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, 2008
 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
  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:
  o o




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PART I Financial InformationItem 1. Financial StatementsUnaudited Consolidated Balance Sheet
as of March 31, 2008.
    
    
    3Unaudited Consolidated Statements of Operations
for the three months ended March 31, 2008.
    
    
    4Unaudited Consolidated Statements of Cash Flows
for the three months ended March 31, 2008.
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operation
    
    
    10Item 3. Disclosure Controls and Procedures
    
    
    14PART II-Other InformationItem 1. Legal Proceedings
    
    
    14Item 2. Changes in Securities
    
    
    14Item 3. Defaults Upon Senior Securities
    
    
    14Item 4. Submission of Matters to a Vote of Security Holders
    
    
    14Item 5. Other Information
    
    
    15Item 6. Exhibits and Reports on Form 8-K
    
    
    15SIGNATURES
    
    
    16CERTIFICATIONS
    
    
    17
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GILLA, INC.
(formerly OSPREY GOLD CORP.) (AN
EXPLORATION STAGE COMPANY)
 CONSOLIDATED BALANCE SHEET
 March
31,
    
    

December
31,2008
    
    
    2007ASSETSCURRENT ASSETSCash
    
    $
    192,234
    
    
    $
    670,142Prepaid
    
    
    6,459
    
    
    
    Other receivable
    
    
    5,095
    
    
    
    3,970TOTAL CURRENT ASSETS
    
    
    203,788
    
    
    
    674,112NON CURRENT ASSETSMining rights
    
    
    12,744,110
    
    
    
    Mining camp
    
    
    50,000
    
    
    
    50,000TOTAL NON CURRENT ASSETS
    
    
    12,794,110
    
    
    
    50,000TOTAL ASSETS
    
    $
    12,997,898
    
    
    $
    724,112LIABILITIES AND SHAREHOLDERS DEFICITCURRENT LIABILITIESAccounts payable
    
    $
    55,456
    
    
    $
    6,731Accrued expenses
    
    
    4,305
    
    
    
    4,158TOTAL LIABILITIES
    
    
    59,761
    
    
    
    10,889Commitments and ContingenciesSHAREHOLDERS DEFICITCommon stock, .0002 par value, 300,000,000 shares authorized;
5,676,069 and 5,646,069 shares issued and outstanding, respectively
    
    
    5,556
    
    
    
    1,135Additional paid in capital
    
    
    24,514,602
    
    
    
    11,237,285Accumulated other comprehensive loss
    
    
    787
    
    
    
    Accumulated deficit
    
    
    (11,582,808
    )
    
    
    (10,525,197
    )TOTAL SHAREHOLDERS DEFICIT
    
    
    12,938,137
    
    
    
    713,223TOTAL LIABILITIES AND SHAREHOLDERS DEFICIT
    
    $
    12,997,898
    
    
    $
    724,112
  3




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GILLA, INC.
(formerly OSPREY GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
 CONSOLIDATED STATEMENTS OF OPERATIONS
 March 28, 1995For the Three Months
    
    
    For the Period FromMarch 31,
    
    
    (Inception) to2008
    
    
    2007
    
    
    March 31, 2008REVENUES
    
    $
    
    
    
    $
    
    
    
    $
    TOTAL REVENUES
    
    
    
    
    
    
    
    
    
    
    EXPENSES:Exploration cost
    
    
    
    
    
    
    
    
    
    
    1,615,472General and administrative
    
    
    1,056,159
    
    
    
    158,311
    
    
    
    14,079,203TOTAL OPERATING EXPENSES
    
    
    1,056,159
    
    
    
    158,311
    
    
    
    15,694,675NET LOSS FROM OPERATIONS
    
    
    (1,056,159
    )
    
    
    (158,311
    )
    
    
    (15,694,675
    )OTHER INCOME (EXPENSES)Interest income
    
    
    
    
    
    
    (3,145
    )
    
    
    40,517Interest expense
    
    
    
    
    
    
    13,233
    
    
    
    (3,277
    )Gain on sale of mining properties
    
    
    
    
    
    
    
    
    
    
    2,100,000Gain (loss) on foreign exchange rate transactions
    
    
    (2,239
    )
    
    
    (352
    )
    
    
    148,849Gain of forgiveness of debt
    
    
    
    
    
    
    134,756
    
    
    
