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GOLD & GEMSTONE MINING INC. - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations

June 3, 2014

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:

Change Between Year Ended Year Ended Year Ended January 31, 2014 January 31, January 31, and Year Ended 2014 2013 January 31, 2013 $ $ $ Revenue Nil Nil Nil Incorporation costs Nil Nil Nil Professional fees 38,046 11,560 26,486 Consulting fees 57,000 Nil 57,000 Transfer agent expense 7,639 12,319 (4,680) General and administrative 11,485 4,422 7,063 Other (income) expenses 2,851 Nil 2,851 Net loss for the period (117,021) (28,301) 88,720 Operating Expenses

The increase in our operating expenses for our year ended January 31, 2014 was due to an increase in professional fees, consulting fees and general and administrative expenses.

Liquidity and Financial Condition

Working Capital As at January 31, 2013 2012 Current assets $ Nil $ Nil Current liabilities 109,261 17,309 Working capital $ (109,261)$ (17,309) Cash Flows Year Ended January 31, 2013 2012 Cash flows from (used in) operating activities $ (50,052)$ (18,478) Cash flows provided by (used in) investing activities Nil $ Nil Cash flows provided by (used in) financing activities 50,052 $ 10,436 Net increase (decrease) in cash during period $ Nil $ (8,042) 11


Operating Activities

Net cash used in operating activities was $50,052 for our year ended January 31, 2013 compared with cash used in operating activities of $18,478 in the same period in 2012.

Investing Activities

Net cash provided by investing activities was $Nil for our year ended January 31, 2013 compared to net cash used in investing activities of $Nil in the same period in 2012.

Financing Activities

Net cash from financing activities was $50,052 for our year ended January 31, 2013 compared to $10,436 in the same period in 2012.

Contractual Obligations

As a "smaller reporting company", we are not required to provide tabular disclosure obligations.

Going Concern

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Our company incurred a net loss of $117,021 for the year ended January 31, 2013 [2012 - $28,301] and at January 31, 2013 had a deficit accumulated of $171,170 [2012 - $54,149]. We have not generated revenue and we have an accumulated deficit and negative working capital of $109,261 as at January 31, 2013. Our company requires additional funds to maintain its existing operations and to acquire new business assets. These conditions raise substantial doubt about our company's ability to continue as a going concern. Management's plans in this regard are to raise equity and debt financing as required, but there is no certainty that such financing will be available or that it will be available at acceptable terms. The outcome of these matters cannot be predicted at this time.

These financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through a loan from our directors to meet our obligations over the next twelve months. We do not have any arrangements in place for any future debt or equity financing.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Critical Accounting Policies

Exploration Stage Company

Our company is an Exploration Stage Company, as defined by Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 915, Development Stage Entities.

Basis of Presentation

The financial statements of our company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.

Accounting Basis

Our company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America ("GAAP" accounting). Our company has adopted a January 31 fiscal year end.



Cash and Cash Equivalents

Our company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents. Our company had $0 and $0 of cash as of January 31, 2013 and 2012, respectively.

Fair Value of Financial Instruments

Our company's financial instruments consist of cash and cash equivalents, prepaid expenses, bank overdrafts, accrued expenses, accrued interest and shareholder loans. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

Income Taxes

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

Our company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.

Stock-Based Compensation

Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, our company has not adopted a stock option plan and has not granted any stock options.

Basic Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing our company's net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing our company's net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of January 31, 2013.

Comprehensive Income

Our company has which established standards for reporting and display of comprehensive income, its components and accumulated balances. When applicable, our company would disclose this information on its Statement of Stockholders' Equity. Comprehensive income comprises equity except those resulting from investments by owners and distributions to owners. Our company has not had any significant transactions that are required to be reported in other comprehensive income.

Derivative financial instruments

FASB ASC subtopic 815-40, Derivatives and Hedging, Contracts in Entity's own Equity ("ASC 815-40") became effective for our company on October 1, 2009. Our company has derivative liabilities resulting from the issuance of certain convertible debt, which were measured at fair value on a recurring basis using an option pricing model, consistent with level 3 inputs.



Recent Accounting Pronouncements

Our company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on our company's results of operations, financial position or cash flow.

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Source: Edgar Glimpses

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