Our Business

Gilla Inc.
Investor Presentation
OTCQB: GLLA
www.gillainc.com
Safe Harbor
This presentation provides a summary description of Gilla Inc. (“Gilla”) and its business, all of
which is available in the public disclosure record of management, but does not purport to be
complete. Prospective investors are encouraged to obtain independent legal advice concerning
any investment in securities of Gilla and should not base their decision on whether to invest in
either Company upon the material provided herein. There are no representations or warranties
made herein by Gilla or any financial advisors and agents of Gilla (the “Agents”).
There are certain risks inherent in an investment in the securities of Gilla which prospective
investors should carefully consider before investing in the securities of Gilla. This presentation is
not, and under no circumstances is it to be construed as, an advertisement or a public offering of
securities of Gilla. No securities regulatory authority or similar authority has reviewed or in any
way passed upon the presentation or the merits of these securities and any representation to the
contrary is an offence.
This presentation has been prepared for information purposes only in an effort by management
to summarize the public disclosure record of Gilla.
No representation, warranty or undertaking, express or implied, is made and no responsibility or
liability is accepted by Gilla or any of its Agents as to the accuracy or completeness of the
information contained herein or any other information, representation, warranty or undertaking,
express or implied, made by Gilla in connection with the offering of securities described herein.
Private and Confidential - Gilla Inc. (OTCQB:GLLA)
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Gilla aims to become a global leader in the
manufacturing and distribution of E-liquid brands and
proprietary recipes for the vapor industry.
Private and Confidential - Gilla Inc. (OTCQB:GLLA)
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The Opportunity
1.
Consumers Shifting to Vaporizers
•
•
Vaporizers are growing 3x faster than
E-cigarettes
Better user experience
U.S. E-Liquid Market (Millions)
$3,000
$2,500
2.
Industry Ripe For Consolidation
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•
•
•
•
3.
$2,000
$1,500
Fragmented E-liquid industry
$1,000
Hundreds of independent (“mom/pop”)
$500
manufacturers
$2014
2015
2017
2019
2021
2023
Limited expertise operating larger
Imported E-liquids
U.S. Manufactured E-liquids
businesses
Adhere to self-governed manufacturing standards
No current market leader or existing/natural consolidator or buyer
2025
Attractive Acquisition Valuations
•
•
•
4.
Manufacturers have limited access to growth capital
Interested in exiting to “cash-in” on recent growth
Limited buyers given size of targets and early days of the industry
Recurring Revenue & High Margins
•
•
Consumers require E-liquid on a regular basis
Significantly less expensive then combustible cigarettes reducing price sensitivity
Private and Confidential - Gilla Inc. (OTCQB:GLLA)
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The Strategy
Establish Significant Private Label Clientele
Acquire Scalable Manufacturing Platform
•
E Vapor Labs: Daytona, FL based E-liquid facility
Establish Online Retail Channel
•
Legion of Vape and VaporLiq
Establish Global Distribution Platform
•
Gilla Europe: Multinational distribution platform
Acquire & Develop New Brands
•
Low cost customer acquisition, operational synergies,
consolidate sales efforts, and improve margins
Add Manufacturing Platforms
•
•
Reduce jurisdictional risk
Efficiency in distribution/logistics
Private and Confidential - Gilla Inc. (OTCQB:GLLA)
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Recent Announcements
Gilla Appoints Chief Marketing Officer and Leading Sales Team
(Feb. 22, 2016)
Gilla announced that it had appointed an industry veteran, Austin Hopper, as the Company’s Chief
Marketing Officer. Mr. Hopper will utilize his experience in the vape industry to lead and execute on
Gilla’s global marketing strategy as the Company embarks on a new stage of growth. In joining Gilla,
Mr. Hopper also brings his leading sales team that has achieved over $2 million in monthly sales of ELiquids.
Gilla Forms Gilla Europe; Acquires Leading E-Cig Management Team (Jan. 6, 2016)
Gilla announced that it had formed Gilla Europe Kft. in Budapest, Hungary and has hired a leading Ecig sales and distribution team having a platform that accesses over 25 European countries and
covering over 30 languages. The distribution platform was providing exclusive services to a leading
cig-a-like brand and had built sales to over $3 million per year.
