ITEM 1. BUSINESS
Business Development
Gilla Inc. (the “Company”), 112 N. Curry Street, Carson City, Nevada, 87803 was incorporated under the laws of the state of Nevada on March 28, 1995 under the name of Truco, Inc. The shareholders approved a name change on March 22, 1996, March 18, 1997, September 13, 1999, October 3, 2000, April 23, 2003 and February 27, 2007 to Web Tech, Inc., Cynergy, Inc., Mercantile Factoring Credit Online Corp., Incitations, Inc., Osprey Gold Corp. and to its present name, respectively.
We have specialized in acquiring and consolidating large, exploration-stage properties with near-term production potential and future growth through exploration discoveries. Our acquisition and development emphasis is focused on properties containing gold and other strategic minerals located in Africa.
The Company formed and received a 99% ownership interest in GISOR SPRL (“GISOR”), a foreign subsidiary, during the last quarter of 2009 and domiciled in The Democratic Republic of the Congo. This subsidiary was formed solely for the purpose of acquiring mining rights. GISOR has not had significant business activities since its inception.
Business of Issuer
The Company is a mineral-property development company specializing in acquiring and consolidating mineral properties with production potential and future growth through exploration discoveries. Acquisition and development emphasis has been focused on properties containing gold and other strategic minerals that are located in Africa.
ITEM 1A.
ITEM 1A. Risk Factors
MANAGEMENT RISKS
Management of the Company consists of Georges Benarroch/President, Chief Executive Officer and Chief Financial Officer, Daniel Barrette/Chief Operating Officer. There is only one full-time employee of the Company. Consequently, management of the Company has historically relied upon, and will continue to rely upon for the foreseeable future, the employment of outside consultants and independent contractors such as attorneys, accountants, geologists, petroleum engineers, financial advisors, and others to assist management in conducting the business affairs of the Company. The President and directors of the Company have other business interests in which they devote their primary attention or a substantial portion of their time and they are expected to continue to do so for the foreseeable future. As a result, there are at least potential conflicts of interest which may arise because of such other commitments. Any such conflicts, however, have been and are expected to be resolved through the exercise of sound business judgment by such individuals consistent with their fiduciary duties to the Company.
SECURITIES MARKET AND STOCK OWNERSHIP RISKS
There is no predictable method by which investors in the securities of the Company shall be able to realize any gain or return on their investment in the Company, or shall be able to recover all or any substantial portion of the value of their investment. There is, currently no public market for the securities of the Company, and no assurance can be given that a market will develop or that an investor will be able to liquidate his investment without considerable delay, if at all. Consequently, should the investor suffer a change in circumstances arising from an event not contemplated at the time of his investment, and should the investor therefore wish to transfer the common stock owned by him, he may find he has only a limited or no ability to transfer or market the common stock. Accordingly, purchasers of the common stock need to be prepared to bear the economic risk of their investment for an indefinite period of time. If a market should develop, the price may be highly volatile. Factors such as those discussed in this “Risk Factors” section may have a significant impact upon the market price of the securities of the Company. Owing to what may be expected to be the low price of the securities, many brokerage firms may not be willing to effect transactions in the securities.
Even if an investor finds a broker willing to effect a transaction in these securities, the combination of brokerage commissions and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of such securities as collateral for any loans. The Company has no agreement with any securities broker or dealer that is a member of the National Association of Securities Dealers, Inc., to act as a market maker for the Company’s securities. Should the Company fail to obtain one or more market makers for the Company’s securities, the trading level and price of the Company’s securities will be materially and adversely affected. Should the Company happen to obtain only one market maker for the Company’s securities, the market maker would in effect dominate and control the market for such securities. The Company’s registered securities are covered by a Securities and Exchange Commission rule that imposes additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors. For purposes of the rule, the phrase “accredited investors” means, in general terms, institutions with assets in excess of $5,000,000, or individuals having a net worth in excess of $1,000,000 or having an annual income that exceeds $200,000 (or that, when combined with a spouse’s income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written, agreement to the transaction prior to the sale. Consequently, the rule may affect the ability of broker-dealers to sell the Company’s securities and also may affect the ability of investors in securities of the Company to sell their securities in any market that might develop therefore.
Of the currently issued and outstanding shares of common stock of the Company, approximately 12,425,516 shares (approximately 42% of the total number of shares outstanding) are owned by, or are under the direct or indirect control of, only three individuals or corporations. That number of shares is enough to dominate and control the price and trading volume in the Company’s securities. Because those shares are controlled by such a limited number of persons, selling decisions by either or both of those persons can be expected to have a substantial impact upon (or “overhang” over) the market, if any, for the common stock. Should either or both of such persons chose to sell a large number of shares over a short period of time, the market price for the shares could be significantly depressed.
The majority of the Company’s authorized but un-issued common stock remains un-issued. The board of directors of the Company has authority to issue such un-issued shares without the consent or vote of the stockholders of the Company. The issuance of these shares may dilute the interests of investors in the securities of the Company and will reduce their proportionate ownership and voting power in the Company.
