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SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D. C. 20549
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FORM 10-SB/A-1
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.)
1720 Hampton Drive
Coquitlam, British Columbia
Canada V3E 3C9
(Address of executive offices, including postal code)
Registrant's telephone number: (604) 941-0458
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. Gem is
a development stage company incorporated as a wholesale distributor of
jewelry and gemstones. Gem intends to use utilize an Internet website
to sell its jewelry and gemstones. Gem is in the process of developing
its website, however, as of the date hereof, the website has not been
completed and is currently not operational. The discussion of the
website contained in this registration statement is forward looking in
that it sets forth a plan of operation which has not been developed.
Gem intends to sell 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. Gem
intends to offer a selection stone-set, pearl and gold jewelry. Gem
intends to offer detailed product information, helpful shopping
services and merchandising through an easy-to-use Web pages. In
addition, Gem intends to offer consumers the convenience and
flexibility of shopping twenty-four hours a day, seven days a week.
Gem is in the process of developing its online store. Its
website address will be www.buyritejewels.com. As of the date hereof,
Gem has not had adequate funds to complete the development of its
website. Gem believes that it will need $65,000 to complete the
development of its website and estimates, subject to receipt of the
$65,000, that the website will be completely operational in December
2000.
During the last two years, Gem spent $10,844.35 ($-0- in 1998 and
$10,844.35 in 1999) on research and development activities. The
activities were directly related to the development of its website.
The costs related to the research and development were not borne by
customers, but were financed through the sale of equity securities.
Gem has retained NetNations Communications Inc. ("NetNations") as
its outside technology provider to develop its website. NetNations
will provide the following services and products for the website: disk
space, bandwidth, 155 mbit backbone, pop mailboxes, e-mail forwarding,
e-mailing aliasing, auto responder, front page support, unlimited FTP
access, java chat, hotmetal/miva scipt, shopping cart, secure
transactions signio support, cypercash support, macromedia flash and
true speech. The foregoing allow Gem to make retail sales of its
jewelry, promote its products in an attractive fashion, and communicate
with its customers on-line.
Gem also believes that the lack of financial security on the
Internet is hindering economic activity thereon. To ensure the security
of transactions occurring over the Internet, U.S. federal regulations
require that any computer software used within the United States
contain a 128-bit encoding encryption, while any computer software
exported to a foreign country contain a 40-bit encoding encryption.
There is uncertainty as to whether the 128-bit encoding encryption
required by the U.S. is sufficient security for transactions occurring
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over the Internet. Accordingly, there is a danger that any financial
(credit card) transaction via the Internet will not be a secure
transaction. Accordingly, risks such as the loss of data or loss of
service on the Internet from technical failure or criminal acts are now
being considered in the system specifications and in the security
precautions in the development of the website. There is no assurance
that such security precautions will be successful.
Other than investigating potential technologies and recruiting
personnel in support of Gem's business purpose, Gem has had no material
business operations since its inception in 1998. At present Gem 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.
Shopping at Gem's On-line Store
Gem's online store will be located at www.buyritejewels.com.
Convenient Shopping Experience.
Gem's online store will provide customers with an easy-to-use
Web site. The website will be available 24 hours a day, seven days a
week and will be reached from the shopper's home or office. Gem's
online store will enable it to deliver a broad selection of products to
customers in rural or other locations that do not have convenient
access to physical stores. Gem also intends to make the shopping
experience convenient by categorizing its products into easy-to-shop
departments. These include earrings, bracelets and necklaces, pearls,
gold and other jewelry.
Customer Service.
Gem intends to provide a customer service department via email
where consumers can resolve order and product questions. Furthermore,
Gem will insure consumer satisfaction by offering a money back
guaranty.
Online Retail Store
Gem intends to design its online retail store to be the primary
place for consumers to purchase jewelry. Gem believes its Online
Retail Store will be an easy-to-use online store.
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Shopping at the Online Store
Gem 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 Gem's Online
Store include:
Browsing
Gem's Online Store will offer 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 will move 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 will simply click on the "add
to cart" button to add products to their virtual shopping cart.
Consumers will be able to add and subtract products from their
shopping cart as they browse around Gem'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 Gem's Online Store are
prompted to supply shipping details online. Gem will also offer
consumers a variety of gift wrapping and shipping options during the
checkout process. Prior to finalizing an order by clicking the "submit"
button, consumers will be 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 Gem's distribution facility. Gem's
Online Store will use 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.
Gem offers its customers a full refund for any reason if the
customer returns the purchased item within thirty days from the date of
sale in the same condition it was sold to the customer. After thirty
days, Gem will not refund any money to a customer.
Gem 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.
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The success of Gem 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 Gem 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 Gem, factors beyond the control
of Gem may operate to render commercial distribution of jewelry and
precious stones impossible.
Source of Jewelry
Gem 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, Gem's President.
