##### 



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 March 31, 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
    
    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)
 o No þ
 o
  3,399,707.14




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##### 



PART I
    
    Financial InformationItem 1.
    
    Financial StatementsUnaudited Consolidated Balance Sheet
as of March 31, 2007.
    
    
    3Unaudited Consolidated Statements of Operations
for the three months ended March 31, 2007 and 2006
    
    
    4and the period March 28, 1995 (inception) to March 31, 2007Unaudited Consolidated Statement of Changes in Shareholder
Equity for the three months ended March 31, 2007
    
    
    5and the period March 28, 1995 (inception) to March 31, 2007.Unaudited Consolidated Statements of Cash Flows
for the three months ended March 31, 2007 and 2006.and the period March 28, 1995 (inception) to March 31, 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
    
    
    15PART IIItem 1.
    
    Legal Proceedings
    
    
    15Item 2.
    
    Changes In Securities
    
    
    15Item 3.
    
    Defaults Upon Senior Securities
    
    
    15Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    15Item 5.
    
    Other Information
    
    
    15Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    16SIGNATURES
    
    
    17CERTIFICATIONS
    
    
    18
 2




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##### 



GILLA, INC.
(formerly OSPREY GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)
 CONSOLIDATED BALANCE SHEET
 March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)
    
    
    (Audited)ASSETSCURRENT ASSETSCash
    
    $
    136,808
    
    
    $
    335,594Other receivable
    
    
    8,572
    
    
    
    2,999TOTAL CURRENT ASSETS
    
    
    145,380
    
    
    
    338,593NON CURRENT ASSETSRestricted cash
    
    
    1,071,846
    
    
    
    1,058,613Mining camp
    
    
    50,000
    
    
    
    50,000TOTAL ASSETS
    
    $
    1,267,226
    
    
    $
    1,447,206LIABILITIES AND SHAREHOLDERS DEFICITCURRENT LIABILITIESAccounts payable
    
    $
    8,839
    
    
    $
    138,311Accrued expenses
    
    
    19,008
    
    
    
    55,697TOTAL LIABILITIES
    
    
    27,847
    
    
    
    194,008Commitments and ContingenciesSHAREHOLDERS DEFICITCommon stock, .0002 par value, 300,000,000 shares authorized;
5,649,069 shares issued and outstanding
    
    
    1,129
    
    
    
    56,461Additional paid in capital
    
    
    11,214,791
    
    
    
    11,159,459Accumulated deficit
    
    
    (9,976,541
    )
    
    
    (9,962,722
    )TOTAL SHAREHOLDERS DEFICIT
    
    
    1,239,379
    
    
    
    1,253,198TOTAL LIABILITIES AND SHAREHOLDERS DEFICIT
    
    $
    1,267,226
    
    
    $
    1,447,206
  3




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##### 





GILLA, INC.
(formerly OSPREY GOLD CORP.)
(AN EXPLORATION STAGE COMPANY)


CONSOLIDATED STATEMENTS OF OPERATIONS


For the Period FromFor the Three Months Ended
    
    
    March 28, 1995March 31,
    
    
    (Inception) to2007
    
    
    2006
    
    
    March 31, 2007REVENUES
    
    $
    
    
    
    $
    
    
    
    $
    TOTAL REVENUES
    
    
    
    
    
    
    
    
    
    
    EXPENSES:Exploration cost
    
    
    
    
    
    
    14,769
    
    
    
    1,583,991General and administrative
    
    
    158,311
    
    
    
    218,401
    
    
    
    12,462,539TOTAL OPERATING EXPENSES
    
    
    158,311
    
    
    
    233,170
    
    
    
    14,046,530NET LOSS FROM OPERATIONS
    
    
    (158,311
    )
    
    
    (233,170
    )
    
    
    (14,046,530
    )OTHER INCOME (EXPENSES)Interest expense
    
    
    (3,145
    )
    
    
    
    
    
    
    (3,145
    )Interest income
    
    
    13,233
    
    
    
    
    
    
    
    21,846Gain on sale of mining properties
    
    
    
    
    
    
    
    
    
    
    2,100,000Gain (loss) on foreign exchange rate transactions
    
    
    (352
    )
    
    
    (1,584
    )
    
    
    159,094Gain on forgiveness of debt
    
    
    134,756
    
    
    
    628,583
    
    
    
    1,792,194TOTAL OTHER EXPENSES
    
    
    144,492
    
    
    
    626,999
    
    
    
    4,069,989NET INCOME (LOSS)
    
    $
    (13,819
    )
    
    $
    393,829
    
    
    $
    (9,976,541
    )WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANIDING-BASIC AND DILUTED
    
    
    5,646,069
    
    
    
    4,908,095
    
    
    
    4,821,549EARNINGS (LOSS) PER COMMON SHARES-BASIC AND DILUTED
    
    $
    (0.00
    )
    
    $
    0.08
    
    
    $
    (2.07
    )




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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,819
    )
    
