Item 1. Business
This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.
As used in this current report and unless otherwise indicated, the terms “we”, “us” and “our” mean Gold and Gemstone Mining Inc., a Nevada corporation, unless otherwise indicated.
General Overview
We were incorporated in the State of Nevada as a for-profit company on March 5, 2008 under the name Global GSM Solutions Inc. We established a fiscal year end of January 31. We do not have revenues, have minimal assets and have incurred losses since inception. Our company was originally formed to develop, manufacture, and distribute our product and services to the gaming and vending industry that allows remote monitoring of amusement and vending devices. Our product was intended to improve security, productivity, and profitability of devices such as arcade games, toy dispensing machines, redemption games and vending machines. We were not able to raise sufficient capital to carry out our business plan and our management changed our focus to acquiring operating assets or businesses. On May 4, 2012 we entered into a collaboration agreement (the “JV Agreement”) and changed our business to that of mineral exploration.
Our common stock was initially approved for quotation on the OTC Bulletin Board under the symbol “GGSM” on December 27, 2010. On April 24, 2012, we filed a Certificate of Amendment with the Nevada Secretary of State to change our name from Global GSM Solutions Inc. to Gold and Gemstone Mining Inc. and to increase our authorized capital from 75,000,000 to 400,000,000 shares of common stock, par value of $0.001. These amendments became effective on April 30, 2012 upon approval from the Financial Industry Regulatory Authority (“FINRA”). Also effective April 30, 2012, our issued and outstanding shares of common stock increased from 7,350,000 to 330,750,000 shares of common stock, par value of $0.001, pursuant to a 1 old for 45 new forward split of our issued and outstanding shares of common stock. On May 4, 2012 our company’s majority shareholders took a number of actions to reconfigure our capital structure. Our former directors and officers, Gennady Fedosov and Anna Ivashenko cancelled an aggregate of 180,000,000 shares of our common stock and transferred an additional 88,000,000 to incoming management. Subsequent to all cancellations and transfers, we had 150,750,000 shares issued and outstanding. Our CUSIP number is 380485102.
On November 1, 2013, Charmaine King has resigned as Director, President and CEO of our company it will remain responsible as Chief Financial officer of the company. On November 1, 2013, Rafael A Pinedo was appointed President, Chief Executive Officer, director and secretary. Gold and Gemstone Mining is a exploration, mining and claims acquisition company based in Dallas, Texas and Mexico D.F, Mexico, the company currently holds mining claims in B.C Canada, and Sinaloa, Mexico for Gold and Rare Earth elements.
Other than as set out in this current report, we have not been involved in any bankruptcy, receivership or similar proceedings, nor have we been a party to any material reclassification, merger, consolidation or purchase or sale of a significant amount of assets not in the ordinary course of our business.
Our Current Business
On May 4, 2012, we entered into a collaboration agreement (the “JV Agreement”) with Ridgeback Mining (Sierra Leone) Limited (“RMSL”) regarding a joint venture on three prospective diamond and gold properties in Sierra Leone. Pursuant to the JV Agreement, on March 22, 2012 we incorporated of Gold and Gemstone S. L. Limited, a Sierra Leone company (the “JV Company”). The share capital of the JV Company is distributed equally between our company and the shareholders of RMSL, with our company holding 50%. Profits will be distributed evenly as well. Pursuant to the terms of the JV Agreement, RMSL will transfer the properties into JV Company and we will provide ongoing financing for all joint venture operations. Our investment into the JV Company is required to reach $1,500,000 per concession for an aggregate total of $4,500,000 within the first twelve months of operation. Two of the three concessions (the Sandia Concession and the Nyamundu concession) were assigned in to the JV Company on October 22, 2012. If we do not invest the required $1,500,000 per concession within the first twelve months, each concession for which the requirement was not fulfilled will be returned to the ownership of RMSL. At this time the third concession (the Kambaya Concession) has not been assigned by RMSL in to the JV Company and therefore there is no commitment to raise the $1,500,000 until 12 months after it has been assigned to the JV Company
Also on May 4, 2012, we accepted the resignation from Geoffrey Dart as our sole director and officers and accepted the consents to act of Charmaine King, Timothy Cocker and Tom Tucker. Ms. King was appointed as president, chief executive officer, chief financial officer, secretary, treasurer and as a director of our company. Mr. Cocker was appointed as our chief marketing officer and as a member of our board of directors, and Mr. Tucker was appointed as our vice president of African mining operations as well as a member of our board of directors. Mr. Cocker and Mr. Tucker have subsequently resigned from all of their positions on January 16, 2013 and January 17, 2013, respectively.
As of October 22, 2012 RMSL notified both the Nimikoro Chiefdom and the Nimiyama Chiefdom that RMSL has assigned the respective concession in to the JV Company effective October 29, 2012. The notice confirmed that we will have 12 months from the date of the assignment to raise $1,500,000 for each concession in to the JV Company or the concessions will revert back to RMSL.
On November 28, 2012, we entered into two separate agreements for the exploration and development of mineral properties in Africa. The agreements are summarized as follows:
1.
Joint venture agreement between our company and TTM Global Enterprises Ltd., a company incorporated under the laws of the U.K. This agreement relates to the investment by our company into a 30% interest in mining operations in Siguiri, Guinea, Africa. The term of the agreement is 90 days, within which we are required to provide financing of $1,500,000 and take on the financial responsibilities for all administrative fees associated with operations on the property. Of the $1,500,000, $250,000 is a fee to TTM Global for acquiring the 30% interest in the property. The $250,000 is to be delivered to TTM Global within 30 days of signing the TTM Global joint venture agreement and the remaining $1,250,000 must be provided within 90 days.
2.