GEOLOGIC UNCERTAINTY AND INHERENT VARIABILITY
Although the estimated reserves and additional mineralized material have been delineated with appropriately spaced drilling to provide a high degree of assurance in the continuity of the mineralization, there is inherent variability between duplicate samples taken adjacent to each other and between sampling points that cannot be reasonably eliminated. There may also be unknown geologic details that have not been identified or correctly appreciated at the current level of delineation. This results in uncertainties that cannot be reasonably eliminated from the estimation process. Some of the resulting variances can have a positive effect and others can have a negative effect on mining operations. Acceptance of these uncertainties is part of any mining operation.
POLITICAL RISKS
Political unrest or changes in The Democratic Republic of the Congo or nearby countries could interfere with our operating or financing activities.
The political risk in sub-Saharan Africa is significant. Gilla’s rights to explore and develop mineral deposits in The Democratic Republic of the Congo are always subject to the continued political stability of the respective government’s. Political unrest or upheaval in adjoining countries could adversely affect our mining and development activities, and, if significant, would likely increase the costs of long term financing of the mining and processing activities. Further, Gilla may not be able to finance or operate the Cameroon or Angola Properties at all if future state or regional political upheavals occur.
GOLD EXPLORATION IS HIGHLY SPECULATIVE, INVOLVES SUBSTANTIAL EXPENDITURES, AND IS FREQUENTLY NON-PRODUCTIVE
Gold exploration involves a high degree of risk and exploration projects are frequently unsuccessful. Few prospects that are explored end up being ultimately developed into producing mines. To the extent that we continue to be involved in gold explorations, the long-term success of our operations will be related to the cost and success of our exploration programs. We cannot assure you that our gold exploration efforts will be successful. The risks associated with gold exploration include:
The identification of potential gold and probable uncertainties, we cannot assure you that current and future exploration programs will have mineralization based on superficial analysis. Quality of our management, and our geological and reserves, and to develop and construct mining and processing facilities.
Substantial expenditures are required to determine if a project has economically mine able mineralization. It may take several years to establish proven result in the discovery of reserves, the expansion of our existing reserves and the development of mines.
THE PRICE OF GOLD AND OTHER MINERALS ARE HIGHLY VOLATILE AND A DECREASE IN THE PRICE OF GOLD AND OTHER MINERALS CAN HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS
The profitability of gold and mineral mining operations is directly related to market prices. The market prices of gold and other minerals fluctuate significantly and are affected by a number of factors beyond our control, including, but not limited to, the rate of inflation, the exchange rate of the dollar to other currencies, interest rates, development of a mine is undertaken and the time production can commence can significantly affect the profitability of a mine. Accordingly, we may begin to develop one or more of our mines at a time when the price of gold or other minerals makes such exploration economically feasible and, subsequently, incur losses because the price of gold or other minerals decreases. We cannot predict the market price or fluctuations of the gold or copper price.
FUEL PRICE VARIABILITY
The cost of fuel can be a major variable in the cost of mining, one which is not necessarily included in the contract mining prices obtained from mining contractors but is passed on to the overall cost of operation. Although high fuel prices by historical standards have been used in making the reserve estimates included herein, future fuel prices and their impact on operating profitability cannot be predicted.
VARIATIONS IN MINING AND PROCESSING PARAMETERS
The parameters used in estimating mining and processing efficiency are based on testing and experience with previous operations at the properties or on operations at similar properties. While the parameters used have a reasonable basis, various unforeseen conditions can occur that may materially affect the estimates. In particular, past operations indicate that care must be taken to ensure that proper ore grade control is employed and that proper steps are taken to ensure that the leaching operations are executed as planned. The mining contracts for the mines include clauses addressing these issues to help ensure planned requirements are met. Nevertheless, unforeseen difficulties may occur in planned operations.
CHANGES IN ENVIRONMENTAL AND MINING LAWS AND REGULATIONS
Registrant believes that it currently complies with existing environmental and mining laws and regulations affecting its operations. The reserve estimates contain cost estimates based on requirements compliance with current laws and regulations. While there are no currently known proposed changes in these laws or regulations, significant changes have affected past operations and no assurance can be given that such changes will not occur in the future.
Through December 31, 2011, the Company has generated no revenues from operations.
REPORTS TO SECURITIES HOLDERS
There were no shareholders meetings during the period covered by this report.
The Bylaws of the Gilla Inc. are silent regarding an annual report to shareholders. Gilla Inc. is a reporting company and files reports with the U.S. Securities and Exchange Commission (SEC). The Company is required to file quarterly reports (Form 10-Q) and an annual report (Form 10-K) with the SEC. The annual report includes an audited consolidated financial statement.
Any materials that the Company filed with the Securities and Exchange Commission may be read and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Further, you may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Company is an electronic filer and the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission. That site is http://www.sec.gov.
ITEM 2.
ITEM 2. PROPERTIES
The Company occupies office space on a month-to-month basis and therefore has no leasehold interest. The Company pays a fee to a related party, at the rate of $10,000 (US) quarterly, which includes rent, and certain administrative services, such as bookkeeping, copying and printing, courier services, and telephone.
