SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 COMMISSION FILE NO. 000-28107
 GILLA INC.
  Nevada
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    88-0335710
(I.R.S. Employer Identification Number)112 North Curry Street, Carson City, NV
(Address of Principal Executive Offices)
    
    89703
(Zip Code)
 Registrants telephone number, including area code
 Securities registered pursuant to Section 12(g) of the Act:   (Title of Class)
 þ o
 o o
  Large accelerated filer oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company þ o þ
  APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
 þ o
  38,898,055 April 28, 2009




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PART I Financial InformationItem 1. Financial StatementsUnaudited Consolidated Balance Sheet as of March 31, 2009, and Audited
Consolidated Balance Sheet as of December 31, 2008
    
    
    3Unaudited Consolidated Statements of Operations for the three ended
March 31, 2009 and 2008.
    
    
    4Unaudited Consolidated Statements of Cash Flows for the three months
ended March 31, 2009 and 2008
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operation
    
    
    10Item 3. Quantitative and Disclosures About Market Risk
    
    
    14PART II-Other InformationItem 1. Legal Proceedings
    
    
    14Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    14Item 3. Defaults Upon Senior Securities
    
    
    14Item 4. Submission of Matters to a Vote of Security Holders
    
    
    14Item 5. Exhibits and Reports on Form 8-K
    
    
    15SIGNATURES
    
    
    15CERTIFICATIONS
    
    
    16
 2




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GILLA, INC.
(formerly OSPREY GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
 CONSOLIDATED BALANCE SHEET
 March 31,
    
    
    December 31,2009
    
    
    2008(UNAUDITED)
    
    
    AUDITEDASSETSCURRENT ASSETSCash
    
    $
    166,816
    
    
    $
    235,774Other receivable
    
    
    3,480
    
    
    
    2,333TOTAL CURRENT ASSETS
    
    
    170,296
    
    
    
    238,107NON CURRENT ASSETSMining rights
    
    
    17,344,110
    
    
    
    17,344,110TOTAL ASSETS
    
    $
    17,514,406
    
    
    $
    17,582,217LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    19,409
    
    
    $
    7,293TOTAL LIABILITIES
    
    
    19,409
    
    
    
    7,293COMMITMENTS
AND CONTINGENCIESSHAREHOLDERS
EQUITYCommon stock, .0002 par value, 300,000,000 shares authorized;
38,898,055 shares issued and outstanding, respectively
    
    
    7,780
    
    
    
    7,780Additional paid in capital
    
    
    30,341,239
    
    
    
    30,341,239Accumulated deficit
    
    
    (12,854,022
    )
    
    
    (12,774,095
    )TOTAL SHAREHOLDERS EQUITY
    
    
    17,494,997
    
    
    
    17,574,924TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    17,514,406
    
    
    $
    17,582,217
  3




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##### 



GILLA, INC.
(formerly OSPREY GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
 CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 March 28, 1995For the Quarter Ended
    
    
    For the Period FromMarch 31,
    
    
    (Inception) to2009
    
    
    2008
    
    
    March 31, 2009REVENUES
    
    $
    
    
    
    $
    
    
    
    $
    TOTAL REVENUES
    
    
    
    
    
    
    
    
    
    
    EXPENSES:Exploration cost
    
    
    40,038
    
    
    
    
    
    
    
    1,700,160General and administrative
    
    
    48,147
    
    
    
    1,056,159
    
    
    
    15,213,462TOTAL OPERATING EXPENSES
    
    
    88,185
    
    
    
    1,056,159
    
    
    
    16,913,622NET LOSS FROM OPERATIONS
    
    
    (88,185
    )
    
    
    (1,056,159
    )
    
    
    (16,913,622
    )OTHER INCOME (EXPENSES)Loss on abandonment of mining camp
    
    
    
    
    
    
    
    
    
    
    (50,000
    )Gain of forgiveness of debt
    
    
    
    
    
    
    
    
    
    
    1,828,932Gain on sale of mining properties
    
    
    
    
    
    
    
    
    
    
    2,100,000Bad debt (write off)
    
    
    
    
    
    
    
    
    
    
    (13,874
    )Miscellaneous income
    
    
    6,097
    
    
    
    
    
    
    
    6,097Gain (loss) on foreign exchange rate transactions
    
    
    2,148
    
    
    
    (2,239
    )
    
    
    151,192Interest expense
    
    
    
    
    
    
    
    
    
    
    (3,277
    )Interest income
    
    
    13
    
    
    
    
    
    
    
    40,530TOTAL OTHER( EXPENSES)
    
    
    8,258
    
    
    
    (2,239
    )
    
    
    4,059,600NET LOSS
    
    $
    (79,927
    )
    
    $
    (1,058,398
    )
    
    $
    (12,854,022
    )Comprehensive LossForeign currency translation loss
    
    
    
    
    
    
    787
    
    
    
    Total Comprehensive Loss
    
    $
    (79,927
    )
    
    $
    (1,057,611
    )
    
    $
    (12,854,022
    )WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING  BASIC
    
    
    38,898,055
    
    
    
    20,211,256
    
    
    
    25,933,983LOSS PER COMMON SHARES  BASIC
    
    $
    (0.00
    )
    
    $
    (0.05
    )
    
    $
    (0.50
    )WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING  DILUTED
    
    
    44,042,859
    
    
    
    20,211,256
    
    
    
