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EX-31.2 - EXHIBIT 31.2 - CONSOLIDATED GEMS, INC.a50923938_ex31-2.htm
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EXCEL - IDEA: XBRL DOCUMENT - CONSOLIDATED GEMS, INC.Financial_Report.xls
EX-32.1 - EXHIBIT 32.1 - CONSOLIDATED GEMS, INC.a50923938_ex32-1.htm
EX-32.2 - EXHIBIT 32.2 - CONSOLIDATED GEMS, INC.a50923938_ex32-2.htm
 

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 10-Q



(Mark one)
x
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 
 ACT OF 1934
 
 For the Quarterly Period Ended June 30, 2014
or
o
 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: 000-53735

CONSOLIDATED GEMS, INC.
(Exact name of registrant as specified in its charter)


Delaware
26-0267587
(State or Other Jurisdiction
(I.R.S. Employer
of Incorporation)
Identification No.)
   
Level 8, 580 St Kilda Road
 
Melbourne, Victoria, Australia
3004
(Address of Principal Executive Offices)
(Zip Code)
   
Registrant’s telephone number, including area code: 001 (613) 8532 2800
 
(Former Name or Former Address, if changed since Last Report)

 
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.  x Yes  o  No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  x Yes  o No
 
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 definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12-b2 of the Exchange Act.
 
(Check one):   Large accelerated filer  ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b2 of the Exchange Act).
o  Yes  x  No
 
There were 175,315,350 shares of common stock outstanding on August 19, 2014.
 

 
 
 
 

 
 
Table Of Contents





 
1

 




Introduction to Interim Financial Statements.

The interim financial statements included herein have been prepared by Consolidated Gems, Inc. (“Consolidated Gems” or the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (The “Commission”). Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These interim financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

In the opinion of management, all adjustments, consisting of normal recurring adjustments necessary to present fairly the financial position of the Company as of June 30, 2014, the results of its operations for the three and six month periods ended June 30, 2014 and 2013 and the changes in its cash flows for the six month periods ended June 30, 2014 and 2013 have been included.  The results of operations for the interim periods are not necessarily indicative of the results for the full year.

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Foreign Currency Translation

Prior to April 1, 2013, the Company’s functional and reporting currency was the US dollar. However, as a result of Australian based activities in the June 2013 quarter relating to potential gem projects, the Company’s revenue and expenses will be primarily denominated in Australian dollars (A$). ASC 830 Foreign Currency Translation, states that the functional currency of an entity is the currency of the primary economic environment in which the entity operates. Accordingly, the Company determined that from April 1, 2013 the functional and reporting currency of the Company is the Australian dollar. Assets, liabilities and equity were translated at the rate of exchange at April 1, 2013. Revenue and expenses were translated at rates at date of transaction. Translation gains and losses, if material, are included as part of accumulated other comprehensive income. The resulting translations at April 1, 2013 were not material.

Restatement of comparative numbers was made for the change in functional and reporting currency.
 
UNLESS OTHERWISE INDICATED, ALL FINANCIAL INFORMATION PRESENTED IS IN AUSTRALIAN DOLLARS.
 
 
 
2

 


CONSOLIDATED GEMS, INC.
Balance Sheet

   
June 30,
2014
(Unaudited)
   
December 31,
2013
 
      A$       A$  
                 
ASSETS
               
                 
Current Assets:
               
Cash
    2,375       2,270  
Receivables
    1,233       5,422  
Prepayments
    1,206       5,052  
Total Current Assets
    4,814       12,744  
                 
Non-Current Assets:
               
Deposits
    10,000       10,000  
Total Current Assets
    10,000       10,000  
                 
Total Assets
    14,814       22,744  
                 
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
               
                 
Current Liabilities:
               
Accounts payable and accrued expenses
    50,510       54,658  
Total Current Liabilities
    50,510       54,658  
                 
Non-Current Liabilities:
               
Advances from affiliate
    1,022,696       972,838  
Total Non-Current Liabilities
    1,022,696       972,838  
                 
Total Liabilities
    1,073,206       1,027,496  
                 
Stockholders’ (Deficit):
               
Common stock: US$.0001 par value
500,000,000 shares authorised,
and 175,315,350 shares issued and outstanding
    16,825       16,825  
Additional paid-in capital
    1,574,323       1,574,323  
Accumulated (deficit)
    (2,649,540 )     (2,595,900 )
Total Stockholders’ (deficit)
    (1,058,392 )     (1,004,752 )
                 
Total Liabilities and Stockholders’ (Deficit)
    14,814       22,744  
                 
See notes to financial statements
               
 

 
 
3

 

CONSOLIDATED GEMS, INC.
Statements of Operations
(Unaudited)

