GEMSTAR RESOURCES LTD.
Financial Statements
For the fiscal years ended January 31, 2003 and 2002
(Prepared in Canadian dollars)
INDEX
Page
----
Auditors' Report 1
Financial Statements
Balance Sheet 2
Statement of Operations and Deficit 3
Statement of Cash Flows 4
Notes to Financial Statements 5
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1
AUDITORS' REPORT
To the Shareholders of
Gemstar Resources Ltd.
We have audited the balance sheets of Gemstar Resources Ltd. as of January 31,
2003 and 2002 and the statements of operations and deficit and statement of cash
flows for each of the years in the three-year period ended January 31, 2003.
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 Canadian and United States generally
accepted auditing standards. Those standards require that we plan and perform an
audit to obtain reasonable assurance whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes 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, these financial statements present fairly, in all material
respects, the financial position of the Company as of January 31, 2003 and 2002
and the results of its operations and cash flows for each of the years in the
three-year period ended January 31, 2003 in accordance with Canadian generally
accepted accounting principles. As required by the British Columbia Company Act,
we report that, in our opinion, these principles have been applied, on a basis
consistent with that of the preceding year.
Generally accepted accounting principles in Canada vary in certain significant
respects from generally accepted accounting principles in the United States.
Application of generally accepted accounting principles in the United States
would have affected results of operations, loss per share and cash flows for the
years ended January 31, 2003, 2002 and 2001 and total assets, share capital and
deficit at January 31, 2003 and 2002, to the extent summarized in Note 9 to the
financial statements.
/s/ S.G.and Associates
Chartered Accountants
Richmond, BC, Canada
May 10, 2003
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- --------------------------------------------------------------------------------
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA-U.S. REPORTING DIFFERENCES
In the United States, reporting standards for auditors require the additions of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt on
the Company's ability to continue as a going concern, such as those described in
Note 1 to the financial statements. Our report to the shareholders dated May 10,
2003, is expressed in accordance with Canadian reporting standards, which do not
permit a reference to such events and conditions in the auditor's reports when
these are adequately disclosed in the financial statements.
Chartered Accountants
Richmond, BC, Canada
September 26, 2003
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GEMSTAR RESOURCES LTD.
Balance Sheet
January 31, 2003
(Prepared in Canadian dollars)
================================================================================================
2003 2002
- ------------------------------------------------------------------------------------------------
Assets
Current assets
Cash $ 1,854 $ 308
Prepaid 152,000 152,000
GST receivable 1,790 1,573
-------------------------------------------------------------------------------------------
Total current assets 155,644 153,881
Interest in unproven mineral claims (Note 4) --- 200,000
Deposits (Note 3) 6,900 6,900
- ------------------------------------------------------------------------------------------------
Total assets $ 162,544 $ 360,781
================================================================================================
Liabilities and Shareholders' Deficit
Current liabilities
Accounts payable and accrued liabilities $ 100,883 $ 90,240
Accounts payable and accrued liabilities to related parties 105,000 60,500
-------------------------------------------------------------------------------------------
205,883 150,740
Loans Payable from related parties (Note 7) 617,302 608,250
- ------------------------------------------------------------------------------------------------
823,185 758,990
Shareholders' deficit
Share Capital (Note 5) 1,119,846 1,119,846
Deficit (1,780,487) (1,518,055)
-------------------------------------------------------------------------------------------
Total shareholders' deficit (660,641) (398,209)
- ------------------------------------------------------------------------------------------------
Total liabilities and shareholders' deficit $ 162,544 $ 360,781
================================================================================================
See accompanying notes to financial statements.
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GEMSTAR RESOURCES LTD.