Competition
The electronic commerce market is new, rapidly evolving and
intensely competitive. The market for information resources is more
mature but also intensely competitive. Gem 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 Gem 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 Gem's business,
financial condition and results of operations. There can be no
assurance that Gem will be able to compete successfully against current
and future competitors, and competitive pressures faced by Gem may have
a material adverse effect on Gem'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 Gem. Fluctuations in gold,
silver, gemstone, labor prices and regulations set by various
governmental agencies increase the risk to Gem. In the event Gem
marketing/sales program prove to be economically or commercially
unfeasible, Gem 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 Gem when needed
or on term which would permit a profitable operation by Gem.
Netjewels.com and Bluenile.com offer the same services as Gem.
Upon initiating its website operations, Gem will be competing with the
foregoing, in addition to non-Internet jewelry operations. Gem intends
to offer its jewelry at competitive prices and services with the
foregoing online jewelry operations. Gem's initial inventory of
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jewelry will be manufactured in Australia and will be promoted as such,
thereby differentiating it from the foregoing and many other retail
jewelry stores. Because Gem will be initiating its operations, it
faces the obstacles of any start-up business seeking an enterence into
a competitive retail business.
Marketing
Through newspaper, radio, magazine, brochure and email, advertising
Gem will target purchasers of jewelry and gemstone products. Gem may
utilize inbound links that connect directly to Gem's website from other
sites. Potential customers can simply click on these links to become
connected to Gem's website from search engines and community and
affinity sites.
Insurance
Gem maintains insurance in such amounts and covering such losses,
contingencies and occurrences as Gem 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
Gem, as well as damage to the property of others.
Employees; Identification of Certain Significant Employees.
Gem is a development stage company and currently has no employees,
exclusive of its of its Officers and Directors. See "Management." Gem
intends to additional hire employees on an as needed basis. Gem 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 Gem, there is no assurance that Gem can obtain
the services of a suitable replacement.
Offices
The offices of Gem, are located at 1720 Hampton Drive,
Coquitlam, British Columbia, Canada V3E 3C9, and its telephone number
is (604) 941-0458.
Government Regulation
Gem 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
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against at least one online service regarding the manner in which
personal information is collected from users and provided to third
parties. Gem 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.
Gem 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.
In addition, because Gem's products are available over the
Internet in multiple states and foreign countries, other jurisdictions
may claim that Gem is required to qualify to do business in each such
state or foreign country. Gem is qualified to do business only in
Nevada. Gem'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 Gem's ability to enforce contracts in such jurisdictions.
The application of laws or regulations from jurisdictions whose laws do
not currently apply to Gem's business could have a material adverse
effect on its business, results of operations and financial condition.
RISK FACTORS
1. Gem has a limited history of earnings. Gem 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. Gem has a limited history of earnings, its web site is not
operational and it has been in the planning stage since December 1998.
2. Gem is currently in the planning stage and has not initiated
operations of its Internet store. At this time Gem 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. Gem'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. Gem will be seeking qualified companies to implement
the foregoing, however, as of the date hereof, Gem has not entered into
any negotiations with anyone to implement the foregoing technology.
Without securing the necessary technology Gem will not be in a
position to offer the services it is proposing.
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3. Gem has accumulated losses and anticipates operation
losses in the foreseeable future. The Company has current accumulated
losses of $68,902 and anticipates that the losses will continue in the
foreseeable future.
4. Gem has not developed or obtained market acceptance of its
services. Gem's success and growth will depend upon Gem's ability to
market its services. Gem's success will also depend upon the
profitable market's acceptance of, and Gem's ability to deliver and
support its services. As of the date hereof, Gem has not achieved
either.
5. Gem is dependent upon a technology supplier. Gem currently
relies upon NetNation Communications Inc as its outside technology
supplier. While Gem believes that there are numerous outside
technology suppliers that perform the same services as NetNation
Communications Inc., a loss of NetNation's services could interfere
with Gem's operations in the short run.
6. Lack of liquidity and need for additional financing. Gem
believes that it does not have the cash it needs for at least the next
twelve months based upon its internally prepared budget. As such,
Gem's auditors have expressed doubt that Gem can continue as a going
concern. Further, Gem's cash requirements are not easily predictable
and there is a possibility that its budget estimates will prove to be
inaccurate. If Gem 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 Gem will be able to obtain
additional capital if required, or if capital is available, to obtain
it on terms favorable to Gem. Gem 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.
7. Matters over which Gem has no control may impact its
success. Gem's success may be affected by matters over which it does
not control, such as fluctuations of the cost of mining gemstones and
the cost of raw materials for manufacturing jewelry products.
8. We may be liable for customer losses from Internet credit
card Fraud. We may be liable for customer losses from Internet credit
card fraud. Customers who buy are merchandise on the Internet and use
a credit card may have their credit card information appropriated by
third parties or third parties may already have obtained a lost or
stolen credit card and use it to buy merchandise. As a result, we may
have delivered merchandise, but will not be paid for the merchandise by
the credit card company that issued the card. Therefore, we will
suffer the loss on the transaction.