Joint venture agreement between our company and Blue Orange Mining Limited, a company incorporated under the laws of Ghana. This agreement relates to the investment by our company into a 50% interest in thirteen gold concessions within the “Ashanti-belt” in Ghana. The term of the agreement is 90 days, within which we are required to provide financing of $5,000,000 towards the joint venture. Of the $5,000,000, $500,000 is a fee payable to Blue Orange for acquiring the 50% interest in the concessions. The $500,000 is to be delivered to Blue Orange within 30 days of signing the Blue Orange joint venture and the remaining $4,500,000 must be provided within 90 days.
We were unable to fulfill our payment obligations in respect of the Joint Venture Agreements with TTM Global Enterprises Ltd. and Blue Orange Mining Limited and, consequently, the agreements were terminated as at February 26, 2013.
Effective January 25, 2013, we entered into an investment agreement with Deer Valley Management, LLC whereby Deer Valley Management will provide for a non-brokered financing arrangement of up to $5,000,000. The financing allows, but does not require us to issue and sell up to the number of shares of common stock having an aggregate purchase price of $5,000,000 to Deer Valley Management. Subject to the terms and conditions of the financing agreement and a registration rights agreement, we may, in our sole discretion, deliver a notice to Deer Valley Management which states the dollar amount which we intend to sell to Deer Valley Management on a certain date. The maximum amount that we shall be entitled to sell to Deer Valley Management shall be equal to 200% of the average daily volume (U.S. market only) of the common stock for the 10 trading days prior to the applicable notice date so long as such amount does not exceed 4.99% of the outstanding shares of our company. Deer Valley Management will purchase our common stock valued at a 22.5% discount from the weighted average price for the 3 lowest closing bid prices during 10 consecutive trading days or the previous closing bid price, whichever is less, prior to delivery and receipt of our capital request. The shares that we sell to Deer Valley Management must be registered stock, among other conditions of investment.
In connection with the investment agreement, we also entered into a registration rights agreement with Deer Valley Management dated January 25, 2013, whereby we agreed to file a Registration Statement on Form S-1 with the Securities and Exchange Commission within 21 days of the date of the registration rights agreement. As at the date of this annual report we have not complied with our obligation to file a registration statement on Form S-1 pursuant to the registration rights agreement and the investment agreement with Deer Valley Management and we are therefore in default of those Agreements.
Effective February 8, 2013, our company entered into a collaboration agreement with Tell Mining Group for the exploration and development of mineral properties in Africa. Tell Mining is an active owner and developer of gold mining concessions in Ghana. Each concession constitutes a separate mining project. The agreement contemplates the creation of a joint venture company in Ghana (the “Ghana JV Company”) for which our company and Tell Mining shall each hold 50% of the issued and outstanding ordinary shares of the Ghana JV Company. Our company is required to deposit $10,000 cash with Tell Mining prior to commencement of mining along with 15% of net profits once in production, paid quarterly per concession. The term of the agreement is 5 years. As at the date of this annual report no action has been taken in respect of the collaboration agreement with Tell Mining and we have not made any payment pursuant to the agreement.
Effective February 22, 2013, our company entered into a Securities Purchase Agreement with Asher Enterprises, Inc. Under the terms of the Agreement our company issued an 8% convertible promissory note, in the principal amount of $42,500, which note matures on November 26, 2013 and may be converted into shares of our company’s common stock at any time after 180 days from February 22, 2013, subject to adjustments as further set out in the Note. The conversion price shall be at a variable conversion rate of 55% multiplied by the market price, being the average of the lowest two trading prices for our company’s common stock during the 90 trading day period ending on the last complete trading day prior to the conversion date, subject to adjustments as further set out in the note. Our company received the sum of $42,500 principal under the note on February 22, 2013. The note is issued to Asher pursuant to Rule 506 of Regulation D of the Securities Act of 1933 on the basis that they represented to our company that they were an “accredited investor” as such term is defined in Rule 501(a) of Regulation D.
On November 1, 2013, Charmaine King has resigned as Director, President and CEO of our company it will remain responsible as Chief Financial officer of the company. On November 1, 2013, Rafael A Pinedo was appointed President, Chief Executive Officer, director and secretary.
Our Business
Gold and Gemstone Mining is a exploration, mining and claims acquisition company based in Dallas, Texas and Mexico D.F, Mexico, the company currently holds mining claims in B.C Canada, and Sinaloa, Mexico for Gold and Rare Earth elements. We will be shifting our focus on the North West of Mexico as we move forward in 2014. The new corporate strategy is based on identifying potential rare earth sources with long-term supply, developing separation facilities, and building relationships with top tier companies that depend on rare earth elements for their products.
Market, Customers and Distribution Methods
Although future market conditions cannot be predicted, several large and well-capitalized markets for diamonds and gold exist throughout the world. Such markets include a very sophisticated futures market for the pricing and delivery of gold and diamonds. The price for diamonds and gold is affected by a number of global factors, including economic strength and resultant demand for diamonds and gold, fluctuating supplies, mining activities and production by others in the industry, and new and or reduced uses for diamonds and gold.
The mining industry is highly speculative and of a very high-risk nature. As such, mining activities involve a high degree of risk, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Few mining projects actually become operating mines.
The mining industry is subject to a number of factors, including intense industry competition, high susceptibility to economic conditions (such as price, foreign currency exchange rates, and capital and operating costs), and political conditions (which could affect such things as import and export regulations, foreign ownership restrictions). Furthermore, the mining activities are subject to all hazards incidental to mineral exploration, development and production, as well as risk of damage from earthquakes, any of which could result in work stoppages, damage to or loss of property and equipment and possible environmental damage. Hazards such as unusual or unexpected geological formations and other conditions are also involved in mineral exploration and development.