Statement of Operations and Deficit
For the years ended January 31, 2003 and 2002
(Prepared in Canadian dollars)
===============================================================================================
2003 2002 2001
- -----------------------------------------------------------------------------------------------
REVENUES $ --- $ --- $ ---
EXPENSES
Bank charges and interest $ 292 $ 2,286 $ 16,397
Advertising and promotion 24 725 ---
Consulting --- 4,684 ---
Listing and filing fees 2,050 5,970 5,063
Management fees 30,000 20,000 35,000
Office 20,871 20,791 7,248
Professional fees 8,390 10,481 9,086
Transfer Agent 647 2,785 1,152
Travel 158 1,436 ---
- ------------------------------------------------------------------------------------------------
62,432 69,158 73,946
- ------------------------------------------------------------------------------------------------
NET LOSS BEFORE THE FOLLOWING (62,432) (69,158) (73,946)
WRITE OFF INTEREST IN UNPROVEN MINERAL CLAIMS (200,000) --- ---
- ------------------------------------------------------------------------------------------------
NET LOSS FOR THE YEAR (262,432) (69,158) (73,946)
DEFICIT, BEGINNING OF YEAR (1,518,055) (1,448,897) (1,374,951)
- ------------------------------------------------------------------------------------------------
DEFICIT, END OF YEAR $ (1,780,487) $ (1,518,055) $ (1,448,897)
================================================================================================
LOSS PER SHARE:
Basic and diluted $ (0.05) $ (0.01) $ (0.01)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic and diluted 5,652,000 5,652,000 5,970,000
See accompanying notes to financial statements.
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GEMSTAR RESOURCES LTD.
Statement of Cash Flows
(For the years ended January 31, 2003 and 2002
(Prepared in Canadian dollars)
===================================================================================================
2003 2002 2001
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OPERATING ACTIVITIES
Net loss for the year $( 262,432) $ (69,158) $ (73,946)
Add items not affecting working capital
Write off of 200,000 --- ---
- ----------------------------------------------------------------------------------------------------
(62,432) (69,158) (73,946)
Net changes in non-cash working capital items:
Prepaids --- (152,000) ---
GST receivable (217) (1,009) 2,682
Accounts payable and accrued liabilities 55,143 48,147 42,177
- ---------------------------------------------------------------------------------------------------
Cash used in operating activities (7,506) (174,020) (29,087)
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INVESTING ACTIVITIES
Acquisition of interest in unproven mineral claim --- (200,000) ---
Deposits --- --- (6,900)
- ---------------------------------------------------------------------------------------------------
Cash used in investing activities --- (200,000) (6,900)
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FINANCING ACTIVITIES
Loans payable from related parties, net 9,052 368,256 42,074
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Cash provide by financing activities 9,052 368,256 42,074
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INCREASE (DECREASE) IN CASH DURING THE YEAR 1,546 (5,764) 6,087
CASH, BEGINNING OF THE YEAR 308 6,072 (15)
- ---------------------------------------------------------------------------------------------------
CASH, END OF THE YEAR $ 1,854 $ 308 $ 6,072
===================================================================================================
SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid during the year for:
Interest expenses $ 140 $ 1,821 $ 15,894
Income taxes $ --- $ --- $ ---
See accompanying notes to financial statements.
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GEMSTAR RESOURCES LTD.
Notes to the Financial Statements
January 31, 2003
(Prepared in Canadian dollars)
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1. Nature of operations and going concern
The accompanying financial statements have been prepared in accordance with
Canadian generally accepted accounting principles, which contemplates
continuation of the Company as a going concern. The Company's ability to
continue as a going concern is dependent upon the ability of management to
obtain sufficient financing. Management is actively seeking additional
financing, and while they have been successful in the past, there is no
assurance they will be able to do so in the future. These matters raise
doubt about the company's ability to continue as a going concern. These
financial statements do not include adjustments that would be necessary
should the company be unable to continue as a going concern.
..
2. Significant accounting policies
These financial statements are expressed in Canadian dollars except where
noted otherwise. These financial statements are prepared in accordance with
accounting principles generally accepted in Canada which do not differ from
those established in the United States, except as described in Note 9.
