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SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D. C. 20549
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FORM 10-SB
General Form for Registration of Securities
Pursuant to Section 12(b) or (g) of
The Securities Exchange Act of 1934
GEM INTERNATIONAL (USA), INC.
(Exact name of registrant as specific in its charter)
Nevada 87-0628796
(State of Incorporation) (I.R.S. Employer
Identification No.)
810 Peace Portal Drive
Suite 204
Blaine, Washington 98231
(Address of executive offices, including postal code)
Registrant's telephone number: (360) 332-8427
Copies to: Conrad C. Lysiak, Esq.
601 West First Avenue
Suite 503
Spokane, Washington 99201
Securities to be registered pursuant to Section 12(b) of the Act:
NONE
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(Title of Class)
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK
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(Title of Class)
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ITEM 1. DESCRIPTION OF BUSINESS.
History
Gem International (USA), Inc. (the "Company") was incorporated
under the laws of the State of Nevada on December 21, 1998. Since
inception, the Company has been engaged in business as a Web-based
retailer focused on the distribution of jewelry and gemstones. The
Company sells stone-set, pearl and gold jewelry through the benefits of
Internet retailing, thereby delivering consumers an opportunity to buy
quality jewelry at low prices on the Internet. The Company's online
store offers a selection stone-set, pearl and gold jewelry. The
Company's online store offers detailed product information, helpful
shopping services and merchandising through an easy-to-use Web pages.
In addition, the Company offers consumers the convenience and
flexibility of shopping twenty-four hours a day, seven days a week.
The Company's online store is integrated with top selling products
from major manufacturing companies in Canada, the United States and
Australia at low prices for quality merchandise in each category. The
Internet provides retailers with the opportunity to serve the retail
jewelry market as consumers accept the Internet as an alternative
shopping channel. The Company's management believes that traditional
store based retailers face numerous challenges in providing a
satisfying shopping experience for consumers of jewelry. These
challenges include limited product selection, location and levels of
consumer services. As a result the Company believes that many
consumers will find the jewelry shopping experience more convenient
over the Internet and lower prices because of the lower overhead that
can be offered by buying online. Most of the products offered at tje
Company's online store range in price from $50 to $500 with certain
items retailing as high as $10,000.
Other than investigating potential technologies and recruiting
personnel in support of the Company's business purpose, the Company has
had no material business operations since its inception in 1998. At
present the Company has yet to acquire or develop the necessary
technology assets in support of its business purpose to become a Web-
based retailer focused on the distribution of jewelry and gemstones.
The Internet is a world-wide medium of interconnected electronic
and/or computer networks. Individuals and companies have recently
recognized that the communication capabilities of the Internet provide
a medium for not only the promotion and communication of ideas and
concepts, but also for the presentation and sale of information, goods
and services.
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SHOPPING AT THE COMPANY'S ONLINE STORE
The Company's online store can be located at www.buyritejewels.com
Convenient Shopping Experience.
The Company's online store provides customers with an easy-to-use
Web site. The website is available 24 hours a day, seven days a week
and may be reached from the shopper's home or office. The Company's
online store enables it to deliver a broad selection of products to
customers in rural or other locations that do not have convenient
access to physical stores. The Company also makes the shopping
experience convenient by categorizing our products into easy-to-shop
departments. These include earrings, bracelets and necklaces, pearls,
gold and other jewelry.
Customer Service.
The Company provides a customer service department via email where
consumers can resolve order and product questions. Furthermore, the
Company insures consumer satisfaction by offering a money back
guaranty.
Online Retail Store
The Company designed its online retail store to be the primary
place for consumers to purchase jewelry. The Company believes its
Online Retail Store is an easy-to-use online store.
Shopping at the Online Store
The Company believes that the sale of jewelry products over the Web
can offer attractive benefits to consumers. These include enhanced
selection, convenience, quality, ease-of-use, depth of content and
information, and competitive pricing. Key features of the Company's
Online Store include:
Browsing
The Company's Online Store offers consumers with a several subject
areas and special features arranged in a simple, easy-to-use format
intended to enhance product selection. By clicking on a category
names, the consumer moves directly to the home page of the desired
category and can view promotions and featured products.
Selecting a Product and Checking Out.
To purchase products, consumers simply click on the "add to cart"
button to add products to their virtual shopping cart. Consumers can
add and subtract products from their shopping cart as they browse
around the Company's Online Store, prior to making a final purchase
decision, just as in a physical store. To execute orders, consumers
click on the "checkout" button and, depending upon whether the consumer
has previously shopped at the Company's Online Store are prompted to
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supply shipping details online. The Company also offers consumers a
variety of gift wrapping and shipping options during the checkout
process. Prior to finalizing an order by clicking the "submit" button,
Consumers are shown their total charges along with the various options
chosen at which point consumers still have the ability to change their
order or cancel it entirely.
Paying.
To pay for orders, a consumer must use a credit card, which is
authorized during the checkout process, but which is charged when the
customer's items are shipped from the Company's distribution facility.
The Company's Online Store uses a security technology that works with
the most common Internet browsers and makes it virtually impossible for
unauthorized parties to read information sent by its consumers. We also
offer our customers a money-back return policy.
At this time the Company is still at the business investigation
and planning stage and has yet to acquire, license or develop the
necessary software and hardware technology to offer the products and
services that it proposes to offer. The Company's proposed plan of
operations has not been completed as of the date hereof and there are
no assurances that the plan will ever be implemented. The Company is
currently implementing a plan of operations in order to achieve this
goal and is currently seeking qualified parties with the intent of
securing a contract to access the necessary technology. However, at
this time, there can be no assurances that the Company will be
successful in negotiating such a contract. Without securing the
necessary technology the Company will not be in a position to offer the
services it is proposing.
The Company believes that the sale of jewelry and gemstone products
over the Web can offer attractive benefits to consumers. These include
enhanced selection, convenience, ease-of-use, and competitive pricing.
The success of the Company may be affected by fluctuations of the
price of the mining of the gemstones and raw materials for the
manufacturing of the jewelry products, and government agencies. Such
factors are beyond the control of the Company and may render commercial
distribution of mining of the gemstone and raw materials impossible. It
is possible that no matter what the outcome is of any distribution,
evaluation, acquisition, or development programs of the Company,
factors beyond the control of the Company may operate to render
commercial distribution of jewelry and precious stones impossible.
Source of Jewelry
The Company currently buys its jewelry from Queensland Opal, NL in
Queensland, New South Wales, Australia on consignment. Queensland Opal
is owned and controlled by Michael A. Cox, the Company's President.
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Competition
The electronic commerce market is new, rapidly evolving and
intensely competitive. The market for information resources is more
mature but also intensely competitive. The Company expects competition
to continue to intensify in the future. Competitors include companies
with substantial customer bases in the computer and other technical
fields. There can be no assurance that the Company can maintain a
competitive position against current or future competitors,
particularly those with greater financial, marketing, service, support,
technical and other resources. The failure to maintain a competitive
position within the market could have a material adverse effect on the
Company's business, financial condition and results of operations.
There can be no assurance that the Company will be able to compete
successfully against current and future competitors, and competitive
pressures faced by the Company may have a material adverse effect on
the Company's business, financial condition and results of operations.
See "Risk Factors - Competition."
Competition in the distribution, wholesaling, merchandising,
evaluation, acquisition, and development of gemstone and jewelry
product business is intense. Numerous persons and entities are engaged
in distribution, wholesaling, merchandising, development, evaluation,
or acquisition, including companies or individuals possessing financial
resources in excess of that available to the Company. Fluctuations in
gold, silver, gemstone, labor prices and regulations set by various
governmental agencies increase the risk to the Company. In the event
the Company marketing/sales program prove to be economically or
commercially unfeasible, the Company may seek out other distribution,
wholesaling businesses. There can be no assurance, because of
competitive conditions, the sufficient manufactures, gemstones, raw
materials, equipment services and suppliers, will be available to the
Company when needed or on term which would permit a profitable
operation by the Company.
Marketing
Through newspaper, radio, magazine, brochure and email, advertising
the Company will target purchasers of jewelry and gemstone products.
The Company may utilize inbound links that connect directly to the
Company's website from other sites. Potential customers can simply
click on these links to become connected to the Company's website from
search engines and community and affinity sites.
