiar with the market forces as well as the Products for customer liaison and support;
|
7)
|
grant his Customers the same guaranty and warranty terms as are granted to the DISTRIBUTOR by MANUFACTURER; this does not apply where statutory guarantees/warranties are different to the terms granted to DISTRIBUTOR by MANUFACTURER;
|
8)
|
without the written consent of MANUFACTURER refrain from making any promises regarding the quality and functionality of the Products, in particular refrain from any warranty promises or other statements exceeding the promises contained within the sales material and literature provided by MANUFACTURER;
|
9)
|
distribute the Products solely unaltered and - also in regard to packaging if legally permissible - in flawless condition and only with the equipment and packaging prescribed by MANUFACTURER;
|
10)
|
store and transport the Products in accordance with MANUFACTURER’s advice.
|
11)
|
put into place a $5,000,000 Product Liability insurance policy as DISTRIBUTOR
|
a)
|
employ an adequate number of sales and servicing staff in compliance with the requirements set forth below in sub-paragraph b);
|
b)
|
only utilize personnel with good commercial and technical qualifications in accordance with the requirements of MANUFACTURER, and to train such personnel with the frequency and in the manner required by MANUFACTURER;
|
a)
|
DISTRIBUTOR shall be barred from transferring any duties under this agreement to third parties without prior written approval of MANUFACTURER. This shall apply in particular with regard to sub-contracting of distribution and servicing
|
b)
|
To the extent DISTRIBUTOR does retain third parties with the approval of MANUFACTURER, he shall be obligated to supervise them and ensure that their premises and services are commensurate with the requirements set forth in this Agreement with regard to the premises and services of DISTRIBUTOR.
|
a)
|
promptly inform MANUFACTURER of any changes in statutory requirements and/or standards that may impact the contractual relationship and/or the sale of Products, including, but not limited to, import restrictions, governmental requirements regarding the Products and customs duties;
|
b)
|
promptly report to MANUFACTURER any observed infringements of MANUFACTURER's trademarks, patents or other intellectual or industrial property rights as well as any observed imitations of Products and complaints or negative criticism of Products;
|
c)
|
each calendar quarter report his observations for the preceding month regarding quality, sales prices, turnover, successes and failures of competing products as well as any other occurrences and insights that may impact the market or the sale of Products, and report upon request from MANUFACTURER any and all other information in connection with the sale of the Products and to supply such information to MANUFACTURER to the extent possible. The calendar quarterly reports shall deal with the different brands and different Products separately. The calendar quarterly reports have to be sent to MANUFACTURER on the 15
th
of the month following the relevant calendar quarter at the latest.
|
d)
|
maintain and permanently update lists of all resellers and commercial customers, with names, addresses, telephone and fax numbers and each calendar quarter and on further demand pass on such lists to MANUFACTURER;
|
e)
|
within 15 days after each calendar quarter report on all advertising expenditures in the preceding calendar quarter including documentation hereto; MANUFACTURER shall be entitled to have an auditor inspect the advertising account during regular business hours;
|
f)
|
furnish MANUFACTURER a marketing plan for the next business year by 1 October of each year;
|
g)
|
obtain the prior written approval of MANUFACTURER, which approval shall only be withheld for objectively justified cause, for any changes concerning the person of the owner, the composition of its shareholders and the management personnel responsible for MANUFACTURER. To the extent any change occurs without cooperation of DISTRIBUTOR or its management, DISTRIBUTOR shall promptly notify MANUFACTURER of such change and obtain retroactive approval.
|
a)
|
DISTRIBUTOR shall be barred from assigning any claims against MANUFACTURER arising under or in connection with this Agreement.
|
b)
|
DISTRIBUTOR shall not be entitled to set-offs against any claims of MANUFACTURER that arise in connection with the supply of goods or under any other provisions of this Agreement unless DISTRIBUTOR's claim has been established by final judgment or it is undisputed by MANUFACTURER. DISTRIBUTOR shall also not be entitled to any right of retention, unless DISTRIBUTOR's claim has been established by final judgment or it is undisputed by MANUFACTURER.
|
c)
|
DISTRIBUTOR shall be responsible for compliance with the provisions imposed upon him with regard to the distributorship assigned hereunder. DISTRIBUTOR shall obtain any permits and registrations required in the Territory for the effectiveness or implementation of this Agreement, and lay all foundations required for the sale, including but not limited to operating permits, import licenses, and sales licenses. DISTRIBUTOR shall bear any costs arising in connection therewith.