Rare earth elements are critical to many existing and emerging 21st century applications including clean-energy technologies such as hybrid cars and electric vehicles; high-technology applications including cell phones and digital music players; hard disk drives used in computers; microphones; fiber optics; lasers; and in addition, critical defense applications such as global positioning systems, radar and sonar; and advanced water treatment applications, including those for industrial, military, homeland security, domestic and foreign aid use.
The Government Accountability Office issued a report documenting that China, supplier of 97% of the world's rare earths, dominates the supply of rare earth materials crucial to the U.S. defense, computer and renewable energy sectors. The report, commissioned by Congress, resulted from concerns that China could reduce the rare earth materials supply, curbing U.S. production of guided missiles and other defense weapons as well as commercial products such as computer hard drives, cell phones, MRI machines, hybrid autos and wind turbines, among other sophisticated technologies that employ rare earth materials.
The Rare Earth Elements
REEs are a moderately abundant group of 15 metallic elements known as the Lanthanide series; cerium, lanthanum, neodymium, praseodymium, promethium (which does not occur naturally), samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium and lutetium and two elements that have similar chemical properties to the Lanthanide elements; yttrium and scandium. The oxides produced from processing REEs are collectively referred to as rare earth oxides or REOs.
REEs are often classified into two groups: the light REEs ("LREE") and HREEs, according to their atomic weights and location on the periodic table. LREEs and HREEs are contained in all rare earth deposits. Cerium, lanthanum, neodymium, praseodymium, samarium, europium, and gadolinium are considered LREEs that are more dominant in bastnasite. Terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, and yttrium are considered HREEs and are in higher concentrations in monazite than in bastnasite.
Competition
The diamond and gold exploration industry is highly competitive. We are a new exploration stage company and have a weak competitive position in the industry. We compete with junior and senior exploration companies, independent producers and institutional and individual investors who are actively seeking to acquire mineral exploration properties throughout the world together with the equipment, labor and materials required to operate on those properties. Competition for the acquisition of diamond and gold exploration interests is intense with many exploration leases or concessions available in a competitive bidding process in which we may lack the technological information or expertise available to other bidders.
According to the 2011 Critical Materials Report issued from the U.S. Department of Energy, five of the rare earth elements were found to be critical in terms of supply risk in the short term (present - 2015) and into the medium term (2015-2025). As shown in the criticality matrices below, those elements deemed critical are: Dysprosium, Europium, Neodymium, Terbium, and Yttrium.
Many of the mineral exploration companies with which we compete for financing and for the acquisition of mineral exploration properties have greater financial and technical resources than those available to us. Accordingly, these competitors may be able to spend greater amounts on acquiring mineral exploration interests of merit or on exploring or developing their mineral exploration properties. This advantage could enable our competitors to acquire mineral exploration properties of greater quality and interest to prospective investors who may choose to finance their additional exploration and development. Such competition could adversely impact our ability to attain the financing necessary for us to acquire further mineral exploration interests or explore our current or future mineral exploration properties.
We also compete with other junior mineral exploration companies for financing from a limited number of investors that are prepared to invest in such companies. The presence of competing junior mineral exploration companies may impact our ability to raise additional capital in order to fund our acquisition or exploration programs if investors perceive that investments in our competitors are more attractive based on the merit of their mineral exploration properties or the price of the investment opportunity. In addition, we compete with both junior and senior mineral exploration companies for available resources, including, but not limited to, professional geologists, land specialists, engineers, camp staff, helicopters, float planes, mineral exploration supplies and drill rigs.
General competitive conditions may be substantially affected by various forms of legislation and/or regulation introduced from time to time by the governments of the countries in which we operate, as well as factors beyond our control, including international political conditions, overall levels of supply and demand for mineral exploration.
In the face of competition, we may not be successful in acquiring, exploring or developing profitable mineral properties or interests, and we cannot give any assurance that suitable properties or interests will be available for our acquisition, exploration or development. Despite this, we hope to compete successfully in the mineral exploration industry by:
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keeping our costs low;
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relying on the strength of our management’s contacts; and
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using our size and experience to our advantage by adapting quickly to changing market conditions or responding swiftly to potential opportunities.
Research and Development
During the year ended January 31, 2014 we did not spend any funds on research and development.
Employees
We are an exploration stage company and currently have no employees, other than our one officer and director who provide services on a consulting basis. All the other functions on the finance and engineering area are outsource through third parties.
Intellectual Property
We own all of the right to the websites, and the content therein, of www.ggsmining.com and www.chancerymining.com .
Governmental Regulations
The Mining Law or Ley Minera is the section of legislation that govern’s Mexico’s mining sector. The General Directorate of Mines (GDM), under the authority of the General Mining Co-coordinator, has the authority to enforce the Mining Law and its regulations.
Mexican mining law offers the following advantages:
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It allows direct foreign investment with up to 100% ownership of the capital stock.
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Exploration concessions shall have a not extendible six years life.
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Exploitation concessions shall have a term of fifty years. Such concessions may be further extended for the same term.
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There are no limits for the mining concession surfaces.
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Exploration concessions shall be substituted by one or more exploitation concessions.
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It allows private sector participation in minerals previously considered as exclusive for the government (sulphur, phosphorus, potassium, iron ore and coal).
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The general guidelines issued by the concession granting bidding for non-incorporated assignations are established. The concept of economic counterproposal is added.
Timing and authority's answers to the cancelling of concessions, or substitutions obtained in a bidding are established, and the same applies to cases when the bidding was declared deserted. At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through a loan from our directors to meet our obligations with regard to the mining concessions, the initial registrations above, or general operations over the next twelve months. We do not have any arrangements in place for any future debt or equity financing.