Insurance
The Company maintains insurance in such amounts and covering such
losses, contingencies and occurrences as the Company deems adequate to
protect it and its property. The principal type of insurance includes
a comprehensive liability policy covering legal liability for bodily
injury or death of persons, and for damage to property owned by, or
under the control of the Company, as well as damage to the property of
others.
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Employees; Identification of Certain Significant Employees.
The Company is a development stage company and currently has no
employees, exclusive of its of its Officers and Directors. See
"Management." The Company intends to additional hire employees on an
as needed basis. The Company is presently dependent upon the services
of two of its principal officers, namely David Rambaran and Michael
Cox. In the event either such individuals should leave the Company,
there is no assurance that the Company can obtain the services of a
suitable replacement.
Offices
The offices of the Company, are located at 810 Peace Portal Drive,
Suite 203, Blaine, Washington, and its telephone number is (360) 332-8427.
Government Regulation
The Company is not currently subject to direct federal, state or
local regulation other than regulations applicable to businesses
generally or directly applicable to electronic commerce. However, the
Internet is increasingly popular. As a result, it is possible that a
number of laws and regulations may be adopted with respect to the
Internet. These laws may cover issues such as user privacy, freedom of
expression, pricing, content and quality of products and services,
taxation, advertising, intellectual property rights and information
security. Furthermore, the growth of electronic commerce may prompt
calls for more stringent consumer protection laws. Several states have
proposed legislation to limit the uses of personal user information
gathered online or require online services to establish privacy
policies. The Federal Trade Commission has also initiated action
against at least one online service regarding the manner in which
personal information is collected from users and provided to third
parties. The Company will not provide personal information regarding
our users to third parties. However, the adoption of such consumer
protection laws could create uncertainty in Web usage and reduce the
demand for our products and services.
The Company is not certain how its business may be affected by the
application of existing laws governing issues such as property
ownership, copyrights, encryption and other intellectual property
issues, taxation, libel, obscenity and export or import matters. The
vast majority of such laws were adopted prior to the advent of the
Internet. As a result, they do not contemplate or address the unique
issues of the Internet and related technologies. Changes in laws
intended to address such issues could create uncertainty in the
Internet market place. Such uncertainty could reduce demand for
services or increase the cost of doing business as a result of
litigation costs or increased service delivery costs.
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In addition, because the Company's products are available over the
Internet in multiple states and foreign countries, other jurisdictions
may claim that the Company is required to qualify to do business in
each such state or foreign country. The Company is qualified to do
business only in Nevada. The Company's failure to qualify in a
jurisdiction where it is required to do so could subject it to taxes
and penalties. It could also hamper the Company's ability to enforce
contracts in such jurisdictions. The application of laws or
regulations from jurisdictions whose laws do not currently apply to the
Company's business could have a material adverse effect on its
business, results of operations and financial condition.
Year 2000
The Year 2000 issue is the result of computer programs written
using two digits rather than four to define the applicable year. As a
result, date sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in system
failures or miscalculations causing disruptions of operations,
including among others, temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
The Company has examined all of the technology (information and
non-information) that it uses to operate its business and found it to
be Year 2000 compliant. Further, the Company has contacted its current
hardware and software suppliers and has been advised that all hardware
and software supplied to it is Year 2000 compliant. As the Company
acquires new hardware and software suppliers, the Company intends to
determine the extent to which the Company's systems may be vulnerable
should those third parties fail to address and correct their own Year
2000 issues and take measures to reduce the Company's exposure, such
as, finding alternative suppliers or requiring the suppliers to correct
Year 2000 compliance issues prior to the Company acquiring the product.
RISK FACTORS
1. Company with Limited History of Earnings. The Company has a
limited operating history and is subject to all of the risks inherent
in a developing business enterprise including lack of cash flow and
service acceptance.
2. Development and Market Acceptance of Services. The Company's
success and growth will depend upon the Company's ability to market its
services. The Company's success will depend in part upon the market's
acceptance of, and the Company's ability to deliver and support its
services.
3. Dependence on Technology Supplier. While the Company currently
relies upon NetNation Communications Inc as the Company's outside
technology supplier, the Company believes that there are numerous
outside technology suppliers that perform the same services as
NetNation Communications Inc. Accordingly, the Company believes that if
NetNation Communications Inc could not or would not furnish future
services to the Company, the Company could obtain such services from
other sources without interruption of its operations.
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4. Liquidity; Need for Additional Financing. The Company
believes that it does not have the cash it needs for at least the next
twelve months based upon its internally prepared budget. Further, the
Company's cash requirements are not easily predictable and there is a
possibility that its budget estimates will prove to be inaccurate. If
the Company is unable to generate a positive cash flow, it will be
required to curtail operations substantially and seek additional
capital. There is no assurance that the Company will be able to obtain
additional capital if required, or if capital is available, to obtain
it on terms favorable to the Company. The Company may suffer from a
lack of liquidity in the future which could impair its short-term
marketing and sales efforts and adversely affect its results of
operations.
5. Competition. Most of the Company's competitors have
substantially greater financial, technical and marketing resources than
the Company. The wholesale distribution of jewelry is intensely
competitive. The Company expects competition to continue to intensify
in the future. The Company currently or potentially competes with
variety of companies.
6. Reliance Upon Directors and Officers. The Company is wholly
dependent, at the present, upon the personal efforts and abilities of
its officers and directors, Michael A. Cox, President and a member of
the Board of Directors, and David D. Rambaran, Secretary and a member
of the Board of Director, who exercise control over the day to day
affairs of the Company.
7. Issuance of Additional Shares. 195,810,000 shares of Common
Stock or 97.90% of the 200,000,000 authorized shares of Common Stock of
the Company are unissued. The Board of Directors has the power to
issue such shares, subject to shareholder approval, in some instances.
Although the Company presently has no commitments, contracts or
intentions to issue any additional shares to other persons, other than
as described in this registration statement, the Company may in the
future attempt to issue shares to acquire products, equipment or
properties, or for other corporate purposes. Any additional issuance
by the Company, from its authorized but unissued shares, would have the
effect of diluting the interest of existing shareholders.
8. Indemnification of Officers and Directors for Securities
Liabilities. The laws of the State of Nevada provide that the Company
could indemnify any Director, Officer, agent and/or employee as to
those liabilities and on those terms and conditions as are specified in
the Corporation Act of the State of Nevada. Further, the Company may
purchase and maintain insurance on behalf of any such persons whether
or not the corporation would have the power to indemnify such person
against the liability insured against. The foregoing could result in
substantial expenditures by the Company and prevent any recovery from
such Officers, Directors, agents and employees for losses incurred by
the Company as a result of their actions. Further, the Company has
been advised that in the opinion of the Securities and Exchange
Commission, indemnification is against public policy as expressed in
the Securities Act of 1933, as amended, and is, therefore,
unenforceable.
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9. Cumulative Voting, Preemptive Rights and Control. There are
no preemptive rights in connection with the Company's Common Stock.
Shareholders may be further diluted in their percentage ownership of
the Company in the event additional shares are issued by the Company in
the future. Cumulative voting in the election of Directors is not
provided for. Accordingly, the holders of a majority of the shares of
Common Stock, present in person or by proxy, will be able to elect all
of the Company's Board of Directors.
10. No Dividends Anticipated. At the present time the Company
does not anticipate paying dividends, cash or otherwise, on its Common
Stock in the foreseeable future. Future dividends will depend on
earnings, if any, of the Company, its financial requirements and other
factors.
11. Electronic Commerce Security Risks. A significant barrier to
electronic commerce and communications is the secure transmission of
confidential information over public networks. The Company intends to
rely on encryption and authentication technology licensed from third
parties to provide the security and authentication necessary for secure
transmission of confidential information, such as credit card
information. Advances in computer capabilities, new discoveries in the
field of cryptography, or other events or developments may result in a
compromise or breach of the algorithms used by us to protect customer
transaction data. If any such compromise of our security were to occur,
it could seriously harm our reputation, business, financial condition
and results of operations. A party who is able to circumvent our
security measures could misappropriate proprietary information or cause
interruptions in customers' operations. The Company may be required to
obtain and expend significant capital and other resources to protect
against such security breaches or to alleviate problems caused by such
breaches. Concerns over the security of the Internet and other online
transactions and the privacy of users may also inhibit the growth of
the Internet and other online services generally, and the Web in
particular, especially as a means of conducting commercial
transactions. To the extent that activities of the Company or third-
party contractors involve the storage and transmission of proprietary
information, such as credit card numbers, security breaches could
damage our reputation and expose us to a risk of loss or litigation and
possible liability. The Company's security measures may not prevent
security breaches and failure to prevent such security breaches may
seriously harm our business, financial condition and results of
operations.