|
d)
|
In the event that DISTRIBUTOR, during the term of this Agreement, should have any suggestion for improvement with regard to the Products or the sale thereof, DISTRIBUTOR shall communicate all relevant details to MANUFACTURER and allow the latter to make use of such findings free of charge. This includes the right to apply for registration of industrial or intellectual property rights with regard to such improvement.
|
e)
|
DISTRIBUTOR shall hold MANUFACTURER harmless from any damages and liabilities including costs for defending against such damages and liabilities, to the extent such damages or liabilities are based on a violation of this Agreement or culpable conduct of DISTRIBUTOR, his employees, officers, sub- contractors, agents, or other persons commissioned by him.
|
f)
|
DISTRIBUTOR agrees to comply with any direction of MANUFACTURER which MANUFACTURER may issue in connection with the implementation of this Agreement, provided such directions are not unreasonable.
|
a)
|
Subject to sub-paragraph b), it is not permitted to DISTRIBUTOR and constitutes a serious violation of this agreement to perform any sales of contractual products to customers outside the Territory. DISTRIBUTOR shall forward all enquiries in respect of Products coming from outside the Territory to MANUFACTURER. This applies accordingly, if Customers have their registered office inside the Territory, but the delivery of the Products is intended for a property located outside the Territory.
DISTRIBUTOR shall not actively solicit sales of Products to any territories within the European Union and the European Economic Area, as MANUFACTURER will exclusively start to distribute the Products itself to such territories or assign such other territories to other exclusive distributors. Other countries or an area (e.g. Asia) outside of territory has to be defined in a separate contract. As soon as MANUFACTURER decides – either actively itself or through another distributor – not to distribute the Products exclusively in other territories, MANUFACTURER will inform DISTRIBUTOR accordingly, and DISTRIBUTOR shall be entitled to sell the Products in such territory.
|
b)
|
MANUFACTURER will inform DISTRIBUTOR regarding future countries for which MANUFACTURER will reserve these rights for itself or will assign these rights to another distributor.
|
c)
|
All sales via the internet within the territory will be defined in a separate contract. Until that Contract is in place we will continue as discussed DISTRIBUTOR will pay regular prices for goods as listed in Schedule 1. DISTRIBUTOR will add cost of pick and pack, delivery to customer, bank charges for processing order. DISTRIBUTOR will reserve the amount of 15% of all their Internet Sales to spend on advertising. The decision on the type of advertising will be made together by the DISTRIBUTOR and MANUFACTURER. The balance of the sale left will be split equally between the DISTRIBUTOR and MANUFACTERER
|
a)
|
DISTRIBUTOR undertakes with regard to both himself and his personnel not to sell or manufacture, directly or indirectly, any products that may compete with the Products, or to assist in the distribution or manufacture of such products, and DISTRIBUTOR shall neither directly nor indirectly hold an interest in companies that distribute or manufacture such competing products. In the event of doubt as to whether any activity or investment intended by DISTRIBUTOR is permissible under this Clause, DISTRIBUTOR agrees to obtain the prior approval of MANUFACTURER.
|
b)
|
DISTRIBUTOR shall be responsible to MANUFACTURER for imposing the prohibition set forth in sub-paragraph a) above upon all persons and companies retained by him to fulfil his duties hereunder and for ensuring that such prohibition will be observed by such persons and companies.
|
c)
|
For each case of culpable breach of the non-competition clauses provided in sub-paragraphs a) and b) above, DISTRIBUTOR shall owe MANUFACTURER liquidated damages
(Vertragsstrafe)
in the amount of 5% of his annual sales computed on the basis of his average sales in the three calendar years prior to such breach (in the event of a contract period shorter than three years, such period shall be applicable). MANUFACTURER shall be entitled to claim compensation for further damages; the liquidated damages
(Vertragsstrafe)
will be set-off against such further claims.
|
a)
|
By 1 October of each calendar year, DISTRIBUTOR shall present a scheme concerning the advertising and special merchandising measures planned by him for the following calendar year, as well as the relevant cost estimate, and coordinate such scheme with MANUFACTURER.