9. Gem is in a competitive market. Gem will compete with at
least two online Internet retail jewelers and all non-Internet retail
jewelers, all of which, Gem believes, have greater financial, technical
and marketing resources than Gem. The retail distribution of jewelry
is intensely competitive and Gem expects the competition to continue
and intensify in the future.
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10. Gem relies upon its directors and officers. Gem 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 Gem. The loss of either Mr. Cox or Rambaran could
significantly affect Gem's operations.
11. Gem and Michael A. Cox have a conflict of interest. Gem
and Michael A. Cox, Gem's President have a conflict of interest. Mr.
Cox is the owner of Queensland Opal, NL from whom Gem acquires its
inventory of jewelry. It is possible that Gem may be or will in the
future, be paying Queensland more for its inventory than it would be
paying an independent third party.
12. Gem may issue additional shares of common stock which would
dilute existing shareholders. 195,810,000 shares of Common Stock or
97.90% of the 200,000,000 authorized shares of Common Stock of Gem are
unissued. The Board of Directors has the power to issue such shares,
subject to shareholder approval, in some instances. Although Gem
presently has no commitments, contracts or intentions to issue any
additional shares to other persons, other than as described in this
registration statement, Gem may in the future attempt to issue shares
to acquire products, equipment or properties, or for other corporate
purposes. Any additional issuance by Gem, from its authorized but
unissued shares, would have the effect of diluting the interest of
existing shareholders.
13. The Company's common stock is defined as a "penny stock"
and as a result, shareholders may not be able to resell their shares.
Gem's common stock is defined as a "penny stock" under the Securities
and Exchange Act of 1934, and its rules. Because the common stock is a
penny stock, shareholders may be unable to resell the shares. This is
because the Securities Exchange Act of 1934 and the penny stock rules
impose additional sales practice and disclosure requirements on
broker-dealers who sell Gem's common stock to persons other than
certain accredited investors. As a result, fewer broker/dealers, if
any, are willing to make a market in the Gem's common stock which makes
resales of the shares more difficult if not impossible.
14. Gem will indemnify its officers and directors for securities
liabilities. The laws of the state of Nevada provide that Gem 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, Gem 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 Gem and prevent any recovery from such officers,
directors, agents and employees for losses incurred by Gem as a result
of their actions. Further, Gem 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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15. Gem's common stock does not contain provisions for cumulative
voting, preemptive rights and control. There are no preemptive rights
in connection with Gem's Common Stock. Shareholders may be further
diluted in their percentage ownership of Gem in the event additional
shares are issued by Gem in the future. Cumulative voting in the
election of Directors is not provided for. Accordingly, the holders of
a majority of the shares of commons Stock, present in person or by
proxy, will be able to elect all of Gem's board of directors.
16. Gem does not intend to pay any dividends on its common stock.
At the present time Gem 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 Gem, its financial
requirements and other factors. As such, shareholders should not
anticipate receiving any return on their investment through dividends.
17. There are security risks connected with electronic commerce
which could result in losses to Gem. A significant barrier to
electronic commerce and communications is the secure transmission of
confidential information over public networks. Gem 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. Gem 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 Gem 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. Gem's security measures may not prevent security
breaches and failure to prevent such security breaches may seriously
harm Gem's business, financial condition and results of operations.
18. There could be a decrease in the expansion of the Internet
which could have an adverse affect upon Gem. 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 Gem's products and services and increase our cost of doing
business, or otherwise seriously harm our business, financial condition
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and results of operations. Morever, the 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 Gem 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 Gem 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.
19. In order to be successful, Gem believes it must promote its
brand name which could result in large expenses. Gem believes that
establishing, maintaining and enhancing the GEM INTERNATIONAL brand is
critical to attracting customers. To do so, Gem 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, Gem 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, Gem's business, operating
results and financial condition would be. seriously harmed.
20. If the development and growth of the Internet subsides, Gem's
proposed growth could be curtailed. Gem 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
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products over the 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 Gem in particular.
21. To remain competitive, Gem believes it will have to spend
substantial sums of money on Internet technology. To remain
competitive, Gem 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.
Gem'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. Gem 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 Gem 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 statements included in this registration statement 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 Gem 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.
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Gem has inadequate cash to maintain operations during the next
twelve months and must raise additional cash in order to complete its
website. In order to meet its cash requirements, Gem will have to
raise additional capital through the sale of securities or loans. As
of the date hereof, Gem has not made sales of additional securities and
there is no assurance that it will be able to raise additional capital
through the sale of securities in the future. Further, Gem has not
initiated any negotiations for loans to Gem and there is no assurance
that it will be able to raise additional capital in the future through
loans. In the event that Gem is unable to raise additional capital, it
may have to suspend or cease operations.
Gem does not intend to conduct any research or development of its
services during the next twelve months other than the development of
its web-site as described herein. See "Business."
Gem does not intend to purchase a plant or significant equipment.