   
For the three months ended
June 30
   
For the six months ended
June 30
 
   
2014
   
2013
   
2014
   
2013
 
Revenues
    A$-       A$-       A$-       A$-  
                                 
Cost and expenses
                               
Legal, accounting and professional
    9,431       13,830       18,833       24,065  
Administration expense
    9,896       15,447       22,860       29,382  
Exploration expenditure
    3,907       544,389       10,633       544,389  
      23,234       573,666       52,326       597,836  
                                 
(Loss) from operations
    (23,234 )     (573,666 )     (52,326 )     (597,836 )
Foreign currency exchange gain/(loss)
    (1,745 )     (8,561 )     (1,314 )     (8,561 )
(Loss) before income tax
    (24,979 )     (582,227 )     (53,640 )     (606,397 )
Provision for income tax
    -       -       -       -  
                                 
Net (loss)
    (24,979 )     (582,227 )     (53,640 )     (606,397 )
                                 
Basic net (loss) per Common Equivalent Shares
    (0.00 )     (0.00 )     (0.00 )     (0.00 )
                                 
Weighted number of common equivalent shares  (000’s)
    175,315       175,315       175,315       175,315  
                                 
See notes to financial statements
                               
                                 
 
 
 
4

 

 
CONSOLIDATED GEMS, INC.
Statements of Stockholders’ (Deficit)
for the period ended June 30, 2014
 (Unaudited)

   
 
 
Shares
   
Common
Stock
Amount
   
Additional
Paid-in
Capital
   
 
 
 
Accumulated
(Deficit)
   
 
 
Total
 
            $A       $A       $A       $A  
                                       
                                       
Balance, December 31, 2013
    175,315,350       16,825       1,574,323       (2,595,900 )     (1,004,752 )
                                         
Net (loss)
    -       -       -       (53,640 )     (53,640 )
                                         
Balance, June 30, 2014
    175,315,350       16,825       1,574,323       (2,649,540 )     (1,058,392 )
                                         
                                         


See notes to financial statements


 
5

 


CONSOLIDATED GEMS, INC.
Statements of Cash Flows
(Unaudited)

   
For the six months ended
June 30
 
     
2014
A$
     
2013
A$
 
                 
CASH FLOWS FROM OPERATING ACTIVITIES
               
Net (Loss)
    (53,640 )     (606,397 )
                 
Adjustments to reconcile net (loss) to net cash (used) in operating activities
               
Foreign currency exchange (gain)/loss
    1,314       8,561  
Net change in prepayments
    3,846       7,925  
Net change in receivables
    4,189       (65,439 )
Net change in accounts payable and accrued expenses
    (4,148 )     (8,823 )
                 
Net Cash (used) in Operating Activities
    (48,439 )     (664,173 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
                 
Advances from affiliate
    49,858       672,562  
                 
Net Cash provided by Financing Activities
    49,858       672,562  
                 
Effects of Exchange rate on cash
    (1,314 )     (8,561 )
                 
Net increase in Cash
    105       (172 )
                 
Cash at Beginning of Period
    2,270       241  
                 
Cash at End of Period
    2,375       69  
                 
 
 
 

See notes to financial statements

 
6

 

CONSOLIDATED GEMS, INC.
Notes to Financial Statements
June 30, 2014
 
(1)
ORGANIZATION AND BUSINESS
 
Consolidated Gems, Inc. ("Consolidated Gems” or the “Company"), formerly Electrum International, Inc. is a Delaware corporation originally incorporated in Florida as We Sell for U Corp. (“We Sell for U”). The principal stockholder of Consolidated Gems is Power Developments Pty Ltd., an Australian corporation (“Power”), an entity majority owned by the Company’s President, which owned 94.46% of Consolidated Gems as of June 30, 2014.
 
In order to take advantage of management’s substantial experience in the location and development of mineral exploration properties, the Company plans to look for opportunities in the resources industry and has identified silver and base metal exploration in Central America and gem opportunities in Australia for its potential business opportunities.
 
The Company has decided to expand its focus to include precious gems in order to generate value for shareholders and is currently assessing several gem opportunities. On September 24, 2012, the Company changed its name from Electrum International, Inc. to Consolidated Gems, Inc.
 
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which contemplates continuation of Consolidated Gems as a going concern. The Company has not yet commenced revenue producing operations and has incurred net losses since inception and may continue to incur substantial and increasing losses for the next several years, all of which raises substantial doubt as to its ability to continue as a going concern. The financial statements do not contain any adjustments that could arise as a result of this uncertainty.
 
In addition, Consolidated Gems is reliant on loans and advances from corporations affiliated with the Company. Based on discussions with these affiliate companies the Company believes this source of funding will continue to be available. Other than the arrangements noted above, the Company has not confirmed any other arrangement for ongoing funding. As a result the Company may be required to raise funds by additional debt or equity offerings in order to meet its cash flow requirements during the forthcoming year. However, there can be assurance that the Company’s fund raising efforts will be successful.
 
