Gilla Provides Corporate Update; 27% Revenue Increase

NEW YORK, NEW YORK--(Marketwired - Dec. 29, 2016) - Gilla Inc. ("Gilla" or the "Company") (OTCQB:GLLA), the fast-growing designer, manufacturer and marketer of E-liquid for vaporizers, provided today a corporate update for the fourth quarter of 2016 ("Q4") which includes a preliminary Q4 revenue estimate and significant non-dilutive improvements to the Company's balance sheet.

CORPORATE HIGHLIGHTS:

• The Company estimates that revenue for Q4 will be in excess of US $1.33 million, a 27% quarter-over-quarter increase, while maintaining margins of approximately 70%.
• Monthly run-rate revenues and costs from continuing operations now indicate that the Company is cash flow break-even.
• Improved balance sheet by restructuring a total of US $791,162 and CAD $1,030,000 of certain short-term debt into long-term debt through extensions and deferral agreements.
• Planned application for listing on the Canadian Securities Exchange was approved by the board of directors with a targeted listing in the first quarter of 2017.
• In an effort to broaden the Company's product portfolio and to expand into the fast-growing Cannabis sector, Gilla has entered into discussions with a number of licensed producers and growers in multiple jurisdictions.

"We are pleased to continue with record revenue growth and to enter 2017 on a trajectory for profitability. We have accomplished this with limited revenue growth in the United States where we have had to make significant strategic adjustments to our marketing strategy. We anticipate these changes will deliver much improvement domestically in 2017 and we also expect continued global success as we enter new markets," stated J. Graham Simmonds, Chairman and CEO of Gilla. "We are also very excited to be working in the Cannabis sector on a product development basis. We believe the intellectual property we have developed for our nicotine delivery products will be extremely applicable to cannabis products with regards to both the consumer branding strategy and the user experience. We enter 2017 with a very strong global sales and distribution platform, a path to significant profitability, and an exciting new global cannabis market to which we can apply our intellectual property."

The Company has extended the term of its secured promissory notes with a significant third party shareholder (the "Lender"), with principal amounts of US $100,000 and CAD $500,000, from July 1, 2017 to July 1, 2018. The interest rate will remain at the current 10% for both secured promissory notes during the extension period. In consideration of such extension, the Company issued the Lender 250,000 common share purchase warrants entitling the holder to purchase one common share of the Company at a price of US $0.20 per share, expiring on July 1, 2018.

The Company's officers and directors have also agreed to defer a total of US $691,162 and CAD $530,000 in fees accrued and payable to its officers and directors until April 1, 2018. As incentive for such deferrals, the Company has agreed to pay a 10% incentive amount per each dollar deferred to its officers and directors, payable on April 1, 2018.

About Gilla Inc.

Gilla Inc. manufactures, markets and distributes E-liquid, which is the liquid used in vaporizers, E-cigarettes, and other vaping hardware and accessories. E-liquid is heated by the atomizer to deliver the sensation of smoking. Gilla aims to be a global leader in the manufacturing and distribution of E-liquid for the vapor industry. The Company provides consumers with choice and quality across categories and price points. Gilla's product portfolio includes Vinto Vape, Coil Glaze, The Drip Factory, Surf Sauce, Siren, VaporLiq, Craft Vapes, Craft Clouds, Vape Warriors, Miss Pennysworth's Elixirs, The Mad Alchemist, Replicant and Crown E-liquid brands.

Forward-looking Statements

Note: This press release contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on currently available competitive, financial and economic data and management's views and assumptions regarding future events. Such forward-looking statements are inherently uncertain. Gilla Inc. cannot provide assurances that the matters described in this press release will be successfully completed or that the company will realize the anticipated benefits of any transaction. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to: global economic and market conditions; the war on terrorism and the potential for war or other hostilities in other parts of the world; the availability of financing and lines of credit; successful integration of acquired or merged businesses; changes in interest rates; management's ability to forecast revenues and control expenses, especially on a quarterly basis; unexpected decline in revenues without a corresponding and timely slowdown in expense growth; the company's ability to retain key management and employees; intense competition and the company's ability to meet demand at competitive prices and to continue to introduce new products and new versions of existing products that keep pace with technological developments, satisfy increasingly sophisticated customer requirements and achieve market acceptance; relationships with significant suppliers and customers; as well as other risks and uncertainties, including but not limited to those detailed from time to time in Gilla Inc. SEC filings. Gilla Inc. undertakes no obligation to update information contained in this release. For further information regarding risks and uncertainties associated with Gilla Inc.'s business, please refer to the risks and uncertainties detailed from time to time in Gilla Inc.'s SEC filings.

For more information, please visit gilla.com.