Environmental Compliance
We are not aware of any material violations of environmental permits, licenses or approvals that have been issued with respect to our operations. We expect to comply with all applicable laws, rules and regulations relating to our business, and at this time, we do not anticipate incurring any material capital expenditures to comply with any environmental regulations or other requirements.
While our intended projects and business activities do not currently violate any laws, any regulatory changes that impose additional restrictions or requirements on us or on our potential customers could adversely affect us by increasing our operating costs or decreasing demand for our products or services, which could have a material adverse effect on our results of operations.
Reports to Security Holders
We intend to furnish our shareholders with annual reports containing financial statements audited by our independent auditors and to make available quarterly reports containing unaudited financial statements for each of the first three quarters of each year.
The public may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov.
Item 1A.
Item 1A. Risk Factors
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 1B.
Item 1B. Unresolved Staff Comments
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 2.
Item 2. Properties
Executive Offices
Our offices are located at 4020 N MacArthur Blvd Suite 122, Irving, Texas 75038. We will anticipate that we will require additional premises in the foreseeable future.
Mining Concessions
We will anticipate that we will anticipate commitments in other areas, particularly in Mexico.
We will entered into a joint venture with gold mining concessions in Mexico.
Location and Access
State of Sinaloa, Mexico
Accounting Considerations
Our financial statements are prepared in accordance with US GAAP, and accordingly, we intend to account for our investment in the joint venture using the equity method required by Accounting Principles Board Opinion No. 18. Using the equity method our investment in the joint venture will be initially recorded at cost. The carrying amount of the investment will thereafter be increased or decreased to recognize our share of profits or losses from the joint venture after the acquisition date. Any distributions received from the joint venture will reduce the carrying amount of the investment.
History of Operations
none
Present Condition
The mining concessions have not had any exploration work completed on them and do not exhibit any evidence of historical operations. They are undeveloped and will require significant exploration and surface work before any mining activity can begin. We plan to undertake exploration work on the mining concessions and generate a full geological survey and report.
Plan of Exploration
The below tables describe our planned operating budget for the 12 month period beginning August 2014. The timeframe and cost estimates described represent our management’s beliefs based on its experiences and understanding of the mining industry in Mexico, where the concessions are located. The time frames described for each task indicate the estimated time of completion from when the task is initiated. Importantly, the initiation of any task will be subject to the availability of required capital, which cannot be guaranteed, and to the seasonal limitations on exploration in Mexico.
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is not traded on any exchange. Our common stock is quoted on the OTC Bulletin Board under the trading symbol “GGSM”. Trading in stocks quoted on the OTC Bulletin Board is often thin and is characterized by wide fluctuations in trading prices due to many factors that may have little to do with a company’s operations or business prospects. We cannot assure you that there will be a market for our common stock in the future.
OTC Bulletin Board securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTC Bulletin Board issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.
The following quotations, obtained from Yahoo Finance, reflect the high and low bids for our common shares based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
(1) Our shares of common stock first traded on April 5, 2012.
Our common shares are issued in registered form. Island Stock Transfer, 15500 Roosevelt Boulevard, Suite 301, Clearwater, Florida 33760 (Telephone: 727.289.0010; Facsimile: 727.289.0069) is the registrar and transfer agent for our common shares.
Holders
On May 4, 2014, the shareholders’ list showed 71 registered shareholders and 600,000,000 common shares authorized.
Dividend Policy
We have not paid any cash dividends on our common stock and have no present intention of paying any dividends on the shares of our common stock. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our board of directors will determine our future dividend policy from time to time.
Equity Compensation Plan Information
We do not have any equity compensation plans.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
We did not sell any equity securities, which were not registered under the Securities Act during our fiscal years ended January 31, 2014, and 2013.
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
We did not purchase any of our shares of common stock or other securities during our fourth quarter of our fiscal years ended January 31, 2014 and 2013.
Item 6.
Item 6. Selected Financial Data
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this annual report. The discussions of results, causes and trends should not be construed to imply any conclusion that these results or trends will necessarily continue into the future.
Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Results of Operations for our Years Ended January 31, 2013 and 2012
Our net loss and comprehensive loss for our year ended January 31, 2013, for our year ended January 31, 2012 and the changes between those periods for the respective items are summarized as follows:
Operating Expenses
The increase in our operating expenses for our year ended January 31, 2014 was due to an increase in professional fees, consulting fees and general and administrative expenses.
Liquidity and Financial Condition
Working Capital
Cash Flows
Operating Activities
Net cash used in operating activities was $50,052 for our year ended January 31, 2013 compared with cash used in operating activities of $18,478 in the same period in 2012.
Investing Activities
Net cash provided by investing activities was $Nil for our year ended January 31, 2013 compared to net cash used in investing activities of $Nil in the same period in 2012.
Financing Activities
Net cash from financing activities was $50,052 for our year ended January 31, 2013 compared to $10,436 in the same period in 2012.
Contractual Obligations
As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.
Going Concern
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Our company incurred a net loss of $117,021 for the year ended January 31, 2013 [2012 - $28,301] and at January 31, 2013 had a deficit accumulated of $171,170 [2012 - $54,149]. We have not generated revenue and we have an accumulated deficit and negative working capital of $109,261 as at January 31, 2013. Our company requires additional funds to maintain its existing operations and to acquire new business assets. These conditions raise substantial doubt about our company’s ability to continue as a going concern. Management’s plans in this regard are to raise equity and debt financing as required, but there is no certainty that such financing will be available or that it will be available at acceptable terms. The outcome of these matters cannot be predicted at this time.
These financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through a loan from our directors to meet our obligations over the next twelve months. We do not have any arrangements in place for any future debt or equity financing.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Critical Accounting Policies
Exploration Stage Company
Our company is an Exploration Stage Company, as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ("ASC") 915, Development Stage Entities.
Basis of Presentation
The financial statements of our company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.
Accounting Basis
Our company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting). Our company has adopted a January 31 fiscal year end.
Cash and Cash Equivalents
Our company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents. Our company had $0 and $0 of cash as of January 31, 2013 and 2012, respectively.
Fair Value of Financial Instruments
Our company’s financial instruments consist of cash and cash equivalents, prepaid expenses, bank overdrafts, accrued expenses, accrued interest and shareholder loans. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
Our company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, our company has not adopted a stock option plan and has not granted any stock options.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing our company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing our company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of January 31, 2013.
Comprehensive Income
Our company has which established standards for reporting and display of comprehensive income, its components and accumulated balances. When applicable, our company would disclose this information on its Statement of Stockholders’ Equity. Comprehensive income comprises equity except those resulting from investments by owners and distributions to owners. Our company has not had any significant transactions that are required to be reported in other comprehensive income.
Derivative financial instruments
FASB ASC subtopic 815-40, Derivatives and Hedging, Contracts in Entity’s own Equity (“ASC 815-40”) became effective for our company on October 1, 2009. Our company has derivative liabilities resulting from the issuance of certain convertible debt, which were measured at fair value on a recurring basis using an option pricing model, consistent with level 3 inputs.
Recent Accounting Pronouncements
Our company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on our company’s results of operations, financial position or cash flow.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 8.
Item 8. Financial Statements
GOLD AND GEMSTONE MINING INC.
(FORMERLY GLOBAL GSM SOLUTIONS, INC.)
(AN EXPLORATION STAGE COMPANY)
JANUARY 31, 2013
Silberstein Ungar, PLLC CPAs and Business Advisors
Phone (248) 203-0080
Fax (248) 281-0940
30600 Telegraph Road, Suite 2175
Bingham Farms, MI 48025-4586
www.sucpas.com
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
Gold and GemStone Mining Inc.
(Formerly Global GSM Solutions, Inc.)
Draper, Utah
We have audited the accompanying balance sheets of Gold and GemStone Mining Inc. (formerly Global GSM Solutions, Inc.) (the “Company”) as of January 31, 2013 and 2012 and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended and the period from March 5, 2008 (Date of Inception) through January 31, 2013. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 Gold and GemStone Mining Inc. (formerly Global GSM Solutions, Inc.) as of January 31, 2013 and 2012 and the results of its operations and its cash flows for the years then ended and the period from March 5, 2008 (Date of Inception) through January 31, 2013 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has a worPinedo capital deficit, has not yet received revenue from sales of products or services, and has incurred losses from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are described in Note 2. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Silberstein Ungar, PLLC
Bingham Farms, Michigan
May 17, 2013
GOLD AND GEMSTONE MINING INC.
(FORMERLY GLOBAL GSM SOLUTIONS, INC.)
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
AS OF JANUARY 31, 2013 AND 2012
See accompanying notes to financial statements.
GOLD AND GEMSTONE MINING INC.
(FORMERLY GLOBAL GSM SOLUTIONS, INC.)
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JANUARY 31, 2013 AND 2012
FOR THE PERIOD FROM MARCH 5, 2008 (INCEPTION) TO JANUARY 31, 2013
See accompanying notes to financial statements.
GOLD AND GEMSTONE MINING INC.
(FORMERLY GLOBAL GSM SOLUTIONS, INC.)
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE PERIOD FROM MARCH 5, 2008 (INCEPTION) TO JANUARY 31, 2013
See accompanying notes to financial statements.
GOLD AND GEMSTONE MINING INC.
(FORMERLY GLOBAL GSM SOLUTIONS, INC.)
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31, 2013 AND 2012
FOR THE PERIOD FROM MARCH 5, 2008 (INCEPTION) TO JANUARY 31, 2013
See accompanying notes to financial statements.
GOLD AND GEMSTONE MINING INC.
(FORMERLY GLOBAL GSM SOLUTIONS, INC.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2013
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of Business
Gold and Gemstone Mining Inc. (formerly Global GSM Solutions, Inc.) (“the Company”) was incorporated under the laws of the State of Nevada, U.S. on March 5, 2008.
On April 24, 2012, the Company amended its articles of incorporation to the change the name of the Company to Gold and Gemstone Mining Inc. The Company's principal business is the acquisition and exploration of mineral resources.
Exploration Stage Company
The Company is an Exploration Stage Company, as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ("ASC") 915, Development Stage Entities .
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.
Accounting Basis
The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted a January 31 fiscal year end.
Cash and Cash Equivalents
The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents. The Company had $0 and $0 of cash as of January 31, 2013 and 2012, respectively.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, prepaid expenses, bank overdrafts, accrued expenses, accrued interest and shareholder loans. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
GOLD AND GEMSTONE MINING INC.
(FORMERLY GLOBAL GSM SOLUTIONS, INC.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2013
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition
The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of January 31, 2013.
Comprehensive Income
The Company has which established standards for reporting and display of comprehensive income, its components and accumulated balances. When applicable, the Company would disclose this information on its Statement of Stockholders’ Equity. Comprehensive income comprises equity except those resulting from investments by owners and distributions to owners. The Company has not had any significant transactions that are required to be reported in other comprehensive income.
Derivative financial instruments
FASB ASC subtopic 815-40, Derivatives and Hedging, Contracts in Entity’s own Equity (“ASC 815-40”) became effective for the Company on October 1, 2009. The Company has derivative liabilities resulting from the issuance of certain convertible debt, which were measured at fair value on a recurring basis using an option pricing model, consistent with level 3 inputs. See Note 5.
