NOTES TO THE FINANCIAL STATEMENTS (unaudited)
APRIL 30, 2014
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 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 April 30, 2014.
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.
F-5
7
GOLD AND GEMSTONE MINING INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS (unaudited)
APRIL 30, 2014
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 April 30, 2013.
Comprehensive Income
The Company has 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.
F-6
8
GOLD AND GEMSTONE MINING INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS (unaudited)
APRIL 30, 2014
NOTE 3 - ACCRUED EXPENSES
Accrued expenses consisted of the following at April 30, 2013 and January 31, 2013:
|
|
|
|
|
| |
|
|
|
2013
|
|
|
2012
|
|
Audit fees
|
$
|
0
|
|
$
|
7,000
|
|
Accounting fees
|
|
2,100
|
|
|
2,100
|
|
Legal
|
|
8,691
|
|
|
8,691
|
|
Transfer agent
|
|
864
|
|
|
864
|
|
Consulting
|
|
50,000
|
|
|
50,000
|
|
Promotion
|
|
2,621
|
|
|
2,621
|
|
|
$
|
64,276
|
|
$
|
71,276
|
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 April 30, 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 $811 was recorded during the period ended April 30, 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; 178.525% volatility; and 0.18% risk-free interest rate.
F-7
9
GOLD AND GEMSTONE MINING INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS (unaudited)
APRIL 30, 2014
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 period ended April 30, 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.
On February 22, 2013 the Company issued a promissory note payable for $ 42,500. The note bears interest at 8% is secured by stock of the Company and is due in full on November 26, 2013. Financing costs related to the note payable of $ 6,250 will be amortized over the life of the note.
Total interest expense on the notes and convertible notes payable was $2,513 during the year ended April 30, 2013.
In accordance with ASC subtopic 815-40, the beneficial conversion features of the convertible notes payable were revalued as of April 30, 2013 at $143,850 using the following inputs; $0.05 stock price on the grant date; $0.01 exercise price; 2-6 month life; 250.12% volatility; and 0.12% - 0.14% risk-free interest rate. The change in the value of the derivative liability of $129,413 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 of 598,750,000 common shares as of May 4, 2014
F-8
10
GOLD AND GEMSTONE MINING INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS (unaudited)
APRIL 30, 2014
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.
NOTE 8 - INCOME TAXES
As of April 30, 2013, the Company had net operating loss carry forwards of approximately $339,000 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 three months ended April 30, 2013 and 2012:
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| |
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2013
|
|
|
2012
|
|
Federal income tax benefit attributable to:
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|
|
|
|
|
Current operations
|
$
|
57,076
|
|
$
|
9,622
|
|
Less: valuation allowance
|
|
(57,076)
|
|
|
(9,622)
|
|
Net provision for Federal income taxes
|
$
|
0
|
|
$
|
0
|
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows as of April 30, 2013 and January 31, 2013:
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|
| |
|
|
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April 30,
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|
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January 31,
|
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|
|
2013
|
|
|
2013
|
|
Deferred tax asset attributable to:
|
|
|
|
|
|
|
Net operating loss carryover
|
$
|
115,274
|
|
$
|
58,198
|
|
Less: valuation allowance
|
|
(115,274)
|
|
|
(58,198)
|
|
Net deferred tax asset
|
$
|
0
|
|
$
|
0
|
F-9
11
GOLD AND GEMSTONE MINING INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS (unaudited)
APRIL 30, 2014
NOTE 8 - INCOME TAXES (CONTINUED)
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of approximately $339,000 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 April 30, 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.
F-10
12