(a) Use of estimates
The preparation of financial statements in conformity with Canadian
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets,
particularly the recoverability of accounts receivable, capital and
intangible assets, and accrued liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting year. Actual results could differ from estimates.
(b) Fair value of financial instruments
The carrying value of certain of the Company's financial instruments,
including cash, accounts receivable, accounts payable, and accrued
liabilities approximates fair value due to their short-term maturity.
It is management's position that the Company is not exposed to
significant interest, currency or credit risks arising from these
financial instruments.
(c)Loss per share
Loss per common share is calculated using the weighted average number
of common shares issued and outstanding during each year.
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GEMSTAR RESOURCES LTD.
Notes to the Financial Statements
January 31, 2003
(Prepared in Canadian dollars)
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2. Significant accounting policies
(d) Interest in Unproven Mineral Claims
The Company records its interest in unproven mineral claims at cost.
Exploration and development expenditures relating to these interests
are capitalized until the properties to which they related are placed
into production, sold or allowed to lapse. These expenditures will be
amortized over the estimated useful life of the property on the units
of production method following commencement of production, written off
if the interest in unproven mineral claims or projects are sold or
allowed to lapse. General exploration expenditures are expensed as
incurred. The Company is in the process of exploring and developing its
properties and has not yet full determined the amount of resources and
reserves available in its properties. Senior management reviews the
carrying values of deferred interest in unproven mineral claims
acquisition and exploration expenditures with a view to assessing
whether there has been any impairment in value. There have been no
events or changes in circumstances to indicate that the carrying values
of the properties should be reassessed. In the event that reserves are
determined to be insufficient to recover the carrying values of any
property, the carrying value will be written down or written off, as
appropriate.
(e) Income taxes
The Company follows the liability method of accounting for income
taxes. Under this method, income liabilities and assets are recognized
for the estimated tax consequences attributable to differences between
the amounts reported in the financial statements and their respective
tax bases, using enacted income tax rates. The effect of a change in
income tax rates on future income tax liabilities and assets is
recognized in income in the period that the change occurs. A valuation
allowance has been provided , no previous benefit has been recognized
in the financial statements.
3. Deposits
The deposits are subject to restrictions that prevent its use for current
purposes.
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GEMSTAR RESOURCES LTD.
Notes to the Financial Statements
January 31, 2003
(Prepared in Canadian dollars)
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4. Interest in Unproven Mineral Claims
===========================================================================
2003 2002
---------------------------------------------------------------------------
Acquisition Costs
Dotted Lake Property, Ontario $ 200,000 $ 200,000
Write off of Interest in unproven mineral claims (200,000) ---
---------------------------------------------------------------------------
$ --- $ 200,000
===========================================================================
Dotted Lake Property, Ontario
The Company acquired a 100% undivided interest in seventy six mineral
claims located in the Black River Area, Thunder Bay Mining Division,
Ontario in the amount of $ 200,000.
During the year, the mineral claim lapsed and as a result the interest in
unproven mineral claims was written off.See Note 9
5. Share Capital
(a) The authorized share capital of the Company consists of 100,000,000
common shares without par value.
(b) The issued and outstanding common shares of the Company are as follows:
=======================================================================
Number of
shares Amount
-----------------------------------------------------------------------
Balance at January 31, 2000 6,289,214 $ 1,119,846
Cancellation of escrow shares (637,500) ---
-----------------------------------------------------------------------
Balance, January 31, 2002 and 2003 5,651,714 $ 1,119,846
=======================================================================
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GEMSTAR RESOURCES LTD.