12. User privacy; Pricing; Content; Copyrights; Distribution, and
Characteristics and Quality of Products and Services. Furthermore, the
growth and development of the market for electronic commerce may prompt
calls for more stringent consumer protection laws that may impose
additional burdens on those companies conducting business online. The
adoption of any additional laws or regulations may decrease the
expansion of the Internet. A decline in the growth of the Internet
could decrease demand for our products and services and increase our
cost of doing business, or otherwise seriously harm our business,
financial condition and results of operations. Moreover, the
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applicability to the Internet of existing laws in various jurisdictions
governing issues such as property ownership, sales tax, libel and
personal privacy is uncertain and may take years to resolve. If the
Company develops its products and services for use on the Internet in
multiple states and foreign countries, such jurisdictions may claim
that we are required to qualify to do business as a foreign corporation
in each such state and foreign country. The failure by the Company to
qualify as a foreign corporation in a jurisdiction where it is required
to do so could subject us to taxes and penalties for the failure to
qualify. It is possible that the governments of other states and
foreign countries also might attempt to regulate the content of our
online store or prosecute us for violations of their laws. Violations
of local laws may be alleged or charged by state or foreign
governments. Further, we might unintentionally violate such laws and
such laws may be modified and new laws may be enacted in the future.
In addition, several telecommunications carriers are seeking to have
telecommunications over the Internet regulated by the Federal
Communications Commission (the "FCC") in the same manner as other
telecommunications services. The growing popularity and use of the
Internet has burdened the existing telecommunications infrastructure
and many areas with high Internet use have begun to experience
interruptions in phone service. As a result, local exchange carriers
have petitioned the FCC to regulate Internet Service Providers ("ISPs")
in a manner similar to long distance telephone carriers and to impose
access fees on the ISPs If any effort to increase regulation of ISPs is
successful, the expense of communicating on the Internet could increase
substantially, potentially slowing the growth in the use of the
Internet. Any such new legislation or regulation or application or
interpretation of existing laws could seriously harm our business,
financial condition and results of operations.
13. Risks Associated With Branding. The Company believes that
establishing, maintaining and enhancing the GEM INTERNATIONAL brand is
critical to attracting customers. To do so, the Company expects to
expand marketing initiatives and build a brand by providing a high-
quality experience supported by a high level of customer service. To
promote and maintain the GEM INTERNATIONAL brand, the Company expects
to increase substantially financial expenditures, including marketing
initiatives. If it fails to promote and maintain our brand, or if it
incurs excessive expenses in an attempt to do so, the Company's
business, operating results and financial condition would be. seriously
harmed.
14. Dependence On Continued Growth Of Electronic Commerce. The
Company intends to expand and provide its products and services through
the Internet. Future operations could be substantially depend upon the
acceptance and use of the Internet and other online services as an
effective medium of commerce by target customers. Rapid growth in the
use of and interest in the Internet, the Web and online services is a
recent phenomenon. As a result, acceptance and use of the Internet may
not continue to develop at historical rates and a sufficiently broad
base of consumers may not adopt, and continue to use, the Internet and
other online services as a medium of commerce. Demand and market
acceptance for recently introduced services and products over the
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Internet are subject to a high level of uncertainty and there exist few
proven services and products. In addition, the Internet may not be
accepted as a viable long-term commercial marketplace for a number of
reasons, including potentially inadequate development of the necessary
network infrastructure or delayed development of enabling technologies
and performance improvements. To the extent that the Internet continues
to experience significant expansion in the number of users, frequency
of use or bandwidth requirements, the infrastructure for the Internet
may be unable to support the demands placed upon it. In addition, the
Internet could lose its viability due to delays in the development or
adoption of new standards and protocols required to handle increased
levels of Internet activity, or due to increased governmental
regulation. Changes in or insufficient availability of
telecommunications services to support the Internet also could result
in slower response times and adversely affect usage of the Internet
generally and the Company in particular.
15. Rapid Technological Change. To remain competitive, the
Company must continue to enhance and improve the responsiveness,
functionality and features of its operations. The Internet and the
electronic commerce industry are characterized by: Rapid technological
change; changes in user and customer requirements and preferences;
frequent new product and service introductions embodying new
technologies; and the emergence of new industry standards and
practices. The evolving nature of the Internet could render our
existing online store and proprietary technology and systems obsolete.
The Company's success will depend, in part on its ability to: enhance
its existing services; develop new services and products that address
the increasingly sophisticated and varied needs of the customer; and
respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis. The development of a
Web site and other proprietary technology entails significant technical
and business risks. The Company may not successfully use new
technologies effectively or adapt an online sites, proprietary
technology and transaction-processing system to customer requirements
or emerging industry standards. If the Company is unable, for
technical, legal, financial or other reasons, to adapt in a timely
manner, in response to changing market conditions or customer
requirements, our business, financial condition and results of
operations could be seriously harmed.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion of the Company's historical result of
operations should be read in conjunction with the "Selected Financial
Data" and the Company's Financial Statements and the related notes
thereto, included elsewhere in this Memorandum The discussion is based
on audited financial statements prepared by management
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FORWARD-LOOKING INFORMATION
The statements included in this Offering Memorandum regarding
future financial performance and results and the other statements that
are not historical facts are forward-looking statements. The words
"expect, " "project," "estimate, " "predict," "anticipate," "believes,"
"intends" and similar expressions are intended to identify forward-
looking statements. Such statements are based upon current expectations
of the Company and involve a number of risks and uncertainties and
should not be considered as guarantees of future performance. Readers
are cautioned not to place undue reliance on these forward looking
statements.
Results of Operations
The Company has had limited operations to date and its activities
have consisted primarily of raising equity capital . Accordingly, the
Company is considered to be a development stage enterprise as defined
in SFA57. Current Operations are to be funded by long term debt and
sales of common stock.
The Company is primarily engaged in operating as a wholesale
distributor of jewel and gemstones. The Company intends to utilize an
Internet "website" for electronic commerce.
The Company has no revenue and anticipates no revenue from
operations, pending development of infrastructure and Website. Revenues
would be generated primarily from wholesale operations.
Since inception, the Company has incurred no profits and expects
to incur net operating losses for the foreseeable future. There can be
no assurance that the Company will achieve profitability or that if
profitability is achieved, it will be sustained. The Company believes
that its success will depend in large part on its ability to expand its
operations into electronic commerce, encourage customer loyalty,
capitalize on the market for jewelry and precious stones. Accordingly,
the Company intends to invest heavily in marketing and promotion, its
direct sales and systems and infrastructure development. There can be
no assurance that such expenditures will result in increased revenues
or customer growth.
Liquidity and Capital Resources
The Company had no working capital at June 15, 2000. The Company's
ability to conduct operations depends upon Management's success in
obtaining additional sources of financing primarily through the this
and additional offerings, bank loans, joint ventures, or other
arrangements.
Effects of Inflation
Inflation has not had a significant impact on the Company's
operations to date.
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Year 2000
The Company is currently evaluating the potential impact of the
year 2000 on the electronic data processing and other information
systems relevant to the Company's business and is developing a plan to
resolve this issue. The year 2000 issue is the result of computer
programs being written using two digits (rather than four) to define
the applicable year. Any of the Company's programs that have time-
sensitive software may recognize a date using '00' the year 1900 rather
than the year 2000, which could result in miscalculations or system
failures. This issue creates risk for the Company from unforeseen
problems in its own computer systems and from third parties with whom
the Company deals on various transactions. Based on preliminary
information, costs of addressing potential problems are not currently
expected to have a material adverse impact on the Company's results of
operations, financial position or cash flows.
Web-site
Revenues generated from the web-site for the six months ended
March 31, 2000 and March 31, 1999 totalled $-0-. This was because the
web-site had yet to generate revenues.
