##### 



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-QSB
 þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 OR
 o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  GILLA INC.
  N/A
 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)
 Registrants telephone number, including area code
 Securities registered pursuant to Section 12(g) of the Act:
 (Title of Class)
  Yes     o
    
    No     þ
 o
  $3,471,301.10




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##### 



PART I
    
    Financial InformationItem 1.
    
    Financial StatementsUnaudited Consolidated Balance Sheet
as of June 30, 2007.
    
    
    3Unaudited Consolidated Statements of Operations
for the three and six months ended June 30, 2007 and the
period March 28, 1999(inception to June 30, 2007.
    
    
    4Unaudited Consolidated Statement of Changes in Shareholder
Equity for the six months ended June 30, 2007.
    
    
    5Unaudited Consolidated Statements of Cash Flows
for the six months ended June 30, 2007 and the
period March 28, 1999(inception to June 30, 2007.
    
    
    6Notes to Unaudited Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operation
    
    
    9Item 3.
    
    Controls and Procedures
    
    
    13PART IIItem 1.
    
    Legal Proceedings
    
    
    13Item 2.
    
    Changes In Securities
    
    
    13Item 3.
    
    Defaults Upon Senior Securities
    
    
    13Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    13Item 5.
    
    Other Information
    
    
    14Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    14SIGNATURES
    
    
    15CERTIFICATIONS
    
    
    16
 2




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##### 



GILLA, INC.
(formerly OSPREY GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
 BALANCE SHEETS
 June 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)
    
    
    (Audited)ASSETSCURRENT ASSETSCash
    
    $
    5,054
    
    
    $
    335,594Other receivable
    
    
    44,411
    
    
    
    2,999TOTAL CURRENT ASSETS
    
    
    49,465
    
    
    
    338,593NON CURRENT ASSETSRestricted cash
    
    
    1,085,559
    
    
    
    1,058,613Mining camp
    
    
    50,000
    
    
    
    50,000TOTAL ASSETS
    
    $
    1,185,024
    
    
    $
    1,447,206LIABILITIES AND SHAREHOLDERS DEFICITCURRENT LIABILITIESAccounts payable
    
    $
    93,529
    
    
    $
    138,311Accrued expenses
    
    
    3,937
    
    
    
    55,697TOTAL LIABILITIES
    
    
    97,466
    
    
    
    194,008Commitments and ContingenciesSHAREHOLDERS DEFICITCommon stock, .0002 par value, 300,000,000 shares authorized;
5,646,069 shares issued and outstanding
    
    
    1,129
    
    
    
    56,461Additional paid in capital
    
    
    11,214,791
    
    
    
    11,159,459Accumulated deficit
    
    
    (10,128,362
    )
    
    
    (9,962,722
    )TOTAL SHAREHOLDERS DEFICIT
    
    
    1,087,558
    
    
    
    1,253,198TOTAL LIABILITIES AND SHAREHOLDERS DEFICIT
    
    $
    1,185,024
    
    
    $
    1,447,206
  3




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##### 



GILLA, INC.
(formerly OSPREY GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
 STATEMENTS OF OPERATIONS
 March 28, 1995For the Three Months Ended
    
    
    For the Six Months Ended
    
    
    For the Period FromJune 30,
    
    
    June 30,
    
    
    (Inception) to2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    June 30, 2007REVENUES
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    TOTAL REVENUES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    EXPENSES:Exploration cost
    
    
    2,578
    
    
    
    5,873
    
    
    
    2,578
    
    
    
    20,642
    
    
    
    1,586,569General and administrative
    
    
    193,341
    
    
    
    300,735
    
    
    
    351,652
    
    
    
    519,136
    
    
    
    12,655,880TOTAL OPERATING EXPENSES
    
    
    195,919
    
    
    
    306,608
    
    
    
    354,230
    
    
    
    539,778
    
    
    
    14,242,449NET LOSS FROM OPERATIONS
    
    
    (195,919
    )
    
    
    (306,608
    )
    
    
    (354,230
    )
    
    
    (539,778
    )
    
    
    (14,242,449
    )OTHER INCOME (EXPENSES)Interest expense
    
    
    (132
    )
    
    
    
    
    
    
    (3,277
    )
    
    
    
    
    
    
    (3,277
    )Interest income
    
    
    13,713
    
    
    
    
    
    
    
    26,946
    
    
    
    
    
    
    
    35,559Gain on sale of mining properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,100,000Gain (loss) on foreign exchange
rate transactions
    
    
    (2,280
    )
    
    
    1,050
    
    
    
    (2,632
    )
    
    
    (534
    )
    
    
    156,814Gain on forgiveness of debt
    
    
    32,797
    
    
    
    
    
    
    
    167,553
    
    
    
    628,583
    
    
    
    1,824,991TOTAL OTHER EXPENSES
    
    
    44,098
    
    
    
    1,050
    
    
    
    188,590
    
    
    
    628,049
    
    
    
    4,114,087NET INCOME (LOSS)
    
    $
    (151,821
    )
    
    $
    (305,558
    )
    
