[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2013
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from [ ] to [ ]
Commission file number 000-54700
GOLD AND GEMSTONE MINING
Registrants telephone number, including area code: (801) 882-1179
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
Common shares par value of $0.001 per
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes [ ] No[ x ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act Yes [ ] No[ x ]
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the last 90 days. Yes [ x ] No[ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-K (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ x ] No[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes[ ] No[ x ]
The aggregate market value of Common Stock held by non-affiliates of the Registrant on July 31, 2012 was $592,000 based on a $0.08 average bid and asked price of such common equity, as of the last business day of the registrants most recently completed second fiscal quarter.
Indicate the number of shares outstanding of each of the registrants classes of common stock as of the latest practicable date.
150,750,000 common shares as of June 4, 2013
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
Item 1. Business
This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as may, should, expects, plans, anticipates, believes, estimates, predicts, potential or continue or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled Risk Factors that may cause our or our industrys actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States Dollars (US$) 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.
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 companys 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.
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
Our company was not successful as a development-stage company formed to develop, manufacture, and distribute our product and services of remote monitoring of amusement and vending devices to the gaming and vending industry. 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 had limited operations and are no longer in any of these businesses.
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:
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 companys 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 companys 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.
Upon the execution of the JV Agreement, we shifted our business focus to that of diamond exploration in Sierra Leone. The mining concessions which are the subject of our joint venture with RMSL are currently in the exploration stage and no reserves have been proven. Through the joint venture arrangement, we will undertake exploration activity on the mining concessions, and will also make efforts to increase our own land holdings and assets in the gold and diamond exploration industry throughout Africa.
Pursuant to the JV Agreement with RMSL, we are required to finance each of the three claims subject to our joint venture with a minimum of $1,500,000 per claim, for an aggregate total of $4,500,000. If we fail to invest the required amount for any of the claims within 12 months from the date upon which the mining concessions are transferred to the JV Company by written instrument registered with the applicable government authorities, the claims will revert back to the sole ownership of RMSL. We do not currently have enough funds to meet our investment obligations for any of the claims which are due by October 22, 2013.
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.
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.
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:
Research and Development
During the year ended January 31, 2013 we did not spend any funds on research and development.
We are an exploration stage company and currently have no employees, other than our one officer and director who provides her services on a consulting basis.
We own all of the right to the website, and the content therein, of www.ggsmining.com.
Mining operations in Sierra Leone are subject to a number of governmental regulations including the Mines and Minerals Act of 2009 and diamond mining specifically is regulated by the Diamond Trading Act. We are committed to complying with and are, to our knowledge, in compliance with, all governmental regulations applicable to our company and our mining concessions. Permits from a variety of regulatory authorities are required for many aspects of mine operation and reclamation. We cannot predict the extent to which these requirements will affect our company or our properties if we identify the existence of minerals in commercially exploitable quantities. In addition, future legislation and regulation could cause additional expense, capital expenditure, restrictions and delays in the exploration of our mining concessions.
The JV Company being formed with RMSL will be registered with a Small Scale Mining License from the Ministry of Mine and Mineral Resources in Sierra Leone. The Ministry overseas the conduct of all mining companies in the country and ensures compliance with the Mines and Minerals Act of 2009. The first steps for the JV Company to meet Government Regulations as a Licensed Small Scale Mining Company are set out below:
On May 22, 2012, the JV Company was incorporated under the name Gold and Gemstone S. L. Limited, a Sierra Leone company, and on September 18, 2012, the JV Company became registered to carry on small-scale mining activities pursuant to the Mines and Minerals Act (Sierra Leone) at a cost of $1,000; this registration is valid until September 17, 2013 when it will have to be renewed. The registration fee was advanced to our company without terms for repayment by Tom Tucker, our former director and vice president of African mining operations. We intend to satisfy the balance of the regulatory requirements on an as needed basis and subject to our available capital resources. Our company will require additional equity or debt investment to satisfy all additional licensing and regulatory obligations and, to date, we have not secured or identified any sources of such financing and there is no guarantee that we will be successful in that regard. If we are unable to secure the requite financing to fulfill our regulatory obligations, we will have no alternative but to reduce the number of licenses in proportion to the funds available to us, or to delay or suspend our exploration activities until we raise sufficient funds. In relation to ongoing business operations and continued compliance with the regulations as set out in the Mines and Minerals Act of 2009 we anticipate hiring a specialist advisor who has significant experience in complying with Government Regulation in Sierra Leone and specifically with the Ministry of Mines and Minerals.