|
b)
|
DISTRIBUTOR will procure suitable advertising material according to the requirements agreed upon between the DISTRIBUTOR and MANUFACTURER. DISTRIBUTOR and MANUFACTURER shall each invest at least 6% of the previous year’s sales revenue in appropriate advertising campaigns. Such amount shall refer to the costs of printing, distribution, placing and trade fairs only, and shall not contain any costs for design or consultancy and creative production.
|
c)
|
If DISTRIBUTOR adapts advertising material to the taste of the public in the Territory in order to increase the effectiveness of advertising, DISTRIBUTOR will send samples of the adapted advertising material to MANUFACTURER and will only use such material after the prior written consent of MANUFACTURER.
|
d)
|
Any advertising material may only be passed on by DISTRIBUTOR to third parties in the ordinary course of business. Empty packaging and tools labeled with trademarks and/or provided with get-ups of MANUFACTURER may not be handed out by DISTRIBUTOR to any third party (this also applies after termination of this Agreement) unless with the prior written approval of MANUFACTURER
|
e)
|
DISTRIBUTOR may not advertise Products by highlighting features or usability for particular purposes, or give any warranty in that respect, if and to the extent MANUFACTURER itself does not advertise or has not allowed such advertising, or agreed to warrant in that respect. Further, DISTRIBUTOR shall not grant any third party the right to advertise or warrant in that manner.
Without
prejudice
to any further rights of MANUFACTURER, DISTRIBUTOR shall hold MANUFACTURER free and harmless from any risks that may result from any violation of the foregoing undertakings.
|
f)
|
DISTRIBUTOR acknowledges that all industrial property rights, in particular patents, design patents, utility models, trademarks, and get-ups (inclusive of product names), as well as copyrights that have been established by MANUFACTURER in the Products or that are used in connection with the Products, their packaging or advertisements, are held exclusively by MANUFACTURER and that he has no rights whatsoever in that respects.
|
g)
|
Any rights nonetheless being held by, or arising to DISTRIBUTOR, shall be promptly assigned by DISTRIBUTOR to MANUFACTURER. DISTRIBUTOR shall refrain from any act that may weaken or cancel the above-mentioned rights of MANUFACTURER. On demand of MANUFACTURER, he shall enter into a license agreement (to be registered, if required) with MANUFACTURER with regard to any industrial property rights of MANUFACTURER.
|
h)
|
For the term of this Agreement, DISTRIBUTOR shall be entitled to use MANUFACTURER’s protected trademarks, other protected logos and corporate design in order to advertise for the Products. DISTRIBUTOR shall use appropriate features on his letterhead, printed forms and advertising material to make clear that he is a distributor of the Products. DISTRIBUTOR shall be entitled to use the protected trademarks or the brand name “SNOKE®” as part of his company name subject to MANUFACTURERS prior written consent only. The same shall apply to the registration and/or use of any internet domain and email-addresses that includes the brand name “SNOKE®”.
|
i)
|
To the extent DISTRIBUTOR is allowed to make use of trademarks and get-ups, such trademarks and get-ups may only be used without any change and only in the manner determined by MANUFACTURER. DISTRIBUTOR undertakes to submit to MANUFACTURER, for prior written approval, any self-produced advertising material, business paper, signboards of his firm, as well as any other material on which are shown trademarks or get-ups of MANUFACTURER, and not to use such material without such written approval.
|
j)
|
DISTRIBUTOR shall not, either during the term or after termination hereof, challenge or contest the industrial property rights set forth in sub-paragraph f) above.
|
k)
|
DISTRIBUTOR shall observe MANUFACTURER's directions, and render reasonable assistance to MANUFACTURER
|
1)
|
if complaints about or negative criticism of Products or the packaging thereof have to be warded off;
|
2)
|
in the event that infringements of industrial property rights of MANUFACTURER by third parties should have to be pursued; in particular, DISTRIBUTOR shall inform MANUFACTURER without delay about infringements or potential infringements of MANUFACTURER's trade marks including imitations of MANUFACTURER's packing, get-up and shapes which could give rise to confusion. At the request of MANUFACTURER DISTRIBUTOR shall assist MANUFACTURER in legal proceedings, MANUFACTURER reserving the right to issue a Power of Attorney or any other Power to represent MANUFACTURER's interest concerning matters of trade marks and industrial property rights. The costs hereto are at the expense of MANUFACTURER.