    27,224,445LOSS PER COMMON SHARES  DILUTED$
    (0.00
    )
    
    $
    (0.05
    )
    
    $
    (0.47
    )
  4




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GILLA, INC.
(formerly OSPREY GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
 CONSOLIDATED STATEMENTS OF CHANGES IN CASH FLOWS
(UNAUDITED)
 For the Period FromFor the Quarter Ended
    
    
    March 28, 1995March 31
    
    
    (Inception) to2009
    
    
    2008
    
    
    March 31, 2009CASH FLOW FROM OPERATING ACTIVITIESNet loss from operations
    
    $
    (79,927
    )
    
    $
    (1,057,611
    )
    
    $
    (12,854,022
    )Adjustment to reconcile net loss to net cash
used in operating activities:Stock compensation
    
    
    
    
    
    
    778,415
    
    
    
    10,836,792Changes in operating assets and liabilitiesPrepaid
    
    
    
    
    
    
    (6,459
    )
    
    
    Other receivable
    
    
    (1,147
    )
    
    
    (1,125
    )
    
    
    (3,480
    )Mining camp
    
    
    
    
    
    
    
    
    
    
    50,000Accounts payable
    
    
    12,116
    
    
    
    48,725
    
    
    
    390,066Accrued expenses
    
    
    
    
    
    
    147
    
    
    
    4,156Net cash provided by (used in) operating activities
    
    
    (68,958
    )
    
    
    (237,908
    )
    
    
    (1,576,488
    )CASH FLOW FROM FINANCING ACTIVITIESDividends
    
    
    
    
    
    
    (240,000
    )
    
    
    (240,000
    )Sale of common stock
    
    
    
    
    
    
    
    
    
    
    1,983,304Net cash provided by financing activities
    
    
    
    
    
    
    (240,000
    )
    
    
    1,743,304CASH FLOW FROM INVESTING ACTIVITIESNet cash used in investing activities
    
    
    
    
    
    
    
    
    
    
    Effects of exchange rate on cash
    
    
    
    
    
    
    787
    
    
    
    Net Increase (decrease) in cash
    
    
    (68,958
    )
    
    
    (477,121
    )
    
    
    166,816Cash and cash equivalents at beginning of period
    
    
    235,774
    
    
    
    670,142
    
    
    
    Cash and cash equivalents at end of period
    
    $
    166,816
    
    
    $
    193,021
    
    
    $
    166,816Supplemental Disclosure of Cash Flow Information:Cash paid for:Interest
    
    $
    
    
    
    $
    
    
    
    $
    Taxes
    
    $
    
    
    
    $
    
    
    
    $
    
  5




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NOTE 1  ORGANIZATION AND DESCRIPTION OF BUSINESS
  6




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NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Principles of Consolidation
  Basis of Accounting
  Interim Reporting
   Going Concern
    7




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NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  Managements Plans
  Use of Estimates
  8




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NOTE 3  MINING RIGHTS
   9




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operation
    2 2
   2
  OVERVIEW
    CERTAIN BUSINESS RISK FACTORS
  10




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MINERAL EXPLORATION IS HIGHLY SPECULATIVE, INVOLVES SUBSTANTIAL EXPENDITURES, AND IS FREQUENTLY
NON-PRODUCTIVE
  $
    
    The identification of potential gold mineralization based on superficial analysis;$
    
    The quality of our management and our geological and technical expertise; and$
    
    The capital available for exploration and development.
  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
  FUEL PRICE VARIABILITY
  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.
  11




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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 DEFCIT ALL OF WHICH MEANS
THAT WE MAY NOT BE ABLE TO CONTINUE OPERATIONS UNLESS WE OBTAIN ADDITIONAL FUNDING.
  WE ARE DEPENDENT ON KEY PERSONNEL, THEIR LOSS MAY HAVE AN ADVERSE EFFECT
  THE MARKET PRICE OF OUR COMMON STOCK IS HIGHLY VOLATILE, WHICH COULD HINDER OUR ABILITY TO RAISE
ADDITIONAL CAPITAL
  PENNY STOCK REGULATION EFFECT OUR STOCK PRICE, WHICH MAY MAKE IT MORE DIFFICULT FOR INVESTORS TO
SELL THEIR STOCK
  12




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OWNERSHIP OF OUR SHARES IS CONCENTRATED, TO SOME EXTENT, IN THE HANDS OF A FEW INVESTORS, WHICH
COULD LIMIT THE ABILITY OF OUR OTHER STOCKHOLDERS TO INFLUENCE THE DIRECTION OF THE COMPANY:
  CRITICAL ACCOUNTING POLICIES
   DEPRECIATION AND DEPLETION.
  IMPAIRMENT OF LONG-LIVE ASSETS
  RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 2009
  LIQUIDITY AND CAPITAL RESOURCES
    13




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Item 3. Disclosure Controls and Procedures
   PART II
 ITEM 1. LEGAL PROCEEDINGS
 st
 ITEM 2. CHANGES IN SECURITIES
 st
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  14




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ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
  SIGNATURES
  GILLA INC.
(FORMERLY OSPREY GOLD CORP.)By:
    /s/  Georges BenarrochGeorges Benarroch, President &Chief Financial Officer  Name
    
    Title
    
    Date/s/ Georges Benarroch
    
    President
    
    May 15, 2009Chief Financial Officer
Director
 15