The Company owns no investments.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
There have been no changes since the filing of our Form 10-K for December 31, 2010.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The securities have been trading on the over-the-counter market until it was moved to Pink Sheets in February 2011, under the symbol “GLLA” as the trading activity was not sufficient for continuing to trade over the counter. The Company is listed on the Pink Sheets under the symbol “GLLA.” The following table sets forth for the periods indicated the range of high and low closing bid quotations per share as reported by the over-the-counter market for the past two years. These quotations represent inter-dealer prices, without retail markups, markdowns or commissions and may not necessarily represent actual transactions. The market for the common stock has been sporadic and there have been long periods during which there were few, if any, transactions in the common stock and no reported quotations. Accordingly, reliance should not be placed on the quotes listed below, as the trades and depth of the market may be limited, and therefore, such quotes may not be a true indication of the current market value of the Company’s common stock.
On December 31, 2011, the closing price of our common stock as reported on the OTCBB was $0.0035 per share. On December 31, 2011, we had in excess of 374 beneficial stockholders of our common stock and 29,477,766 shares of our common stock were issued and outstanding.
DIVIDENDS
On January 17, 2008 the Board of Directors of Gilla Inc. declared a cash dividend to its common stock Shareholders of Record on February 4, 2008 in the amount of $0.035 per share of common stock, which was distributed on February 15, 2008. The next dividend payment is unknown.
RECENT SALES OF UNREGISTERED SECURITIES
In January 2011, 1,500,000 common shares were issued, as a repayment of a $15,000 loan to the company.
In May 2011, 700,000 common shares were issued, as a repayment of a $7,000 loan to the company.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Earnings per share for each of the fiscal years shown below are based on the weighted average number of shares outstanding.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Gilla is a mineral-property development company specializing in acquiring and consolidating mineral properties with production potential, and future growth through exploration discoveries.
Gilla entered into a definitive agreement effective October 3, 2008 to acquire the mining rights owned by Terra Merchant Resources, (“Terra”), a private company incorporated in Ontario, Canada. Terra has secured rights to a gold exploration property in Angola, known under the name of Salutar Commercio Mining Concession, located some 120 km north of Cabinda City, Angola. The concession covers 199 square kilometers. Through a Joint Venture agreement, Gilla has rights to 70% of the mineral concession.
Following the death of the principal shareholder of Salutar, and the difficulties encountered by the estate, Gilla has made the decision not to expend further resources on this property despite interesting results from the 2008 exploration stream sediment sampling program. Consequently, the mining rights of $4,600,000 have been impaired.
Gilla has received confirmation that the application for Mineral Rights made by its 99% owned Congolese subsidiary, GISOR SPRL (“GISOR”), was successful. The Company was granted approval (“Avis Favorable”) on August 9, 2010, by the Cadastre Minier (CAMI) of a concession covering 451 «carrés miniers» or 383 square kilometres (38,300 Hectares) (Mwenga Project) located in the South-Kivu Province, Democratic Republic of Congo (“DRC”). The licence is contiguous to BANRO CORP’s (TSX-BAA) mining licences.
The Certificate entitles GISOR to conduct gold and diamond exploration on the awarded Exploration Licence (Permis de Recherches “PR”).
Banro’s Licences in the Lugushwa area cover a total of 641 square kilometres, has announced an inferred resource of 37Mt averaging 2.3g/t. (source: Banro’s Web site)
The company is current in meeting its obligation in the Democratic Republic of Congo as it pertains to it permits rights.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2011
The Registrant conducted no actual mining operation during the year ended December 31, 2011. As such, it had no revenues as described in the consolidated financial statements, attached hereto. However, the Company had total net loss of $40,624 and net loss of $5,033,142 for the years ended December 31, 2011 and 2010, respectively
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital deficits of $98,502 and $169,103 as of December 31, 2011 and 2010. Cash were $118 and $1,617 as of December 31, 2011 and 2010, respectively.
Cash from operating activities
The Company’s cash outflow from operations of $45,999 for year ended December 31, 2011 was $103,224 below cash flow from operations of $149,223 for the year ended December 31, 2010.
Cash from financing activities
The Company’s net cash inflow from financing activities of $44,500 for the year ended December 31, 2011 was $71,217 below the cash inflow from financing activities for the year ended December 31, 2010, which was $115,717.
The report of our independent accountants on our December 31, 2011 consolidated financial statements includes an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern due to lack of operations and revenue and substantial recurring losses from operations and significant accumulated deficit and working capital deficit. Our ability to continue as a going concern will be determined by our ability to obtain additional funding and commence and maintain successful operations. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
CERTAIN BUSINESS RISK FACTORS
You should carefully consider the risks described below before purchasing our common stock. If any of the following risks actually occur, our business, financial condition, or results or operations could be materially adversely affected, the trading of our common stock could decline, and you may lose all or part of your investment. You should acquire shares of our common stock only if you can afford to lose your entire investment.
WE HAVE A LIMITED OPERATING HISTORY WITH SIGNIFICANT LOSSES AND EXPECT LOSSES TO CONTINUE FOR THE FORESEEABLE FUTURE
We have yet to establish any history of profitable operations. We expect that our revenues will not be sufficient to sustain our operations for the foreseeable future. Our profitability will require the successful commercialization of our gold mines. No assurances can be given that we will be able to successfully commercialize our gold mines or that we will ever be profitable.
