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| þ |   | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|--------|-----------------------------------------------------------------------------------------|

| o |   | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|--------|------------------------------------------------------------------------------------------|

| Nevada                                   |   | 88-0335710                              |
|------------------------------------------|--------|-----------------------------------------|
| (State or Other Jurisdiction of          |   | (I.R.S. Employer Identification Number) |
| Incorporation or Organization)           |   |                                    |
|                                     |   |                                    |
| 112 North Curry Street, Carson City, NV  |   | 89703                                   |
| (Address of Principal Executive Offices) |   | (Zip Code)                              |

|                 Large accelerated filer o |   | Accelerated filer o |   | Non-accelerated filer   o(Do not check if a smaller reporting company) |   | Smaller Reporting Company þ |
|---------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|-----------------------------------------------------------------------------|--------|----------------------------------|

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| PART I - Financial Information |                                                                                                                 | Page   |   |
|--------------------------------|----------------------------------------------------------------------------------------------------------------------|--------|--------|
|                           |                                                                                                                 |   |   |   |
| Item 1.                   | Financial Statements (unaudited)                                                                                     |   |   |   |
|                           |                                                                                                                 |   |   |   |
|                           | Condensed Consolidated Balance Sheet as of June 30, 2012(Unaudited) and December 31, 2011                            |   |   | 3 |   |
|                           |                                                                                                                 |   |   |   |   |
|                           | Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2012 and 2011  |   |   | 4 |   |
|                           |                                                                                                                 |   |   |   |   |
|                           | Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months  Ended June 30, 2012 and 2011 |   |   | 5 |   |
|                           |                                                                                                                 |   |   |   |   |
|                           | Notes to Unaudited Condensed Consolidated Financial Statements                                                       |   |   | 6 |   |
|                           |                                                                                                                 |   |   |   |   |
| Item 2.                   | Management’s Discussion and Analysis of Financial Condition and Results of Operation                           |   |   | 12 |   |
|                           |                                                                                                                 |   |   |   |   |
| Item 3.                   | Quantitative and Qualitative Disclosures About Market Risk                                                           |   |   | 15 |   |
|                           |                                                                                                                 |   |   |   |   |
| Item 4.                        | Control and Procedures                                                                                               |   |   | 15 |   |
|                           |                                                                                                                 |   |   |   |   |
| PART II - Other Information    |                                                                                                                 |   |   |   |
|                           |                                                                                                                 |   |   |   |   |
| Item 1.                   | Legal Proceedings                                                                                                    |   |   | 16 |   |
|                           |                                                                                                                 |   |   |   |   |
| Item 1A.                       | Risk Factors                                                                                                         |   |   | 16 |   |
|                           |                                                                                                                 |   |   |   |   |
| Item 2.                   | Unregistered Sales of Equity Securities and Use of Proceeds                                                          |   |   | 16 |   |
|                           |                                                                                                                 |   |   |   |   |
| Item 3.                   | Defaults Upon Senior Securities                                                                                      |   |   | 16 |   |
|                           |                                                                                                                 |   |   |   |   |
| Item 4.                   | Mine Safety Disclosures                                                                                              |   |   | 16 |   |
|                           |                                                                                                                 |   |   |   |   |
| Item 5.                   | Other Information                                                                                                    |   |   | 16 |   |
|                           |                                                                                                                 |   |   |   |   |
| Item 6.                        | Exhibits                                                                                                             |   |   | 16 |   |
|                           |                                                                                                                 |   |   |   |   |
| SIGNATURES                     |                                                                                                                 |   | 17     |   |
|                           |                                                                                                                 |   |   |   |   |
| CERTIFICATIONS                 |                                                                                                                 |   |   |   |

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| GILLA, INC.                           |
|---------------------------------------|
| CONDENSED CONSOLIDATED BALANCE SHEETS |