Notes to the Financial Statements
January 31, 2003
(Prepared in Canadian dollars)
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6. Related Party Transactions
a) The Company paid and or accrued to a spouse of a director for the
following:
======================================================================
2003 2002 2001
----------------------------------------------------------------------
Office $ 18,000 $ 18,000 $ 7,500
Management Fees $ 30,000 $ 20,000 $ 35,000
----------------------------------------------------------------------
b) $105,000 (2002 - $ 60,500) included in accounts payable is an
amount due to a spouse of a director with respect for management
fees and office.
c) During the 2001 year, the Company was indebted to a company
controlled by a former director of the Company. This loan was
unsecured and repayable upon demand. This debt in the amount of
$215,705 was assigned to a spouse of a director.
d) These transactions are in the normal course of operations and are
measured at the exchange amount, which is the amount of
consideration established and agreed to by the related parties.
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GEMSTAR RESOURCES LTD.
Notes to the Financial Statements
January 31, 2003
(Prepared in Canadian dollars)
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7. Loans Payable from Related Parties
---------------------------------------------------------------------------------------
2003 2002
---------------------------------------------------------------------------------------
Unsecured non interest bearing loan without terms of repayment
from a spouse of a director of the Company. $ 22,231 77,639
Unsecured non interest bearing loan without terms of repayment
from a director of the Company. 413,317 423,857
Unsecured non interest bearing loan without terms of repayment
from a family member of a director of the Company. 181,754 106,754
---------------------------------------------------------------------------------------
617,302 608,250
8. Subsequent Event
Subsequent to January 31, 2003, the Company restaked the mineral claims
disclosed in Note 4.
9. United States Generally Accepted Accounting Principles
These financial statements have been prepared in accordance with generally
accepted accounting principles in Canada ("Canadian GAAP"), which differ in
certain respects from those principles and practices that the Company would
have followed had its financial statements been prepared in accordance with
generally accepted accounting principles in the United States ("US GAAP").
The Company is considered to be an exploration stage company under US GAAP.
Comprehensive earnings are the same as net earnings under US GAAP for all
periods presented. The following summarizes the significant differences
between Canadian GAAP and US GAAP as they relate to the Company:
(a) Interest in unproven mineral claims :
Under Canadian GAAP applicable to junior exploration companies, mineral
exploration expenditures related to interest in unproven mineral claims may
be initially capitalized if such costs have the characteristics of
property, plant and equipment and that capitalization is appropriate to its
circumstances. Under US GAAP, all interest in unproven mineral claims
acquisition costs and exploration expenditures are expensed until an
independent feasibility study has determined that the property is capable
of economic commercial production.
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GEMSTAR RESOURCES LTD.
Notes to the Financial Statements
January 31, 2003
(Prepared in Canadian dollars)
- --------------------------------------------------------------------------------
9. United States Generally Accepted Accounting Principles (continued)
(b) Recent Accounting Pronouncements:
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity".
SFAS No. 150 establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). The requirements of SFAS No. 150 apply to issuers'
classification and measurement of freestanding financial instruments,
including those that comprise more than one option or forward contract.
SFAS No. 150 does not apply to features that are embedded in a financial
instrument that is not a derivative in its entirety. SFAS No. 150 is
effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003, except for mandatorily redeemable
financial instruments of nonpublic entities. It is to be implemented by
reporting the cumulative effect of a change in an accounting principle for
financial instruments created before the issuance date of SFAS No. 150 and
still existing at the beginning of the interim period of adoption.
Restatement is not permitted. The adoption of this standard is not expected
to have a material effect on the Company's results of operations or
financial position.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure", which amends SFAS No. 123 to
provide alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 expands the disclosure requirements
of SFAS No. 123 to require more prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported
results. The transition provisions of SFAS No. 148 are effective for fiscal
years ended after December 15, 2002. The disclosure provisions of SFAS No.
148 are effective for financial statements for interim periods beginning
after December 15, 2002. The Company adopted SFAS No. 148 on February 1,
2003 and as the Company has not granted stock options for the prior three
fiscal years, its impact did not have a material effect on the Company's
results of operations or financial position.