Our independent auditors have added an explanatory paragraph to their audit opinion issued in connection with the consolidated financial statements for the year ended December 31, 2011. The Company’s auditors have expressed doubt about the Company’s ability to continue as a going concern. The Company has current assets in the form of cash of $118 and current liabilities of $98,620. The Company’s net losses to date are $30,864,746.
THERE IS SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN DUE TO SIGNIFICANT RECURRING LOSSES FROM OPERATIONS, ACCUMULATED DEFICIT AND WORKING CAPITAL DEFICIT ALL OF WHICH MEANS THAT WE MAY NOT BE ABLE TO CONTINUE OPERATIONS UNLESS WE OBTAIN ADDITIONAL FUNDING.
The report of our independent accountants on our December 31, 2011 consolidated financial statements includes an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern due to lack of operations and revenue and substantial recurring losses from operations and significant accumulated deficit and working capital deficit. Our ability to continue as a going concern will be determined by our ability to obtain additional funding and commence and maintain successful operations. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Gilla, Inc.
Consolidated Financial Statements
December 31, 2011 and 2010
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Gilla, Inc.
Ontario, Canada
We have audited the accompanying consolidated balance sheet of Gilla, Inc. and its subsidiaries (the “Company”), as of December 31, 2011 and 2010, and the related consolidated statements of operations, deficiency in stockholders’ equity and cash flows for the year ended December 31, 2011 and 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We have conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Gilla, Inc. and its subsidiaries as of December 31, 2011 and 2010, and the consolidated results of its operations and its cash flows for the year ended December 31, 2011 and 2010, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the accompanying consolidated financial statements, the Company has not commenced its planned principal operations and has suffered recurring losses since inception, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to this matter are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ RBSM LLP
New York, New York
March 30, 2012
GILLA, INC.
CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of these consolidated financial statements.
GILLA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of these consolidated financial statements.
GILLA, INC.
CONSOLIDATED STATEMENTS OF (DEFICIENCY) IN SHAREHOLDERS' EQUITY For the year ended December 31,2011 and 2010
The accompanying notes are an integral part of these consolidated financial statements.
GILLA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these consolidated financial statements.
GILLA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
DECEMBER 31, 2011 AND 2010
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND DESCRIPTION OF BUSINESS
Gilla Inc. ("Gilla" or the "Company") was incorporated under the Laws of the State of Nevada on March 28, 1995 under the name of Truco, Inc. The stockholders approved a name change on March 22, 1996, March 18, 1997, September 13, 1999, October 3, 2000, April 23, 2003 and February 27, 2007 to Web Tech, Inc., Cynergy, Inc., Mercantile Factoring Credit Online Corp., Incitations, Inc., Osprey Gold Corp. and to its present name respectively. The Company’s activities are focused on mineral-property development specializing in acquiring and consolidating mineral properties with production potential and future growth through exploration discoveries. Our acquisition and development emphasis is focused on properties containing gold and other strategic minerals located in Africa. The company is currently not in the exploration stage and was in “exploration stage” till June 30, 2011.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its 99% subsidiary, GISOR SPRL (“GISOR”). All significant intercompany transactions have been eliminated in consolidation. GISOR had no activities during the years ended December 2011 and 2010.
Basis of Accounting
The consolidated financial statements are prepared using the accrual basis of accounting where revenues and expenses are recognized in the period in which they were incurred. The basis of accounting conforms to accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not established any sources of revenue and has incurred net loss of $ 40,624 and $5,033,142 during the years ended December 31, 2011 and 2010, respectively. These conditions create an uncertainty as to the Company’s ability to continue as a going concern. Management plans to explore new mining opportunities and possibly form joint ventures with other exploration and mining interests. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Cash and Cash Equivalents
For purposes of the Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with an original maturity date of three months or less to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of these financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant of these estimates is the impairment evaluation of mining rights. Accordingly, actual results could differ from those estimates.
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Net Income (Loss) per Common Share
The Company computes earnings per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Basic net income (loss) per common share is computed by dividing net loss by the weighted average number of shares of common stock. Diluted earnings per share is computed using the weighted average number of common and common stock equivalent shares outstanding during the period. There is no effect on diluted loss per share since the common stock equivalents are anti-dilutive. Dilutive common stock equivalents consist of shares issuable upon conversion of convertible notes and the exercise of the Company's stock options and warrants.
Mining Properties and Deferred Expenditures
Significant payments related to the acquisition of land and mineral rights will be capitalized as mining properties at cost. If a mineral ore body is discovered, such costs will be amortized to income when production begins, using the unit of production method, based on estimated proven and probable reserves. If no mineral ore body is discovered, such costs will be expensed in the period in which it is determined that the property has no future economic value.
Expenditures for new facilities and improvements that can extend the useful lives of existing facilities will be capitalized as plant and equipment at cost.
