Gem International Usa 10QSB 2001 Q3 Quarterly report (small business)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10QSB

[x]	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
	OR
[ ]	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from to

COMMISSION FILE NUMBER 000-30845

GEM INTERNATIONAL (USA), INC.
(Exact name of registrant as specified in its charter)

Nevada	87-0628796
(State of other jurisdiction of incorporation or organization)	(IRS Employer Identification Number)

501 - 2071 Kingsway Ave.
Port Coquitlam, BC
Canada V3C 6N2
(Address of principal executive offices)

(604) 941-0458
(Registrant's telephone number, including area code)

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 past 90 days.
Yes [ ] No [ x ]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as ofSeptember 30, 2001: 4,190,000

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Board of Directors
Gem International (USA), Inc.
Vancouver, BC Canada

ACCOUNTANT'S REVIEW REPORT

We have reviewed the accompanying balance sheet of Gem International (USA), Inc. (a development stage company) as of September 30, 2001, and the related statements of operations, stockholders' equity (deficit), and cash flows for the nine months ended September 30, 2001 and 2000 and for the period from December 21, 1998 (inception) to September 30, 2001. All information included in these financial statements is the representation of the management of Gem International (USA), Inc.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.

The financial statements for the year ended December 31, 2000 were audited by us and we expressed an unqualified opinion on them in our report dated April 12, 2001. We have not performed any auditing procedures since that date.

As discussed in Note 2, the Company has been in the development stage since its inception on December 21, 1998. The Company has limited sales and negative working capital. Realization of a major portion of the assets is dependent upon the Company's ability to meet its future financing requirements, and the success of future operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans regarding the resolution of this issue are also discussed in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
April 15, 2002

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GEM INTERNATIONAL (USA), INC. (A Development Stage Company) BALANCE SHEETS
					September 30, 2001 (Unaudited)		December 31, 2000
ASSETS
	CURRENT ASSETS
		Cash and cash equivalents		$	752	$	1,353
		Accounts receivable			-		360
		Inventory			6,677		6,677
		Note receivable, related party			38,109		41,525
		Accrued interest receivable			589		1,464
			Total Current Assets		46,127		51,379
	PROPERTY, PLANT AND EQUIPMENT
		Office equipment			18,354		17,954
		Accumulated depreciation			(7,287)		(4,985)
			Total Property, Plant and Equipment		11,067		12,969
		TOTAL ASSETS		$	57,194 ===========	$	64,348 ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
	CURRENT LIABILITIES
		Accounts payable		$	18,446	$	18,810
		Note payable, related party			39,329		39,329
			Total Current Liabilities		57,775		58,139
	COMMITMENTS AND CONTINGENCIES				-		-
	STOCKHOLDERS' EQUITY (DEFICIT)
		Common stock, $0.0001 par value; 5,000,000,000 shares       authorized, 4,190,000 shares issued and outstanding
					419		419
		Additional paid-in capital			113,704		112,054
		Deficit accumulated during development stage			(114,704)		(106,264)
			Total Stockholders' Equity (Deficit)		(581)		6,209
		TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)		$	57,194 ===========	$	64,348 ===========

See accompanying notes and accountant's review report.
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GEM INTERNATIONAL (USA), INC. (A Development Stage Company) STATEMENTS OF OPERATIONS
				Quarter Ended				Nine Months Ended				From Inception (December 21, 1998) to September 30, 2001 (Unaudited)
				September 30, 2001 (Unaudited)		September 30, 2000 (Unaudited)		September 30, 2001 (Unaudited)		September 30, 2000 (Unaudited)
REVENUES
	Revenue		$	-	$	17,200	$	-	$	36,100	$	36,100
	Related party revenue			26,627		-		26,627		-		26,627
	Total Revenue			26,627		17,200		26,627		36,100		62,727
COST OF REVENUES				21,302		14,414		21,302		28,837		44,424
GROSS PROFIT				5,325		2,786		5,325		7,263		18,303
GENERAL AND ADMINISTRATIVE EXPENSES
	Advertising			-		-		-		6,063		18,485
	Depreciation			768		837		2,302		2,512		7,287
	Bad debt			360		-		360		-		15,660
	Bank charges			52		55		156		183		473
	Excise and duty charges			-		-		-		-		5,778
	Freight			-		-		-		289		1,060
	Licenses and fees			-		-		370		100		470
	Management fees			-		1,000		-		13,000		22,450
	Office expense			527		9		1,135		5,125		7,417
	Professional expense			2,438		14,002		9,698		23,459		43,179
	Rent and storage			-		150		-		650		1,750
	Research and marketing			-		3,624		-		3,624		3,624
	Telephone and utilities			-		-		-		-		2,089
	Travel			-		286		-		1,292		2,378
	Web site expenses			-		-		-		-		10,884
		Total Expenses		4,145		19,963		14,021		56,297		142,984
INCOME (LOSS) FROM OPERATIONS				1,180		(17,177)		(8,696)		(49,034)		(124,681)
OTHER INCOME (EXPENSES)
	Interest income			590		743		1,893		1,820		4,564
	Other income			13		10,000		13		10,000		10,013
	Interest expense			(550)		(550)		(1,650)		(1,649)		(4,600)
	Total Other Income (Expenses)			53		10,193		256		10,171		9,977
INCOME (LOSS) BEFORE INCOME TAXES				1,233		(6,984)		(8,440)		(38,863)		(114,704)
INCOME TAXES				-		-		-		-		-
NET INCOME (LOSS)			$	1,233 =======	$	(6,984) =======	$	(8,440) =======	$	(38,863) =======	$	(114,704) =========
BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE			$	nil =======	$	nil =======	$	nil =======	$	(0.01) =======	$	(0.03) =========
WEIGHTED AVERAGE NUMBER OF BASIC AND DILUTED COMMON SHARES OUTSTANDING				4,190,000 =======		4,190,000 =======		4,190,000 =======		3,861,533 =======		3,603,436 =========