|                                                                  |   | June 30, 2012 |        |   | December 31 |   |
|-----------------------------------------------------------------------|--------|---------------|-------------|--------|-------------|--------|
|                                                                  |   | 2012          |        |   | 2011        |   |
|                                                                  |   | (unaudited)   |        |   |        |   |
|                                                                  |   |          |        |   |        |   |
| ASSETS                                                                |
|                                                                  |   |          |        |   |        |   |
| CURRENT ASSETS                                                        |   |          |        |   |        |   |
| Cash and cash equivalents                                             |   | $             | 18          |   |        | $      | 118 |   |
|                                                                  |   |          |        |   |        |   |   |   |
| TOTAL CURRENT ASSETS                                                  |   |          | 18          |   |        |   | 118 |   |
|                                                                  |   |          |        |   |        |   |   |   |
|                                                                  |   |          |        |   |        |   |   |   |
| TOTAL ASSETS                                                          |   | $             | 18          |   |        | $      | 118 |   |
|                                                                  |   |          |        |   |        |   |   |   |
|                                                                  |   |          |        |   |        |   |   |   |
| LIABILITIES AND (DEFICIENCY) IN STOCKHOLDERS' EQUITY             |
|                                                                  |   |          |        |   |        |   |   |   |
| CURRENT LIABILITIES                                                   |   |          |        |   |        |   |   |   |
| Accounts payable                                                      |   | $             | 17,307      |   |        | $      | 8,170 |   |
| Accrued liabilities                                                   |   |          | 5,000       |   |        |   | 10,000 |   |
| Accrued liabilities, related party                                    |   |          | 90,000      |   |        |   | 70,000 |   |
| Accrued interest payable, related party                               |   |          | 16,840      |   |        |   | 10,450 |   |
| Notes payable related party (net of debt discount)                    |   |          | 82,635      |   |        |   | - |   |
|                                                                  |   |          |        |   |        |   |   |   |
| TOTAL CURRENT LIABILITIES                                             |   |          | 211,782     |   |        |   | 98,620 |   |
|                                                                  |   |          |        |   |        |   |   |   |
| LONG TERM LIABILITIES                                                 |   |          |        |   |        |   |   |   |
|                                                                  |   |          |        |   |        |   |   |   |
| Notes payable related party (net of debt discount)                    |   |          | -           |   |        |   | 51,360 |   |
| Derivative liability                                                  |   |          | 100,223     |   |        |   | 37,865 |   |
| TOTAL LONG TERM  LIABILITIES                                |   |          | 100,223     |   |        |   | 89,225 |   |
|                                                                  |   |          |        |   |        |   |   |   |
| TOTAL LIABILITIES                                                     |   |          | 312,005     |   |        |   | 187,845 |   |
|                                                                  |   |          |        |   |        |   |   |   |
| COMMITMENTS AND CONTINGENCIES                                         |   |          |        |   |        |   |   |   |
|                                                                  |   |          |        |   |        |   |   |   |
| (DEFICIENCY) IN STOCKHOLDERS' EQUITY                                  |   |          |        |   |        |   |   |   |
| Common stock, $0.0002 par value, 300,000,000 shares authorized;       |   |          |        |   |        |   |   |   |
| 29,477,766   shares issued and outstanding             |   |          |        |   |        |   |   |   |
|  as of  June 30, 2012 and December 31, 2011            |   |          | 5,895       |   |        |   | 5,895 |   |
| Additional paid - in capital                                          |   |          | 30,681,124  |   |        |   | 30,671,124 |   |
| Accumulated deficit                                                   |   |          | (30,999,006 | )      |        |   | (30,864,746 | ) |
|                                                                  |   |          |        |   |        |   |   |   |
| TOTAL (DEFICIENCY) IN STOCKHOLDERS' EQUITY                            |   |          | (311,987    | )      |        |   | (187,727 | ) |
|                                                                  |   |          |        |   |        |   |   |   |
|                                                                  |   |          |        |   |        |   |   |   |
| TOTAL LIABILITIES AND  (DEFICIENCY) IN STOCKHOLDERS' EQUITY |   | $             | 18          |   |        | $      | 118 |   |

----

| GILLA, INC.                                     |
|-------------------------------------------------|
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| (UNAUDITED)                                     |