In June, 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". The provisions of this Statement are
effective for exit or disposal activities that are initiated after December
31, 2002, with early application encouraged. This Statement addresses
financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force (EITF) Issue
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)". This Statement requires that a liability for a cost
associated with an exit or disposal activity be recognized when the
liability is incurred. The Company adopted SFAS No. 146 on January 1, 2003
and its impact did not have a material effect on its financial position or
results of operations.
FASB has also issued SFAS No. 145, 147 and 149 but they will not have any
relationship to the operations of the Company therefore a description of
each and their respective impact on the Company's operations have not been
disclosed.
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GEMSTAR RESOURCES LTD.
Notes to the Financial Statements
January 31, 2003
(Prepared in Canadian dollars)
- --------------------------------------------------------------------------------
9. United States Generally Accepted Accounting Principles (continued)
The effect of differences in accounting under Canadian GAAP and US GAAP on
the statements of loss are as follows:
============================================================================
2003 2002 2001
----------------------------------------------------------------------------
Net loss for the year, under Canadian GAAP $ (262,432) $ (69,158) $ (73,946)
Difference in accounting for interest in
unproven mineral claims costs 200,000 (200,000) ---
----------------------------------------------------------------------------
Net loss for the year, under US GAAP $ (62,432) $(269,158) $ (73,946)
============================================================================
Net loss for the year under US GAAP per
common share:
Basic and diluted $ (0.01) $ (0.05) $ (0.01)
The effect of the differences in accounting under Canadian GAAP and US GAAP
on the balance sheets are as follows:
=========================================================================================================
January 31, 2003 January 31, 2002
---------------- ----------------
Canadian United States Canadian United States
GAAP GAAP GAAP GAAP
----------------------------------------------------------------------------------------------------------
Current assets $ 155,644 $ 155,644 $ 153,881 $ 153,881
Interest in unproven mineral claims --- --- 200,000 ---
Deposits 6,900 6,900 6,900 6,900
---------------------------------------------------------------------------------------------------------
$ 162,544 $ 162,544 $ 360,781 $ 160,781
---------------------------------------------------------------------------------------------------------
Current liabilities $ 205,883 $ 205,883 $ 150,740 $ 150,740
Loans payable from related parties 617,302 617,302 608,250 608,250
Share Capital 1,119,846 1,119,846 1,119,846 1,119,846
Deficit (1,780,487) (1,780,487) (1,518,055) (1,718,055)
---------------------------------------------------------------------------------------------------------
$ 162,544 $ 162,544 $ 360,781 $ 160,781
=========================================================================================================
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GEMSTAR RESOURCES LTD.
Notes to the Financial Statements
January 31, 2003
(Prepared in Canadian dollars)
- --------------------------------------------------------------------------------
9. United States Generally Accepted Accounting Principles (continued)
The effect of the differences in accounting under Canadian GAAP and US GAAP
on the statements of cash flows are as follows:
------------------------------------------------------------------------------------------
2003 2002 2001
------------------------------------------------------------------------------------------
Cash used in operating activities,
under Canadian GAAP $ (7,506) $ (174,020) $ (29,087)
Difference in accounting for interest
in unproven mineral claims costs --- (200,000) ---
-------------------------------------------------------------------------------------------
Cash used in operating activities,
under US GAAP $ (7,506) $ (374,020) $ (29,087)
-------------------------------------------------------------------------------------------
Cash used in investing activities,
under Canadian GAAP $ --- $ (200,000) $ (6,900)
Difference in accounting for interest
in unproven mineral claims costs --- 200,000 ---
-------------------------------------------------------------------------------------------
Cash used in investing activities,
under US GAAP $ --- $ --- $ (6,900)
-------------------------------------------------------------------------------------------
Cash used in financing activities,
under Canadian GAAP $ 9,052 $ 368,256 $ 42,074
Difference in accounting for interest --- --- ---
-------------------------------------------------------------------------------------------
Cash used in financing activities,
under US GAAP $ 9,052 $ 368,256 $ 42,074
-------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GEMSTAR RESOURCES LTD.