Operating expenses relating to the web-site was approximately
$3500 for the six months ending March 31, 2000 as compared with $0 for
the six months ending March 31, 1999. This was as a result of the
development of the web-site.
ITEM 3. DESCRIPTION OF PROPERTIES.
The Company does not own any real or personal property. The
Company's only asset is cash.
The Company's headquarters are located 810 Peace Portal Drive,
Suite 203, Blaine, Washington 98231 and its telephone number is (360)
332-8427. The Company leases the foregoing premises from Horseshoe
Antique on a month to month basis. The monthly rental is $200.00
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth the Common Stock ownership of each
person known by the Company to be the beneficial owner of five percent
or more of the Company's Common Stock, each director individually and
all officers and directors of the Company as a group. Each person has
sole voting and investment power with respect to the shares of Common
Stock shown, unless otherwise noted, and all ownership is of record and
beneficial.
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Name and Number of Percent
address of owner Shares Position of Class
Michael A. Cox 500,000[1] President and 11.93%
80 Edinburgh Road Director
Castlecrag NSW 2068
Australia
David Rambaran 2,500,000 Secretary and 59.66%
1720 Hampton Drive Director
Coquitlam, B.C.
Canada V3E 3C9
All officers and 3,000,000 71.59%
directors as a
group (2 persons)
Clariden Bank 1,000,000 23.86%
12 East 49th Street
New York, New York 10017
[1] Shares are held in the name of Queensland Opals NL, a corporation
owned and controlled by Michael A. Cox, the Company's President.
Queensland Opals NL is an Australian corporation in which Mr. Cox
is the President and a member of the Board of Directors.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The officers and directors of the Company are as follows:
Name Age Position
Michael A. Cox 38 President and a member of the Board of
Directors
David Rambaran 38 Secretary and a member of the Board of
Director
Each director serves for a term of one year and the directors are
elected at the annual meeting of shareholders. The Company's officers
are appointed by the Board of Directors and hold office at the
discretion of the Board.
Michael A. Cox - President and member of the Board of Directors.
Since inception, Mr. Cox has been the President and a member of
the Board of Directors. From September 1988 to December 1995, he was
an Investment Analyst with ABS White & Co., Ltd., Sydney, Australia,
and for a short period of time a mining analyst with James Capel Ltd.,
of Sydney Australia. He has served or currently serves as a director
and secretary for Australian Environmental Resources NL, Mildura,
Australia, Opal Mining & Exploration NL, Sydney, Australia, and
Queensland Opals NL, Milton, Australia, and Corundum Pty Ltd., and is
<PAGE> 15
the sole director of Chaoxs Pty Ltd. He graduated from Sydney Technical
College in 1987, with a certificate of accounting. He received a
Diploma of Gemology from the Gemological Association of Australia in
1984 and a Graduate Diploma of Diamond Technology in 1998. The Company
currently has a verbal agreement for distribution of Queensland Opals
NL's products.
David Rambaran - Secretary and a member of the Board of Directors
Since inception, Mr. Rambaran has been the secretary and a member
of the Board of Directors of the Company. He has fifteen years
experience in all aspects of the jewelry industry, including marketing,
research, analysis, manufacturing and product development, advertising,
public relations, seeking new business opportunities, financial
management, merchandising, and the facilitating of staff services. Mr.
Rambaran is a native of London, England and studied Business
Administration at the University of London for three years before
immigrating to Canada in 1982. From March 1980 to September 1982, he
was employed in the military department for the Kuwait Embassy in
London, England. From July 1996 to September 1997, Mr. Rambaran served
as president of Canadian Northern Lites. He is a member of the
Canadian Jewelers Association and the AGTA Jewelers Association. Mr.
Rambaran also is the President, Secretary, and founder of J.C.C.
International, Inc.
ITEM 6. EXECUTIVE COMPENSATION.
Summary Compensation.
The following table sets forth the compensation paid by the
Company from January 1, 1997 through December 31, 1999, for each
officer and director of the Company. This information includes the
dollar value of base salaries, bonus awards and number of stock options
granted, and certain other compensation, if any.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards Payouts
Securities
Names Other Under Restricted Other
Executive Annual Options/ Shares or Annual
Officer and Compen- SARs[1] Restricted LTIP[2] Compen-
Principal Year Salary Bonus sation Granted Share Payouts sation
Position Ended (US$) (US$) (US$) (#) Units (US$) (US$) (US$)
Michael A. 1999 0 0 0 0 0 0 0
Cox 1998 0 0 0 0 0 0 0
President 1997 0 0 0 0 0 0 0
& Director
David 1999 0 0 0 0 0 0 0
Rambaran 1998 0 0 0 0 0 0 0
Secretary 1997 0 0 0 0 0 0 0
& Director
<PAGE> 16
The Company anticipates paying no salaries to its officers in
2000.
Option/SAR Grants.
Information concerning individual grants of stock options, whether
or not in tandem with stock appreciation rights ("SARs"), and
freestanding SARs made during fiscal 1998 and options granted to date
in fiscal 1999 to each of the Named Executive Officers is reflected in
the table below.
Option/SAR Grants in Fiscal 1998 and to date in Fiscal 1999.
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants for Option Term
-------------------------------------------------------------------------------
Percent of
Number of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees or Base Expiration
Name Granted (#) in Fiscal Yr Price Date
Michael A. Cox 0 0% $0.00 0
David Rambaran 0 0% $0.00 0
Long-Term Incentive Plan Awards.
The Company does not have any long-term incentive plans that
provide compensation intended to serve as incentive for performance.
Compensation of Directors.
The members of the Board of Directors are not compensated by the
Company for acting as such.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On December 31, 1998, the Company issued 500,000 shares of common
stock to Michael A. Cox, the Company's President in consideration of
$50.00. The foregoing shares were issued pursuant to Section 4(2) of
the Securities Act of 1933 (the "Act").
On December 31, 1998, the Company issued 2,500,000 shares of
common stock to David Rambaran, the Company's President in
consideration of $250.00. The foregoing shares were issued pursuant to
Section 4(2) of the Act.
<PAGE> 17
On October 28, 1999, the Company issued 1,000,000 shares of common
stock to Clariden Bank, in consideration of $100,000. The foregoing
shares were issued pursuant to Reg. 504 of the Act.
In December 1999, the Company loaned JCC International Investment
Ltd $5,000 which is evidenced by a promissory note accruing interest at
the rate of 2% above the prime rate. JCC International Investments
Ltd. is owned and controlled by David Rambaran, the Company's Secretary
The Company purchases its inventory of jewelry and gems from
Queensland Opal NA a corporation owned and controlled by Michael A.
Cox, the Company's President.
ITEM 8. LEGAL PROCEEDINGS.
The Company is not a party to any pending or threatened litigation
and to its knowledge, no action, suit or proceedings has been
threatened against its officers and its directors.
ITEM 9. MARKET PRICE FOR COMMON EQUITY AND OTHER SHAREHOLDER MATTERS.
No market exists for the Company's securities and there is no
assurance that a regular trading market will develop, or if developed,
that it will be sustained. A shareholder in all likelihood, therefore,
will be unable to resell the securities referred to herein should he or
she desire to do so. Furthermore, it is unlikely that a lending
institution will accept the Company's securities as pledged collateral
for loans unless a regular trading market develops.
There are no plans, proposals, arrangements or understandings with
any person with regard to the development of a trading market in any of
the Company's securities. The Company plans to file or have filed the
required forms with the National Association of Securities Dealers,
Inc. (the "NASD") requesting that the Company's common stock be listed
on the Bulletin Board operated by the NASD when this registration
statement is declared effective by the Securities and Exchange
Commission (the "Commission") and the Company has satisfied all
comments made by the Commission.
There are no outstanding options or warrants, or other securities
convertible into, common equity of the Company. Of the 4,190,000
shares of common stock outstanding as of May 15, 2000, 4,100,000 shares
were issued to the Company's officers, directors, and beneficial
owners, of more than 10% of the Company's shares, and may only be
resold in compliance with Rule 144 of the Securities Act of 1933.
There are no shares of common stock currently being proposed to be
publicly offered (pursuant to an employee benefit plan or dividend
reinvestment plan) the offering of which could have a material adverse
effect upon the market price of the Company's common stock.
