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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
 For the quarterly period ended September 30, 2007
 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.
  N/A
  Nevada
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    88-0335710
(I.R.S. Employer Identification Number)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)
 o No þ
 o
  $4,134,004.04




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##### 



PART I Financial InformationItem 1. Financial StatementsUnaudited Consolidated Balance Sheet as of September 30, 2007.
    
    
    3Unaudited Consolidated Statements of Operations for the nine months ended September 30, 2007.
    
    
    4Unaudited Consolidated Statement of Changes in Shareholder Equity for the nine months ended September 30, 2007.
    
    
    5Unaudited Consolidated Statements of Cash Flows for the nine months ended September 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
    
    
    14PART IIItem 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
    
    
    15Item 5. Other Information
    
    
    15Item 6. Exhibits and Reports on Form 8-K
    
    
    15SIGNATURES
    
    
    16CERTIFICATIONS
    
    
    17EX-31.1EX-32.1
  2




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GILLA, INC.
(formerly OSPREY GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
 
 BALANCE SHEETS
 September 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)
    
    
    (Audited)ASSETSCURRENT ASSETSCash
    
    $
    824,981
    
    
    $
    335,594Other receivable
    
    
    1,271
    
    
    
    2,999Prepaid expenses
    
    
    8,293
    
    
    
    TOTAL CURRENT ASSETS
    
    
    834,545
    
    
    
    338,593NON CURRENT ASSETSRestricted cash
    
    
    
    
    
    
    1,058,613Mining camp
    
    
    50,000
    
    
    
    50,000TOTAL ASSETS
    
    $
    884,545
    
    
    $
    1,447,206LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    7,808
    
    
    $
    138,311Accrued expenses
    
    
    4,217
    
    
    
    55,697TOTAL LIABILITIES
    
    
    12,025
    
    
    
    194,008Commitments and ContingenciesSHAREHOLDERS EQUITYCommon stock, .0002 par value, 300,000,000 shares authorized;
5,646,069 shares issued and outstanding, September 30, 2007;
and December 31, 2006
    
    
    1,129
    
    
    
    1,129Additional paid in capital
    
    
    11,214,791
    
    
    
    11,214,791Accumulated deficit
    
    
    (10,343,400
    )
    
    
    (9,962,722
    )TOTAL SHAREHOLDERS EQUITY
    
    
    872,520
    
    
    
    1,253,198TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    884,545
    
    
    $
    1,447,206
  3




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GILLA, INC.
(formerly OSPREY GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
 
 STATEMENTS OF OPERATIONS
 For the Period FromFor the Three Months Ended
    
    
    For the Nine Months Ended
    
    
    March 28, 1995September 30,
    
    
    September 30,
    
    
    (Inception) to2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    September 30, 2007REVENUES
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    TOTAL REVENUES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    EXPENSES:Exploration cost
    
    
    2,338
    
    
    
    
    
    
    
    4,916
    
    
    
    26,196
    
    
    
    1,588,907General and administrative
    
    
    211,423
    
    
    
    56,797
    
    
    
    563,075
    
    
    
    639,527
    
    
    
    12,867,303TOTAL OPERATING EXPENSES
    
    
    213,761
    
    
    
    56,797
    
    
    
    567,991
    
    
    
    665,723
    
    
    
    14,456,210NET LOSS FROM OPERATIONS
    
    
    (213,761
    )
    
    
    (56,797
    )
    
    
    (567,991
    )
    
    
    (665,723
    )
    
    
    (14,456,210
    )OTHER INCOME (EXPENSES)Gain on sale of mining properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,100,000Gain on forgiveness of debt
    
    
    
    
    
    
    61,000
    
    
    
    167,553
    
    
    
    628,583
    
    
    
    1,824,991Gain (loss) on foreign exchange rate transactions
    
    
    (6,235
    )
    
    
    (5,863
    )
    
    
    (8,867
    )
    
    
    (5,707
    )
    
    
    150,579Interest income
    
    
    4,958
    
    
    
    
    
    
    
    31,904
    
    
    
    
    
    
    
    40,517Interest expense
    
    
    
    
    
    
    
    
    
    
    (3,277
    )
    
    
    
    
    
    
    (3,277
    )TOTAL OTHER EXPENSES
    
    
    (1,277
    )
    
    
    55,137
    
    
    