Gem will hire employees on an as needed basis, however, Gem does
not expect any significant changes in the number of employees.
Gem expects to earn additional revenues in the fourth quarter of
2000. There is no assurance, however, that Gem will earn said revenues
as planned.
Results of Operations
Gem has had limited operations to date and its activities have
consisted primarily of raising equity capital. Accordingly, Gem is
considered to be a development stage enterprise as defined in SFA 7.
Operations to date have been funded by the sale of common stock along
with related party debt. Future operations during the development
state will be funded by a combination of common stock sales and long
term debt.
Gem will be primarily engaged in operating as a wholesale
distributor of jewels and gemstones. The Company is planning to utilize
the Internet for electronic commerce and is currently developing an
Internet web-site for that purpose.
As of the date hereof, the web-site has been designed and the
front page completed. The portion of the web-site which consists of
images and descriptions is approximately 30% completed. The balance of
the web-site which consists of payment technology, inventory purchases,
shipping and inventory control has yet to be completed.
Gem had no revenue from its planned operations for the year ended
December 31, 1999, and had a net loss for the year of $49,087. During
the three months ended March 31, 2000, Gem generated $16,882 in
sales due mainly to trade show revenues. The net loss from
inception (December 21, 1998) to March 31,2000 is $68,902. During the
quarter ended June 30, 2000, the Company had revenue of $2,018 bringing
total revenue from sales to $18,900 for the six months ended June 30,
2000, while the net loss amounted to $80,966 from inception to June 30,
2000.
<PAGE> 14
Gem anticipates minimal revenues from operations continuing until
its web-site and infrastructure is fully developed. When Gem is fully
operational, it expects the majority of revenues to come from wholesale
customers.
Given the current accumulated net losses and the anticipated
future losses, there can be no assurance that Gem will achieve
profitability or that if profitability is achieved, it will be
sustained. Gem believes that its success will depend in large part on
its ability to expand its operations into electronic commerce,
encourage customer loyalty, and capitalize on the market for jewelry
and precious stones. Accordingly, Gem 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
Gem had no working capital at September 15, 2000. Gem'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 Gem's operations to
date.
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.
Gem does not own any real or personal property. Gem's only asset
is cash.
Gem's headquarters are located 1720 Hampton Drive, Coquitlam,
British Columbia Canada V3E 3C9 and its telephone number is (604) 941-
0458. The Company use the property rent free.
<PAGE> 15
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth the Common Stock ownership of each
person known by Gem to be the beneficial owner of five percent or more
of Gem's Common Stock, each director individually and all officers and
directors of Gem 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.
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, Gem'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 Gem 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. Gem's officers are
appointed by the Board of Directors and hold office at the discretion
of the Board.
<PAGE> 16
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
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. Gem
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 Gem. 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 Gem from
January 1, 1997 through December 31, 1999, for each officer and
director of Gem. This information includes the dollar value of base
salaries, bonus awards and number of stock options granted, and certain
other compensation, if any.
<PAGE> 17
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
Gem 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.
Gem does not have any long-term incentive plans that provide
compensation intended to serve as incentive for performance.
<PAGE> 18
Compensation of Directors.
The members of the Board of Directors are not compensated by Gem
for acting as such.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On December 31, 1998, Gem issued 500,000 shares of common stock to
Michael A. Cox, Gem'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, Gem issued 2,500,000 shares of common stock
to David Rambaran, Gem's President in consideration of $250.00. The
foregoing shares were issued pursuant to Section 4(2) of the Act.
On October 28, 1999, Gem 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, Gem 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. The current interest rate on the
promissory note is 7%. JCC International Investments Ltd. is
owned and controlled by David Rambaran, Gem's Secretary
Gem purchases its inventory of jewelry and gems from Queensland
Opal NA a corporation owned and controlled by Michael A. Cox, Gem's
President. Gem received a consignment of inventory from Queensland
Opal N.L. valued at $140,000.
Michael Cox owns 11.93% of Gem's outstanding shares of common
stock.
Dave Rambaran owns 59.66% of the Company's outstanding shares of
common stock.
Clariden Bank is incorporated in the State of New York. Clariden
Bank owns 23.86% of Gem's outstanding shares of common stock.
ITEM 8. DESCRIPTION OF SECURITIES.
Common Stock
The authorized Common Stock of Gem 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
Gem.
<PAGE> 19
Upon liquidation, dissolution or winding up of Gem, the assets of
Gem, 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 Gem and
have no right to require Gem to redeem or purchase their shares. The
shares of Common Stock presently outstanding are fully paid and non-
assessable.
Dividends
Holders of the Common Stock are entitled to share equally in
dividends when, as and if declared by the Board of Directors of Gem,
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
Gem's transfer agent is Madison Stock Transfer, PO Box 0145,
Brooklyn, NY 11229-0145 and its telephone number is (718) 627- 4453.