Mineral exploration costs are charged to income in the year in which they are incurred. When it is determined that a mining property can be economically developed as a result of established proven and probable reserves, the costs of further exploration and development to further delineate the ore body on such property are capitalized. The establishment of proven and probable reserves is based on results of final feasibility studies, which indicate whether a property is economically feasible. Upon the commencement of the commercial production of a development project, these costs are transferred to the appropriate asset category and are amortized to income using the unit of production method.
The recoverability of the amounts capitalized in respect of non producing mining properties is dependent upon the existence of economically recoverable reserves, the ability of the company to obtain the necessary financing to complete the exploration and development of the properties, and upon future profitable production or proceeds from the disposition of the property.
Foreign Currency Translation
Monetary assets and liabilities denominated in a currency other than US dollars are translated into US dollars using the exchange rate in effect at the year end. Non monetary assets and liabilities are translated at historical exchange rates while revenues and expenses are translated at the average exchange rate during the year. Exchange gains and losses are included in income.
Concentration of Credit Risk
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit.
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
The Company accounts for income taxes in accordance with FASB ASC 740-10 “Income Taxes.” Under this method, deferred income taxes are recognized for the tax consequences in future years for differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable for the period and the change during the period of deferred tax assets and liabilities.
The Company policy for interest and penalties on material uncertain income tax positions recognized in the Company’s consolidated financial statements is to classify these as interest expense and operating expense, respectively. The Company did not incur material income tax interest or penalties during the year ended December 31, 2011.
Fair Value of Financial Instruments
The carrying amounts of financial instruments, including cash, accounts receivable, accounts payable and accrued expenses approximate fair value at December 31, 2011 and 2010 because of the relatively short maturity of the instruments.
The Company adopted ASC 820-10, “Fair Value Measurements” (SFAS 157), which provides a framework for measuring fair value under GAAP. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs.
Stock Based Compensation
The Company accounts for stock based awards in accordance with Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”), which requires a fair value measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options and restricted stock awards.
The Company estimates the fair value of stock options granted using the Black-Scholes valuation model. This model requires the Company to make estimates and assumptions including, among other things, estimates regarding the length of time an employee will retain vested stock options before exercising them, the estimated volatility of our common stock price and the number of options that will be forfeited prior to vesting. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Changes in these estimates and assumptions can materially affect the determination of the fair value of stock-based compensation and consequently, the related amount recognized in Company’s consolidated statements of operations.
The expected term of the options represents the estimated period of time until exercise and is based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior.
Share-based compensation expense for the years ended December 31, 2011 and 2010 was $0 and $22,000, respectively.
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Reclassifications
Certain reclassifications have been made in prior year's consolidated financial statements to conform to classifications used in the current year.
Impairment or Disposal of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10 (formerly Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets). Recoverability is measured by comparison of the carrying amount to the future net cash flows which the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future cash flows arising from the asset using a discount rate determined by management to be commensurate with the risk inherent to Company’s current business model. The company recorded impairment expenses of $4,600,000 for the year ended December 31, 2010.
NOTE 2 - ACCOUNTING STANDARDS UPDATES
Significant Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying consolidated financial statements.
NOTE 3 RELATED PARTY
The company rents office space and administrative services on a month to month basis from a related party at an average rate of $3,333 per month. Administrative services provided include bookkeeping, copying and printing, courier services, and telephone. Total expense for rent and administrative fees paid to this related party for the years ended December 31, 2011 and 2010 was $40,000 and $40,000, respectively.
NOTE 4 NOTES PAYABLE-RELATED PARTY
Notes payable at December 31, 2011 and December 31, 2010 are as follows:
Note issued in 2010
In accordance with ASC Topic “Debt”, the Company attributed a beneficial conversion feature of $22,000 to the convertible debt based upon the difference between the effective conversion price of those shares and the closing price of the Company’s common stock on the date of issuance. The amount attributable to the beneficial conversion feature, aggregating $22,000, has been recorded as an interest expense for the year ended December 31, 2010.
Note issued in 2011
On April 15, 2011, the Company entered into a Loan Agreement with an investor pursuant to which the Company sold and issued a convertible promissory note in the principal amount of for up to $200,000. As of December 31, 2011 the investor has loaned the company $126,217. The Note is convertible into shares of common stock at an initial conversion price of $0.01 per share subject to adjustment as contained in the Note. The Note accrues interest at a rate of 10% per annum and matures on December 31, 2012.
The Company identified embedded derivatives related to the Convertible Note entered into on April 15, 2011. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Note, the Company determined a fair value of $474,696 of the embedded derivative. The fair value of the embedded derivative was determined using the Black-Scholes Model based on the following assumptions:
(1) dividend yield of 0%;
(2) expected volatility of 312%
(3) risk-free interest rate of 1.0%,
(4) expected life of 1.75 years, and
(5) fair value of the Company’s common stock of $0.04 per share.
The initial fair value of the embedded debt derivative of $474,696 was allocated as a debt discount upto the proceeds of the note with the remainder ($352,979) charged to current period operations as interest expenses.
During the year ended December 31, 2011, the Company amortized $51,362 to current period operations as interest expense.
The fair value of the described embedded derivative of $37,865 at December 31, 2011 was determined using the Black-Scholes Model with the following assumptions:
(1) risk free interest rate of 10%;
(2) dividend yield of 0%;
(3) volatility factor of 268%;
(4) an expected life of the conversion feature of 1 year, and
(5) estimated fair value of the company’s common stock of $0.0036 per share.