<PAGE> 18
As of May 15, 2000, the Company has 35 holders of record of its
common stock.
The Company has not paid any dividends since it is inception and
does not anticipate paying any dividends on its Common Stock in the
foreseeable future.
SEC Rule 15g
The Company's shares are covered by Section 15g of the Securities
Act of 1933, as amended that imposes additional sales practice
requirements on broker/dealers who sell such securities to persons
other than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with
net worth in excess of $1,000,000 or annual income exceeding $200,000
or $300,000 jointly with their spouses). For transactions covered by
the Rule, the broker/dealer must make a special suitability
determination for the purchase and have received the purchaser's
written agreement to the transaction prior to the sale. Consequently,
the Rule may affect the ability of broker/dealers to sell the Company's
securities and also may affect the ability of purchasers to sell their
shares in the secondary market.
Section 15g also imposes additional sales practice requirements on
broker/dealers who sell penny securities. These rules require a one-
page summary of certain essential items. The items include the risk of
investing in penny stocks in both public offerings and secondary
marketing; terms important to in understanding of the function of the
penny stock market, such as "bid" and "offer" quotes, a dealers
"spread" and broker/dealer compensation; the broker/dealer
compensation, the broker/dealers duties to its customers, including the
disclosures required by any other penny stock disclosure rules; the
customers rights and remedies in causes of fraud in penny stock
transactions; and, the NASD's toll free telephone number and the
central number of the North American Administrators Association, for
information on the disciplinary history of broker/dealers and their
associated persons.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
The Company has 4,190,000 shares of Common Stock issued and
outstanding as of May 15, 2000. Of the 4,190,000 shares of the
Company's Common Stock outstanding, 90,000 shares are freely tradeable
and 4,100,000 shares can only be resold in compliance with Reg. 144
adopted under the Securities Act of 1933 (the "Act").
In general, under Rule 144 as currently in effect, a person (or
persons whose Shares are aggregated) who has beneficially owned Shares
privately acquired directly or indirectly from the Company or from an
affiliate, for at least one year, or who is an affiliate, is entitled
to sell within any three month period a number of such Shares that does
not exceed the greater of 1% of the then outstanding shares of the
Company's Common Stock or the average weekly trading volume in the
<PAGE> 19
Company's Common Stock during the four calendar weeks, immediately
preceding such sale. Sales under Rule 144 are also subject to certain
manner of sale provisions, notice requirements and the availability of
current public information about the Company. A person (or persons
whose Shares are aggregated) who is not deemed to have been an
affiliate at any time during the 90 day preceding a sale, and who has
beneficially owned Restricted Shares for at least two years, is
entitled to sell all such Shares under Rule 144 without regard to the
volume limitations, current public information requirements, manner of
sale provisions or notice requirements.
The following sets forth in chronological order the sale of
unregistered securities:
On December 31, 1998,the Company issued 500,000 shares of common
stock to Michael A. Cox, the Company's President in consideration of
$50.00. The foregoing shares were issued pursuant to Section 4(2) of
the Securities Act of 1933 (the "Act").
On December 31,1998,the Company issued 2,500,000 shares of common
stock to David Rambaran, the Company's President in consideration of
$250.00. The foregoing shares were issued pursuant to Section 4(2) of
the Act.
On December 31,1998, the Company issued 100,000 shares of common
stock to Michael D. Cohen in consideration of $10.00. The foregoing
shares were issued pursuant to Section 4(2) of the Act.
In April 6, 1998, the Company issued 90,000 shares of common stock
to thirty-one persons in consideration of $9,000. The foregoing shares
were issued pursuant to Reg. 504 of the Act.
On October 28, 1998,the Company issued 1,000,000 shares of common
stock to Clariden Bank, in consideration of $100,000. The foregoing
shares were issued pursuant to Reg. 504 of the Act.
ITEM 11. DESCRIPTION OF SECURITIES.
Common Stock
The authorized Common Stock of the Company consists of 200,000,000
shares, $0.001 par value per share. All shares have equal voting
rights, are non-assessable and have one vote per share. Voting rights
are not cumulative and, therefore, the holders of more than 50% of the
Common Stock could, if they choose to do so, elect all of the directors
of the Company.
Upon liquidation, dissolution or winding up of the Company, the
assets of the Company, after the payment of liabilities, will be
distributed pro rata to the holders of the Common Stock. The holders
of the Common Stock do not have preemptive rights to subscribe for any
securities of the Company and have no right to require the Company to
redeem or purchase their shares. The shares of Common Stock presently
outstanding are fully paid and non-assessable.
<PAGE> 20
Dividends
Holders of the Common Stock are entitled to share equally in
dividends when, as and if declared by the Board of Directors of the
Company, out of funds legally available therefore. No dividend has
been paid on the Common Stock since inception, and none is contemplated
in the foreseeable future.
Transfer Agent
The Company's transfer agent is Madison Stock Transfer, PO Box
0145, Brooklyn, NY 11229-0145 and its telephone number is (718) 627-
4453.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The laws of the state of Nevada under certain circumstances
provide for indemnification of the Company's Officers, Directors and
controlling persons against liabilities which they may incur in such
capacities. A summary of the circumstances in which such
indemnification is provided for is contained herein, but this
description is qualified in its entirety by reference to the Company's
Articles of Incorporation and to the statutory provisions.
In general, any Officer, Director, employee or agent may be
indemnified against expenses, fines, settlements or judgments arising
in connection with a legal proceeding to which such person is a party,
if that person's actions were in good faith, were believed to be in the
Company's best interest, and were not unlawful. Unless such person is
successful upon the merits in such an action, indemnification may be
awarded only after a determination by independent decision of the Board
of Directors, by legal counsel, or by a vote of the shareholders, that
the applicable standard of conduct was met by the person to be
indemnified.
The circumstances under which indemnification is granted in
connection with an action brought on behalf of the Company is generally
the same as those set forth above; however, with respect to such
actions, indemnification is granted only with respect to expenses
actually incurred in connection with the defense or settlement of the
action. In such actions, the person to be indemnified must have acted
in good faith and in a manner believed to have been in the Company's
best interest, and have not been adjudged liable for negligence or
misconduct.
The Company's Articles of Incorporation and Bylaws contain
provisions which provide for indemnification to the fullest extent
provided by Nevada law.
ITEM 13. FINANCIAL STATEMENTS.
Financial Statements begin on following page.
<PAGE> 21
Board of Directors
Gem International (USA), Inc.
Coquitlam, BC
Canada
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets of Gem International
(USA), Inc. (a development stage company) as of December 31, 1999 and
1998 and the related statements of operations, stockholders' equity and
cash flows for the years then ended and from inception (December 21,
1998) to December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Gem
International (USA), Inc. (a Development Stage Company) as of December
31, 1999 and 1998 and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted
accounting principles.
As discussed in Note 2, the Company has been in the development stage
since its inception on December 21, 1998. Realization of a major
portion of the assets is dependent upon the Company's ability to meet
its future financing requirements, and the success of future
operations. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans regarding
the resolution of this issue are also discussed in Note 2. The
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ Williams & Webster, P.S.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
April 26, 2000
F-1
<PAGE> 22
GEM INTERNATIONAL (USA), INC.
(A Development Stage Company)
BALANCE SHEETS
December 31, December 31,
1999 1998
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 841 $ -
Note receivable 5,128 -
------------ ------------
Total Current Assets 5,969 -
------------ ------------
PROPERTY, PLANT AND EQUIPMENT
Computer equipment 7,000 -
Office equipment 5,861 -
Accumulated depreciation (1,636) -
------------ ------------
Total Property Plant and Equipment 11,225 -
OTHER ASSETS
Organization costs - 213
Rent deposit 300 -
------------ ------------
Total Other Assets 300 213
------------ ------------
TOTAL ASSETS $ 17,494 $ 213
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 16,979 $ -
Note payable to related party 39,329 213
------------ ------------
Total Current Liabilities 56,307 213
------------ ------------
COMMITMENTS AND CONTINGENCIES - -
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.0001 par value;
5,000,000 shares authorized,3,190,000
shares issued and outstanding 319 -
Additional paid-in capital 9,955 -
Deficit accumulated during
development stage (49,087) -
------------ ------------
Total Stockholders' Equity (Deficit) (38,813) -
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 17,494 $ 213
The accompanying notes are an integral part of these financial
statements.