See accompanying notes and accountant's review report.
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GEM INTERNATIONAL (USA), INC. (A Development Stage Company) STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
	Common Stock				Additional Paid-in Capital		Accumulated Deficit During Development Stage		Total
	Number of Shares		Amount
Stock issued in April 1999 at an average price of $0.003 per share	3,190,000	$	319	$	8,991	$	-	$	9,310
Cash contributed for start-up costs	-		-		213		-		213
Imputed interest on loan from shareholder	-		-		751		-		751
Net loss for the year ending December 31, 1999	-		-		-		(49,087)		(49,087)
Balance at December 31, 1999	3,190,000		319		9,955		(49,087)		(38,813)
Stock issued for cash at $0.10 per share	1,000,000		100		99,900		-		100,000
Imputed interest on loan from shareholder	-		-		2,199		-		2,199
Net loss for the year ended December 31, 2000	-		-		-		(57,177)		(57,177)
Balance at December 31, 2000	4,190,000		419		112,054		(106,264)		6,209
Imputed interest on loan from shareholder	-		-		1,650		-		1,650
Net loss for the period ended September 30, 2001	-		-		-		(8,440)		(8,440)
Balance at September 30, 2001 (Unaudited)	4,190,000 =======	$	419 =======	$	113,704 =======	$	(114,704) ==========	$	(581) =======

See accompanying notes and accountant's review report.
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GEM INTERNATIONAL (USA), INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS
			Nine Months Ended September 30, 2001 (Unaudited)		Nine Months Ended September 30, 2000 (Unaudited)		From Inception (December 21, 1998) to September 30, 2001 (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss		$	(8,440)	$	(38,863)	$	(114,704)
	Adjustments to reconcile net loss to net cash used by operating activities:
		Depreciation expense		2,302		2,512		7,287
		Imputed interest		1,650		1,649		4,600
	Change in assets and liabilities:
		Accounts receivable		360		(15,660)		-
		Accrued interest income		875		(615)		(589)
		Inventory		-		(6,677)		(6,677)
		Bank overdrafts		-		1,489		-
		Accounts payable		(364)		(1,788)		18,446
		Net cash used by operating activities		(3,617)		(57,953)		(91,637)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchase computer and office equipment			(400)		(5,093)		(18,354)
	Investment in short-term note receivable			(3,766)		(58,393)		(77,490)
	Payments received from short term note receivable			7,182		20,908		39,381
		Net cash provided (used) by investing activities		3,016		(42,578)		(56,463)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from sales of common stock			-		100,000		109,310
	Proceeds from related party loan			-		-		39,542
		Net cash provided by financing activities		-		100,000		148,852
	Net increase in cash and cash equivalents			(601)		(531)		752
	Cash and cash equivalents beginning of period			1,353		841		-
	Cash and cash equivalents at end of period		$	752 ============	$	310 ============	$	752 ============
Supplemental cash flow disclosures:
	Income taxes paid		$	-	$	-	$	-
	Interest paid		$	-	$	-	$	-
Non-cash items:
	Capital contribution for imputed interest		$	1,650	$	1,649	$	4,600

See accompanying notes and accountant's review report.
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GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2001