PART II
ITEM 1. MARKET PRICE FOR COMMON EQUITY AND OTHER SHAREHOLDER MATTERS.
No market exists for Gem'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 Gem'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
Gem's securities. Gem plans to file or have filed the required forms
with the National Association of Securities Dealers, Inc. (the "NASD")
requesting that Gem'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 Gem has satisfied all comments made by the Commission.
There are no outstanding options or warrants, or other securities
convertible into, common equity of Gem. Of the 4,190,000 shares of
common stock outstanding as of May 15, 2000, 4,100,000 shares were
issued to Gem's officers, directors, and beneficial owners, of more
than 10% of Gem'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 Gem's common stock.
<PAGE> 20
As of May 15, 2000, Gem has 35 holders of record of its common
stock.
Gem 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
Gem'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 Gem'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 2. LEGAL PROCEEDINGS.
Gem 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 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial
disclosures from the inception of Gem through the date of this
Registration Statement.
<PAGE> 21
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
Gem has 4,190,000 shares of Common Stock issued and outstanding
as of May 15, 2000. Of the 4,190,000 shares of Gem'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 Gem 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 Gem's
Common Stock or the average weekly trading volume in the 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 Gem. 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,Gem issued 500,000 shares of common stock to
Michael A. Cox, Gem'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,Gem issued 2,500,000 shares of common stock to
David Rambaran, Gem's President in consideration of $250.00. The
foregoing shares were issued pursuant to Section 4(2) of the Act.
On December 31,1998, Gem 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, Gem 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,Gem 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.
<PAGE> 22
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The laws of the state of Nevada under certain circumstances
provide for indemnification of Gem'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 Gem'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
Gem'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 Gem 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 Gem's best interest, and
have not been adjudged liable for negligence or misconduct.
Gem's Articles of Incorporation and Bylaws contain provisions
which provide for indemnification to the fullest extent provided by
Nevada law.
PART F/S
Financial statement begin on the following page.
<PAGE> 23
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 year ended December 31, 1999, for the period from
Decmeber 21, 1998 to December 31, 1998, 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 year ended December 31, 1999, for the period from Decmeber 21,
1998 to December 31, 1998, and from inception (December 21, 1998) to
December 31, 1999 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 and Webster, P.S.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
April 26, 2000
F-1
<PAGE> 24
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 16,978 -
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;
5,000,000,000 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> 25
GEM INTERNATIONAL (USA), INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Year Ended Period Ended Inception
December 31, December 31, (December 21, 1998)
1999 1998 to December 31,
1999
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)$ - $ (9,087)
========== ============ =============
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> 26
GEM INTERNATIONAL (USA), INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
Accumulated
Addi- Deficit
Common Stock tional 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 $ 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
December 31, 1999 3,190,000 $ 319 $ 9,955 $ (49,087) $ (38,813)
========== ======= ========= ========= =========
The accompanying notes are an integral part of these financial
statements.
F-4
<PAGE> 27
GEM INTERNATIONAL (USA), INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Inception
Year ending Period ending (12/31/98)
December 31, December 31, to
1999 1998 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
=========== =========== ============
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
<PAGE> 28
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-6
<PAGE> 29
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (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 a related party, Queensland Opal N.L. (an
Australian Corporation). See Note 5. This inventory remains the
property of Queensland Opal N.L., which is responsible for
maintaining insurance on the inventory, until it is sold, returned,
lost, stolen, damaged, or destroyed.
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 as follows and amounted
to $1,636 for the year ended December 31, 1999:
Computer Equipment 30% declining balance
Office Furniture and Equipment 20% declining balance
For income tax purposes, the statutory depreciation methods are used.
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-7
<PAGE> 30
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (continued)
Revenue Recognition
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, the net sale, gross
proceeds less cost, will be recognized at the point title transfers
from consignor to purchaser.
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.
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. The Company determines impairment by comparing
the undiscounted future cash flows estimated to be generated by its
assets to their respective carrying amounts. Asset values will be
adjusted using the discounted future cash flows expected to be received
for the assets. The Company does not believe any adjustments are
needed to the carrying value of its assets at December 31, 1999.
F-8
<PAGE> 31
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Website Development
An outside consultant is developing the Company's website to sell the
Company's products in the future. The development costs incurred in
this project, in the amount of $10,884 for the year ended December
31, 1999, are expensed as incurred in accordance with SOP 98-1, and
are included in advertising expenses.
Translation of Foreign Currency
The Company has adopted Financial Accounting Standard No. 52.
Monetary assets and liabilities denominated in foreign currencies are
translated into United States dollars at rates of exchange in effect
at the balance sheet date. Gains or losses are included in income
for the year, except gains or losses relating to long-term debt,
which are deferred and amortized over the remaining term of the debt.
Non-monetary assets and liabilities and items recorded in the income
statement arising from transactions denominated in foreign currencies
are translated at rates of exchange in effect at the date of the
transaction.
Foreign Operations
The accompanying balance sheet includes $17,494 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 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
the president of the Company 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.