----------------------
Financial Statements
For the Three Month period ended April 30, 2003
(Prepared in Canadian dollars)
- --------------------------------------------------------------------------------
GEMSTAR RESOURCES LTD.
Balance Sheet
April 30, 2003
(Prepared in Canadian dollars)
=================================================================================================
April 30, January 31,
2003 2003
=================================================================================================
Assets
Current assets
Cash $ 1,952 $ 1,854
Prepaid 152,000 152,000
GST receivable 1,790 1,790
-------------------------------------------------------------------------------------------
Total current assets 155,742 155,644
Interest in unproven mineral claims (Note 1) 4,206 ---
Deposits 6,900 6,900
- ------------------------------------------------------------------------------------------------
Total assets $ 166,848 $ 162,544
================================================================================================
Liabilities and Shareholders' Deficit
Current liabilities
Accounts payable and accrued liabilities $ 101,357 $ 100,883
Accounts payable and accrued liabilities to related parties $ 117,000 $ 105,000
-------------------------------------------------------------------------------------------
218,357 205,883
Loans Payable from related parties 622,998 617,302
- ------------------------------------------------------------------------------------------------
841,355 823,185
Shareholders' deficit
Share Capital 1,119,846 1,119,846
Deficit (1,794,353) (1,780,487)
-------------------------------------------------------------------------------------------
Total shareholders' deficit (674,507) (660,641)
- ------------------------------------------------------------------------------------------------
Total liabilities and shareholders' deficit $ 166,848 $ 162,544
================================================================================================
- --------------------------------------------------------------------------------
GEMSTAR RESOURCES LTD.
Statement of Operations and Deficit
For the Three Month period ended April 30,2003
(Prepared in Canadian dollars)
- ------------------------------
==================================================================================
Three Month Three Month
April 30, April 30,
2003 2002
==================================================================================
REVENUES $ --- $ ---
EXPENSES
Advertising $ --- $ 137
Bank charges and interest 213 101
Consulting 1,035 ---
Management fees 7,500 7,500
Office 4,718 4,788
Professional fees 400 ---
Transfer Agent --- 147
Travel --- 45
- ----------------------------------------------------------------------------------
13,866 12,718
- ----------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD (13,866) (12,718)
DEFICIT, BEGINNING OF PERIOD (1,780,487) (1,518,055)
- ----------------------------------------------------------------------------------
DEFICIT, END OF PERIOD $ (1,794,353) $ (1,530,773)
===================================================================================
LOSS PER SHARE:
Basic and diluted $ (0.01) $ (0.01)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic and diluted 5,652,000 5,652,000
- --------------------------------------------------------------------------------
GEMSTAR RESOURCES LTD.
Statement of Cash Flows
For the Three Month period ended April 30, 2003
(Prepared in Canadian dollars)
========================================================================================
Three Month Three Month
April 30, April 30,
2003 2002
- ----------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net loss for the period $ (13,866) $ (12,718)
Net Changes in non-cash working capital items:
Accounts payable 12,474 12,208
GST receivable --- (40)
- ----------------------------------------------------------------------------------------
Cash used in operating activities (1,392) (550)
- ----------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Increase in Interest in unproven mineral claims (4,206) ---
- ----------------------------------------------------------------------------------------
Cash used in investing activities (4,206) ---
- ---------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Loans payable from related parties, net 5,696 135,500
- ----------------------------------------------------------------------------------------
Cash provided by financing activities 5,696 135,500
- ----------------------------------------------------------------------------------------
INCREASE IN CASH DURING THE PERIOD 98 134,950
CASH, BEGINNING OF THE PERIOD 1,854 308
- ----------------------------------------------------------------------------------------
CASH, END OF THE PERIOD $ 1,952 $ 135,258
========================================================================================
SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid in the period for:
Interest expense $ 159 $ 50
Income taxes $ --- $ --
- --------------------------------------------------------------------------------
GEMSTAR RESOURCES LTD.