    
    (13,819
    )Balance March 31, 2007
    
    
    5,646,069
    
    
    $
    1,129
    
    
    $
    11,214,791
    
    
    $
    (9,976,541
    )
    
    $
    1,239,379


5




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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 Ended
    
    
    March 28, 1995March 31,
    
    
    (Inception) to2007
    
    
    2006
    
    
March 31, 2007CASH FLOW FROM OPERATING ACTIVITIESNet income (loss) from operations
    
    $
    (13,819
    )
    
    $
    393,829
    
    
    $
    (9,976,541
    )Adjustment to reconcile net income (loss) to net cash
used in operating activities:Stock compensation
    
    
    
    
    
    
    
    
    
    
    9,082,803(Increase) in assets:Other receivable
    
    
    (5,573
    )
    
    
    
    
    
    
    (8,572
    )Increase(decrease) in current liabilitiesAccounts payable
    
    
    (129,472
    )
    
    
    (575,776
    )
    
    
    383,654Accrued expenses
    
    
    (36,689
    )
    
    
    31,227
    
    
    
    19,006Net cash (used in) operating activities
    
    
    (185,553
    )
    
    
    (150,720
    )
    
    
    (499,650
    )CASH FLOW FROM FINANCING ACTIVITIESIncrease (decrease) in due to related party
    
    
    
    
    
    
    33,461
    
    
    
    Sale of common stock
    
    
    
    
    
    
    
    
    
    
    1,708,304Net cash provided by financing activities
    
    
    
    
    
    
    33,461
    
    
    
    1,708,304CASH FLOW FROM INVESTING ACTIVITIESRestricted cash
    
    
    (13,233
    )
    
    
    
    
    
    
    (1,071,846
    )Net cash used in investing activities
    
    
    (13,233
    )
    
    
    
    
    
    
    (1,071,846
    )Net Increase (decrease) in cash
    
    
    (198,786
    )
    
    
    (117,259
    )
    
    
    136,808Cash and cash equivalents at beginning of period
    
    
    335,594
    
    
    
    123,097
    
    
    
    Cash and cash equivalents at end of period
    
    $
    136,808
    
    
    $
    5,838
    
    
    $
    136,808Supplemental Disclosure of Cash Flow Information:Cash paid for:Interest
    
    
    3,145
    
    
    
    
    
    
    
    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
      CERTAIN BUSINESS RISK FACTORS
  FORWARD-LOOKING NATURE OF RESERVE AND MINERALIZATION ESTIMATES
  9




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GEOLOGIC UNCERTAINTY AND INHERENT VARIABILITY
  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
  FUEL PRICE VARIABILITY
  VARIATIONS IN MINING AND PROCESSING PARAMETERS
  10




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CHANGES IN ENVIRONMENTAL AND MINING LAWS AND REGULATIONS
  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.
  THE DEVELOPMENT AND OPERATION OF OUR MINING PROJECTS INVOLVE NUMEROUS UNCERTAINTIES
   $
    
    estimation of reserves
 11




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$
    
    anticipated metallurgical recoveries;$
    
    future gold prices; and$
    
    anticipated capital and operating costs of such projects.
  THE DEVELOPMENT AND OPERATION OF OUR MINING PROJECTS INVOLVE NUMEROUS UNCERTAINTIES (Continued)
  $
    
    unanticipated changes in grade and tonnage of ore to be mined and processed;$
    
    unanticipated adverse geotechnical conditions;$
    
    incorrect data on which engineering assumptions are made;$
    
    costs of constructing and operating a mine in a specific environment;$
    
    availability and cost of processing and refining facilities;$
    
    availability of economic sources of power;$
    
    adequacy of water supply;$
    
    adequate access to the site;$
    
    unanticipated transportation costs;$
    
    government regulations (including regulations relating to prices, royalties, duties, taxes, restrictions on
production, quotas on exportation of minerals, as well as the costs of protection of the environment and
agricultural lands);$
    
    fluctuation in gold prices; and$
    
    accidents, labor actions and FORCE MAJEURE events.
  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
  12




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##### 



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
   DEPRECIATION AND DEPLETION.
  IMPAIRMENT OF LONG-LIVE ASSETS
  13




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##### 



ENVIRONMENT MATTERS
   RESULTS OF OPERATIONS FOR THE QUARTER ENDED March 31, 2007
  LIQUIDITY AND CAPITAL RESOURCES
    14




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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
  ITEM 5. OTHER INFORMATION
  15




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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
 
 16




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##### 



SIGNATURES
  GILLA INC.(FORMERLY OSPREY GOLD CORP.)By:
    
    /s/ Georges Benarroch

Georges Benarroch, President &Chief Financial Officer
  Name
    
    
    
    Title
    
    
    
    Date/s/ Georges Benarroch
    
    
    
    President
    
    
    
    May 10, 2007Chief Financial OfficerDirector/s/ Jean Jacques Treyvaud
    
    
    
    Director
    
    
    
    May 10, 2007
 17