Gilla Closes Acquisition of The Mad Alchemist E-Liquid Brand
(Dec. 2, 2015)
Gilla acquired all of the assets, rights and title to own and operate The Mad Alchemist and the
Replicant E-liquid brands available online and in vape shops in the United States, Canada, Europe
and United Arab Emirates. The total purchase price of the assets was $500,000 payable to the vendor
over a period of 30 months from the closing in common stock and cash. The Company also agreed to
a tiered quarterly earn-out based on the gross profit stream of the acquired brands up to a maximum
of 25% of such stream.
Gilla Closes Acquisition of Craft Vapes E-Liquid Brand
(Nov. 3, 2015)
Gilla acquired all of the assets, rights and title to own and operate the Craft Vapes, Craft Clouds, and
Miss Pennysworth’s Elixirs E-liquid brands available online and in vape shops in the United States,
the United Kingdom and France. At closing, Gilla issued to the vendor 1,000,000 common shares
valued at $150,000; paid to the vendor $23,000 in cash for inventory and equipment; and agreed to a
tiered quarterly earn-out based on the gross profit stream of the acquired brands up to a maximum of
25% of such stream.
Gilla Surpasses Q3 Expectations; Provides Q4 Guidance
(Oct. 8, 2015)
Gilla surpassed its expectation of $750,000 in the third quarter of 2015 with total revenues of over
$800,000 recorded in the period.
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Shifting Landscape
Consumer demand has drastically shifted from “cig-a-like”
E-cigarettes to Vaporizers, Tanks and Mods.
Cig-a-like
Vaporizers
•
•
•
•
•
•
•
Limited power
Limited flavor capacity
Lower conversion rate (5.6%)
compared to vaporizers (9.6%)
Big tobacco is a large player
in the E-cig space with control
over c-store distribution channel
Better performance
Better affordability
Attractive “vaping lifestyle”
Vape Shops
•
•
•
•
More than 19,000 globally
½ in the United States
Robust assortment of flavors
and products
Vaping experts are educating
users
E-Liquid Demand
•
•
US E-liquid industry is
expected to grow to $2.8B
by 2025
Growing demand for US
$2.8B
manufactured E-liquid
by 2025
Private and Confidential - Gilla Inc. (OTCQB:GLLA)
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Our Business
Developing & Expanding New E-liquid Brands
Recently acquired Florida based 10,000 sq. ft. facility with room for
expansion
•
•
Current capacity: 30,000 bottles a day
Skilled workforce and knowledgeable management team
Key Attributes
•
•
•
•
In house branding and marketing team
• Brand/logo design
• Vape hardware and apparel design
Flavoring solutions
• USA sourced ingredients
• 500 base flavor options
• Custom flavoring through a “mixologist”
Fulfilment services
• Customized labeling and bottling
• Outsourced hardware supply
• Warehousing and shipping
Expertise of launching new brands rapidly
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Our Business
Private Label Clientele
Clientele Includes Major Global Tobacco Companies
•
•
•
Focus on C-store channel
GRE is a global cigarette manufacturer based in North America with products in over
150,000 points of sale worldwide
Increased manufacturing efficiency by producing for smaller vape brands
GRE Tobacco
Other Clientele
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Our Business
Our Product Portfolio
Established In-House Expertise In New Brand Development
Private and Confidential - Gilla Inc. (OTCQB:GLLA)
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Our Business
Brand Promotion - Online Strategy
Creative Design
•
•
•
•
•
Website design
User interface design
Mobile optimization
Integrated payment processing
Packaging design
Social Media Managment
•
•
•
•
Strategy development
Social networking services
Create and manage social feeds
Community monitoring
Affiliate-Based Marketing
•
•
Lead generation
Drive targeted traffic
Private and Confidential - Gilla Inc. (OTCQB:GLLA)
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Our Business
Multinational Distribution Platform
