Gilla Inc. and Sarasvati Investments Inc. entered into a Term Loan Agreement whereby the Lender would loan the Company the aggregate principal amount of CAD 1,000,000 for capital expenditures, marketing expenditures and working capital. The Term Loan is secured by all of the Company's inventory and accounts due relating to any inventory as granted in the intercreditor and subordination agreement and security agreement. The Term Loan shall bear interest at a rate of 16% per annum, on the outstanding principal, such interest shall accrue daily and paid monthly, in arrears.

The Term Loan shall mature on July 3, 2017, whereby any outstanding principal on the Term Loan together with all accrued and unpaid interest thereon shall become due and payable. The Company may elect to repay the outstanding principal of the Term Loan together with all accrued and unpaid interest thereon prior to the Maturity Date, subject to an early repayment penalty of the maximum of i) three months interest on the outstanding principal of the Term Loan; or ii) 50% of the interest payable on the outstanding principal of the Term Loan until the Maturity Date. The Term Loan shall be immediately due and payable at the option of the Lender if there is a change in key personnel meaning J. Graham Simmonds serving as the Company's Chief Executive Officer and Ashish Kapoor serving as the Company's Chief Financial Officer.