Notes to the Financial Statements
April 30, 2003
(Prepared in Canadian dollars)
- --------------------------------------------------------------------------------
Interim Reporting
While the information presented in the accompanying interim three month to April
30, 2003 financial statements is unaudited, it includes all adjustments which
are, in the opinion of management, necessary to present fairly the financial
position, results of operations and cash flows for the interim periods
presented.
Significant Accounting Policies
In the opinion of management the unaudited quarterly financial statements
reflect all adjustments consisting only of normal recurring adjustments,
necessary to present fairly the financial position at April 30, 2003, the
results of operations and changes in cash flows for the three month period ended
April 30, 2003, in accordance with accounting principles generally accepted in
Canada. These financial statements should be read in conjunction with the
company's financial statements and notes thereto related to the year ended
January 31, 2003.
Notes to the Financial Statements
1. Interest in Unproven Mineral Claims
==============================================================================
April 30, January 31,
2003 2003
==============================================================================
Acquisition Costs
Dotted Lake Property, Ontario $ 4,206 $ 200,000
Deferred Exploration Costs
Dotted Lake Property, Ontario --- ---
Write off of Interest in unproven mineral claims --- (200,000)
------------------------------------------------------------------------------
$ 4,206 $ ---
==============================================================================
- --------------------------------------------------------------------------------
GEMSTAR RESOURCES LTD.
Notes to the Financial Statements
April 30, 2003
(Prepared in Canadian dollars)
- --------------------------------------------------------------------------------
10. United States Generally Accepted Accounting Principles
These financial statements have been prepared in accordance with generally
accepted accounting principles in Canada ("Canadian GAAP"), which differ in
certain respects from those principles and practices that the Company would
have followed had its financial statements been prepared in accordance with
generally accepted accounting principles in the United States ("US GAAP").
The Company is considered to be an exploration stage company under US GAAP.
Comprehensive earnings are the same as net earnings under US GAAP for all
periods presented. The following summarizes the significant differences
between Canadian GAAP and US GAAP as they relate to the Company:
(a) Interest in Unproven Mineral Claims:
Under Canadian GAAP applicable to junior exploration companies, mineral
exploration expenditures related to interest in unproven mineral claims may
be initially capitalized if such costs have the characteristics of
property, plant and equipment and that capitalization is appropriate to its
circumstances. Under US GAAP, all interest in unproven mineral claims
acquisition costs and exploration expenditures are expensed until an
independent feasibility study has determined that the property is capable
of economic commercial production
(b) Recent Accounting Pronouncements:
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity".
SFAS No. 150 establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). The requirements of SFAS No. 150 apply to issuers'
classification and measurement of freestanding financial instruments,
including those that comprise more than one option or forward contract.
SFAS No. 150 does not apply to features that are embedded in a financial
instrument that is not a derivative in its entirety. SFAS No. 150 is
effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003, except for mandatorily redeemable
financial instruments of nonpublic entities. It is to be implemented by
reporting the cumulative effect of a change in an accounting principle for
financial instruments created before the issuance date of SFAS No. 150 and
still existing at the beginning of the interim period of adoption.
Restatement is not permitted. The adoption of this standard is not expected
to have a material effect on the Company's results of operations or
financial position.
- --------------------------------------------------------------------------------
GEMSTAR RESOURCES LTD.
Notes to the Financial Statements
April 30, 2003
(Prepared in Canadian dollars)
- --------------------------------------------------------------------------------
2. United States Generally Accepted Accounting Principles (Continued):
(b) Recent Accounting Pronouncements:
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure", which amends SFAS No. 123 to
provide alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 expands the disclosure requirements
of SFAS No. 123 to require more prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported
results. The transition provisions of SFAS No. 148 are effective for fiscal
years ended after December 15, 2002. The disclosure provisions of SFAS No.