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Gem International (USA), Inc. (hereinafter "the Company") was incorporated on December 21, 1998 under the laws of the State of Nevada for the purpose of wholesale distribution of jewelry and gemstones. The Company commenced activity in April 1999. The Company maintains offices in Coquitlam, British Columbia, Canada and Blaine, Washington. The Company's fiscal year-end is December 31.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Gem International (USA), Inc. is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

Development Stage Activities

The Company has been in the development stage since its formation in December 1998 and has not yet realized any significant third party revenues from its planned operations. It is primarily engaged in wholesale distribution of jewelry and gemstones.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As shown in the accompanying financial statements, the Company incurred a net loss of $8,440 for the period ended September 30, 2001, has an accumulated deficit of $114,704, and had minimal sales from inception. The future of the Company is dependent upon its ability to obtain financing and upon future successful and profitable operations. Management has plans to seek additional capital through a public offering of its common stock. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

Accounting Method

The Company's financial statements are prepared using the accrual method of accounting.

Advertising Costs

Advertising costs are charged to operations when incurred.

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GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2001

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Earnings (Loss) Per Share

Basic and diluted net earnings (loss) per common share was computed by dividing the net loss by the weighted average number of shares outstanding during the period. The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. Diluted loss per share is the same as basic loss per share, as there were no common stock equivalents outstanding.

Inventories

The Company had $6,677 in inventory as of September 30, 2001. Inventory is purchased periodically for special orders and display purposes only and is stated at the lower of cost (using specific identification) or market.

The Company holds approximately $120,000 worth of inventory, valued at cost, on consignment from a related party, Queensland Opal N.L. (an Australian corporation). See Note 7. This inventory remains the property of Queensland Opal N.L., which is responsible for maintaining insurance on the inventory, until the inventory is sold, returned, lost, stolen, damaged, or destroyed.

Revenue Recognition

The Company recognizes the net sale, gross proceeds less cost, at the point when title transfers from consignor to purchaser.

Revenues from special orders, not on consignment, are recognized when title transfers to purchaser.

Compensated Absences

The Company has no employees. At such time as the Company hires personnel, its employees will be entitled to paid vacation, paid sick days and personal days off depending on job classification, length of service, and other factors. The Company's policy will be to recognize the cost of compensated absences when actually paid to employees.

Provision for Doubtful Accounts

Provision for losses on trade accounts receivable is made in amounts required to maintain an adequate allowance to cover anticipated bad debts. Accounts receivable are charged against the allowance when it is determined by the Company that payment will not be received. During the year ended December 31, 2000, the Company expensed $15,300 as bad debts.

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GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2001

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Provision for Doubtful Accounts (Continued)

During the period ended September 30, 2001, the Company expensed $360 as bad debts. Receivables are shown net of allowance for bad debts of $0 as of September 30, 2001.

Provision for Taxes

Income taxes are provided based upon the liability method of accounting pursuant to SFAS No. 109 "Accounting for Income Taxes." Under this approach, deferred income taxes are recorded to reflect the tax consequences on future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the "more likely than not" standard imposed by SFAS No. 109 to allow recognition of such an asset.

At September 30, 2001, the Company had net deferred tax assets of approximately $16,200, principally arising from net operating loss carryforwards for income tax purposes. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to the net deferred tax asset has been established at September 30, 2001.

At September 30, 2001, the Company has net operating loss carryforwards of approximately $108,000, which expire in the years 2019 through 2020.

Cash and Cash Equivalents

For purposes of its statement of cash flows, the Company considers money market accounts and all short-term debt securities purchased with a maturity of three months or less to be cash equivalents.

Use of Estimates

The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.

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GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2001

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Reclassifications

Certain amounts from prior periods have been reclassified to conform with the current period presentation. This reclassification has resulted in no changes to the Company's accumulated deficit or net losses presented.

Web Site Development

An outside consultant is developing the Company's web site to sell the Company's products in the future. The planning and development costs incurred in this project, in the amount of $10,884 for the period from inception (December 21, 1998) through December 31, 1999, were expensed as incurred in accordance with SOP 98-1.

Effective January 1, 2000, the Company adopted SOP 98-1 as amplified by EITF 99-2, "Accounting for Web Site Development Costs." In accordance with this early adoption, the Company will henceforth capitalize web site development costs. Even though the development is not complete, during the nine months ended September 30, 2001, the Company had not incurred any web site development costs.

Fair Value of Financial Instruments

The carrying amounts for cash, accounts receivable, notes receivable, accounts payable, and notes payable approximate their fair value

Derivative Instruments

The Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB No. 133", and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities", which is effective for the Company as of January 1, 2001. This standard establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value.