F-2
<PAGE> 23
GEM INTERNATIONAL (USA), INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Inception
12-31-99 12-31-98 (12-21-98)
12-31-99
REVENUES $ - $ - $ -
------------ -------- -----------
GENERAL AND ADMINISTRATIVE
EXPENSES
Advertising 22,806 - 22,806
Depreciation 1,636 - 1,636
Bank charges 69 - 69
Excise and duty charges 5,778 - 5,778
Freight 771 - 771
Management fees 6,000 - 6,000
Office expense 1,157 - 1,157
Professional expense 6,274 - 6,274
Rent and storage 800 - 800
Telephone and utilities 2,089 - 2,089
Travel 1,086 - 1,086
------------ -------- -----------
Total Expenses 48,466 - 48,466
------------ -------- -----------
LOSS FROM OPERATIONS (48,466) - (48,466)
------------ -------- -----------
OTHER INCOME (EXPENSES)
Interest income 130 - 130
Interest expense (751) - (751)
------------ -------- -----------
Total Other Income (Expenses) (621) - (621)
------------ -------- -----------
LOSS BEFORE INCOME TAXES (49,087) - (49,087)
INCOME TAXES - - -
------------ -------- -----------
NET LOSS $ (49,087) - $ (49,087)
============ ======== ===========
BASIC AND DILUTED NET LOSS PER
COMMON SHARE $ nil $ nil $ nil
============ ======== ===========
WEIGHTED AVERAGE NUMBER OF
BASIC AND DILUTED COMMON
SHARES OUTSTANDING 1,866,877 - 1,817,093
============ ======== ===========
The accompanying notes are an integral part of these financial
statements.
F-3
<PAGE> 24
GEM INTERNATIONAL (USA), INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
Accumulated
Common Stock Additional Deficit During
Number Paid-in Development
of Shares Amount Capital Stage Total
Stock issued in April
1999 for an average
price of $0.003 per
share 3,190,000 3,190,000 $ 319 $ 8,991 $ - $ 9,310
Cash contributed for
start up costs - - 213 - 213
Imputed interest on
loan from shareholder - - 751 - 751
Net loss for the year
ending December 31, 1999 - - - (49,087) (49,087)
--------- ----- ------- --------- ----------
Balances at 12-31-99 3,190,000 $ 319 $ 9,955 $ (49,087)$ (38,813)
The accompanying notes are an integral part of these financial
statements.
F-4
<PAGE> 25
GEM INTERNATIONAL (USA), INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Inception
(12-31-98)
Year ending Period ending to
12-31-99 12-31-98 12-31-99
Cash flows from operating
activities:
Net loss $ (49,087) $ - $ (49,087)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation expense 1,636 - 1,636
Imputed interest 751 - 751
Accrued interest income (128) - (128)
Change in assets and liabilities:
Organization costs 213 (213) -
Accounts payable 16,978 - 16,978
--------- ----------- ----------
Net cash used by operating
activities (29,637) (213) (29,850)
--------- ----------- ----------
Cash flows from investing
activities:
Deposit paid (300) - (300)
Purchase computer equipment (7,000) - (7,000)
Purchase office equipment (5,861) - (5,861)
Short term note receivable (5,000) - (5,000)
--------- ----------- ----------
Net cash used by investing
activities (18,161) - (18,161)
--------- ----------- ----------
Cash flows from financing
activities:
Proceeds from sales of
common stock 9,310 - 9,310
Proceeds from related party loan 39,329 213 39,542
--------- ----------- ---------
Net cash provided by
financing activities 48,639 213 48,852
--------- ----------- ---------
Net increase (decrease) in cash
and cash equivalents 841 - 841
Cash and cash equivalents
beginning of period - - -
--------- ---------- ---------
Cash and cash equivalents
at end of period $ 841 $ - $ 841
========= ========== =========
The accompanying are an integral part of these financial statements.
F-5
<PAGE> 26
GEM INTERNATIONAL (USA), INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS (cont.)
Inception
(12-31-98)
Year ending Period ending to
12-31-99 12-31-98 12-31-99
Supplemental cash flow disclosures:
Income taxes paid $ - $ - $ -
Interest paid $ - $ - $ -
Non-cash financing items:
Imputed interest on note
payable $ 751 $ - $ 751
Accrued interest on note
receivable $ 128 $ - $ 128
The accompanying notes are an integral part of these financial
statements.
F-6
<PAGE> 27
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Gem International (USA), Inc. (hereinafter "the Company") was
incorporated on December 21, 1998 under the laws of the State of
Nevada for the purpose of wholesale distribution of jewelry and
gemstones. The Company maintains offices in Blaine, Washington. The
Company's fiscal year-end is December 31.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Gem International
(USA), Inc. is presented to assist in understanding the Company's
financial statements. The financial statements and notes are
representations of the Company's management which is responsible for
their integrity and objectivity. These accounting policies conform
to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
Development Stage Activities
The Company has been in the development stage since its formation in
December 1998 and has not yet realized any revenues from its planned
operations. It is primarily engaged in wholesale distribution of
jewelry and gemstones.
Going Concern
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern.
As shown in the accompanying financial statements, the Company
incurred a net loss of $49,087 for the year ended December 31, 1999
and had no sales. The future of the Company is dependent upon its
ability to obtain financing and upon future successful operations.
Management has plans to seek additional capital through a public
offering of its common stock. The financial statements do not
include any adjustments relating to the recoverability and
classification of recorded assets, or the amounts and classification
of liabilities that might be necessary in the event the Company
cannot continue in existence.
Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting.
F-7
<PAGE> 28
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
For purposes of its statement of cash flows, the Company considers
money market accounts and all short-term debt securities purchased
with a maturity of three months or less to be cash equivalents.
Loss Per Share
Basic and diluted loss per common share was computed by dividing the
net loss by the weighted average number of shares outstanding during
the period. The weighted average number of shares was calculated by
taking the number of shares outstanding and weighting them by the
amount of time that they were outstanding. Diluted loss per share is
the same as basic loss per share, as there were no common stock
equivalents outstanding.
Inventories
The company has no inventory as of December 31, 1999, however the
Company holds approximately $152,000 worth of inventory, valued at
cost, on consignment from Queensland Opal N.L. (an Australian
Corporation). This inventory remains the property of Queensland Opal
N.L, which is responsible for maintaining insurance on the inventory,
until it is sold to a third party.
Depreciation
The Company has capitalized computer and office equipment at cost and
has elected to depreciate the computer equipment over three years and
the office equipment over five years using the declining balance
method.
Provision for Taxes
At December 31, 1999, the Company had net operating loss of
approximately $49,000. No provision for taxes or tax benefit has
been reported in the financial statements, as there is not a
measurable means of assessing future profits or losses.
F-8
<PAGE> 29
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Derivative Instruments
In June 1998 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This
new standard establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at
fair value.
At December 31, 1999, the Company has not engaged in any transactions
that would be considered derivative instruments or hedging activities.
Revenues
As noted in its statement of operations, Gem International (USA), Inc.
has not produced any revenue in the period ended December 31, 1999.
When the Company does generate revenue, sales will be recognized at the
point title transfers.
Use of Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of estimates
and assumptions regarding certain types of assets, liabilities,
revenues, and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the financial statements.
Accordingly, upon settlement, actual results may differ from estimated
amounts.
Impaired Asset Policy
In March 1995, the Financial Accounting Standards Board issued a
statement titled "Accounting for Impairment of Long-lived Assets." In
complying with this standard, the Company will review its long-lived
assets quarterly to determine if any events or changes in circumstances
have transpired which indicate that the carrying value of its assets
may not be recoverable. Asset values will be adjusted using the
undiscounted future cash flows expected to be received for the assets.
F-9
<PAGE> 30
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1999
NOTE 3 - COMMON STOCK
In April 1999, 3,190,000 shares of common stock were issued for cash
at an average value of $0.003 per share.
NOTE 4 - ADDITIONAL PAID IN CAPITAL
During the year ended December 31, 1998, shareholders contributed
$213 for start up costs. At December 31, 1999, the Company owed
$39,329 to a shareholder in the form of a note, which had no stated
interest rate. Interest was imputed using the applicable federal rate
which was 5.59% at the date the note was initiated (October 1, 1999).
