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1. NATURE OF OPERATIONS
9 Months Ended
Sep. 30, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
1. NATURE OF OPERATIONS

The Company 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.

 

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.

 

On June 25, 2012, the Company entered into a Share Purchase Agreement to sell all of the Company’s shares in GISOR in exchange for a reduction of a portion of the Company’s outstanding debt. The Company sold 990 shares of common stock held in GISOR to a related party for $10,000.

 

On June 25, 2012, the Company entered into a Letter of Intent with Snoke Distribution Canada Ltd., a corporation existing under the laws of Ontario (“Snoke Distribution”), to acquire all of the outstanding common shares of Snoke Distribution through the issuance of 25 million common shares of the Registrant to the shareholders of Snoke Distribution.

 

On November 21, 2012, the Company closed the acquisition of Snoke Distribution through the issuance of 29,766,667 commons shares of the Registrant.

 

On November 21, 2012, the Company closed a private placement of $135,000 at a price of $0.05 per common share with a half warrant entitling the holder to acquire one common share of the Company at a price of $0.10 per share for a period of 6 months from the Merger date.

 

On December 12, 2012, the Company closed a private placement of $16,667 at a price of $0.05 per common share with a half warrant entitling the holder to acquire one common share of the Company at a price of $0.10 per share for a period of 6 months from the date of issuance.

 

On March 9, 2013, the Company received a notice that the Exclusive Distribution Agreement has been terminated by ecoreal GmbH & Co. KG. The Company is not in agreement with reason for termination, however, has subsequently accepted the termination as significant doubt exists regarding the ability of the European manufacturer to meet the terms of the agreement.

 

On April13, 2013, Henry Kloepper was appointed as lead independent director of the board. Mr. Kloepper will also serve as chairman of the audit committee and compensation committee.

 

The Company incorporated Gilla Operations LLC (“Gilla Operations”), a wholly-owned subsidiary under the laws of the State of Florida, on May 2, 2013. Since incorporation, Gilla Operations has been the primary operating subsidiary of the Company.

 

On May 20, 2013, Gilla Operations entered into a Supply Contract with a Chinese e-cigarette contract manufacturer to produce and supply the Company with e-cigarette products and related accessories. The supply contract set forth the terms and conditions of the purchase order between Gilla Operations and the manufacturer who has agreed to supply e-cigarettes as specifically designed by the Company.

 

On June 18, 2013, the Company signed a Production and Supply Agreement with a South American Distributor to supply e-cigarettes and related accessories. Under the terms of the supply agreement, the Distributor has reserved the exclusive right to distribute a brand of the Company’s e-cigarette products in Brazil, Chile, Paraguay, Uruguay, Argentina, Venezuela, Columbia, Peru and Ecuador (collectively, the “Territory”). The supply agreement has a five-year term, which shall automatically renew for an additional five-year term, provided that the Distributor has satisfied all of the minimum performance and order quantity requirements set forth to maintain exclusivity in the distribution Territory.

  

 

On September 3, 2013, the Company issued $425,000 of Unsecured Subordinated Convertible Debentures (“Debentures”). The Debentures will mature on January 31, 2016 and bear interest at a rate of 12% per annum. The Debentures shall be convertible into the Common Stock of the Company at a conversion rate of $0.07 per share at any time prior to the maturity date.

 

On September 25, 2013, the Company closed a private placement of $108,377 at a price of $0.035 per Gilla common share and issued 2,173,960 common shares. The remaining 922,467 common shares remain unissued. Of these shares, 1,973,960 shares were issued in settlement of shareholders loan valued at $98,700. The Company also issued 942,784 common shares as the result of a consulting settlement.

 

On September 30, 2013, the Company issued a $200,000 Secured Promissory Note (“Secured Note”). The Secured Note shall be due on January 1, 2015 and bear interest at a rate of 1.5% per month.

 

Subsequent to the quarter ended September 30, 2013, the Company incorporated Charlie’s Club, Inc. (“Charlie’s Club”), a wholly-owned subsidiary under the laws of the State of Florida.  Charlie’s Club will be primary operating subsidiary of the Company’s e-commerce sales initiative.

 

Prior to the acquisition, the Company was a mineral-property development company specializing in acquiring and consolidating mineral properties with production potential and future growth through its exploration activities and its discoveries. Acquisition and development emphasis was focused on properties containing gold and other strategic minerals that were located in Africa.

 

The Company designs, markets and distributes electronic cigarettes (“e-cigarettes”) and accessories. E-cigarettes are replacements for traditional cigarettes allowing smokers to reproduce the smoking experience. E-cigarettes do not burn tobacco are not smoking cessation devices.

 

The Company is in the development stage as defined by Accounting Standards Codification subtopic 915-10 Development stage Entities (“ASC 915-10”). To date, the Company, has not generated sales revenues, has incurred expenses and has sustained losses. Consequently, its operations are subject to all the risks inherent in the establishment of a new business enterprise. For the period from November 29, 2011 (date of inception) through September 30, 2013, the Company has accumulated losses of $2,133,954.