    $
    (165,640
    )
    
    $
    88,271
    
    
    $
    (10,128,362
    )WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING-BASIC AND DILUTED
    
    
    5,646,069
    
    
    
    5,908,095
    
    
    
    5,646,069
    
    
    
    5,908,095
    
    
    
    4,821,549EARNINGS (LOSS) PER COMMON
SHARES-
BASIC AND DILUTED
    
    $
    (0.03
    )
    
    $
    (0.05
    )
    
    $
    (0.03
    )
    
    $
    0.01
    
    
    $
    (2.10
    )
  4




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##### 



GILLA, INC.
(formerly OSPREY GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
 Common Stock
    
    
    Additional
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Paid In Capital
    
    
    Deficit
    
    
    TotalBalance  December 31, 2002
    
    
    544,092
    
    
    $
    109
    
    
    $
    306,296
    
    
    $
    (700,132
    )
    
    $
    (393,727
    )Issuance of common stock for mining claims
- related party
    
    
    31,000,000
    
    
    
    6,200
    
    
    
    
    
    
    
    
    
    
    
    6,200Issuance of common stock for consulting
services
    
    
    6,000,000
    
    
    
    1,200
    
    
    
    398,800
    
    
    
    
    
    
    
    400,000Issuance of common stock for directors fees
    
    
    500,000
    
    
    
    100
    
    
    
    309,900
    
    
    
    
    
    
    
    310,000Fair market value of options granted
    
    
    
    
    
    
    
    
    
    
    465,000
    
    
    
    
    
    
    
    465,000Purchase of camp
    
    
    2,000,000
    
    
    
    400
    
    
    
    49,600
    
    
    
    
    
    
    
    50,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (915,574
    )
    
    
    (915,574
    )Balance December 31, 2003
    
    
    40,044,092
    
    
    $
    8,009
    
    
    $
    1,529,596
    
    
    $
    (1,615,706
    )
    
    $
    (78,101
    )Issuance of common stock for mining claims
- related party
    
    
    100,840,000
    
    
    
    20,168
    
    
    
    
    
    
    
    
    
    
    
    20,168Issuance of common stock for mining claims
    
    
    550,000
    
    
    
    110
    
    
    
    176,890
    
    
    
    
    
    
    
    177,000Issuance of common stock for directors fees
    
    
    300,000
    
    
    
    60
    
    
    
    41,940
    
    
    
    
    
    
    
    42,000Issuance of common stock for consulting
fees
    
    
    23,190,651
    
    
    
    4,638
    
    
    
    4,425,622
    
    
    
    
    
    
    
    4,430,260Issuance of common stock for management
fees
    
    
    4,000,000
    
    
    
    800
    
    
    
    527,200
    
    
    
    
    
    
    
    528,000Issuance of common stock for financing fees
    
    
    200,000
    
    
    
    40
    
    
    
    23,960
    
    
    
    
    
    
    
    24,000Issuance of common stock for cancellation
of letter of intent and services
    
    
    15,500,000
    
    
    
    3,100
    
    
    
    321,900
    
    
    
    
    
    
    
    325,000Sale of common stock
    
    
    10,780,020
    
    
    
    2,156
    
    
    
    1,206,148
    
    
    
    
    
    
    
    1,208,304Capital contribution
    
    
    
    
    
    
    
    
    
    
    68,408
    
    
    
    
    
    
    
    68,408Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,717,947
    )
    
    
    (7,717,947
    )Balance December 31, 2004
    
    
    195,404,763
    
    
    $
    39,081
    
    
    $
    8,321,664
    
    
    $
    (9,333,653
    )
    
    $
    (972,908
    )Sale of common stock
    
    
    100,000,000
    
    
    
    20,000
    
    
    
    480,000
    
    
    
    
    
    
    
    500,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (213,799
    )
    
    
    (213,799
    )Balance December 31, 2005
    
    
    295,404,763
    
    
    $
    59,081
    
    
    $
    8,801,664
    
    
    $
    (9,547,452
    )
    
    $
    (686,707
    )Cancellation of common stock
    
    
    (61,150,000
    )
    
    
    (12,230
    )
    
    
    12,230
    
    
    
    
    
    
    
    Issuance of common stock for consulting
fees
    
    
    35,000,000
    
    
    
    7,000
    
    
    
    1,568,000
    
    
    
    
    
    
    
    1,575,000Issuance of common stock for services
rendered
    
    
    1,690,106
    
    
    
    338
    
    
    
    43,169
    
    
    
    
    
    
    
    43,507Issuance of common stock for directors fees
    
    
    500,000
    
    
    
    100
    
    
    
    32,400
    
    
    
    
    
    
    
    32,500Issuance of common stock for satisfaction
of debt
    
    
    328,325
    
    
    
    66
    
    
    
    19,634
    
    
    
    
    
    
    
    19,700Issuance of common stock for salary
    
    
    10,530,262
    
    
    
    2,106
    
    
    
    682,362
    
    
    
    
    
    
    
    684,468Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (415,270
    )
    