Distribution Network
•
•
Current reach of 30 countries
International logistics and supply chain
management platform
Sales Support
•
•
•
Multilingual call center
Multinational payment processing
systems
Country managers for all of Europe and
North America
Infrastructure
•
•
•
In-house developed ERP systems
Best-in-class manufacturing and quality
assurance
Strategically located distribution hubs
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Our Business
Economics of Our E-Liquid Manufacturing
Retail
96%-98% Margins
Distributor
Wholesale
81%-88% Margins
91%-94% Margins
Private Label
48%-75% Margins
All margins are based on a 30ml E-liquid bottle
Private and Confidential - Gilla Inc. (OTCQB:GLLA)
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Our Business
A Scalable Revenue Model
Vape Shops Bottles/Month
Shelf Space
Revenue/Year
Gross Margin/Year
1
1K - 2K
10%
$9.6K - $19.2K
$8.1K - $16.2K
100
100K - 200K
10%
$960K - $1.9M
$810K - $1.6M
500
500K - 1.0M
10%
$4.8M - $9.6M
$4.1M - $8.1M
2,000
2.0M - 4.0M
10%
$19.2M- $38.4M
$16.2M - $32.4M
A 1% increase in shelf space equates to an additional $960 - $1,920 in
revenue per vape shop annually
Private and Confidential - Gilla Inc. (OTCQB:GLLA)
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Consolidation Strategy
Selectively pursue financially and strategically accretive targets
•
•
•
•
Net positive cash-flow
Growing sales
Access to new/unique customer base/markets
Product and/or industry experience
Consolidate operations and expertise to leverage
•
•
•
•
•
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Operational/cost synergies
Consolidation of manufacturing facilities
Current private label expertise to improve margins
Customer base to introduce additional revenue streams (hardware etc.)
“Best of Breed” flavors across the customer base
Online marketing across the board to develop customer base
Management “tailor-made” for execution of consolidation strategy
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•
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CEO with over 17 years of experience in public company management
and business development in the gaming and technology sectors
CFO having completed in excess of $3B in principal investments and
advised on a further $4B of M&A for third party clients
COO with over 10 years of experience in the logistics
and distribution businesses
Private and Confidential - Gilla Inc. (OTCQB:GLLA)
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Key Investment Highlights
High growth E-liquid industry
•
•
US E-liquid industry is expected to grow to $2.8B by 2025
According to a leading Wells Fargo analyst, vapor consumption (including hardware
and “cig-a-like” products) could surpass combustible cigarettes in 10 years
High margin manufacturing business
•
•
E-liquid portfolio of 6 premium brands with 2 in late development
Margins in excess of 75% on premium E-liquid brands
Pure play investment vehicle
•
•
•
Listed in the US on the OTCQB: GLLA
Only public company focused on E-liquids
Plans to up-list to the NASDAQ and dual list in Canada to improve liquidity and
valuation
Strategic and well developed consolidation strategy
•
•
•
•
Strong pipeline of accretive targets
Opportunity to expand product verticals, grow revenues and profitability by
leveraging expertise and consolidating operations
Proven and well suited management team
Utilize public vehicle
Private and Confidential - Gilla Inc. (OTCQB:GLLA)
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Key Financial Highlights
Key Financial Information
Revenue
Gilla Owned Brands
OEM
Other
Total Revenue
31-Dec-15
$
78,750 $
157,500
236,250
31-Mar-16
157,500 $
834,750
290,250
1,282,500
30-Jun-16
831,563 $
486,469
498,000
1,816,031
30-Sep-16
1,402,500 $
827,250
665,700
2,895,450
31-Dec-16
2017
2018
2019
2,071,875 $ 18,131,250 $ 40,456,875 $ 57,900,000
1,175,063
7,503,375
9,398,063
10,644,000
798,600
3,534,650
3,919,050
4,143,450
4,045,538
29,169,275
53,773,988
72,687,450
Cost of Goods Sold