|                                                          |   | For the Three Months Ended |       |   | For the Six Months Ended |   |
|---------------------------------------------------------------|--------|----------------------------|------------|--------|--------------------------|--------|
|                                                          |   | June 30                    |       |   | June 30                  |   |
|                                                          |   | 2012                       |       |   | 2011                     |   |   | 2012 |   |   | 2011 |   |
|                                                          |   |                       |       |   |                     |   |   |   |   |   |   |   |
| OPERATING EXPENSES:                                           |   |                       |       |   |                     |   |   |   |   |   |   |   |
| Exploration cost                                              |   | $                          | -          |   |                     | $      | - |   |   | $ | - |   |   | $ | 4,450 |   |
| General and administrative                                    |   |                       | 14,962     |   |                     |   | 30,764 |   |   |   | 28,287 |   |   |   | 58,215 |   |
|                                                          |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL OPERATING EXPENSES                                      |   |                       | 14,962     |   |                     |   | 30,764 |   |   |   | 28,287 |   |   |   | 62,665 |   |
|                                                          |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
|                                                          |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| LOSS FROM OPERATIONS                                          |   |                       | (14,962    | )      |                     |   | (30,764 | ) |   |   | (28,287 | ) |   |   | (62,665 | ) |
|                                                          |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| OTHER INCOME (EXPENSES)                                       |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Gain (loss) on change in fair value of derivative liabilities |   |                       | 518,241    |   |                     |   | 121,717 |   |   |   | (62,359 | ) |   |   | 121,717 |   |
| Interest expense                                              |   |                       | (21,855    | )      |                     |   | (125,972 | ) |   |   | (43,614 | ) |   |   | (125,972 | ) |
| TOTAL OTHER INCOME (EXPENSES)                            |   |                       | 496,386    |   |                     |   | (4,255 | ) |   |   | (105,973 | ) |   |   | (4,255 | ) |
|                                                          |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME (LOSS) BEFORE INCOME TAXES                         |   | $                          | 481,424    |   |                     | $      | (35,019 | ) |   | $ | (134,260 | ) |   | $ | (66,920 | ) |
|                                                          |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| INCOME (TAX) BENEFIT                                          |   |                       | -          |   |                     |   | - |   |   |   | - |   |   |   | - |   |
|                                                          |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME (LOSS)                                             |   | $                          | 481,424    |   |                     | $      | (35,019 | ) |   | $ | (134,260 | ) |   | $ | (66,920 | ) |
|                                                          |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| WEIGHTED AVERAGE NUMBER OF SHARES                             |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| OUTSTANDING-                                                  |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| BASIC                                                         |   |                       | 29,477,766 |   |                     |   | 29,170,074 |   |   |   | 29,477,766 |   |   |   | 28,759,534 |   |
| FULLY DILUTED                                                 |   |                       | 49,522,319 |   |                     |   | 29,170,074 |   |   |   | 29,477,766 |   |   |   | 28,759,534 |   |
|                                                          |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS (LOSS) PER COMMON SHARES-                            |   |                       |       |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| BASIC                                                         |   | $                          | 0.02       |   |                     | $      | (0.00 | ) |   | $ | (0.00 | ) |   | $ | (0.00 | ) |
| DILUTED                                                       |   | $                          | 0.01       |   |                     | $      | (0.00 | ) |   | $ | (0.00 | ) |   | $ | (0.00 | ) |

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| GILLA, INC.                                     |
|-------------------------------------------------|
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (UNAUDITED)                                     |

|                                                                                  |   | For the Six Months Ended |     |
|---------------------------------------------------------------------------------------|--------|--------------------------|----------|
|                                                                                  |   | June 30                  |     |
|                                                                                  |   | 2012                     |     |   | 2011 |   |
|                                                                                  |   |                     |     |   |   |   |
|                                                                                  |   |                     |     |   |   |   |
| CASH FLOW FROM OPERATING ACTIVITIES                                                   |   |                     |     |   |   |   |
| Net loss                                                                              |   | $                        | (134,260 | ) |   | $ | (66,920 | ) |
| Adjustment to reconcile net loss to net cash                                          |   |                     |     |   |   |   |   |   |
|      used in operating activities:                           |   |                     |     |   |   |   |   |   |
| Amortization of deferred debt discount                                                |   |                     | 37,223   |   |   |   | - |   |
| Beneficial conversion discount                                                        |   |                     | -        |   |   |   | 121,717 |   |
| Gain (loss) on change in fair value of derivative liabilities                         |   |                     | 62,358   |   |   |   | (121,717 | ) |
| Changes in operating assets and liabilities:                                          |   |                     |     |   |   |   |   |   |
|      Increase in accounts payable                            |   |                     | 9,139    |   |   |   | 721 |   |
|      Increase in accrued expenses and related party accruals |   |                     | 21,390   |   |   |   | 26,255 |   |
| Net cash used in operating activities                                                 |   |                     | (4,150   | ) |   |   | (39,944 | ) |
|                                                                                  |   |                     |     |   |   |   |   |   |
| CASH FLOW FROM INVESTING ACTIVITIES                                                   |   |                     | -        |   |   |   | - |   |
|                                                                                  |   |                     |     |   |   |   |   |   |
| CASH FLOW FROM FINANCING ACTIVITIES                                                   |   |                     |     |   |   |   |   |   |
| Proceeds from notes payable, related party                                            |   |                     | 4,050    |   |   |   | 40,000 |   |
| Net cash provided by financing activities                                             |   |                     | 4,050    |   |   |   | 40,000 |   |
|                                                                                  |   |                     |     |   |   |   |   |   |
| Net (decrease) increase in cash and cash equivalents                                  |   |                     | (100     | ) |   |   | 56 |   |
|                                                                                  |   |                     |     |   |   |   |   |   |
| Cash and cash equivalents at beginning of period                                      |   |                     | 118      |   |   |   | 1,617 |   |
|                                                                                  |   |                     |     |   |   |   |   |   |
| Cash and cash equivalents at end of period                                            |   | $                        | 18       |   |   | $ | 1,673 |   |
|                                                                                  |   |                     |     |   |   |   |   |   |
| Supplemental Disclosure of Cash Flow Information:                                     |   |                     |     |   |   |   |   |   |
|         Cash paid for:                        |   |                     |     |   |   |   |   |   |
|            Interest            |   | $                        | -        |   |   | $ | - |   |
|            Income taxes        |   | $                        | -        |   |   | $ | - |   |
|                                                                                  |   |                     |     |   |   |   |   |   |
| Non-cash investing and financing activities                                           |   |                     |     |   |   |   |   |   |
|       Common Stock Issued for Notes Payable             |   | $                        | -        |   |   | $ | 22,000 |   |
|       Beneficial conversion features                    |   | $                        | -        |   |   | $ | 121,717 |   |
|       Sale of 990 shares of subsdiairy to related party |   | $                        | 10,000   |   |   | $ | - |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | June 30, 2012(unaudited) |    |   | December 31, 2011 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|---------|--------|-------------------|--------|
| Note payable to related party, with 10% interest per annum. The note matures on December 31, 2012. In consideration for the credit facility provided to the Company, CFCC or its designee shall receive a 15% non-dilution interest in all real and personal properties held by the Company through its 99% GISOR SA subsidiary in the Democratic Republic of the Congo as of the date hereof, and not as security for the payment of the Note, but subject to any liens or other security interests arising from bona fide indebtedness of the Company and its subsidiaries.  |   | $                        | 120,267 |   |              | $      | 126,217 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                     |    |   |              |   |   |   |
| Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                     | 120,267 |   |              |   | 126,217 |   |
| Less: Unamortized deferred debt discount                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                     | (37,632 | )      |              |   | (74,855 | ) |
| Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                     | 82,635  |   |              |   | 51,362 |   |
| Less: current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                     | (82,635 | )      |              |   | - |   |
| Notes payable – long term                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                        | -       |   |              | $      | 51,362 |   |