At December 31, 2011, the Company adjusted the recorded fair value of the derivative liability to market resulting in non-cash, non-operating gain of $441,332 for the year ended December 31, 2011.
NOTE 5 EQUITY
2010 - Stock issued in settlement of legal action
On January 28, 2010, 200,000 Common Shares of the company were issued to RM Communication in settlement of a law suit. The shares were valued at $16,000 at $0.08 per share.
2010 - Cancellation of common stock
In March 2010, 16,992,150 shares of common stock held by these individuals; Georges Fotso, Capital Venture Facilitators, LLC, Mathurin Djekam, Marie-Gisele Momo Minlo and Pauline NGO Bapa have been returned to the Company for cancellation and were subsequently cancelled. Defendant DRR Capital Corporation is not part of the Settlement Agreement.
2010 - Sale of common stock
In March 2010, Gilla Inc. completed a Private Placement for 300,000 common shares for proceeds of $12,000 at $0.04 per share. The sole subscriber was a shareholder of the Company.
2010 - Stock issued for services
In April 2010, 1,180,000 common shares were issued to Daniel Barratte. 1,000,000 common shares, valued at $50,000 at $0.05 per share, in lieu of cash as a bonus for obtaining mining permits in the Democratic Republic of Congo, and 180,000 common shares valued at $9,000 at $0.05 per share were issued in lieu of cash for consulting services.
In September 2010, 700,000 common shares were issued, valued at $35,000 at $0.05 per share in lieu of cash as a bonus for obtaining additional mining permits in the Democratic Republic of Congo.
2010 - Stock issued as directors fees and management fees
In September 2010, 2,000,000 common Shares were issued to Georges Benarroch (one of the directors), valued at $100,000 at $0.05 per share in lieu of cash as management fee. In September 2010, 60,000 common shares were issued as directors fees, to each of the Company’s four directors, in lieu of cash. Total common shares issued as directors fees for the year ended December 31, 2010 were 240,000 valued at $0.05 per share.
In January 2011, 1,500,000 common shares were issued, as a repayment of a $15,000 loan to the company.
In May 2011, 700,000 common shares were issued, as a repayment of a $7,000 loan to the company.
NOTE 6 INCOME TAXES
Deferred income taxes arise from timing differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. A deferred tax asset valuation allowance is recorded when it is more likely than not that deferred tax assets will not be realized. There are no deferred taxes as of December 31, 2011.
There was no income tax expense for the year ended December 31, 2011.
The Company's benefit differs from the "expected" benefit for the year ended December 31, 2011 (computed by applying the Corporate tax rate of 38% to the loss before taxes), as follows:
The effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities at December 31, 2011 are as follows:
The Company has a net operating loss carryforward of approximately $30,864,746 available to offset future taxable income through 2029.
Significant changes in ownership may limit the Company's future use of its existing net operating losses.
NOTE 7 FAIR VALUE MEASUREMENTS
Fair Value Measurements under GAAP clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements are separately disclosed by level within the fair value hierarchy. It only applies to accounting pronouncements that already require or permit fair value measures, except for standards that relate to share-based payments.
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.
Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of December 31, 2011:
The debt derivative liability are measured at fair value using quoted market prices and estimated volatility factors based on historical prices for the Company’s common stock and are classified within Level 3 of the valuation hierarchy.
Level 3 Liabilities are comprised of convertible debt features on our convertible notes.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL DISCLOSURE
New independent registered public accounting firm
On February 20, 2011 (the “Engagement Date”), the Company engaged RBSM LLP (“RBSM ”) as its independent registered public accounting firm for the Company’s fiscal year ended December 31, 2010. The engagement of RBSM as the Company’s independent registered public accounting firm was approved by the Audit Committee of the Company’s Board of Directors.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, we have concluded that these disclosure controls and procedures are not effective.
REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the company’s internal control over financial reporting were not effective based on criteria set forth by the COSO as of December 31, 2011. The following material weaknesses were identified in our internal control over financial reporting as of December 31, 2011.
●
The company was unable to maintain the proper segregation of various accounting and finance duties because of our small size and limited resources. At risk areas include cash receipts and payments, processing of journal entries and accounts reconciliations
●
The company’s financial closing process is done off-line on electronic spreadsheets that are maintained on individual computers
These control deficiencies could result in a misstatement of account balances that would result in a reasonable possibility that a material misstatement to our consolidated financial statements may not be prevented or detected on a timely basis. Accordingly, we have determined that these control deficiencies as described above together constitute a material weakness.
In light of this material weakness, we performed additional analyses and procedures in order to conclude that our consolidated financial statements for the year ended December 31, 2011 included in this Annual Report on Form 10-K were fairly stated in accordance with US GAAP. Accordingly, management believes that despite our material weaknesses, our consolidated financial statements for the year ended December 31, 2011 are fairly stated, in all material respects, in accordance with US GAAP.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report on Form 10-K.