The cost for completing the initial registrations and compliance with the regulations is approximately $115,450 which is broken down as follows:
Outside of the above mentioned regulations associated with the Mines and Minerals Act 2009 we do not foresee any specific government regulation that will have an impact on the day to day running of our operations in Sierra Leone. Other than of course operating within the relevant laws currently in force in the Republic of Sierra Leone and fulfilling all obligations to the community.
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.
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. Risk Factors
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 1B. Unresolved Staff Comments
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 2. Properties
Our principal executive offices are located at 2144 Whitekirk Way, Draper, Utah. This space is a residential office provided to us at no charge by our sole officer and director and is adequate for our present needs. We do not anticipate that we will require any additional premises in the foreseeable future.
We have entered into a joint venture with RMSL to explore three distinct diamond and gold mining concessions in Sierra Leone. A description of these concessions follows.
Location and Access
The mining concessions are split across three separate Chiefdoms; the Sandia Concession (Nimiyama Chiefdom), the Nyamundu concession (Nimikoro Chiefdom) and the Kambaya Concession (Sandoh Chiefdom). These concessions are all in the Kono District which is located in the north eastern region of Sierra Leone. The below map of Sierra Leone outlines (in red) the location of the Kono District:
The three concessions are located on and around the banks of the Sewa River, which is the main diamond bearing river in Sierra Leone. The Sewa River is the most important commercial stream in Sierra Leone and is formed by the junction of the Bagbe and Bafi rivers, which rise in the northeastern part of the country near the Guinea border; it flows for 150 miles (240 km) in a south-southwesterly direction.
Specifically, these claims and sizes are as follows:
Nimiyama Chiefdom (The Sandia Concession) 50 Acres situated on the banks of the Sewa River
The Nimiyama Chiefdom has granted the Sandia concession near Madina Village (grid reference 8.522626, -11.257639) which is 17km South on rough roads to the nearest town which is Njaiama-Sewafe (Grid reference 8.543337, -11.243305) . From Njaiama-Sewafe it is about a 35km drive North East by main road to Yengema Airport (grid reference 8.621926, -11.044178) and a further 12km East by main road to the Koidu City (grid reference 8.650948, -10.973282) . The journey by car from Njaiama-Sewafe to Koidu City is approximately 40minutes. There is no railway in the location of the concession. The road from Njaiama-Sewafe to the Sandia concession is serviceable by motor vehicle but is very rough and there may be some remedial works required for heavy plant machinery access. There is no electricity in the local town or at the concession area so the site would rely upon generators to begin operations. There is good mobile phone network coverage in the area.
Nimikoro Chiefdom (The Nyamundu Concession) 25 Acres of diamond and gold exploration land in the Nimikoro Chiefdom. The total claim area is 87 acres but RMSL has been granted an initial 25 acre concession with the option to extend later.
The Nimikoro Chiefdom has granted the Nyamandu concession (grid reference 8.676318, -11.154692) located close to the town Nyamandu, it is a further 3km North to the main road junction at Bumpeh (grid reference 8.69473, -11.166916) . From Bumpeh it is approximately 18km South East by main road to Yengema Airport (grid reference 8.621926, -11.044178) and it is a further 12km East to the nearest major city which is Koidu City (grid reference 8.650948, -10.973282) . To travel to the airport or Koidu you must catch a ferry to cross the Sewa River. There is no railway in the location of the concession. The road from Nyamandu is serviceable by motor vehicle but is very rough and there may be some remedial works required for heavy plant machinery access. There is no electricity in the local town or at the concession area so the site would rely upon generators to begin operations. There is good mobile phone network coverage in the area.