|
3)
|
if MANUFACTURER has to ward off allegations of third parties claiming that MANUFACTURER, in the Territory, had violated any of their industrial property rights or the principles of fair competition;
|
4)
|
in the event that any third party, with regard to the sale of competing products, should have
violated the principles of fair competition which violation would be pursued.
|
l)
|
Any activities DISTRIBUTOR is not allowed to engage in under this Clause shall also be disallowed by DISTRIBUTOR to any third party.
|
a)
|
MANUFACTURER will endeavour to supply DISTRIBUTOR with Products as scheduled and in sufficient quantity, and to notify DISTRIBUTOR as soon as possible of any foreseeable delivery problems and/or delays.
|
b)
|
MANUFACTURER shall
|
1)
|
continuously provide DISTRIBUTOR with any material relating to the Products, in particular with leaflets, datasheets, catalogues, advertising material, and standard forms, whereby such material shall remain the property of MANUFACTURER';
|
2)
|
provide DISTRIBUTOR with all market information including such lists of customers that are available to MANUFACTURER from the time period prior to commencement of the contractual relationship with DISTRIBUTOR as hereunder established or that come to the attention of MANUFACTURER in the future independent of the activities of DISTRIBUTOR;
|
c)
|
MANUFACTURER shall promptly inform DISTRIBUTOR of any discontinuation of Products as well as of new Products.
|
d)
|
MANUFACTURER shall indemnify and hold DISTRIBUTOR harmless from any claims arising from the sale of Products which infringes upon industrial property rights of third parties. However, this shall only apply under the condition that DISTRIBUTOR immediately informs MANUFACTURER of any such complaints of third parties as soon as he becomes aware of them and that DISTRIBUTOR follows MANUFACTURER’s instructions regarding the defence against such claims.
|
a)
|
This Agreement shall commence on November 1, 2011 and end on October 31, 2016 Thereafter this Agreement shall automatically be extended for consecutive periods of 5 years each unless it is terminated for cause with 6 months written notice prior the end of the specific term.
|
b)
|
This Agreement shall be interminable during its term. The right to a termination for cause (Clause 18 herein) shall remain unaffected.
|
c)
|
This Agreement shall terminate at the latest on October 31 2021. The parties shall conduct negotiations for a new Agreement no later than six months prior to the termination of this Agreement.
|
a)
|
Both parties are entitled – at their own option - to terminate this Agreement prematurely for just cause with or without notice. Just cause shall be presumed in particular in cases where one party
|
1)
|
becomes insolvent or – voluntarily or involuntarily - applies for insolvency or bankruptcy proceedings of any kind;
|
2)
|
breaches this Agreement so substantially or with such a lasting effect that the non-breaching party cannot be expected to adhere to this Agreement until the end of the cancellation period;
|
3)
|
repeats a breach of this Agreement or does not cease a continued breach within two weeks despite written admonition.
|
b)
|
Moreover, MANUFACTURER may terminate this Agreement prematurely – at its own option - with or without notice in cases where
|
1)
|
DISTRIBUTOR fails to meet the annual minimum quantities as set out in Clause 8 herein by more than 20%. MANUFACTURER shall have no right to terminate the Agreement if DISTRIBUTOR proves that the failure to meet the minimum quantities was occurred with no fault of his own;
|
2)
|
if DISTRIBUTOR is either (i) in default for more than 60 calendar days in accepting any or all of the Products ordered and does not correct such default after receipt of a warning letter pointing out such default and demanding correction of such default within a reasonable period of time and stating MANUFACTURER’s intention to terminate the Agreement otherwise or (ii) is repeatedly (
at least twice
) in default for more than 60 calendar days in accepting any or all of the Products ordered and has received above mentioned warning letter after the previous default. DISTRIBUTOR shall also be in default if the contract products have been ordered but cannot be delivered since their payment is not assured. MANUFACTURER shall have no right to terminate the Agreement if DISTRIBUTOR proves that the default was occurred with no fault of his own;
|
3)
|
the shareholders or the management of DISTRIBUTOR have changed without MANUFACTURER’s prior written approval, even though this approval could have been obtained, and where MANUFACTURER refuses retroactive approval for factually justifiable cause.
|
4)
|
MANUFACTURER shall exercise his right to terminate this Agreement prematurely at the latest 3 months after having knowledge of such case.