F-9
<PAGE> 32
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1999
NOTE 5 - RELATED PARTIES
The Company holds inventory on consignment from a stockholder,
Queensland Opal N.L. (an Australian Corporation), hereinafter
"Queensland." Queensland is owned and controlled by the Company's
president. See Note 2.
During the period ended December 31, 1999, the Company loaned funds
in the amount of $5,000 to JCC International Investments, Ltd., which
is controlled by the Company's secretary and main shareholder.
Interest is being charged at prime plus 2% (10.25%) on this
uncollateralized obligation. The Company expects to collect on this
note by June 2000. 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> 33
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 and from inception (December 21, 1998)
to December 31, 1999. 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.
/s/ Williams and Webster, P.S.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, WA
May 15, 2000
F-1
<PAGE> 34
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;
5,000,000,000 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> 35
GEM INTERNATIONAL (USA), INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Three Months Inception
Ended (December 21, 1998)
March 31, 2000 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) (68,90
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> 36
GEM INTERNATIONAL (USA), INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDER'S EQUITY
Accumulated
Common Stock Additional Deficit During
Number Paid-in Development
of Shares Amount Capital Stage Total
Stock issued in
April 1999 for an 3,190,000 $ 319 $ 8,991 $ - $ 9,310
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
December 31, 1999 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
March 31, 2000
(Unaudited) 4,190,000 $ 419 $ 110,405 $ (68,902)$ 41,922
========= ====== ========= =========== =========
See accompanying notes and accountant's review report.
F-4
<PAGE> 37
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 $ 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> 38
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.
Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting.
F-6
<PAGE> 39
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, on consignment from a related party, Queensland Opal N.L.
(an Australian Corporation). See Note 6. This inventory remains the
property of Queensland Opal N.L., which is responsible for
maintaining insurance on the inventory, until the inventory is sold,
returned, lost, stolen, damaged, or destroyed.
Revenue Recognition
The Company recognizes the net sale, gross proceeds less cost, at the
point when title transfers from consignor to purchaser.
Revenues from special orders not on consignment are recognized when
title transfers to purchaser.
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.
F-7
<PAGE> 40
GEM INTERNATIONAL (USA ), INC.
( A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 as follows and amounted
to $837 for the three-month period ended March 31, 2000:
Computer Equipment 30% declining balance
Office Furniture and Equipment 20% declining balance
For income tax purposes, the statutory depreciation methods are used.
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.
Asset values will be adjusted using the discounted future cash flows
expected to be received for the assets. The Company does not believe
any adjustments are needed to the carrying value of its assets at
March 31, 2000.
<PAGE> 41
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Website Development
An outside consultant is developing the Company's website to sell the
Company's products in the future. The development costs incurred in
this project, in the amount of $10,884 for the period from inception
(December 21, 1998) through March 31, 2000, are expensed as incurred
in accordance with SOP 98-1, and are included in advertising
expenses.
Translation of Foreign Currency
The Company has adopted Financial Accounting Standard No. 52.
Monetary assets and liabilities denominated in foreign currencies are
translated into United States dollars at rates of exchange in effect
at the balance sheet date. Gains or losses are included in income
for the year, except gains or losses relating to long-term debt,
which are deferred and amortized over the remaining term of the debt.
Non-monetary assets and liabilities and items recorded in the income
statement arising from transactions denominated in foreign currencies
are translated at rates of exchange in effect at the date of the
transaction.
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.
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.
<PAGE> 42
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 $0.10 per share.
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 the
president of the Company 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
The Company holds inventory on consignment from a stockholder,
Queensland Opal N.L. (an Australian Corporation), hereinafter
"Queensland." Queensland is owned and controlled by the Company's
president. See Note 2.
During the period ended December 31, 1999, the Company loaned funds in
the amount of $5,000 to a company, which is controlled by the Company's
secretary and main shareholder. Interest is being charged at prime
plus 2% (10.25%) on this uncollateralized obligation. The Company
expects to collect on this note by June 2000. For additional related
party transactions see Note 5.
F-10
<PAGE> 43
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2000
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.
F-11
<PAGE> 44
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 June 30, 2000 and the
related statements of operations, stockholders' equity and cash flows
for the six months then ended and for the period from inception
(December 21, 1998) to June 30, 2000. 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.
/s/ Williams and Webster, P.S.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, WA
August 22, 2000
F-1
<PAGE> 45
GEM INTERNATIONAL (USA), INC.