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| (1) risk free interest rate of                        | 10%;              |
|------------------------------------------------------------|-------------------|
| (2) dividend yield of                                 | 0%;               |
| (3) expected volatility factor of                | 479%;             |
|                                                       |              |
| (4) an expected life of the conversion feature of     | 0.50 year, and    |
| (5) fair value of the company’s common stock of | $0.006 per share. |

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|                        |   |         |    |   | Fair Value Measurements at June 30, 2012 using: |   |
|-----------------------------|--------|--------------|---------|--------|-------------------------------------------------------------------------------|--------|
|                        |   | June 30,2012 |    |   | Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) |   |   | SignificantOtherObservableInputs (Level 2) |   |   | SignificantUnobservableInputs(Level 3) |   |
| Liabilities:                |   |         |    |   |                                                                          |   |   |   |   |   |   |   |
| Debt Derivative liabilities |   | $            | 100,223 |   |                                                                          |   | - |   |   |   | - |   |   | $ | 100,223 |   |

|                                                                                             |   | Debt Derivative Liability |    |
|--------------------------------------------------------------------------------------------------|--------|-------------------------------------|---------|
| Balance, January 1, 2012                                                                         |   | $                                   | 37,865  |   |
| Initial fair value of debt derivatives at note issuances                                         |   |                                | -       |   |
| Mark-to-market at June , 2012:                                                                   |   |                                |    |   |
| - Embedded debt derivatives                                                                      |   |                                | 62,359  |   |
| Balance, June 30, 2012                                                                           |   | $                                   | 100,223 |   |
|                                                                                             |   |                                |    |   |
| Net (loss) for the period included in earnings relating to the liabilities held at June 30, 2012 |   | $                                   | (62,359 | ) |

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| 31.1   |   | Certification Pursuant to Rule 13A-14 or 15D-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 signed by the Principal Executive and Financial Officer* |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                  |
| 32.1   |   | Certification Required by 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 signed by Principal Executive and Financial Officer,*                                          |

| ●   | Filed herewith |
|---------------------|----------------|

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|   | GILLA INC.      |                                                       |
|--------|-----------------|------------------------------------------------------------|
|   |            |                                                       |   |
|   | By:   | /s/  Georges Benarroch                                |   |
|   |            | Georges Benarroch,President, Chief Executive Officer & |     |
|   |            | Chief Financial Officer                                    |   |

| Name                        |   | Title                   |   | Date                              |
|-----------------------------|--------|-------------------------|--------|-----------------------------------|
|                        |   |                    |   |                              |
| /s/  Georges Benarroch |   | President               |   | August 14, 2012    |
| Georges Benarroch           |   | Chief Executive Officer |   |                              |
|                        |   | Chief Financial Officer |   |                              |

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