    187,313
    
    
    
    622,876
    
    
    
    4,112,810NET INCOME (LOSS)
    
    $
    (215,038
    )
    
    $
    (1,660
    )
    
    $
    (380,678
    )
    
    $
    (42,847
    )
    
    $
    (10,343,400
    )WEIGHTED AVERAGE NUMBER OF SHARES

OUTSTANIDING-BASIC AND DILUTED
    
    
    5,646,069
    
    
    
    4,911,084
    
    
    
    5,646,069
    
    
    
    5,532,106
    
    
    
    3,254,805EARNINGS (LOSS) PER COMMON SHARES-

BASIC AND DILUTED
    
    $
    (0.04
    )
    
    $
    (0.00
    )
    
    $
    (0.07
    )
    
    $
    (0.01
    )
    
    $
    (3.18
    )
  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
    
    
    10,882
    
    
    $
    2
    
    
    $
    306,403
    
    
    $
    (700,132
    )
    
    $
    (393,727
    )Issuance of common stock
for mining claims  related
party
    
    
    620,000
    
    
    
    124
    
    
    
    6,076
    
    
    
    
    
    
    
    6,200Issuance of common stock
for consulting services
    
    
    120,000
    
    
    
    24
    
    
    
    399,976
    
    
    
    
    
    
    
    400,000Issuance of common stock
for directors fees
    
    
    10,000
    
    
    
    2
    
    
    
    309,998
    
    
    
    
    
    
    
    310,000Fair market value of
options granted
    
    
    
    
    
    
    
    
    
    
    465,000
    
    
    
    
    
    
    
    465,000Purchase of camp
    
    
    40,000
    
    
    
    8
    
    
    
    49,992
    
    
    
    
    
    
    
    50,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (915,574
    )
    
    
    (915,574
    )Balance December 31, 2003
    
    
    800,882
    
    
    $
    160
    
    
    $
    1,537,445
    
    
    $
    (1,615,706
    )
    
    $
    (78,101
    )Issuance of common stock
for mining claims  related
party
    
    
    2,016,800
    
    
    
    404
    
    
    
    19,764
    
    
    
    
    
    
    
    20,168Issuance of common stock
for mining claims
    
    
    11,000
    
    
    
    2
    
    
    
    176,998
    
    
    
    
    
    
    
    177,000Issuance of common stock
for directors fees
    
    
    6,000
    
    
    
    1
    
    
    
    41,999
    
    
    
    
    
    
    
    42,000Issuance of common stock
for consulting fees
    
    
    463,813
    
    
    
    93
    
    
    
    4,430,167
    
    
    
    
    
    
    
    4,430,260Issuance of common stock
for management fees
    
    
    80,000
    
    
    
    16
    
    
    
    527,984
    
    
    
    
    
    
    
    528,000Issuance of common stock
for financing fees
    
    
    4,000
    
    
    
    1
    
    
    
    23,999
    
    
    
    
    
    
    
    24,000Issuance of common stock
for cancellation of letter
of intent and services
    
    
    310,000
    
    
    
    62
    
    
    
    324,938
    
    
    
    
    
    
    
    325,000Sale of common stock
    
    
    215,600
    
    
    
    43
    
    
    
    1,208,261
    
    
    
    
    
    
    
    1,208,304Capital contribution
    
    
    
    
    
    
    
    
    
    
    68,408
    
    
    
    
    
    
    
    68,408Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,717,947
    )
    
    
    (7,717,947
    )Balance December 31, 2004
    
    
    3,908,095
    
    
    $
    782
    
    
    $
    8,359,963
    
    
    $
    (9,333,653
    )
    
    $
    (972,908
    )Sale of common stock
    
    
    2,000,000
    
    
    
    400
    
    
    
    499,600
    
    
    
    
    
    
    
    500,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (213,799
    )
    
    
    (213,799
    )Balance December 31, 2005
    
    
    5,908,095
    
    
    $
    1,182
    
    
    $
    8,859,563
    
    
    $
    (9,547,452
    )
    
    $
    (686,707
    )Cancellation of common stock
    
    
    (1,223,000
    )
    
    
    (245
    )
    
    
    245
    
    
    
    
    
    
    
    Issuance of common stock
for consulting fees
    
    
    700,000
    
    
    
    140
    
    
    