Recent Accounting Pronouncements
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.
NOTE 2 - GOING CONCERN
The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has a working capital deficit, has not yet received revenues from sales of products or services, and has incurred losses since inception. Further losses are anticipated in the development of our business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and loans from directors and or private placement of common stock.
GOLD AND GEMSTONE MINING INC.
(FORMERLY GLOBAL GSM SOLUTIONS, INC.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2013
NOTE 3 - ACCRUED EXPENSES
Accrued expenses consisted of the following at January 31, 2013 and 2012:
NOTE 4 - DUE TO RELATED PARTIES
An officer loaned $840 to the Company on March 5, 2008 and an additional $3,000 to the Company during the year ended January 31, 2011. The loans were due on demand, non-interest bearing and unsecured. The loans were forgiven during the year ended January 31, 2012 and recorded as contributed capital in accordance with ASC 470-50.
Additionally, during the year ended January 31, 2012, a shareholder and officer paid for expenses totaling $10,436. The amount is unsecured, non-interest bearing and due on demand. During the year ended January 31, 2013, $8,459 of this amount was repaid with the remaining $1,977 forgiven and recorded as contributed capital in accordance with ASC 470-50.
Also during the year ended January 31, 2013, a shareholder loaned the Company $900. The loan is unsecured, non-interest bearing and due on demand.
NOTE 5 - NOTES AND CONVERTIBLE NOTES PAYABLE
On February 22, 2012, the Company issued a convertible promissory note payable for $7,000. The note bears 10% interest, is secured by stock of the Company and is due in full on February 22, 2015. The loan and any accrued interest can be converted into shares of the Company’s common stock at any time at the market value on the date of conversion.
On May 30, 2012, the Company issued a convertible promissory note payable for $16,092. The note bears 10% interest, is secured by stock of the Company and is due in full on May 29, 2015. The loan and any accrued interest can be converted into shares of the Company’s common stock at any time at the market value on the date of conversion.
On July 17, 2012, the Company issued a convertible promissory note payable for $8,855. The note bears 8% interest, is secured by stock of the Company and is due in full on July 18, 2013. The loan and any accrued interest can be converted into shares of the Company’s common stock at any time at the average trading price of the Company’s stock for the 30 days preceding the conversion date. The Company valued the derivative liability associated with the beneficial conversion feature at $3,244 which was recorded as a discount on the debt and is being amortized over the life of the loan. Amortization of the debt discount of $1,622 was recorded during the year ended January 31, 2013. The Company used the following inputs to value the beneficial conversion feature; $0.04 stock price on the grant date; $0.06 exercise price; 1 year life; 178.25% volatility; and 0.18% risk-free interest rate.
GOLD AND GEMSTONE MINING INC.
(FORMERLY GLOBAL GSM SOLUTIONS, INC.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2013
NOTE 5 - NOTES AND CONVERTIBLE NOTES PAYABLE (CONTINUED)
On October 31, 2012, the Company issued a convertible promissory note payable for $25,000. The note bears 6% interest, is secured by stock of the Company and is due in full on October 31, 2013. The loan and any accrued interest can be converted into shares of the Company’s common stock at any time at the average trading price of the Company’s stock for the 30 days preceding the conversion date. The Company valued the derivative liability associated with the beneficial conversion feature at $17,043 which was recorded as a discount on the debt and is being amortized over the life of the loan. Amortization of the debt discount of $4,261 was recorded during the year ended January 31, 2013. The Company used the following inputs to value the beneficial conversion feature; $0.08 stock price on the grant date; $0.08 exercise price; 1 year life; 199.48% volatility; and 0.18% risk-free interest rate.
On January 25, 2013, the Company issued a promissory note payable for $664. The note bears 8% interest, is unsecured and due on January 26, 2014.
Total interest expense on the notes and convertible notes payable was $2,513 during the year ended January 31, 2013.
In accordance with ASC subtopic 815-40, the beneficial conversion features of the convertible notes payable were revalued as of January 31, 2013 at $14,437 using the following inputs; $0.05 stock price on the grant date; $0.07 exercise price; 6-9 month life; 204.58% - 250.12% volatility; and 0.12% - 0.14% risk-free interest rate. The change in the value of the derivative liability of $5,850 has been recorded in other income.
NOTE 6 - COMMON STOCK
The Company had 75,000,000 common shares authorized with a par value of $ 0.001 per share. On April 11, 2012, the Company filed an amendment to increase the authorized shares to 400,000,000 with a par value of $0.001 per share.
On January 19, 2010, the Company issued 270,000,000 shares of its common stock for total cash proceeds of $6,000.
On October 28, 2010, the Company issued 60,750,000 shares of its common stock for total cash proceeds of $27,000.
On April 11, 2012, the Company filed a certificate of change effecting a 45 to 1 forward stock split. All share and per share data in these financial statements and footnotes has been adjusted retrospectively to account for the stock split.
On May 4, 2012, a shareholder returned and cancelled 180,000,000 shares of common stock.
Total shares of common stock outstanding as of January 31, 2013 and 2012 were 150,750,000 and 330,750,000, respectively.
GOLD AND GEMSTONE MINING INC.
(FORMERLY GLOBAL GSM SOLUTIONS, INC.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2013
NOTE 7 - COMMITMENTS
The Company neither owns nor leases any real or personal property. An officer has provided office services without charge. There is no obligation for the officer to continue this arrangement. Such costs are immaterial to the financial statements and accordingly are not reflected herein. The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.