Gilla Owned Brands
OEM
Other
Total COGS
14,063
105,000
119,063
28,125
565,125
82,800
676,050
94,922
322,594
137,700
555,216
196,875
545,625
181,800
924,300
316,406
771,938
221,400
1,309,744
3,023,438
4,843,875
1,002,600
8,869,913
7,010,156
5,792,063
1,150,800
13,953,019
10,125,000
6,373,500
1,266,000
17,764,500
Total Other Expenses
EBITDA
707,738
(590,551)
1,325,798
(719,348)
1,488,440
(227,625)
1,697,741
273,409
1,794,343
941,450
9,177,020
11,122,342
12,673,265
27,147,704
15,488,419
39,434,531
Depreciation / Amortization
Depreciation
EBIT
2,805
(593,356)
6,485
(725,833)
6,323
(233,948)
6,165
267,244
11,011
930,440
63,425
11,058,918
98,158
27,049,546
127,229
39,307,302
Interest Expense
Tax
Net Income
80,794
(674,150) $
85,322
17,261
(828,416) $
102,834
13,554
(350,336) $
90,725
55,843
120,676 $
92,179
209,565
628,696 $
Key Revenue and GM Assumptions
Gilla Owned Brands (Gross Margin: 82%)
# of Stores Reached
% of Shelf Space
OEM
# of Hardware sold (Gross Margin: 32%)
# of E-liquid bottles sold to Vape Stores (Gross Margin: 53%)
$ Revenue from 3rd Party Liquid Clients (Gross Margin: 32%)
Other Revenue
New - Ecig Revenues (Gross Margin: 65%)
Distribution Revenues (Gross Margin: 40%)
$
236,788
105,000
105,000
2,705,532
6,736,137
9,800,576
8,116,597 $ 20,208,410 $ 29,401,727
31-Dec-15
31-Mar-16
30-Jun-16
30-Sep-16
31-Dec-16
2017
2018
2019
50
5.0%
100
5.0%
225
7.5%
350
10.0%
450
12.5%
850
22.5%
1,250
30.0%
1,650
30.0%
150,000
200,000
7,500
7,500
675,000
7,500
25,313
300,000
7,500
52,500
600,000
7,500
84,375
900,000
30,000
806,250
5,700,000
30,000
1,869,375
6,000,000
30,000
2,700,000
6,000,000
-
270,000
20,250
450,000
48,000
570,000
87,000
660,000
126,000
2,840,000
631,500
3,000,000
835,500
3,000,000
1,039,500
Private and Confidential - Gilla Inc. (OTCQB:GLLA)
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Capital Structure
Capital Structure
# of Shares
Current Shares Outstanding*
Warrants Outstanding
Warrants Outstanding (Average exercise price of $0.27)
Current Acquisitions (Assumed to be issued at $0.15)
Fully Diluted Shares Outstanding
100,521,239
Current Raise ($1.15M convertible at $0.10)**
Current Raise (Full warrant at $0.20 exercise price) **
11,500,000
11,500,000
Fully Diluted Shares Outstanding (Post-Financing)
*Inside Ownership of 24%
**50% of the Current Raise Closed
7,227,373
1,333,333
109,081,945
132,081,945
Private and Confidential - Gilla Inc. (OTCQB:GLLA)
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Contact
Graham Simmonds
Chief Executive Officer
T: 1 647 503 6602
M: 1 416 843 2281
[email protected]
Ashish Kapoor
Chief Financial Officer
T: 1 647 503 6603
M: 1 416 523 3350
[email protected]
Canada (Corporate Office)
70 York St.
Suite 1610
Toronto, ON
M5J 1S9
U.S.A. (Sales Office)
475 Fentress Blvd.
Unit L
Daytona Beach, FL
32114
Private and Confidential - Gilla Inc. (OTCQB:GLLA)
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Appendix
Management & Board
J. Graham Simmonds, Chairman of the Board of Directors and CEO
Mr. Simmonds has served as Chairman of the Board of Directors since May 14, 2015 and as Chief Executive Officer of the Company since
November 15, 2012. Mr. Simmonds has over 18 years of experience in public company management and business development projects
within both the gaming and technology sectors. Mr. Simmonds is licensed and/or has previously been licensed/registered with a number of
horse racing and gaming commissions in the United States and Canada. Mr. Simmonds developed and launched the first in-home digital
video horseracing service in North America and is a former director and partner in eBet Technologies Inc., a licensed ADW operator and
software developer for the online horse racing industry in the United States. He is the founder and CEO of Baymount Incorporated, a
diversified investment, financial advisory and venture capital firm focused in opportunities within the horse racing, gaming and technology
industries and former chairman and CEO of DealNet Capital Corp., a consumer finance company.