(A Development Stage Company)
BALANCE SHEETS
June 30, December 31,
2000 1999
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,838 $ 841
Accounts receivable 15,660 -
Inventory 6,677 -
Note receivable, related party 53,659 5,000
Accrued interest receivable 939 128
------------ -----------
Total Current Assets 78,773 5,969
------------ -----------
PROPERTY, PLANT AND EQUIPMENT
Office equipment 17,954 12,861
Accumulated depreciation (3,311) (1,636)
------------ -----------
Total Property, Plant and Equipment 14,643 11,225
------------ -----------
OTHER ASSETS
Deposits 300 300
------------ -----------
Total Other Assets 300 300
------------ -----------
TOTAL ASSETS $ 93,716 $ 17,494
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 23,980 $ 16,978
Note payable, related party 39,329 39,329
------------ -----------
Total Current Liabilities 63,309 56,307
------------ -----------
COMMITMENTS AND CONTINGENCIES - -
------------ -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.0001 par value;
5,000,000,000 shares authorized,
4,190,000 and 3,190,000 shares
issued and outstanding, respectively 419 319
Additional paid-in capital 110,954 9,955
Deficit accumulated during development stage(80,966) (49,087)
------------ -----------
Total Stockholders' Equity (Deficit) 30,407 (38,813)
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 93,716 $ 17,494
============ ===========
See accompanying notes and accountant's review report.
F-2
<PAGE> 46
GEM INTERNATIONAL (USA), INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Six Months Six Months Inception
Ended Ended (December 21, 1998)
June 30,2000 June 30, 1999 to June 30, 2000
(Unaudited) (Unaudited) (Unaudited)
REVENUES $ 18,900 $ - $ 18,900
COST OF REVENUES 14,423 - 14,423
----------- ------------ ------------
GROSS PROFIT 4,477 - 4,477
----------- ------------ ------------
GENERAL AND ADMINISTRATIVE EXPENSES
Advertising 6,063 - 28,869
Depreciation 1,675 - 3,311
Bank charges 128 6 197
Excise and duty charges - - 5,778
Freight 289 - 1,060
Licenses and fees 100 - 100
Management fees 12,000 - 18,000
Office expense 5,116 - 6,273
Professional expense 9,457 1,000 15,731
Rent and storage 500 - 1,300
Telephone and utilities - - 2,089
Travel 1,006 - 2,092
----------- ------------ ------------
Total Expenses 36,334 1,006 84,800
----------- ------------ ------------
LOSS FROM OPERATIONS (31,857) (1,006) (80,323)
----------- ------------ ------------
OTHER INCOME (EXPENSES)
Interest income 1,077 - 1,207
Interest expense (1,099) - (1,850)
----------- ------------ ------------
Total Other Income
(Expenses) (22) - (643)
----------- ------------ ------------
LOSS BEFORE INCOME TAXES (31,879) (1,006) (80,966)
INCOME TAXES - - -
----------- ------------ ------------
NET LOSS $ (31,879) $ (1,006) $ (80,966)
=========== ============ ============
BASIC AND DILUTED NET LOSS PER
COMMON SHARE $ (0.01) $ nil $ (0.03)
=========== ============ ============
WEIGHTED AVERAGE NUMBER
OF BASIC AND DILUTED COMMON
SHARES OUTSTANDING 3,695,495 3,190,000 3,009,069
=========== ============ ============
See accompanying notes and accountant's review report.
F-3
<PAGE> 47
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 $ 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
December 31, 1999 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 - - 1,099 - 1,099
Net loss for the six months ended
June 30, 2000 (Unaudited) - - - (31,879) (31,879)
---------- ------ -------- ---------- --------
Balance at June 30, 2000
(Unaudited) 4,190,000 $ 419 $110,954 $ (80,966)$ 30,407
========== ====== ======== ========== ========
See accompanying notes and accountant's review report.
F-4
<PAGE> 48
GEM INTERNATIONAL (USA), INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Inception
Six Months Six Months (12/21/1998)
Ended Ended to
June 30, 2000 June 30, 1999 06/30/00
(Unaudited) (Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss $ (31,879) $ (1,006) $ (80,966)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation expense 1,675 - 3,311
Imputed interest 1,099 - 1,850
Change in assets and liabilities:
Accounts receivable (15,660) - (15,660)
Accrued interest income (811) - (939)
Inventory (6,677) - (6,677)
Accounts payable 7,002 1,000 23,980
Deposits - - (300)
----------- ---------- ----------
Net cash used by operating activities (45,251) (6) (75,401)
----------- ---------- ----------
Cash flows from investing activities:
Purchase computer and office equipment (5,093) (9,000) (17,954)
Investment in short-term note receivable (58,393) - (63,393)
Payments received from short
term note receivable 9,734 - 9,734
----------- ---------- ----------
Net cash used by investing activities (53,752) (9,000) (71,613)
----------- ---------- ----------
Cash flows from financing activities:
Proceeds from sales of common stock 100,000 9,000 109,310
Proceeds from related party loan - - 39,542
----------- ---------- ----------
Net cash provided by
financing activities 100,000 9,000 148,852
----------- ---------- ----------
Net increase in cash and cash equivalents 997 (6) 1,838
Cash and cash equivalents beginning
of period 841 - -
----------- ---------- ----------
Cash and cash equivalents at
end of period $ 1,838 $ (6) $ 1,838
=========== ========== ==========
Supplemental cash flow disclosures:
Income taxes paid $ - $ - $ -
Interest paid $ - $ - $ -
Non-cash items:
Capital contribution for imputed
interest $ 1,099 $ - $ 1,850
See accompanying notes and accountant's review report.