On May 4, 2012, the Company entered into a collaboration agreement (the “JV Agreement”) with Ridgeback Mining (Sierra Leone) Limited (“RMSL”) regarding a joint venture on three prospective diamond and gold properties in Sierra Leone (the “Properties”). Pursuant to the JV Agreement, the Company has initiated the incorporation of Gold and Gemstone Sierra Leone Limited, a Sierra Leone company (the “JV Company”). The shares capital of the JV Company is distributed equally between our company and the shareholders of RMSL, with our company holding fifty percent and profits will be distributed evenly as well. Pursuant to the terms of the JV Agreement, RMSL will transfer the Properties into JV Company and we will provide ongoing financing for all joint venture operations. Our investment into the JV Company is required to reach $1,500,000 per concession for an aggregate total of $4,500,000 within the first twelve months of operation. Two of the three concessions (the Sandia Concession and the Nyamundu concession) were assigned to the JV Company on October 22, 2012. If we do not invest the required $1,500,000 per concession by October 31, 2013, each concession for which the requirement was not fulfilled will be returned to the ownership of RMSL. At this time the third concession (the Kambaya Concession) has not been assigned by RMSL to the JV Company and therefore there is no commitment to raise the $1,500,000 until 12 months after it has been assigned to the JV Company.
NOTE 8 - INCOME TAXES
As of January 31, 2013, the Company had net operating loss carry forwards of approximately $171,170 that may be available to reduce future years’ taxable income in varying amounts through 2033. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.
The provision for Federal income tax consists of the following for the years ended January 31, 2013 and 2012:
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows as of January 31, 2013 and 2012:
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of approximately $171,170 for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years.
NOTE 9 - SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to January 31, 2013 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements other than the events described above.
Item 9.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
There were no disagreements related to accounting principles or practices, financial statement disclosure, internal controls or auditing scope or procedure during the two fiscal years and interim periods.
Item 9A.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer), as appropriate to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As of January 31, 2013, the end of the period covered by this annual report, our management carried out an evaluation of the effectiveness of our disclosure controls and procedures. Based on the foregoing, and primarily as a result of our failure to timely file this annual report on Form 10-K, our management concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this annual report, The primary deficiencies noted by our management in respect of our disclosure controls and procedures was a lack of financial and human resources to manage disclosure obligations on an ongoing basis.
Management is committed to improving its disclosure controls and procedures and will continue to use third party specialists to address shortfalls in staffing and to assist our company with accounting and legal responsibilities.
Management Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for our company.
Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of its management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect material misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in there being a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
Our chief executive officer (our principal executive officer) conducted an evaluation of the effectiveness of our internal control over financial reporting, as of January 31, 2013, based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation under this framework, we concluded that our internal control over financial reporting was not effective as of the evaluation date due to the factors stated below.
Management assessed the effectiveness of our company's internal control over financial reporting as of evaluation date and identified the following material weaknesses:
Insufficient Resources: We have an inadequate number of personnel with requisite expertise in the key functional areas of finance and accounting.
Inadequate Segregation of Duties: We have an inadequate number of personnel to properly implement control procedures.
Lack of Audit Committee and Outside Directors on our Company's Board of Directors: We do not have a functioning audit committee or outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.
Management is committed to improving its internal controls and will (1) continue to use third party specialists to address shortfalls in staffing and to assist our company with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel and (3) may consider appointing outside directors and audit committee members in the future.
Management has discussed the material weakness noted above with our independent registered public accounting firm. Due to the nature of this material weakness, there is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements could occur that would not be prevented or detected.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management's report in this annual report.
Changes in Internal Control
During the fiscal year ended January 31, 2013 there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
Item 9B. Other Information
Effective January 16, 2013, Tim Cocker resigned as chief marketing officer and director of our company.
Effective January 17, 2013, Tom Tucker resigned as vice president of African mining operations and director of our company.
Effective April 2, 2013, Michael Arnold resigned as vice president of International Business Development and director of our company.
These resignations were not the result of any disagreements with our company regarding our operations, policies, practices or otherwise.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
All directors of our company hold office until the next annual meeting of the security holders or until their successors have been elected and qualified. The officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows:
Business Experience
The following is a brief account of the education and business experience during at least the past five years of each director, executive officer and key employee of our company, indicating the person’s principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.
Mr. Rafael Pinedo - Chief Executive Officer, President
Mr. Pinedo, age 46, has over 23 years of experience in the areas of consulting and business transformation. Mr. Pinedo has served as president and chief executive officer of Pilgrim Petroleum Corporation (PGPM.OTC and PHV on the Frankfurt Stock Exchange), a consulting & oil and gas Exploration Company based out of Dallas, Texas. He has also served as president and director of engineering and operations, for Chancery Resources, Inc, a US based operating company, and managing director of American BNP Resources LP based in Midland, Texas, Managing Partner at Crescent Hill Capital Corporation, Dallas Texas and Boston Massachusetts. Mr. Pinedo also serves as a director of CB Resources Ltd. (CNQ.ICD) a Canadian public company based in Vancouver, Canada and director at Mineral Hills Industries Ltd. a Canadian public company (TSXV.MHI).
Significant Employees
There are no individuals other than our executive officers who make a significant contribution to our business.
Family Relationships
There are no family relationships between any of our directors, executive officers and proposed directors or executive officers.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
1.
been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
2.
had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
3.
been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
4.
been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
5.
been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
6.
been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors and persons who own more than 10% of our common stock to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports that they file.
Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended January 31, 2013, all filing requirements applicable to our officers, directors and greater than 10% percent beneficial owners were complied with.
Code of Ethics
We plan to adopt a code of ethics that obligates our directors, officers and employees to disclose potential conflicts of interest and prohibits those persons from engaging in such transactions without our consent.