Ashish Kapoor, Chief Financial Officer
Mr. Kapoor has served as the Company’s Chief Financial Officer since November 15, 2012. Mr. Kapoor has over 15 years of experience in
providing capital markets advisory and assurance services as a finance professional. After obtaining his Chartered Accountant designation
at Ernst & Young, Mr. Kapoor has gained over 10 years of experience in investment banking, advising client across various industries. As a
senior vice president at Macquarie Capital Markets Canada Ltd., Mr. Kapoor was responsible for the Canadian telecom, media,
entertainment and technology investment banking and principal investing group. During his 10 years at Macquarie, Mr. Kapoor completed
in excess of $3B in successful principal investments and advised on a further $4B of mergers and acquisitions for third party clients. Mr.
Kapoor was formerly the CFO of DealNet Capital Corp., a consumer finance company, and Transeastern Power Trust, an independent
power producer focussed on renewable energy sources. Mr. Kapoor obtained his Chartered Accountant designation as part of the Ernst &
Young’s Toronto practice and was awarded the Gold Medal for first place in Ontario, and the Bronze Medal for third place in Canada on the
2000 Chartered Accountancy Uniform Final Examination. Mr. Kapoor is also a CFA Charter holder and holds a Masters of Accounting and
a Bachelor of Arts degree from University of Waterloo.
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Appendix
Management & Board
Balint Antal, Managing Director of Europe
Mr. Antal has served as the Company’s Managing Director of Europe since January 6, 2016. Mr. Antal has over 14 years of experience in
logistics and distribution, business development and management in IT, real estate and international commerce sectors. After a few years
as a quality manager of an IT company providing services for the largest international bank, Mr. Antal successfully built and operated his
own companies; including E-Distribution Kft., a leading European E-cigarette distributor where he built a 20-plus-person team in Hungary
providing customer service, E-commerce, IT services and the logistics, warehousing and distribution services generating sales of over $3M
per year. In the Hungarian real estate sector, Mr. Antal built over $5M of annual income through the development of commercial properties
providing land development, financial, sales and rental, and management services. Mr. Antal holds a Masters of Business Administration
and Management from Corvinas University.
Austin Hopper, Managing Director of North America
Mr. Hopper has served as the Company’s Managing Director of North America since February 22, 2016. In 2002, Mr. Hopper found himself
at the epicenter of the emerging vaping industry when he began working at Space Jam. This new and dynamic market was the perfect fit
for Mr. Hopper’s personal sales approach and natural showmanship, and soon Space Jam was a stratospheric success. Mr. Hopper
repeated the trick by helping to launch Cosmic Fog, before turning his attention to the just launched Cuttwood. Within a year, Mr. Hopper
helped turn that struggling start-up into arguably the world’s biggest E-liquid brand.
Danny Yuranyi, Director, Chief Procurement Officer
Mr. Yuranyi has served as a director of the Company since November 15, 2012. Prior to that, he was president of DY Consulting, a
consulting firm. Mr. Yuranyi has over 30 years of experience in the transportation, logistics, and distribution businesses having successfully
built and operated his own companies on a number of occasions. Mr. Yuranyi has held senior positions with Loomis and Gelco Express
which was later sold to Air Canada. After helping build a division of Gelco Express from $1M to more than $12M in annualized sales, Mr.
Yuranyi left to start a new business of his own called United Messengers which quickly grew to become the largest same-day messenger
service in Canada. Most recently, Mr. Yuranyi has invested in building distribution relationships with European brands in the energy drink
and bottled water businesses..