If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change.

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GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2001

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Derivative Instruments (Continued)

Historically, the Company has not entered into derivatives contracts to hedge existing risks or for speculative purposes.

At September 30, 2001, the Company has not engaged in any transactions that would be considered derivative instruments or hedging activities.

Interim Financial Statements

The interim financial statements as of and for the nine months ended September 30, 2001 included herein have been prepared for the Company without audit. They reflect all adjustments, which are, in the opinion of management, necessary to present fairly the results of operations for these periods. All such adjustments are normal recurring adjustments. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full fiscal year.

Accounting Pronouncements

In September 2000, the FASB issued SFAS No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities." This statement provides accounting and reporting standards for transfers and servicing of financial assets and extinguishment of liabilities and also provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. SFAS No. 140 is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000, and is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The Company believes that the adoption of this standard will not have a material effect on the Company's results of operations or financial position.

In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 provides for the elimination of the pooling-of-interests method of accounting for business combinations with an acquisition date of July 1, 2001 or later. SFAS No. 142 prohibits the amortization of goodwill and other intangible assets with indefinite lives and requires periodic reassessment of the underlying value of such assets for impairment. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001. An early adoption provision exists for companies with fiscal years beginning after March 15, 2001. The Company plans to adopt SFAS No. 142 on January 1, 2002. The Company believes that the adoption of these standards will not have a material effect on the Company's results of operations or financial position.

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GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2001

NOTE 3 - CONCENTRATIONS

Bank Accounts

The Company maintains cash balances at a bank in British Columbia, Canada. The Canadian dollar account is insured up to a maximum of $60,000 per account. However, the United States dollar account is not insured. As of September 30, 2001, a total of $300 was at risk.

Customers

All of the Company's sales during the nine months ending September 30, 2001 were to one entity, which is controlled by the Company's secretary and main shareholder.

NOTE 4 - PROPERTY PLANT AND EQUIPMENT

The cost of property, plant, and equipment is depreciated over the estimated useful lives of the related assets. Depreciation is computed using the declining balance method as followsand amounted to $2,302 for the nine months ended September 30, 2001:

Computer Equipment                                30% declining balance

Office Furniture and Equipment                 20% declining balance

For income tax purposes, the statutory depreciation methods are used.

NOTE 5 - COMMON STOCK

The Company is authorized to issue 5,000,000,000 shares of $0.0001 par value common stock. All shareholders are entitled to one non-cumulative vote per share owned.

In April 1999, 3,190,000 shares of common stock were issued for cash at an average value of $0.003 per share.

During the year ending December 31, 2000, 1,000,000 shares of common stock were issued for $0.10 per share.

NOTE 6 - ADDITIONAL PAID-IN CAPITAL

During the year ended December 31, 1998, shareholders contributed $213 for start-up costs. At September 30, 2001, the Company owed $39,329 to the president of the Company in the form of an uncollateralized note, which had no stated interest rate. However, interest is imputed using the applicable federal rate, which was 5.59% at the date the note was initiated (October 1, 1999). The imputation of interest resulted in additional paid-in capital of $1,650 for the nine months ended September 30, 2001.

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GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2001

NOTE 7 - RELATED PARTIES

The Company holds inventory on consignment from a stockholder, Queensland Opal N.L., an Australian corporation, (hereinafter "Queensland"). Queensland is owned and controlled by the Company's president. See Note 2.

During the year ended December 31, 1999, the Company loaned funds in the amount of $5,000 to a company, which is controlled by the Company's secretary and main shareholder. The purpose of this loan was to generate a higher interest return than at a banking institution. Interest is being charged at prime plus 2% (10.25%) on this uncollateralized obligation. The Company received full payment on this note, plus $266 in accrued interest in April 2000.

During the year ended December 31, 2000, the Company loaned additional funds in the amount of $68,724 to a company, which is controlled by the Company's secretary and main shareholder. The purpose of this loan was to generate a higher interest return than at a banking institution. Additionally, during the quarter ended September 30, 2001, $3,766 was advanced to the related party for the balance due on a sale. Interest is being charged at 7% per annum on this uncollateralized obligation. On September 30, 2001, the balance owing is $38,109, plus accrued interest. For additional related party transactions, see Note 3 and Note 6.

NOTE 8 - OTHER INCOME

During the year ended December 31, 2000, the Company was awarded an advertising reimbursement. Due to past advertising disbursements being expensed in two different years, the reimbursement of $10,000 was recognized as income in 2000.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

Foreign Operations

The accompanying balance sheet includes $57,194 relating to the Company's assets in Canada. Although this country is considered politically and economically stable, it is always possible that unanticipated events in foreign countries could disrupt the Company's operations.