Board and Committee Meetings
Our board of directors held no formal meetings during the year ended January 31, 2014. All proceedings of the board of directors were conducted by resolutions consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the Nevada General Corporate Law and our Bylaws, as valid and effective as if they had been passed at a meeting of the directors duly called and held.
For the year ended January 31, 2014 we did not have any standing committee of the board of directors.
Nomination Process
As of January 31, 2013, we did not effect any material changes to the procedures by which our shareholders may recommend nominees to our board of directors. Our board of directors does not have a policy with regards to the consideration of any director candidates recommended by our shareholders. Our board of directors has determined that it is in the best position to evaluate our company’s requirements as well as the qualifications of each candidate when the board considers a nominee for a position on our board of directors. If shareholders wish to recommend candidates directly to our board, they may do so by sending communications to the president of our company at the address on the cover of this annual report.
Audit Committee
We do not currently have an audit committee, the duties of this committee are performed by our entire board of directors. We currently do not have nominating, compensation committees or committees performing similar functions. There has not been any defined policy or procedure requirements for shareholders to submit recommendations or nomination for directors.
During fiscal 2013, aside from quarterly review teleconferences, there were no meetings held by this committee. The business of the audit committee was conducted though these teleconferences and by resolutions consented to in writing by all the members and filed with the minutes of the proceedings of the audit committee.
Audit Committee Financial Expert
Our board of directors has determined that none of the members of our audit committee qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K, and is “independent” as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.
We believe that the members of our board of directors are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. We believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated any material revenues to date. In addition, we currently do not have nominating, compensation or audit committees or committees performing similar functions nor do we have a written nominating, compensation or audit committee charter. Our board of directors does not believe that it is necessary to have such committees because it believes the functions of such committees can be adequately performed by our board of directors.
Item 11.
Item 11. Executive Compensation
None of our directors or executive officers has received any compensation from our company in the last two fiscal years. Pursuant to Item 402(a)(5) of Regulation S-K, we have omitted the table and columns as no compensation has been awarded to, earned by, or paid to these individuals.
Option Exercises
During our fiscal year ended January 31, 2014, there were no options exercised by our named officers.
Compensation of Directors
We do not have any agreements for compensating our directors for their services in their capacity as directors, although such directors are expected in the future to receive stock options to purchase shares of our common stock as awarded by our board of directors.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.
Indebtedness of Directors, Senior Officers, Executive Officers and Other Management
None of our directors or executive officers or any associate or affiliate of our company during the last two fiscal years is or has been indebted to our company by way of guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of June 4, 2013, certain information with respect to the beneficial ownership of our common shares by each shareholder known by us to be the beneficial owner of more than 5% of our common shares, as well as by each of our current directors and executive officers as a group. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.
(1)
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on June 4, 2013. As of June 4, 2013, there were 150,750,000 shares of our company’s common stock issued and outstanding.
(2)
Charmaine King was appointed as chief executive officer, chief financial officer, president, secretary, treasurer and director of our company on May 4, 2012.
(3)
Effective January 16, 2013, Tim Cocker resigned as chief marketing officer and director of our company.
(4)
Effective January 17, 2013, Tom Tucker resigned as vice president of African mining operations and director of our company.
Securities Authorized for Issuance under Equity Compensation Plans
There were no unexercised options, stock that has not vested and equity incentive plan awards for our named executive officers during the last two fiscal years.
Changes in Control
We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change in control of our company.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Except as disclosed herein, no director, executive officer, shareholder holding at least 5% of shares of our common stock, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction since the year ended January 31, 2013, in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at the year-end for the last three completed fiscal years.
Director Independence
We currently act with one director, consisting of Rafael Pinedo. We have determined that we do not have an “independent director” as defined in NASDAQ Marketplace Rule 4200(a)(15).
Currently our audit committee consists of our entire board of directors. We currently do not have nominating, compensation committees or committees performing similar functions. There has not been any defined policy or procedure requirements for shareholders to submit recommendations or nomination for directors.
Our board of directors has determined that it does have a member of its audit committee who qualifies as an “audit committee financial expert” as defined in as defined in Item 407(d)(5)(ii) of Regulation S-K.
From inception to present date, we believe that the members of our audit committee and the board of directors have been and are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting.
Item 14.
Item 14. Principal Accounting Fees and Services
The aggregate fees billed for the most recently completed fiscal year ended January 31, 2013 and for fiscal year ended January 31, 2012 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our independent auditors are engaged by us to render any auditing or permitted non-audit related service, the engagement be:
·
approved by our audit committee (which consists of our entire board of directors); or
·
entered into pursuant to pre-approval policies and procedures established by the board of directors, provided the policies and procedures are detailed as to the particular service, the board of directors is informed of each service, and such policies and procedures do not include delegation of the board of directors’ responsibilities to management.
Our board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.
Our board of directors has considered the nature and amount of fees billed by our independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independent auditors’ independence.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules
(a)
Financial Statements
(1)
Financial statements for our company are listed in the index under Item 8 of this document
(2)
All financial statement schedules are omitted because they are not applicable, not material or the required information is shown in the financial statements or notes thereto.
(b)
Exhibits
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
GOLD AND GEMSTONE MINING INC.
(Registrant)
Dated: May 29, 2014
/s/Rafael Pinedo
Rafael Pinedo
Chief Executive Officer, Chief Financial Officer,
President, Secretary, Treasurer, Director
(Principal Executive Officer, Principal Financial
Officer and Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
GOLD AND GEMSTONE MINING INC.
(Registrant)
Dated: May 29, 2013
/s/Rafael Pinedo
Rafael Pinedo
Chief Executive Officer, Chief Financial Officer,
President, Secretary, Treasurer, Director
(Principal Executive Officer, Principal Financial
Officer and Principal Accounting Officer)