F-5
<PAGE> 49
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
June 30, 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 $31,879 for the six month period ended June
30, 2000, has an accumulated deficit of $80,966, 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.
Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting.
F-6
<PAGE> 50
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 June 30, 2000. Inventory
is purchased periodically for special orders and display purposes
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, on consignment from a related party, Queensland Opal N.L.
(an Australian Corporation). See Note 6. This inventory remains the
property of Queensland Opal N.L., which is responsible for
maintaining insurance on the inventory, until the inventory is sold,
returned, lost, stolen, damaged, or destroyed.
Revenue Recognition
The Company recognizes the net sale, gross proceeds less cost, at the
point when title transfers from consignor to purchaser.
Revenues from special orders, not on consignment, are recognized when
title transfers to purchaser.
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.
Advertising Costs
Advertising costs are charged to operations when incurred. Advertising
expenses for the six-month period ended June 30, 2000 amounted to
$6,063.
F-7
<PAGE> 51
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 as follows and amounted
to $1,675 for the six-month period ended June 30, 2000:
Computer Equipment 30% declining balance
Office Furniture and Equipment 20% declining balance
For income tax purposes, the statutory depreciation methods are used.
Provision for Taxes
At June 30, 2000, the Company had an accumulated net operating loss
of approximately $80,000. 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.
Asset values will be adjusted using the discounted future cash flows
expected to be received for the assets. The Company does not believe
any adjustments are needed to the carrying value of its assets at
June 30, 2000.
F-8
<PAGE> 52
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Website Development
An outside consultant is developing the Company's website to sell the
Company's products in the future. The development costs incurred in
this project, in the amount of $10,884 for the period from inception
(December 21, 1998) through June 30, 2000, are expensed as incurred
in accordance with SOP 98-1 and are included in advertising expenses.
Translation of Foreign Currency
The Company has adopted Financial Accounting Standard No. 52.
Monetary assets and liabilities denominated in foreign currencies are
translated into United States dollars at rates of exchange in effect
at the balance sheet date. Gains or losses are included in income
for the year, except gains or losses relating to long-term debt,
which are deferred and amortized over the remaining term of the debt.
Non-monetary assets and liabilities and items recorded in the income
statement arising from transactions denominated in foreign currencies
are translated at rates of exchange in effect at the date of the
transaction.
Interim Financial Statements
The interim financial statements as of and for the six months ended
June 30, 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.
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
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 June 30, 2000, the Company has not engaged in any transactions that
would be considered derivative instruments or hedging activities.
F-9
<PAGE> 53
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 six-month period ending June 30, 2000, 1,000,000 shares of
common stock were issued for $0.10 per share.
NOTE 5 - ADDITIONAL PAID-IN CAPITAL
During the year ended December 31, 1998, shareholders contributed $213
for start up costs. At June 30, 2000, the Company owed $39,329 to the
president of the Company 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 $1,099 for the six-month period ended June 30, 2000.
NOTE 6 - RELATED PARTIES
The Company holds inventory on consignment from a stockholder,
Queensland Opal N.L., an Australian Corporation, (hereinafter
"Queensland.") Queensland is owned and controlled by the Company's
president. See Note 2.
F-10
<PAGE> 54
GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2000
NOTE 6 - RELATED PARTIES (Continued)
During the period ended December 31, 1999, the Company loaned funds
in the amount of $5,000 to a company, which is controlled by the
Company's secretary and main shareholder. Interest is being charged
at prime plus 2% (10.25%) on this uncollateralized obligation. The
Company received full payment on this note, plus $266 in accrued
interest in April 2000.
On April 1, 2000, the Company loaned additional funds in the amount
of $58,393 to a company which is controlled by the Company's
secretary and main shareholder. Interest is being charged at 7% per
annum on this uncollateralized obligation. The Company intends to
collect on this note before December 31, 2000. On June 30, 2000, the
balance owing is $53,659, plus accrued interest. 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 $93,716 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 effects relating to the Year 2000 issue.
F-11
<PAGE> 55
PART III
ITEM 1. INDEX TO EXHIBITS.
Exhibit No. Description
3.1 * Articles of Incorporation.
3.2 * Bylaws.
3.3 * Amended Articles of Incorporation.
4.1 * Specimen Stock Certificate.
27.2 Financial Data Schedule.
* Previously filed.
<PAGE> 56
SIGNATURES
In accordance with Section 12 of the Securities Ace of 1934, the
registrant caused this amendment to its 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 10/18/2000
Officer and a member of the
Board of Directors
/s/ David Rambaran
David Rambaran Secretary/Treasurer, Chief 10/18/2000
Financial Officer and a
member of the Board of
Directors