    
    (415,270
    )Balance December 31, 2006
    
    
    282,303,456
    
    
    $
    56,461
    
    
    $
    11,159,459
    
    
    $
    (9,962,722
    )
    
    $
    1,253,1981:50 Reverse stock split effective March
14, 2007
    
    
    (276,657,387
    )
    
    
    (55,332
    )
    
    
    55,332
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (165,640
    )
    
    
    (165,640
    )Balance June 30, 2007
    
    
    5,646,069
    
    
    $
    1,129
    
    
    $
    11,214,791
    
    
    $
    (10,128,362
    )
    
    $
    1,087,558
  5




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##### 



GILLA, INC.
(formerly OSPREY GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
 STATEMENTS OF CHANGES IN CASH FLOWS
 For the Period FromFor the Six Months Ended
    
    
    March 28, 1995June 30,
    
    
    (Inception) to2007
    
    
    2006
    
    
    June 30, 2007CASH FLOW FROM OPERATING ACTIVITIESAccounts payable
    
    $
    (165,640
    )
    
    $
    88,271
    
    
    $
    (10,128,362
    )Accrued expensesOther receivableStock compensation
    
    
    
    
    
    
    
    
    
    
    9,082,803used in operating activities:(Increase) in assets:
    
    
    (41,412
    )
    
    
    
    
    
    
    (44,411
    )Adjustment to reconcile net income
(loss) to net cashIncrease(decrease) in current liabilities
    
    
    (44,782
    )
    
    
    (504,012
    )
    
    
    468,344Net cash (used in) operating activities
    
    
    (51,760
    )
    
    
    24,923
    
    
    
    3,935Net income (loss) from operations
    
    
    (303,594
    )
    
    
    (390,818
    )
    
    
    (617,691
    )CASH FLOW FROM FINANCING ACTIVITIESIncrease (decrease) in due to related
party
    
    
    
    
    
    
    272,676
    
    
    
    Sale of common stock
    
    
    
    
    
    
    
    
    
    
    1,708,304Net cash provided by financing activities
    
    
    
    
    
    
    272,676
    
    
    
    1,708,304CASH FLOW FROM INVESTING ACTIVITIESRestricted cash
    
    
    (26,946
    )
    
    
    
    
    
    
    (1,085,559
    )Net cash used in investing activities
    
    
    (26,946
    )
    
    
    
    
    
    
    (1,085,559
    )Net Increase (decrease) in cash
    
    
    (330,540
    )
    
    
    (118,142
    )
    
    
    5,054Cash and cash equivalents at beginning
of period
    
    
    335,594
    
    
    
    123,097
    
    
    
    Cash and cash equivalents at end of
period
    
    $
    5,054
    
    
    $
    4,955
    
    
    $
    5,054Supplemental Disclosure of Cash Flow
Information:Cash paid for:Interest
    
    
    
    
    
    
    
    
    
    $
    3,145Taxes
    
    
    
    
    
    
    
    
    
    
    
  6




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NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
  Basis of Accounting
  NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Interim Reporting
   Going Concern
    7




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NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
   Managements Plans
  Use of Estimates
  Recent accounting pronouncements
  NOTE 3. EQUITY
 Reverse stock split
  NOTE 5. SUBSEQUENT EVENTS
   8




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Item 2. PLAN OF OPERATION
    OVERVIEW
      CERTAIN BUSINESS RISK FACTORS
  GOLD EXPLORATION IS HIGHLY SPECULATIVE, INVOLVES SUBSTANTIAL EXPENDITURES, AND IS FREQUENTLY
NON-PRODUCTIVE
  
  9




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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.
  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 DEFICIT ALL OF WHICH
MEANS THAT WE MAY NOT BE ABLE TO CONTINUE OPERATIONS UNLESS WE OBTAIN ADDITIONAL FUNDING.
  10




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WE ARE DEPENDENT ON KEY PERSONNEL, THE LOSS OF EITHER OF THEM 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
  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
  11




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##### 



DEPRECIATION AND DEPLETION.
  IMPAIRMENT OF LONG-LIVE ASSETS
  RESULTS OF OPERATIONS FOR THE QUARTER ENDED June 30, 2007
  LIQUIDITY AND CAPITAL RESOURCES
     12




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##### 



Item 3. Disclosure Controls and Procedures
   PART II
 ITEM 1. LEGAL PROCEEDINGS
 st
 Mark B. Aronson th st th
 ITEM 2. CHANGES IN SECURITIES
 Name Change:
  Reverse of All Outstanding Shares:
  ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  13




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##### 



ITEM 5. OTHER INFORMATION
   
  th
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
  14




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SIGNATURES
  GILLA INC.
(FORMERLY OSPREY GOLD CORP.)By:
    /s/  Georges BenarrochGeorges Benarroch,President & Chief Financial Officer  Name
    
    Title
    
    Date/s/ Georges Benarroch
    
    President
    
    August 2, 2007Chief Financial OfficerDirector/s/ Jean Jacques Treyvaud
    
    Director
    
    August 2, 2007
 15