(2)
RECENT ACCOUNTING PRONOUNCEMENTS
 
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
 
In June 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation”. The Company adopted the amendment to (Topic 915) Development Stage Entities, for the elimination of certain disclosures currently required under US GAAP in the financial statements for development stage entities. The amendment removes the definition of a development stage entity, thereby removing the financial reporting distinction between the development stage entities and reporting entities from US GAAP. The Company has eliminated the inception-to-date information in the statements of income, cash flows, and shareholder equity. The financial statements are no longer labelled as an exploration or development stage entity, and no disclosure is required for a description of the development stage activities the entity is engaged or when they are no longer a development stage entity. This update also eliminates an exception provided to development stage entities in FASC Topic 810, Consolidation, for determining whether an entity is a Variable Interest Entity (VIE) based on the amount of equity at risk.
 
(3)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
The following is a summary of the significant accounting policies followed in connection with the preparation of the financial statements.
 
Basis of Presentation and Used Estimates
 
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure on contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
 
 
 
7

 
 
The functional and reporting currency is the Australian dollar.
 
Mineral Property Acquisition, Exploration Costs and Amortization of Mineral Rights
 
Mineral property acquisition, exploration and development costs are expensed as incurred until such time as economic reserves are quantified.  To date, the Company has not established any proven or probable reserves on its mineral properties. When it is determined that a mining deposit can be economically and legally extracted or produced based on established proven and probable reserves, further exploration costs and development costs incurred after such determination will be capitalized. The establishment of proven and probable reserves is based on results of final feasibility studies which indicate whether a property is economically feasible. Upon commencement of commercial production, capitalized costs will be transferred to the appropriate asset category and amortized over their estimated useful lives. Capitalized costs, net of salvage values, relating to a deposit which is abandoned or considered uneconomic for the foreseeable future, will be written off. Mineral rights are amortized over their estimated useful lives being the Company’s estimated rights to tenure.
 
Foreign Currency Translation
 
Effective April 1, 2013, the Company’s functional and reporting currency is the Australian dollar.  Revenue and expenses incurred in a currency other than Australian dollars are translated at the date incurred or invoiced. Assets and liabilities are re-valued at the period end exchange rate where appropriate. Gains or losses from foreign currency transactions are included in the results of operations.
 
Prior to April 1, 2013, the Company’s functional currency was the US dollar. However, as a result of Australian based activities in the second quarter of 2013 relating to potential gem projects, the Company’s revenue and expenses are now primarily denominated in Australian dollars (A$). ASC 830 Foreign Currency Translation states that the functional currency of an entity is the currency of the primary economic environment in which the entity operates. Accordingly, the Company determined that from April 1, 2013, the functional currency of the Company is the Australian dollar. Assets, liabilities and equity were translated at the rate of exchange at April 1, 2013. Revenue and expenses were translated at rates at date of transaction. Translation gains and losses, if material, are included as part of accumulated other comprehensive income. The resulting translation at April 1, 2013 was not material.

Restatement of comparative March 31, 2013 numbers was made for the change in functional and reporting currency.
 
Goods and Services Tax (“GST”)
 
Revenues, expenses and assets generated in Australia are subject to Australian GST which requires the supplier to add a 10% GST to predominately all expenses and the cost of assets and for the Company to include a 10% GST to the selling price of a product. Revenues, expenses and assets are recognized net of the amount of GST except where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognized as part of the cost of acquisition of the assets or as part of the expense item as applicable, and receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. Cash flows are included in the cash flow statement on a gross basis and the GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority
 
Comparative Figures
 
Where necessary, comparative figures have been reclassified to be consistent with current year presentation with no effect on operations.
 
(4)
AFFILIATE TRANSACTIONS
 
The Company entered into an agreement with AXIS Consultants Pty Ltd (“AXIS”) to provide management and administration services to the Company. AXIS is affiliated through common management. The Company is one of nine affiliated companies to which AXIS provides services. Each of the companies has some common Directors, officers and shareholders. Currently, there are no material arrangements or planned transactions between the Company and any of the affiliated companies other than AXIS.
 
 
8

 
 
During the six months ended June 30, 2014, AXIS provided services in accordance with the services agreement, incurred direct costs on behalf of the Company and provided funding of A$49,858. The amounts owed to the affiliate as of June 30, 2014 and December 31, 2013 is A$1,022,696 and A$972,838, respectively, and are reflected in non-current liabilities - advances from affiliate. During the six months ended June 30, 2014 and 2013, the affiliates have agreed not to charge interest.
 
The Company intends to repay these amounts with funds raised either via additional debt or equity offerings. Both affiliates have agreed not to call the advance within the next twelve months and accordingly the Company has classified the amounts payable as non-current in the accompanying balance sheet.
 