Sandoh Chiefdom (The Kambaya Concession) 30 Acres of diamond and gold exploration land in the Sandoh Chiefdom with an additional 50 acres available upon commencing of mining operations.
The Sandoh Chiefdom has granted a concession near Kambaya (grid reference 8.69299, -11.149449) . The nearest airport is Yengema Airport (grid reference 8.621926, -11.044178) which is 16km East of Kambaya by main road. The nearest major city is Koidu City (grid reference 8.650948, -10.973282) which is a further 12km East from the airport by main road. The journey from Kambaya to Koidu City is approximately one hour by car. To travel to the airport or Koidu you must catch a ferry to cross the Sewa River. . There is no railway in the location of the concession. The short road from Kambaya to the specific concession site is serviceable by motor vehicle but is very rough and there may be some remedial works required for heavy plant machinery access. There is no electricity in the local town or at the concession area so the site would rely upon generators to begin operations. There is good mobile phone network coverage in the area.
Access to the country interior from Freetown, the capital of Sierra Leone, is by a combination of paved and dirt roads and it is approximately 200 miles between Freetown and Yengema Airport. New hydroelectric schemes are being developed to help address the electricity needs of the countrys power grids. Communications have improved significantly in the last few years, with the mobile phone network being regularly extended. Coverage now reaches most population centers and main roads.
Key to locations on the following maps:
Map of the Kono District showing the location of the three concessions on the Western side close to the Sewa River:
Zoomed satellite image showing the three concessions and their proximity to Yengema Airport and Koidu City:
We have entered into the JV Agreement with Ridgeback Mining Sierra Leone (RMSL) which holds certain exclusive mining rights to the above described mining concessions. The concession lands and all associated mining rights are owned and administered by the local Paramount Chiefs of each of the above mentioned Chiefdoms. Prior to entering into the JV Agreement RMSL obtained the exclusive right by agreement with each relevant Chiefdom to conduct mining activities and to exploit the concessions through October, 2012. The mining rights are further described below. The JV Agreement provides that the joint venture incorporate a JV Company to hold title to, and to operate, the mining concession. The JV Company was incorporated on March 22, 2012 under the name Gold and Gemstone Mining S. L. Limited. The JV Agreement further provides that the share capital in the JV Company and all profits generated by the JV Company are to be distributed equally between our company and RMSL. Pursuant to the terms of the JV Agreement, RMSL will transfer the mining concessions into JV Company upon incorporation and our company is responsible to 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. If we do not invest the required $1,500,000 per concession within the first twelve months from the date upon which the claims are transferred to the JV Company, each concession for which the requirement was not fulfilled will be returned to the ownership of RMSL.
The rights of the joint venture to the concessions are secured by letter agreements dated October 2, 2010 between RMSL and each of the Nimiyama, Nimikoro and Sandoh Chiefdoms. The letter agreements are set to expire in October, 2012. Subsequently, on May 18, 2012, RMSL, entered into an extension agreement with the Nimiyama Chiefdom to extend the Sandia Concession until May 18, 2013. On May 25, 2012, RMSL, acting on behalf of the joint venture, entered into an extension agreement with the Nimikoro Chiefdom to extend the Nyamundu Concession until May 25, 2013. Pursuant to the extension agreements, if commercial operations on the applicable concessions are commenced prior to the expiration of the extension period, the concessions will renewed for an additional five years. Both the Sandia and Nyamundu concessions are subject to a net profit royalty payable to the applicable Chiefdom. The royalty amounts are subject to further negotiations with each Chiefdom. 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.
The third concession, located in Kambaya and administered by The Sandoh Chiefdom has not been formally renewed as at the date of this annual report. To date, we have received verbal assurances from the Sandoh Chiefdom that the Kambaya concession will be renewed on terms similar to the Nyamundu and Sandia concessions, however we are neither able to guarantee the renewal of the concession nor the terms of renewal. . Upon the anticipated extension of the Kambaya concession, it will be immediately assigned in to the JV Company and at that date we will have 12 months to provide $1,500,000 to the JV Company. In the event that we are not able to do so, this concession, will be returned to RMSL.