Limitations on Effectiveness of Controls and Procedures
Our management, including our Chief Executive Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Controls
During the fiscal quarter ended December 31, 2011, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.
ITEM 9B.
ITEM 9B. OTHER ITEMS
Please refer to the consolidated financial statements for additional costs and expenditures and other financial information.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
A) IDENTIFY DIRECTORS AND EXECUTIVE OFFICERS
The business experience of the persons listed above during the past five years are as follows:
Georges Benarroch/Chief Financial Officer/President/Director/Chief Executive Officer:
Mr. Benarroch was elected as President effective November 18th, 2004, and a Director of the Company since September 2004. Mr. Benarroch is the President and Chief Financial Officer of Credifinance Capital Corp. and President of and Chief Executive Officer of Kyto Biopharma Inc. a public company. The Company believes Mr. Benarroch's past experience in corporate finance gives him the qualifications and skills to serve as a Director.
Linda Kent/Corporate Secretary Treasurer/Director:
Ms. Kent has worked in the securities brokerage industry from 1979 to 2008.
Mr. Daniel Barrette
Mr. Barrette has spent the last few years in Africa where he has gained experience and developed, over the years, an extensive network of strategic business contacts as well as being responsible for the acquisition of several mineral properties for public listed and private mining companies. He was also responsible for the establishment of some Canadian companies: creation of subsidiaries, JV negotiations, logistics, dealings with government bodies and Cadastre Minier. The Company believes Mr. Barrette's experience in business development qualifies him to serve as a Director.
Mr. Stanley D. Robinson, M.Sc., P.Geo
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 dominant 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. His exploration experience includes data base compilations and ore deposit interpretations used to calculate ore resources for and feasibility studies, which the Company believes qualifies him to serve as a Director.
B) IDENTIFY SIGNIFICANT EMPLOYEES
The Company does not expect to receive a significant contribution from employees that are not executive officers.
C) FAMILY RELATIONSHIPS
There are no directors, executive officers or persons nominated or persons chosen by the Company to become a director or executive officer of the Company who are directly related to an individual who holds the position of director or executive officer or is nominated to one of the said positions.
D) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
There are no material events that have occurred in the last five years that would affect the evaluation of the ability or integrity of any director, person nominated to become a director, executive officer, promoter or control person of the Company.
E) AUDIT COMMITTEE
The Audit Committee has the responsibility of (i) recommending the selection of our independent public accountants, (ii) reviewing and approving the scope of the independent public accountants' audit activity and extent of non-audit services, (iii) reviewing with management and our independent public accountants the adequacy of our accounting system and the effectiveness of our internal audit plan and activities, (iv) reviewing with management and our independent public accountants the consolidated financial statements and exercising general oversight of the financial reporting process and (v) reviewing with us litigation and other legal matters that may affect our financial condition, and monitoring compliance with our business ethics and other policies.
The Audit Committee is composed of Daniel Barrette, Linda Kent, and Georges Benarroch. The Audit Committee did not meet in 2011. The Audit Committee has not adopted a charter. The functions that would normally be performed by the Audit Committee were performed by the Board.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and long-term compensation awarded to, earned by, payable/paid to Georges Benarroch the Company’s President/Director, Linda Kent the Company’s Corporate Secretary Treasurer, Daniel Barrette the Company’s Chief Operating Officer, for all services rendered in all capacities to the company for the years ended December 31, 2011 and 2010.
Name/Title
Year
Salary
Bonus
Other
Restricted
Annual
Option Stocks/
Compensation
Payouts Awarded
$
$
$
#
-
-
Georges Benarroch
-
-
-
-
President/CEO/Director
-
-
-
2,060,000
Linda Kent
-
-
-
-
Secretary/Treasurer/Director
-
-
-
60,000
Daniel Barrette
-
-
-
-
COO/Director
24,000
-
-
1,640,000
Stanley Robinson
-
-
-
-
Director
-
-
-
60,000
OPTIONS/SAR GRANTS TABLE
There were no options granted to employees and no grants to key employees in fiscal years 2011 and 2010.
COMPENSATION OF DIRECTORS
All directors hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified. There are no agreements with respect to the election and compensation of directors. The Board of Directors appoints officers annually and each executive officer serves at the discretion of the Board of Directors. The Company does not have any standing committees at this time.
The Company does not currently maintain insurance for the benefit of the directors and officers of Gilla against liabilities incurred by them in their capacity as directors or officers of Gilla. Gilla does not maintain a pension plan for its employees, officers or directors.
The directors received 60,000 common shares each for services during the fiscal year 2010. None of the directors or senior officers of Gilla and no associate of any of the directors or senior officers of Gilla was indebted to the Company during the financial period ended December 31, 2011 of Gilla other than for routine indebtedness.
EMPLOYMENT CONTRACTS
None
REPORT ON REPRICING OF OPTIONS/SARS
None
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The table below sets forth the beneficial ownership of our common stock, as of March 28, 2012, by:
• all of our directors and executive officers, individually,
• all of our directors and executive officers, as a group, and
• all persons who beneficially owned more than 5% of our outstanding common stock.
The following persons (including any group as defined in Regulation S-B, Section 228.403) are known to the Company, as the issuer, to be beneficial owner of more than five percent (5%) of any class of the said issuers voting securities.