    1,824,991TOTAL OTHER EXPENSES
    
    
    (2,239
    )
    
    
    144,492
    
    
    
    4,111,080NET LOSS
    
    $
    (1,058,398
    )
    
    $
    (13,819
    )
    
    $
    (11,583,595
    )Comprehensive LossForeign currency translation loss
    
    
    787
    
    
    
    
    
    
    
    787Total Comprehensive Loss
    
    $
    (1,057,611
    )
    
    $
    (13,819
    )
    
    $
    (11,582,808
    )WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANIDING-BASIC AND DILUTED
    
    
    20,221,256
    
    
    
    5,646,069
    
    
    
    25,763,675EARNINGS (LOSS) PER COMMON SHARES-
BASIC AND DILUTED
    
    $
    (0.05
    )
    
    $
    (0.00
    )
    
    $
    (0.45
    )
  4




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GILLA, INC.
(formerly OSPREY GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
 CONSOLIDATED STATEMENTS OF CHANGES IN CASH FLOWS
 For the Period FromFor the Three Months Endend
    
    
    March 28, 1995March 31
    
    
    (Inception) to2008
    
    
    2007
    
    
    March 31, 2007CASH FLOW FROM OPERATING ACTIVITIESNet (loss) from operations
    
    $
    (1,058,398
    )
    
    $
    (13,819
    )
    
    $
    (11,583,595
    )Adjustment to reconcile net income (loss) to
net cash used in operating activities:Stock compensation
    
    
    778,415
    
    
    
    
    
    
    
    9,883,718(Increase) decrease in assets:Prepaid
    
    
    (6,459
    )
    
    
    
    
    
    
    (6,459
    )Other receivable
    
    
    (1,125
    )
    
    
    (5,573
    )
    
    
    (5,095
    )Increase(decrease) in current liabilitiesAccounts payable
    
    
    48,725
    
    
    
    (129,472
    )
    
    
    430,271Accrued expenses
    
    
    147
    
    
    
    (36,689
    )
    
    
    4,303Net cash provided by (used in) operating activities
    
    
    (238,695
    )
    
    
    (185,553
    )
    
    
    (1,276,857
    )CASH FLOW FROM FINANCING ACTIVITIESSale of common stock
    
    
    
    
    
    
    
    
    
    
    1,708,304Net cash provided by financing activities
    
    
    
    
    
    
    
    
    
    
    1,708,304CASH FLOW FROM INVESTING ACTIVITIESDividends
    
    
    (240,000
    )
    
    
    
    
    
    
    (240,000
    )Restricted cash
    
    
    
    
    
    
    (13,233
    )
    
    
    Net cash used in investing activities
    
    
    (240,000
    )
    
    
    (13,233
    )
    
    
    (240,000
    )Effect of Exchange Rate on Cash
    
    
    787
    
    
    
    
    
    
    
    787Net Increase (decrease) in cash
    
    
    (477,908
    )
    
    
    (198,786
    )
    
    
    192,234Cash and cash equivalents at beginning of period
    
    
    670,142
    
    
    
    335,594
    
    
    
    Cash and cash equivalents at end of period
    
    $
    192,234
    
    
    $
    136,808
    
    
    $
    192,234Supplemental Disclosure of Cash Flow
Information:Cash paid for:Interest
    
    
    
    
    
    
    
    
    
    
    Taxes
    
    
    
    
    
    
    
    
    
    
    In January 2008 the company issued 21,240,184
valued at $12,774,110 for the purchase of mining rights
  5




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NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
    NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Principles of Consolidation
  Basis of Accounting
  6




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NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 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
 Disclosure about Derivative Instruments and Hedging Activities
 " ,
 Determination of the Useful Life of Intangible Assets
  NOTE 3  MINING RIGHTS
  8




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NOTE 4  EQUITY
       9




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




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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.
  11




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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:
  12




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CRITICAL ACCOUNTING POLICIES
   DEPRECIATION AND DEPLETION.
  IMPAIRMENT OF LONG-LIVE ASSETS
  RESULTS
OF OPERATIONS FOR THE QUARTER ENDED March 31, 2008
  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
 Name Change:
  Reverse of All Outstanding Shares:
  ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  14




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ITEM 5. OTHER INFORMATION
        ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
  15




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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
Chief Financial Officer
Director
    
    April 29, 2008
 16