This transaction resulted in an additional paid-in capital
transaction of $751.
NOTE 5 - RELATED PARTIES
At December 31, 1999, the Company had a note receivable from JCC
International Investments, Ltd., which is controlled by the Company's
main shareholder. Interest is being charged at prime plus 2% on this
uncollateralized obligation. For additional related party
transactions see Note 4.
NOTE 6 - YEAR 2000 ISSUES
Like other companies, Gem International (USA), Inc. could be
adversely affected if the computer systems the Company, its suppliers
or customers use do not properly process and calculate date-related
information and data from the period surrounding and including
January 1, 2000. This is commonly known as the "Year 2000" issue.
Additionally, this issue could impact non-computer systems and
devices such as production equipment and elevators, etc. Any costs
associated with Year 2000 compliance are expensed when incurred. At
this time, there have been no adverse affects relating to the Year
2000 issue.
NOTE 7 - INTANGIBLE ASSETS
During 1998, Gem International (USA), Inc. incurred organization
costs of $213. These organization costs were being amortized over
the useful life of sixty months beginning December 21, 1998. In
accordance with SOP 98-5 (effective for fiscal years beginning after
December 15, 1998), the Company has written off its all organization
costs in the year ending December 31, 1999.
F-10
<PAGE> 31
Board of Directors
Gem International (USA), Inc.
Coquitlam, BC
Canada
Accountant's Review Report
We have reviewed the accompanying balance sheet of Gem International
(USA), Inc. (a development stage company) as of March 31, 2000 and
the related statements of operations, stockholders' equity and cash
flows for the three months then ended. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures applied to financial data and making inquiries
of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as
a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements in order
for them to be in conformity with generally accepted accounting
principles.
The financial statements for the period ended December 31, 1999 were
audited by us and we expressed an unqualified opinion on them in our
report dated April 26, 2000, but we have not performed any auditing
procedures since that date.
As discussed in Note 2, the Company has been in the development stage
since its inception on December 21, 1998. Realization of a major
portion of the assets is dependent upon the Company's ability to meet
its future financing requirements, and the success of future
operations. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans
regarding the resolution of this issue are also discussed in Note 2.
The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, WA
May 15, 2000
F-1
<PAGE> 32
GEM INTERNATIONAL (USA), INC.
(A Development Stage Company)
BALANCE SHEETS
March 31, December 31,
2000 1999
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 59,213 $ 841
Accounts receivable 15,660 -
Inventory 6,677 -
Note receivable 5,266 5,128
----------- ------------
Total Current Assets 86,816 5,969
----------- ------------
PROPERTY, PLANT AND EQUIPMENT
Office equipment 17,954 12,861
Accumulated depreciation (2,473) (1,636)
----------- ------------
Total Property, Plant and Equipment 15,481 11,225
----------- ------------
OTHER ASSETS
Deposits 300 300
----------- ------------
Total Other Assets 300 300
----------- ------------
TOTAL ASSETS $ 102,597 $ 17,494
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 21,346 $ 16,978
Note payable to related party 39,329 39,329
----------- ------------
Total Current Liabilities 60,675 56,307
----------- ------------
COMMITMENTS AND CONTINGENCIES - -
----------- ------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.0001 par value;
5,000,000 shares authorized,
4,190,000 and 3,190,000 shares issued
and outstanding, respectively 419 319
Additional paid-in capital 110,405 9,955
Deficit accumulated during development
stage (68,902) (49,087)
----------- ------------
Total Stockholders' Equity (Deficit) 41,922 (38,813)
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 102,597 $ 17,494
=========== ============
See accompanying notes and accountant's review report.
F-2
<PAGE> 33
GEM INTERNATIONAL (USA), INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Inception
March 31, (December 21, 1998)
2000 to March 31, 2000
(Unaudited) (Unaudited)
REVENUES $ 16,882 $ 16,882
COST OF REVENUES 13,092 13,092
------------ ------------
GROSS PROFIT 3,790 3,790
------------ ------------
GENERAL AND ADMINISTRATIVE EXPENSES
Advertising 6,063 28,869
Depreciation 837 2,473
Bank charges 53 122
Excise and duty charges - 5,778
Freight 289 1,060
Management fees 12,000 18,000
Office expense 3,736 4,893
Professional expense 15 6,289
Rent and storage 200 1,000
Telephone and utilities - 2,089
Travel - 1,086
------------ ------------
Total Expenses 23,193 71,659
------------ ------------
LOSS FROM OPERATIONS (19,403) (67,869)
------------ ------------
OTHER INCOME (EXPENSES)
Interest income 138 268
Interest expense (550) (1,301)
------------ ------------
Total Other Income (Expenses) (412) (1,033)
------------ ------------
LOSS BEFORE INCOME TAXES (19,815) (68,902)
INCOME TAXES - -
------------ ------------
NET LOSS $ (19,815) $ (68,902)
============ ============
BASIC AND DILUTED NET LOSS PER
COMMON SHARE $ (0.01) $ (0.03)
============ ============
WEIGHTED AVERAGE NUMBER OF BASIC AND
DILUTED COMMON SHARES OUTSTANDING 3,211,978 2,089,485
============ ============
See accompanying notes and accountant's review report.
F-3
<PAGE> 34
GEM INTERNATIONAL (USA), INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
Accumulated
Common Stock Additional Deficit During
Number Paid-in Development
of Shares Amount Capital Stage Total
Stock issued in April
1999 for 3,190,000 $ 319 $ 8,991 $ - $ 9,310
an average price of
$0.003 per share
Cash contributed for
start up costs - - 213 - 213
Imputed interest on
loan from shareholder - - 751 - 751
Net loss for the year
ending December 31, 1999 - - - (49,087) (49,087)
--------- ----- --------- --------- --------
Balances at 12-31-99 3,190,000 319 9,955 (49,087) (38,813)
Stock issued for $0.10
per share 1,000,000 100 99,900 - 100,000
Imputed interest on
loan from shareholder - - 550 - 550
Net loss for the three-months
ended March 31, 2000 - - - (19,815) (19,815)
--------- ----- --------- --------- --------
Balance at 3-31-2000
(Unaudited) 4,190,000 $ 419 $ 110,405 $ (68,902)$ 41,922
========= ===== ========= ========= ========
See accompanying notes and accountant's review report.
F-4
<PAGE> 35
GEM INTERNATIONAL (USA), INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Inception
Three-months (December 21, 1998)
Ended to
March 31, 2000 March 31, 2000
(Unaudited) (Unaudited)
Cash flows from operating
activities:
Net loss $ (19,815) $ (68,902)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation expense 837 2,473
Imputed interest 550 1,301
Accrued interest income (138) (266)
Change in assets and liabilities:
Accounts receivable (15,660) (15,660)
Organization costs - 213
Accounts payable 4,368 21,346
Inventory (6,677) (6,677)
Deposits - (300)
------------- ------------
Net cash used by operating activities (36,535) (66,472)
------------- ------------
Cash flows from investing activities:
Purchase computer and office equipment (5,093) (17,954)
Short term note receivable - (5,000)
------------- ------------
Net cash used by investing activities (5,093) (22,954)
------------- ------------
Cash flows from financing activities:
Proceeds from sales of common stock 100,000 109,310
Proceeds from related party loan - 39,329
------------- ------------
Net cash provided by financing
activities 100,000 148,639
------------- ------------
Net increase in cash and cash equivalents 58,372 59,213
Cash and cash equivalents beginning
of period 841 -
------------- ------------
Cash and cash equivalents at end of
period $ 59,213 $ -
============= ============
Supplemental cash flow disclosures:
Income taxes paid $ - $ -
Interest paid $ - $ -
Non-cash items
Capital contribution for imputed
interest $ 550 $ 1,301
Accrued interest income $ 138 $ 266
See accompanying notes and accountant's review report.