______________
(1)
Beneficial ownership was calculated based on 29,477,766 common stock issued and outstanding as of March 28,2012
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(A) CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Detail of related party transactions are described in note 3 & 4 of the consolidated Financial Statements.
(B) TRANSACTIONS WITH PROMOTERS
Officers, directors and employees will refrain from gathering competitor intelligence by illegitimate means and refrain from acting on knowledge, which has been gathered in such a manner. The officers, directors and employees of Gilla Inc. will seek to avoid exaggerating or disparaging comparisons of the services and competence of their competitors.
Officers, directors and employees will obey all Equal Employment Opportunity laws and act with respect and responsibility towards others in all of their dealings. Officers, directors and employees will remain personally balanced so that their personal life will not interfere with their ability to deliver quality products or services to the company and its clients.
Officers, directors and employees agree to disclose unethical, dishonest, fraudulent and illegal behavior, or the violation of company policies and procedures, directly to management.
Violation of this Code of Ethics can result in discipline, including possible termination. The degree of discipline relates in part to whether there was a voluntary disclosure of any ethical violation and whether or not the violator cooperated in any subsequent investigation.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Board of Directors appointed RBSM LLP (“RBSM”), as our independent auditors for the fiscal year ending December 31, 2011.
(1) Audit Fees
RBSM LLP, Independent Registered Public Accounting firm billed an aggregate of $18,000 for audit of our annual consolidated financial statements for the fiscal year ended December 31, 2011 included in our annual report on Form 10-K.
(2) Audit Related Fees
No other professional services were rendered by RBSM LLP for audit related services rendered during the fiscal year ended December 31, 2011, in connection with, among other things, the preparation of a Registration Statement on Form 10-K.
(3) Tax Fees
No professional services were rendered by RBSM LLP for tax compliance, tax advice, and tax planning the fiscal year ended December 31, 2011.
(4) All Other Fees
Not applicable.
ITEM 15.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES SIGNATURES
(A) LISTING OF EXHIBITS
* Incorporated by reference filed as form 10SB
(B) CODE OF ETHICS
Gilla Inc. will conduct its business honestly and ethically wherever we operate in the world. We will constantly improve the quality of our services, products and operations and will create a reputation for honesty, fairness, respect, responsibility, and integrity, trust and sound business judgment. No illegal or unethical conduct on the part of officers, directors, employees or affiliates is in the company's best interest. Gilla Inc. will not compromise its principles for short-term advantage. The ethical performance of this company is the sum of the ethics of the men and women who work here. Thus, we are all expected to adhere to high standards of personal integrity.
Officers, directors, and employees of the company must never permit their personal interests to conflict, or appear to conflict, with the interests of the company, its clients or affiliates. Officers, directors and employees must be particularly careful to avoid representing Gilla Inc. in any transaction with others with whom there is any outside business affiliation or relationship. Officers, directors, and employees shall avoid using their company contacts to advance their private business or personal interests at the expense of the company, its clients or affiliates.
No bribes, kickbacks or other similar remuneration or consideration shall be given to any person or organization in order to attract or influence business activity. Officers, directors and employees shall avoid gifts, gratuities, fees, bonuses or excessive entertainment, in order to attract or influence business activity.
Officers, directors and employees of Gilla Inc. will often come into contact with, or have possession of, proprietary, confidential or business-sensitive information and must take appropriate steps to assure that such information is strictly safeguarded. This information - whether it is on behalf of our company or any of our clients or affiliates - could include strategic business plans, operating results, marketing strategies, customer lists, personnel records, upcoming acquisitions and divestitures, new investments, and manufacturing costs, processes and methods. Proprietary, confidential and sensitive business information about this company, other companies, individuals and entities should be treated with sensitivity and discretion and only be disseminated on a need-to-know basis.
Misuse of material inside information in connection with trading in the company's securities can expose an individual to civil liability and penalties. Directors, officers, and employees in possession of material information not available to the public are "insiders". Spouses, friends, suppliers, brokers, and others outside the company who may have acquired the information directly or indirectly from a director, officer or employee are also "insiders." The Act prohibits insiders from trading in, or recommending the sale or purchase of, the company's securities, while such inside information is regarded as "material", or if it is important enough to influence you or any other person in the purchase or sale of securities of any company with which we do business, which could be affected by the inside information.
The following guidelines should be followed in dealing with inside information:
Until the company has publicly released the material information, an employee must not disclose it to anyone except those within the company whose positions require use of the information.
Employees must not buy or sell the company's securities when they have knowledge of material information concerning the company until it has been disclosed to the public and the public has had sufficient time to absorb the information.
Employees shall not buy or sell securities of another corporation, the value of which is likely to be affected by an action by the company of which the employee is aware and which has not been publicly disclosed.
Officers, directors and employees will seek to report all information accurately and honestly, and as otherwise required by applicable reporting requirements.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf on March 30, 2012 by the undersigned, thereunto authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities on the date(s) indicated.
Name
Title
Date
/s/ Georges Benarroch
President
March 30, 2012
Chief Financial Officer
Chief Executive Officer