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
The three concessions which make up the mining concessions subject to the JV Agreement with RMSL have not had any concerted historical operations. The general area in which the mining concessions are located has seen a significant amount of mining activity and a small summary is provided below.
Alluvial diamond mining by Sierra Leone Selection Trust commenced in the Kono area in 1932. Artisanal mining (legal and illegal) also accounted for a significant output in these areas. By 1997, diamond recovery was seriously disrupted by rebel activity; with most of the diamondiferous areas being overrun. Since January 2002 the federal government has re-established control of the diamond producing areas and rebel activity has ceased. Alluvial mining for diamonds recommenced in a number of areas, initially led by licensed and unlicensed artisanal workers and later by an increasing number of local and international mining companies.
In 2004 Koidu Holdings Ltd commenced hard rock mining on the kimberlite pipes at Koidu, in the same district as the mining concessions.
Much of Sierra Leone, including the Kono District where we intend to operate, is covered with dense secondary forest or bush, which has been cleared in many places for local subsistence agriculture. Over large areas the land surface comprises residual laterite, or detrital material. Mining in the area is open pit-style along the current banks of existing rivers, as well as coving sites of ancient riverbeds.
Broadly speaking, the eastern half of Sierra Leone, where the mining concessions lie, consists of a number of elevated plateaus and mountain ranges generally lying between 300m and 600m above sea level and rising to a maximum height of 1,950m. Most of the rivers descend from the plateau to the coastal plain in a series of rapids and waterfalls.
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 February 2013. The timeframe and cost estimates described represent our managements beliefs based on its experiences and understanding of the mining industry in Sierra Leone and the Kono District 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 Sierra Leone. We anticipate that all significant exploration activities will be suspended during Sierra Leones rainy season, being the months of April through October.
There has not been any geology conducted specifically on the mining concessions. What follows is a general description of the geology of Sierra Leone and specifically the region in which the mining concessions are located.
Most of the country is underlain by rocks of Precambrian age (Achaean and Proterozoic) with a coastal strip about 50km in width comprising marine and estuarine sediments of Tertiary and Quaternary to Recent age. The Precambrian (mainly Achaean) underlies about 75 percent of the country and typically comprises granite-greenstone terrain. It represents parts of an ancient continental nucleus located on the edge of the West African Craton. The Achaean basement can be subdivided into; infra-crustal rocks (gneisses and granitoids with metamorphic inclusions); supra-crustal rocks (containing greenstone belts); basic and ultra basic igneous intrusions.
The infra-crustal gneisses and granitoids were formed and reworked during two major orogenic cycles, an older Leonean episode (~ 2,950-3,200 Ma) and a younger Liberian episode (~ 2700 Ma). The granitoids represent the host unit for the later diamond-bearing kimberlite intrusions, believed to be of Cretaceous age. The supra-crustal greenstone belts, comprising mainly gneisses and schists, are the principal hosts of the gold mineralization of the country.
The basic and ultra basic intrusive are seen primarily on the coast of the Freetown peninsula. Dolerite intrusions are common, occurring as dykes trending mainly east-west or northwest-southeast within the basement complex, and as extensive sills. Tertiary, and more recent, weathering has led to lateralization across a large part of Sierra Leone, affecting mainly the greenstone belts and the extensive dolerite intrusions, diamondiferous kimberlitic dykes and pipes of Mesozoic age, trending 070°-074°, occur in the east of the country, at Koidu and Tongo, and new discoveries of narrow northwest-trending dykes are reported from the north and west of the country. Erosion of diamondiferous kimberlites during various phases of uplift resulted in the transportation and deposition of diamonds and other heavy minerals in alluvial deposits along rivers and river terraces over an area of almost 20,000km2 in the east and southeast of the country, representing more than one quarter of the land area of Sierra Leone.