|
a)
|
The termination of the Agreement shall not affect individual transactions between DSITRIBUTOR and MANUFACTURER which have been concluded according to the instant Agreement. In the case of a contractual notice of termination MANUFACTURER shall continue to supply DISTRIBUTOR in such a way that DISTRIBUTOR is able to fulfil his contractual obligations with third parties as usual until the termination becomes effective.
|
b)
|
MANUFACTURER may request DISTRIBUTOR to return, upon termination of this Agreement, any and all or - at MANUFACTURER's sole option - part of any remaining Products received from MANUFACTURER. MANUFACTURER shall reimburse DISTRIBUTOR for any shipping costs and - to the extent such items are the property of DISTRIBUTOR – for the purchase price.
|
c)
|
Inasmuch as MANUFACTURER is obligated to take back Products after termination of this Agreement, this obligation shall only apply in so far as Products are concerned which are still in MANUFACTURER’s product portfolio and which are unused and still packed in the – largely undamaged – original packaging. There shall be no obligation whatsoever to buy back any Products if and when DISTRIBUTOR has unwarrantedly terminated this Agreement or if the termination is based upon conduct of DISTRIBUTOR which would have entitled the supplier to terminate the Agreement without notice.
|
d)
|
Neither party shall be entitled to claim damages or compensation as a result of the termination of this Agreement. In particular, DISTRIBUTOR shall not be entitled to compensation according to sec. 89b) of the German Commercial Code (HGB). Claims for damages resulting from breach of contract shall remain unaffected hereof.
|
e)
|
Upon termination of this Agreement, DISTRIBUTOR shall
|
1)
|
return all samples as well as all written sales and advertising material;
|
2)
|
refrain from utilizing any of MANUFACTURER’s industrial property rights, in particular its trademarks, and for each case of culpable infringement pay liquidated damages
(Vertragsstrafe)
of €25,000.00, and in cases of continuous infringement liquidated damages
(Vertragsstrafe)
of €2,500.00 per day of such infringement. MANUFACTURER shall be entitled to claim compensation for further damages; the liquidated damages
(Vertragsstrafe)
will be set-off against such further claims.
|
3)
|
only use such trademarks and presentations for any new products which DISTRIBUTOR may choose to distribute after the termination of this Agreement which show noticeable dissimilarity from the Products to avoid confusion in the market. This obligation does not result in any compensation claim of DISTRIBUTOR.
|
a)
|
To the extent that this Agreement requires written form, this requirement shall also be met through use of telegrams, faxes, telex or email.
|
b)
|
Any notices sent by registered/certified mail or air mail shall be deemed received by the recipient no later than one week after dispatch.
|
c)
|
Any amendments to this Agreement must be in writing. This shall also apply to an agreement to abolish the requirement of writing. Moreover, every decision, every exercise of discretion and every approval of MANUFACTURER shall only be effective if made in writing.
|
d)
|
Notices shall be sent to the following addresses:
|
MANUFACTURER: | ecoreal GmbH & Co. KG | |
[name of contact person] | ||
Spinnmühlengasse 9 | ||
50676 Köln | ||
Germany | ||
DISTRIBUTOR: | ||
Snoke Distribution Canada/ Snoke Distribution USA | ||
425 Alness, Toronto Canada M2J 2T8 |
|
so long as the other party has not received a written change of address notification.
|
a)
|
This Agreement shall be governed by German law.
|
b)
|
The applicability of the United Nations Convention on Contracts for the International Sale of Goods (CISG) is hereby explicitly excluded for all deliveries to DISTRIBUTOR.
|
c)
|
All disputes arising in connection with this contract or its validity shall be finally settled according to the Arbitration Rules of the German Institution of Arbitration e.V. (DIS) without recourse to the ordinary courts of law. The place of arbitration is Cologne in Germany. The arbitral tribunal consists of three arbitrators. The language of the arbitral proceedings is the English language.