    1,574,860
    
    
    
    
    
    
    
    1,575,000Issuance of common stock
for services rendered
    
    
    33,802
    
    
    
    7
    
    
    
    43,500
    
    
    
    
    
    
    
    43,507Issuance of common stock
for directors fees
    
    
    10,000
    
    
    
    2
    
    
    
    32,498
    
    
    
    
    
    
    
    32,500Issuance of common stock
for satisfaction of debt
    
    
    6,567
    
    
    
    1
    
    
    
    19,699
    
    
    
    
    
    
    
    19,700Issuance of common stock
for salary
    
    
    210,605
    
    
    
    42
    
    
    
    684,426
    
    
    
    
    
    
    
    684,468Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (415,270
    )
    
    
    (415,270
    )Balance December 31, 2006
    
    
    5,646,069
    
    
    $
    1,129
    
    
    $
    11,214,791
    
    
    $
    (9,962,722
    )
    
    $
    1,253,198Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (380,678
    )
    
    
    (380,678
    )Balance September 30, 2007
    
    
    5,646,069
    
    
    $
    1,129
    
    
    $
    11,214,791
    
    
    $
    (10,343,400
    )
    
    $
    872,520
  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 Nine Months Ended
    
    
    March 28, 1995September 30,
    
    
    (Inception) to2007
    
    
    2006
    
    
    September 30, 2007CASH FLOW FROM OPERATING ACTIVITIESNet (loss) from operations
    
    $
    (380,678
    )
    
    $
    (42,847
    )
    
    $
    (10,343,400
    )Adjustments to reconcile net (loss) to net cash
used in operating activities:Stock compensation
    
    
    
    
    
    
    
    
    
    
    9,082,803(Increase) in assets:Other receivable
    
    
    1,728
    
    
    
    
    
    
    
    (1,271
    )Prepaid expenses
    
    
    (8,293
    )
    
    
    
    
    
    
    Increase (decrease) in current liabilities:Accounts payable
    
    
    (130,503
    )
    
    
    (546,775
    )
    
    
    382,623Accrued expenses
    
    
    (51,480
    )
    
    
    26,163
    
    
    
    4,215Net cash used in operating activities
    
    
    (569,226
    )
    
    
    (563,459
    )
    
    
    (875,030
    )CASH FLOW FROM FINANCING ACTIVITIESIncrease in due to related party
    
    
    
    
    
    
    440,416
    
    
    
    Sale of common stock
    
    
    
    
    
    
    
    
    
    
    1,708,304Net cash provided by financing activities
    
    
    
    
    
    
    440,416
    
    
    
    1,708,304CASH FLOW FROM INVESTING ACTIVITIESRestricted cash
    
    
    1,058,613
    
    
    
    
    
    
    
    Net cash provided by investing activities
    
    
    1,058,613
    
    
    
    
    
    
    
    Net increase (decrease) in cash
    
    
    489,387
    
    
    
    (123,043
    )
    
    
    833,274Cash and cash equivalents at beginning of period
    
    
    335,594
    
    
    
    123,097
    
    
    
    Cash and cash equivalents at end of period
    
    $
    824,981
    
    
    $
    54
    
    
    $
    833,274Supplemental Disclosure of Cash Flow Information:Cash paid for interest
    
    $
    
    
    
    $
    
    
    
    $
    3,145Cash paid for taxes
    
    $
    
    
    
    $
    
    
    
    $
    
  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
  8




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Item 2. PLAN OF OPERATION
    OVERVIEW
  9




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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.
  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
  10




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FUEL PRICE VARIABILITY
  WE HAVE A LIMITED OPERATING HISTORY WITH SIGNIFICANT LOSSES AND EXPECT LOSSES TO CONTINUE FOR THE
FORESEEABLE FUTURE
   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 SEPTEMBER 30, 2007
  LIQUIDITY AND CAPITAL RESOURCES
    13




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Item 3. Disclosure Controls and Procedures
   
 PART II
 
 ITEM 1. LEGAL PROCEEDINGS
  Mark B. Aronson
 
 ITEM 2. CHANGES IN SECURITIES
 Name Change
  Reverse of All Outstanding Shares
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  14




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 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
    
    November 9, 2007Chief Financial OfficerDirector/s/ Jean Jacques Treyvaud
    
    Director
    
    November 9, 2007
 16