148 are effective for financial statements for interim periods beginning
after December 15, 2002. The Company adopted SFAS No. 148 on February 1,
2003 and as the Company has not granted
stock options for the prior three fiscal years, its impact did not have a
material effect on the Company's results of operations or financial
position.
In June, 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". The provisions of this Statement are
effective for exit or disposal activities that are initiated after December
31, 2002, with early application encouraged. This Statement addresses
financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force (EITF) Issue
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)". This Statement requires that a liability for a cost
associated with an exit or disposal activity be recognized when the
liability is incurred. The Company adopted SFAS No. 146 on January 1, 2003
and its impact did not have a material effect on its financial position or
results of operations.
FASB has also issued SFAS No. 145, 147 and 149 but they will not have any
relationship to the operations of the Company therefore a description of
each and their respective impact on the Company's operations have not been
disclosed.
The effect of differences in accounting under Canadian GAAP and US GAAP on
the statements of loss are as follows:
--------------------------------------------------------------------------
April 30, April 30,
2003 2002
--------------------------------------------------------------------------
Net loss for the period, under Canadian GAAP $ (13,866) $ (12,718)
Difference in accounting for interest in
unproven mineral claims (4,206) ---
--------------------------------------------------------------------------
Net loss for the year, under US GAAP $ (18,072) $ (12,718)
--------------------------------------------------------------------------
Net loss for the year under US GAAP per common share:
Basic and diluted $ (0.01) $ (0.01)
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GEMSTAR RESOURCES LTD.
Notes to the Financial Statements
April 30, 2003
(Prepared in Canadian dollars)
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3. United States Generally Accepted Accounting Principles (Continued):
The effect of the differences in accounting under Canadian GAAP and US GAAP
on the balance sheets are as follows:
---------------------------------------------------------------------------------------------------------
April 30, 2003 January 31, 2003
-------------- -----------------
Canadian United States Canadian United States
GAAP GAAP GAAP GAAP
---------------------------------------------------------------------------------------------------------
Current assets $ 155,742 $ 155,742 $ 155,644 $ 155,644
Interest in Unproven Mineral Claims 4,206 --- --- ---
Deposits 6,900 6,900 6,900 6,900
---------------------------------------------------------------------------------------------------------
$ 166,848 $ 162,642 $ 162,544 $ 162,544
---------------------------------------------------------------------------------------------------------
Current liabilities $ 218,357 $ 218,357 $ 205,883 $ 205,883
Loans payable 622,998 622,998 617,302 617,302
Share Capital 1,119,846 1,119,846 1,119,846 1,119,846
Deficit (1,794,353) (1,798,559) (1,780,487) (1,780,487)
---------------------------------------------------------------------------------------------------------
$ 166,848 $ 162,642 $ 162,544 $ 162,544
---------------------------------------------------------------------------------------------------------
The effect of the differences in accounting under Canadian GAAP and US GAAP
on the statements of cash flows are as follows:
----------------------------------------------------------------------------------------------
April 30 April 30,
2003 2002
----------------------------------------------------------------------------------------------
Cash used in operating activities,
under Canadian GAAP $ (1,392) $ (12,718)
Difference in accounting for interest in unproven mineral claims (4,206) ---
----------------------------------------------------------------------------------------------
Cash used in operating activities,
under US GAAP $ (5,598) $ ---
----------------------------------------------------------------------------------------------
Cash used in investing activities,
under Canadian GAAP $ (4,206) $ ---
Difference in accounting for interest in unproven mineral claims 4,206 ---
----------------------------------------------------------------------------------------------
Cash used in investing activities,
under US GAAP $ --- $ ---
----------------------------------------------------------------------------------------------
Cash used in financing activities,
under Canadian GAAP $ 5,696 $ 135,500
Difference in accounting for interest in unproven mineral claims --- ---
----------------------------------------------------------------------------------------------
Cash used in financing activities,
under US GAAP $ 5,696 $ 135,500
----------------------------------------------------------------------------------------------
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