|
Köln | November 24, 2011 | Toronto | November 13, 2011 | |
By: | /s/ Dr. Jurgen Ruhlmann | By: | /s/ Danny Yuranyi | |
Dr. Jurgen Ruhlmann | Danny Yuranyi | |||
ecoreal GmbH & Co. KG |
Snoke Distribution Canada/
Snoke Distribution USA
|
REVENUE
|
$ | - | ||
EXPENSES | ||||
Administrative
|
144,388 | |||
Marketing
|
48,217 | |||
Consulting
|
135,670 | |||
Vehicle
|
17,264 | |||
Interest
|
15,087 | |||
Depreciation
|
50 | |||
NET LOSS
|
$ | (360,676 | ) | |
Foreign exchange translation adjustment for the period
|
1,780 | |||
COMPREHENSIVE LOSS
|
$ | (358,896 | ) | |
Loss per weighted average number of shares outstanding during the period, | ||||
-Basic and fully diluted*
|
$ | (0.014 | ) | |
Weighted average number of shares outstanding during the period
|
||||
-Basic and fully diluted*
|
25,087,432 |
Share
|
Accumulated
|
|||||||||||||||||||||||
Number of
|
Subscription
|
Other
|
||||||||||||||||||||||
Common
|
pending
|
Comprehensive | ||||||||||||||||||||||
Shares
|
Amount
|
Allotment
|
Deficit
|
Income (Loss)
|
Total
|
|||||||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||||||
Common shares issued for cash
|
25,000,000 | 100 | 100 | |||||||||||||||||||||
Net loss for the period
|
(87,478 | ) | (87,478 | ) | ||||||||||||||||||||
Balance March 31, 2012
|
25,000,000 | 100 | - | (87,478 | ) | - | (87,378 | ) | ||||||||||||||||
Common shares issued for cash
|
400,000 | 10,000 | 10,000 | |||||||||||||||||||||
Share subscription received
|
||||||||||||||||||||||||
pending allotment
|
61,000 | 61,000 | ||||||||||||||||||||||
Foreign currency translation
|
1,780 | 1,780 | ||||||||||||||||||||||
Net loss for the period
|
(360,676 | ) | (360,676 | ) | ||||||||||||||||||||
Balance September 30, 2012
|
25,400,000 | 10,100 | 61,000 | (448,154 | ) | 1,780 | (375,274 | ) |
September 30, 2012
|
March 31, 2012
|
|||||||||||||||
Cost
|
Accumulated
Amortization
|
Cost
|
Accumulated
Amortization
|
|||||||||||||
Furniture and equipment
|
$ | 610 | $ | 133 | $ | 610 | $ | 102 | ||||||||
Computer hardware
|
600 | 119 | 600 | 100 | ||||||||||||
$ | 1,210 | $ | 252 | $ | 1,210 | $ | 202 | |||||||||
Net carrying value
|
$ | 958 | $ | 1,008 |
2012
|
$ | 2,394 | ||
2013
|
9,576 | |||
2014
|
3,990 | |||
$ | 15,960 | |||
Number
of shares*
|
Amount
|
|||||||
Balance, November 29, 2011 (date of incorporation)
|
- | $ | - | |||||
Common Shares issued during the period
|
25,000,000 | 100 | ||||||
Balance, March 31, 2012
|
25,000,000 | $ | 100 | |||||
Common Shares issued during the period
|
400,000 | $ | 10,000 | |||||
Balance, September 30, 2012
|
25,400,000 | $ | 10,100 | |||||
The loan from the shareholder is unsecured, bears
interest at 6% per annum and is due on August 31,
2013.
|
$ | 19,069 | ||
Interest accrued during the period ended September 30, 2012
|
675 | |||
$ | 19,744 |
●
|
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;
|
●
|
Level 2 -
Observable Inputs other than quoted prices included in level 1 that are observable for the asset or liability either directly or indirectly
; and
|
●
|
Level 3 - Inputs that are not based on observable market data.
|
Report of Independent Registered Public Accounting Firm
|
2 | |||
Consolidated Balance Sheet as of March 31, 2012
|
3 | |||
Consolidated Statement of Operations and Comprehensive Loss for the period from November 29, 2011 (Date of Incorporation) to March 31, 2012 | 4 | |||
Consolidated Statement of Changes in Shareholder’s Deficiency from
November 29, 2011 (Date of Incorporation) to March 31, 2012
|
5 | |||
Consolidated Statement of Cash Flows for the period from
November 29, 2011 (Date of Incorporation) to March 31, 2012
|
6 | |||
Notes to Consolidated Financial Statements
|
7 – 18 |
SNOKE DISTRIBUTION CANADA LTD.