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Appendix
Management & Board
Henry J. Kloepper, Lead Independent Director
Mr. Kloepper has served as the Company’s Lead Independent Director since April 13, 2013 and is currently the Chairman of the
Compensation and Governance Committees. Mr. Kloepper is a leading financier and has been involved in investment banking and
corporate finance for over 30 years. He brings a rounded knowledge of the capital markets, strategic growth, and investments. Mr.
Kloepper is currently the CEO of Houston Lake Mining Inc., interim CEO of NWT Uranium Corp., and chair of Unique Broadband Systems
Inc. Mr. Kloepper was previously a director and president of Mogul Energy International Inc. and has held executive positions with Award
Capital, JP Morgan, Citibank, Bank of America, and North American Trust in the US, Canada, and Europe.
Gerald Goldberg, Chairman of the Audit Committee
Mr. Goldberg has served as a director of the Company since June 29, 2016 and is currently the Chairman of the Audit Committee. Mr.
Goldberg is a Chartered Professional Accountant and is a senior partner in the accounting firm of Schwartz Levitsky Feldman LLP, in
Toronto. Mr. Goldberg was previously a partner in Grant Thornton and its predecessor firm for over 15 years. Mr. Goldberg has over 30
years of experience in the service, distribution, retail, mining, natural resources and oil & gas, real estate, not-for-profit entities and
manufacturing industries, with a strong emphasis in taxation and business advisory services. He is also active in corporate finance and
development and has been involved in the structure and design of numerous innovative financing instruments, tax shelters and
syndications, both in Canada and the United States. He is actively involved with the audit of various publicly listed companies in both
Canada and abroad. Mr. Goldberg also has tremendous experience as an independent director, chairman and member of the audit
committee of publicly listed companies, non-for-profit companies, educational and other institutions, organizations and companies.
Dr. Blaise A. Aguirre, Director
Dr. Aguirre has served as a director of the Company since November 7, 2014. Dr. Aguirre, an internationally known expert, author and
lecturer in child and adolescent psychiatry, is the founding medical director of 3East at McLean Hospital, and is an assistant professor of
psychiatry at Harvard Medical School. He served as an independent director of Investors Capital Holdings Ltd. from October 28, 2011 until
its sale to RCS Capital Company (RCAP:NYSE) in 2014. Previously, Dr. Aguirre was a broker with Investors Capital Company having
obtained his series 7 and 63 securities licenses. Dr. Aguirre sits on the board of directors that oversees the annual running of the Illinois
Marathon in Champaign, IL. He was a member of the Medical Advisory Board of IVPCARE Inc. prior to their buyout by Walgreens. Dr.
Aguirre has developed and maintains enduring relationships with institutional money managers and venture capitalists and has developed
expertise as a small cap stock analyst.
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Appendix
Management & Board
Christopher Rich, Director
Mr. Rich has served as a director of the Company since November 7, 2014. Mr. Rich is a successful television, film and theater actor and
producer. He studied acting at the University of Texas and later at Cornell University, where he received a master’s degree in theater arts.
He began his performing career in New York performing on stage in many off-Broadway and regional productions. Mr. Rich has appeared
in many television series, most notably on Murphy Brown and Reba. On the big screen, he starred in The Joy Luck Club, Flight of the
Intruder, and the independent art film Prisoners of Inertia with Amanda Plummer. He has appeared in numerous television movies, with
credits including Going Home opposite Jason Robards in one of his last performances. Mr. Rich appeared in the Company’s Charlie’s Club
original online series called “Find Him. Bring Him In.”
Stanley D. Robinson, Director
Mr. Robinson has served as a director of the Company since October 29, 2008. In addition, Mr. Robinson was most recently a
Geologist/Exploration Manager with Kilo Goldmines Ltd., a position he held since January 2007. He is an exploration geologist with over 30
years of experience in Africa (Angola, Democratic Republic of Congo, Ghana, Tanzania, Burkina Faso), Canada and South America. Mr.
Robinson’s principal technical expertise is in the management of gold and base metal exploration projects, from grassroots to feasibility
stage, geological interpretations with an emphasis on structure and alteration, and in the identification of projects with economic potential.
He has extensive experience in managing exploration projects in remote locations and in climatic environments that range from permafrost
to tropical and semi-desert.
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