Kimberlites, the primary source of diamonds, were first discovered in the Kono District in 1948, specifically in the Koidu area, where the mining concessions reside, and subsequently at Tongo. These were extensively tested and bulk sampled at the time, with limited mining being carried out.
Index of Geologic Terms
Item 3. Legal Proceedings
We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.
Item 4. Mine Safety Disclosures
Item 5. Market for Registrants 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 companys 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.
On June 4, 2013, the shareholders’ list showed 38 registered shareholders and 150,750,000 common shares outstanding.
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 future dividend policy will be determined from time to time by our board of directors.
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, 2013 and 2012.
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, 2013 and 2012.
Item 6. Selected Financial Data
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 7. Managements 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:
The increase in our operating expenses for our year ended January 31, 2013 was due to an increase in professional fees, consulting fees and general and administrative expenses.
Liquidity and Financial Condition
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.
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.
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.
As a smaller reporting company, we are not required to provide tabular disclosure obligations.
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 companys ability to continue as a going concern. Managements 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.
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 companys 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 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.
Our company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.
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 companys 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 companys 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.
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 Entitys 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 companys results of operations, financial position or cash flow.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
GOLD AND GEMSTONE MINING INC.
(AN EXPLORATION STAGE COMPANY)
JANUARY 31, 2013
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
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 Companys 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 working 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 Companys ability to continue as a going concern. Managements 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
See accompanying notes to financial statements.
See accompanying notes to financial statements.
See accompanying notes to financial statements.
See accompanying notes to financial statements.
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of Business
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
Basis of Presentation
Cash and Cash Equivalents
Fair Value of Financial Instruments
Use of Estimates
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Basic Income (Loss) Per Share
Derivative financial instruments
Recent Accounting Pronouncements
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 Companys 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.
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 Companys 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 Companys 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 Companys common stock at any time at the average trading price of the Companys 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.
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 Companys common stock at any time at the average trading price of the Companys 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.
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. 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. 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. 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.
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:
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 persons principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.
Ms. Charmaine King Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer, Director
Ms. King worked in fashion/retail/cosmetics until 2001 managing several stores, vendors and clothing lines. She then went into marketing of cosmeceuticals and pharmaceuticals for Perry Hill International (South Africa) working directly with the late John Hill running the head offices in the United States. Working independently for two years on clothing and accessory lines, Ms. King started her own marketing company importing fashion accessory products to the United States from South Africa, Tibet, Afghanistan and the Himalayas, all with a philanthropic focus.
In January 2007, Ms. King travelled back to Africa and began building a network of buyers, suppliers, mining companies and other contacts within precious metals, diamonds and gemstones with a view to trading these products and also for use in fashion. Contacted in January 2008 by the Corem Rose head designer for diamonds to embellish a womans evening purse, Ms. King has been working on a fine jewelry line to launch in 2014 for spring.
Since January 2008 Ms. King has also worked as an independent consultant to mines, concession holders, and wholesalers; introducing them to investors and mining companies for collaboration and funding. Combining her education and experience in fashion and the arts with her links to mining companies, Ms. King has kept a focus on fine jewelry and high end fashion jewelry.
Ms. King is connected to a repertoire of buyers and suppliers of diamonds, gemstones and precious metals and has great contacts within the African mining sector through which she may be able to seek partnerships and funding for our mining projects and concessions. Ms. King also has experience in diamond, gemstone and precious metal trading and is looking forward to bring her skill to our board and assisting with the exploitation of the concessions.
We appointed Ms. King to our board of directors due to her extensive business experience and knowledge of the diamond industry.
There are no individuals other than our executive officers who make a significant contribution to our business.
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:
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, 2013. 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, 2013 we did not have any standing committee of the board of directors.
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 companys 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.
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. 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.
During our fiscal year ended January 31, 2013, 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. 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.
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. 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.
We currently act with one director, consisting of Charmaine King. 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. 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:
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.
Item 15. Exhibits, Financial Statement Schedules
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.
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.