|
Consolidated Balance Sheet as at March 31, 2012
|
(Amounts expressed in Canadian Dollars)
|
REVENUE
|
$ | - | ||
EXPENSES
|
||||
Administrative
|
22,636 | |||
Marketing
|
55,852 | |||
Vehicle
|
7,981 | |||
Interest
|
807 | |||
Depreciation
|
202 | |||
NET LOSS AND COMPREHENSIVE LOSS
|
$ | (87,478 | ) | |
Loss per weighted average number of shares outstanding during the period,
|
||||
-Basic and fully diluted
|
$ | (0.003 | ) | |
Weighted average number of shares outstanding during the period
|
||||
-Basic and fully diluted*
|
25,000,000 |
SNOKE DISTRIBUTION CANADA LTD.
|
Consolidated Statement of Changes in Shareholder’s Deficiency
|
For the period from November 29, 2011(Date of Incorporation) to March 31,
2012
|
(Amounts expressed in Canadian Dollars)
|
Share capital
|
||||||||||||||||
Number of
|
Accumulated
|
|||||||||||||||
Shares*
|
Amount
|
Deficit
|
Total
|
|||||||||||||
$ | $ | $ | ||||||||||||||
Common shares issued for cash
|
25,000,000 | 100 | - | 100 | ||||||||||||
Net loss for the period
|
- | - | (87,478 | ) | (87,478 | ) | ||||||||||
Balance, March 31, 2012
|
25,000,000 | $ | 100 | $ | (87,478 | ) | $ | (87,378 | ) | |||||||
* Reflects the August 24, 2012 twenty five thousand-for-one stock split (refer to note 13(i)) |
SNOKE DISTRIBUTION CANADA LTD.
|
Consolidated Statement of Cash Flows
|
For the period from November 29, 2011(Date of Incorporation) to March 31,
2012
|
(Amounts expressed in Canadian Dollars)
|
1.
|
NATURE OF BUSINESS AND GOING CONCERN
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
|
●
|
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;
|
●
|
Level 2 – Observable Inputs other than quoted prices included in level 1 that are observable for the asset or liability either directly or indirectly; and
|
●
|
Level 3 - Inputs that are not based on observable market data.
|
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
|
● Computer hardware | 3 years |
● Furniture and equipment | 3 years |
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
|
3.
|
PROPERTY & EQUIPMENT
|
March 31, 2012 | ||||||||||||
Accumulated | ||||||||||||
Cost | Amortization | Net | ||||||||||
Furniture and equipment
|
$ | 610 | $ | 102 | $ | 508 | ||||||
Computer hardware
|
600 | 100 | 500 | |||||||||
$ | 1,210 | $ | 202 | $ | 1,008 |
4.
|
COMMITMENTS AND CONTINGENCIES
|
2012 | $ | 4,302 | ||
2013 | 2,688 | |||
$ | 6,990 |
5. |
LOAN PAYABLE
|
Loan payable to an arm’s length third party consists of the following:
|
||||
Promissory note which bears interest at a fixed rate of 1%
|
$ | 20,000 | ||
accrued monthly, secured by the assets of the Company.
|
||||
The promissory note is payable on demand.
|
||||
Interest accrued
|
8 | |||
$ | 20,008 |
7.
|
RELATED PARTY TRANSACTIONS
|
8.
|
LOAN FROM SHAREHOLDER
|
The loan from the shareholder is unsecured, bears
interest at 6% per annum and is due on August 31,
2012.
|
$ | 56,819 | ||
Interest accrued
|
799 | |||
$ | 57,618 |
9.
|
INCOME TAXES
|
Net loss for the period | $ | (87,478 | ) | |
Expected income tax recovery at statutory income tax rates | (22,963 | ) | ||
Meals and entertainment | 1,053 | |||
Amortization | 53 | |||
Tax benefit of non-capital losses not recognized | 21,857 | |||
Income tax expense | $ | - |
Non-capital loss carry-forwards | $ | 83,265 | ||
Deferred tax assets | $ | 20,816 | ||
Less: Valuation allowance | $ | (20,816 | ) | |
- |
9.
|
INCOME TAXES-Cont’d
|
10.
|
CAPITAL MANAGEMENT
|
11.
|
FINANCIAL INSTRUMENT AND RISK FACTORS
|
11.
|
FINANCIAL INSTRUMENT AND RISK FACTORS-Cont’d
|
12.
|
SEGMENTED INFORMATION
|
13.
|
SUBSEQUENT EVENTS
|
13.
|
SUBSEQUENT EVENTS-Cont’d
|
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 |
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 |
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 |
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.
|
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.
|
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 | ) |
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 | ) |
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 | ) |