F-5
<PAGE> 36
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2000
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Gem International (USA), Inc. (hereinafter "the Company") was
incorporated on December 21, 1998 under the laws of the State of
Nevada for the purpose of wholesale distribution of jewelry and
gemstones. The Company commenced activity in April 1999. The
Company maintains offices in Coquitlam, British Columbia, Canada and
Blaine, Washington. The Company's fiscal year-end is December 31.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Gem International
(USA), Inc. is presented to assist in understanding the Company's
financial statements. The financial statements and notes are
representations of the Company's management which is responsible for
their integrity and objectivity. These accounting policies conform
to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
Development Stage Activities
The Company has been in the development stage since its formation in
December 1998 and has not yet realized any significant revenues from
its planned operations. It is primarily engaged in wholesale
distribution of jewelry and gemstones.
Going Concern
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern.
As shown in the accompanying financial statements, the Company
incurred a net loss of $19,815 for the three-month period ended March
31, 2000, has an accumulated deficit of $68,902, and had minimal
sales. The future of the Company is dependent upon its ability to
obtain financing and upon future successful and profitable
operations. Management has plans to seek additional capital through
a public offering of its common stock. The financial statements do
not include any adjustments relating to the recoverability and
classification of recorded assets, or the amounts and classification
of liabilities that might be necessary in the event the Company
cannot continue in existence.
F-6
<PAGE> 37
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting.
Loss Per Share
Basic and diluted net loss per common share was computed by dividing
the net loss by the weighted average number of shares outstanding
during the period. The weighted average number of shares was
calculated by taking the number of shares outstanding and weighting
them by the amount of time that they were outstanding. Diluted loss
per share is the same as basic loss per share, as there were no
common stock equivalents outstanding.
Inventories
The Company had $6,677 in inventory as of March 31, 2000. Inventory
is purchased periodically for special orders only and is stated at
the lower of cost (using specific identification) or market.
The Company holds approximately $140,000 worth of inventory, valued
at cost, which is on consignment from Queensland Opal N.L. (an
Australian Corporation). This inventory remains the property of
Queensland Opal N.L., which is responsible for maintaining insurance
on the inventory, until it is sold to a third party.
Revenue Recognition
Revenues are recognized when title transfers.
Cash and Cash Equivalents
For purposes of its statement of cash flows, the Company considers
money market accounts and all short-term debt securities purchased
with a maturity of three months or less to be cash equivalents.
Depreciation
The cost of property, plant, and equipment is depreciated over the
estimated useful lives of the related assets. Depreciation is
computed using the declining balance method and amounted to $837 for
the three-month period ended March 31, 2000.
F-7
<PAGE> 38
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Advertising Costs
Advertising costs are charged to operations when incurred.
Advertising expenses for the three-month period ended March 31, 2000
amounted to $6,063.
Provision for Taxes
At March 31, 2000, the Company had an accumulated net operating loss
of approximately $68,000. No provision for taxes or tax benefit has
been reported in the financial statements, as there is not a
measurable means of assessing future profits or losses.
Use of Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of
estimates and assumptions regarding certain types of assets,
liabilities, revenues, and expenses. Such estimates primarily relate
to unsettled transactions and events as of the date of the financial
statements. Accordingly, upon settlement, actual results may differ
from estimated amounts.
Impaired Asset Policy
In March 1995, the Financial Accounting Standards Board issued a
statement titled "Accounting for Impairment of Long-lived Assets."
In complying with this standard, the Company reviews its long-lived
assets quarterly to determine if any events or changes in
circumstances have transpired which indicate that the carrying value
of its assets may not be recoverable. The Company determines
impairment by comparing the undiscounted future cash flows estimated
to be generated by its assets to their respective carrying amounts.
The Company does not believe any adjustments are needed to the
carrying value of its assets at March 31, 2000.
Interim Financial Statements
The interim financial statements as of and for the three-months ended
March 31, 2000 included herein have been prepared for the Company
without audit. They reflect all adjustments, which are, in the
opinion of management, necessary to present fairly the results of
operations for these periods. All such adjustments are normal
recurring adjustments. The results of operations for the periods
presented are not necessarily indicative of the results to be
expected for the full fiscal year.
F-8
<PAGE> 39
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Derivative Instruments
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This
new standard establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at
fair value.
At March 31, 2000, the Company has not engaged in any transactions
that would be considered derivative instruments or hedging
activities.
Reclassifications
Certain amounts from prior periods have been reclassified to conform
with the current period presentation. This reclassification has
resulted in no changes to the Company's accumulated deficit or net
losses presented.
NOTE 3 - CONCENTRATION OF CREDIT RISK FOR CASH HELD AT BANKS
The Company maintains cash balances at a bank in British Columbia,
Canada. The Canadian dollar account is insured up to a maximum of
$60,000 per account. However, the United States dollar account is
not insured.
NOTE 4 - COMMON STOCK
In April 1999, 3,190,000 shares of common stock were issued for cash
at an average value of $0.003 per share.
During the three-month period ending March 31, 2000, 1,000,000 shares
of common stock were issued for $.10 per share.
F-9
<PAGE> 40
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY
NOTES TO THE FINANCIAL STATEMENTS
NOTE 5 - ADDITIONAL PAID IN CAPITAL
During the year ended December 31, 1998, shareholders contributed
$213 for start up costs. At March 31, 2000, the Company owed $39,329
to a shareholder in the form of an uncollateralized note, which had
no stated interest rate. However, interest is imputed using the
applicable federal rate, which was 5.59% at the date the note was
initiated (October 1, 1999). This transaction resulted in additional
paid-in capital of $550 for the three-month period ended March 31,
2000.
NOTE 6 - RELATED PARTIES
At March 31, 2000, the Company had an amount receivable from JCC
International Investments, Ltd., which is controlled by the Company's
main shareholder. Interest is being charged at prime plus 2% on this
uncollateralized obligation. For additional related party
transactions see Note 5.
NOTE 7 - INTANGIBLE ASSETS
During 1998, Gem International (USA), Inc. incurred organization
costs of $213. These organization costs were being amortized over
sixty months beginning December 21, 1998. In accordance with SOP 98-
5 (effective for fiscal years beginning after December 15, 1998), the
Company has written off all its organization costs in the year ending
December 31, 1999.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Foreign Operations
The accompanying balance sheet includes $102,597 relating to the
Company's assets in Canada. Although this country is considered
politically and economically stable, it is always possible that
unanticipated events in foreign countries could disrupt the Company's
operations.
NOTE 9 - YEAR 2000 ISSUES
Like other companies, Gem International (USA), Inc. could be
adversely affected if the computer systems the Company, its suppliers
or customers use do not properly process and calculate date-related
information and data from the period surrounding and including
January 1, 2000. This is commonly known as the "Year 2000" issue.
Additionally, this issue could impact non-computer systems and
devices such as production equipment and elevators, etc. Any costs
associated with Year 2000 compliance are expensed when incurred. At
this time, there have been no adverse affects relating to the Year
2000 issue.
<PAGE> 40
ITEM 14. CHANGES IN AND DISAGREMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial
disclosures through the date of this Registration Statement.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(1) List of Financial Statements
Independent Auditors' Reports
Balance Sheet
Statement Income
Statement of Cash Flows
Statement of Shareholders' Equity
Notes to the Financial Statements
(2) List of Exhibits.
Exhibit No. Desciption
3.1 Articles of Incorporation
3.2 Bylaws
3.3 Amendment to the Articles of Incorporation
4.1 Specimen Stock Certificate
27.1 Financial Data Schedule
<PAGE> 41
SIGNATURES
In accordance with Section 12 of the Securities Ace of 1934, the
registrant caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized:
GEM INTERNATIONAL (USA), INC.
BY: /s/ Michael A. Cox
Michael A. Cox,
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENT, that each person whose signature
appears below constitutes and appoints Michael A. Cox, as true and
lawful attorney-in-fact and agent, with full power of substitution,
for his and in his name, place and stead, in any all capacities, to
sign any and all amendments (including post-effective amendments) to
this registration statement, and to file the same, therewith, with
the Securities and Exchange Commission, and to make any and all state
securities law or blue sky filings, granting unto said attorney-in-
fact and agent, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about
the premises, as fully to all intends and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or any substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, this Form 10SB Registration Statement has been signed by the
following persons in the capacities and on the dates indicated:
Signatures Title Date
/s/ Michael A. Cox
Michael A. Cox President, Chief Executive 06/20/2000
Officer and a member of the
Board of Directors
/s/ David Rambaran
David Rambaran Secretary/Treasurer, Chief 06/20/2000
Financial Officer and a
member of the Board of
Directors