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

The statements included in this registration statement regarding future financial performance and results and die other statements that are not historical facts are forward-looking statements. The words "expect. It "project," "estimate, " "predict," "anticipate," "believes," "intends" and similar expressions are intended to identify forward- looking statements. Such statements are based upon current expectations of Gem and involve a number of risks and uncertainties and should not be considered as guarantees of future performance. Readers are cautioned not to place undue reliance on these forward looking statements.

Gem has inadequate cash to maintain operations during the next twelve months and must raise additional cash in order to Complete its website. In order to meet its cash requirements, Gem will have to raise additional capital through the sale of securities or loans, As of the date hereof, Gem has not made sales of additional securities and there is no assurance that it will be able to raise additional capital through, the sale of securities in the future. 'Further, Gem has not initiated any negotiations for loans to Gem and there is no assurance that it will be able to raise additional capital in the future through loans. In the event that Gem is unable to raise additional capital, it may have to suspend or cease operations.

Gem does not intend to conduct any research or development of its services during the next twelve months other than the development of its web-site as described herein. See "Business." Gem does not intend to purchase a plant or significant equipment.

Gem will hire employees on an as needed basis, however, Gem does not expect any significant changes in the number of employees.

Gem expects to earn additional revenues in the fourth quarter of 2000. There is no assurance, however, that Gem will earn said revenues as planned.

Results of Operations

Gem has had limited operations to date and its activities have consisted primarily of raising equity capital. Accordingly, Gem is considered to be a development stage enterprise as defined in SFAS 7. Operations to date have been funded by the sale of common stock along with related party debt. Future operations during The development stage will be funded by a combination of common stock sales and long term debt.

Gem will be primarily engaged in operating as a wholesale distributor of jewels and gemstones. The Company is planning to utilize the Internet for electronic commerce and is currently developing an Internet web-site for that purpose.

As of the date hereof, the web-site has been designed and the front page completed. The portion of the web-site which consists of images and descriptions is approximately 30% completed, The balance of the web-site which consists of payment technology, inventory purchases, shipping and inventory control has yet to be completed.

During the quarter ended September 30, 2001, the Company had revenue of $26,627 bringing total revenue from sales to $26,627 for the nine months ended September 30, 2001, while the act loss amosunted to $(114,704) from inception to September 30, 2001.

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Gem anticipates minimal revenues from operations continuing until its web-site and infrastructure is fully developed. When Gem is fully operational, it expects the majority of revenues to come from wholesale customers.

Given the current accumulated net losses and the anticipated future losses, them can be no assurance that Gem will achieve profitability or that if profitability is achieved, it will be sustained. Gem believes that its success will depend in large part on its ability to expand its operations into electronic commerce, encourage customer loyalty, and capitalize on the market for jewelry and precious stones, Accordingly, Gem intends to invest heavily in marketing and promotion, its direct sales and systems and infrastructure development. There can be no assurance that such expenditures will result in increased revenues or customer growth.

Liquidity and Capital Resources

Gem had minimal working capital at September 30, 2001. Gem's ability to conduct operations depends upon Management's success in obtaining additional sources of financing primarily through additional offerings, bank loans, joint ventures, or other arrangements.

Effects of Inflation

Inflation has not had a significant impact on Gem's operations to date.

Web-site

Revenues generated from the web-site for the nine months ended September 30, 2001 and September 30, 2000 totaled $0. This was because the web-site had yet to generate revenues.

There was no operating expenses relating to the web-site for the nine months ending September 30, 2001 and 2000.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company knows of no litigation present, threatened or contemplated or unsatisfied judgment against the Company, its officers or directors or any proceedings in which the Company, its officers or directors are a party.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

The rights of the holders of the Company's securities have not been modified nor have the rights evidenced by the securities been limited or qualified by the issuance or modification of any other class of securities.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There are no senior securities issued by the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters presented to the shareholders for vote during the three months ended September 30, 2001.

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

No reports on Form 8-K were filed for the quarter ended September 30, 2001.

SIGNATURES

Pursuant to the requirements of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated this 7th day of May, 2002.

GEM INTERNATIONAL (USA), INC.
BY:	/s/ Michael A. Cox
	Michael A. Cox President, Chief Executive Officer, and a member of the Board of Directors
BY:	/s/ David Rambaran
	David Rambaran Secretary/Treasurer, Chief Financial Officer, and a member of the Board of Directors

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