(5)
INCOME TAXES
 
Consolidated Gems files its income tax returns on an accrual basis.
 
The Company files tax returns in the United States. Consolidated Gems has carry-forward losses of approximately A$2,402,000 as of December 31, 2013 which expire in years 2028 through 2033. Due to the uncertainty of the availability and future utilization of those operating loss carry-forwards, management has provided a full valuation against the related tax benefit. The Company’s tax returns for all years since December 31, 2010 remain open to examination by the respective tax authorities.  There are currently no tax examinations in progress.
 
The Company will be required to file a tax return in Australia for 2014. Net operation loss carry-forwards in Australia do not have a definite expiration date and amounted to approximately A$758,000 as of June 30, 2014.
 
(6)
FAIR VALUE OF FINANCIAL INSTRUMENTS
 
The Company’s financial instruments consist of cash, receivables, accounts payable and accrued expenses, and advances from affiliate. The carrying amounts of cash, receivables, accounts payable and accrued expenses approximate their respective fair values because of the short term nature of those instruments. The fair value of the advances from affiliate is not determinable as it is due to an affiliated entity, no market exists for similar instruments and settlement date is uncertain.
 
(7)
COMMITMENTS
 
Exploration
 
The Company has to perform minimum exploration work and expend minimum amounts of money on its tenements. The overall expenditure requirement tends to be limited in the normal course of the Company’s tenement portfolio management through expenditure exemption approvals, and expenditure reductions through relinquishment of parts or the whole of tenements deemed non prospective. Should the company wish to preserve interests in its current tenements the amount which may be required to be expended is as follows:

     
2014
A$
 
Not later than one year
    50,833  
Later than one year but not later than five years
    -  
Later than five years
    -  
      50,833  

(8)
SUBSEQUENT EVENTS
 
The Company has evaluated events and transactions after the balance sheet date and through the date the financial statements were issued, and believes that all relevant disclosures have been included herein and there are no other events which require recognition or disclosure in the accompanying interim financial statements.
 

 
9

 
 
 
General
 
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Financial Statements and accompanying notes and the other financial information appearing elsewhere in this report. This report contains numerous forward-looking statements relating to our business. Such forward-looking statements are identified by the use of words such as believes, intends, expects, hopes, may, should, plan, projected, contemplates, anticipates or similar words. Actual operating schedules, results of operations, ore grades and mineral deposit estimates and other projections and estimates could differ materially from those projected in the forward-looking statements. The functional and reporting currency of the Company is the Australian Dollar.  These interim financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.
 
 Overview
 
Consolidated Gems, Inc. (“Consolidated Gems” or the “Company”), formerly Electrum International, Inc. is a Delaware corporation originally incorporated in Florida as We Sell For U Corp. (“We Sell For U”). Consolidated Gems was originally established with the intention to develop and provide service offerings to facilitate auctions on eBay for individuals and companies who lack the eBay expertise and/or time to list/sell and ship items they wish to sell. In December 2008, Power Developments Pty Ltd, an Australian corporation ("Power") acquired approximately a 96% interest in Consolidated Gems from Edward T. Farmer and certain other stockholders. Mr. Farmer resigned as Sole Director and Officer of Consolidated Gems, Joseph Gutnick was appointed President, Chief Executive Officer and a Director and Peter Lee was appointed Chief Financial Officer and Secretary.
 
On August 12, 2009, the Company re-incorporated in the state of Delaware (the “Reincorporation”) through a merger involving We Sell for U Corp. and Consolidated Gems, a Delaware Corporation that was a wholly owned subsidiary of We Sell for U. The Reincorporation was effected by merging We Sell for U with Consolidated Gems, with Consolidated Gems being the surviving entity. For purposes of the Company’s reporting status with the Securities and Exchange Commission, Consolidated Gems is deemed a successor to We Sell for U.
 
We have incurred net losses since our inception and may continue to incur substantial and increasing losses for the next several years. Since inception we have incurred accumulated losses of A$2,649,540 which was funded primarily by the sale of equity securities and loans from affiliates.
 
Description of Current Business Plans and Activities
 
The following is a description of the Company’s current business plans and activities.
 
In order to take advantage of management’s substantial experience in the location and development of mineral exploration properties, the Company plans to look for opportunities in the resources industry and has identified silver and base metal exploration in Central America and gem opportunities in Australia for its potential business opportunities.
 
The Company has decided to expand its focus to include precious gems in order to generate value for shareholders and is currently assessing several gem opportunities. On September 24, 2012, the Company changed its name from Electrum International, Inc. to Consolidated Gems, Inc.
 
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which contemplates continuation of Consolidated Gems as a going concern. The Company has not yet commenced revenue producing operations and has incurred net losses since inception and may continue to incur substantial and increasing losses for the next several years, all of which raises substantial doubt as to its ability to continue as a going concern. The financial statements do not contain any adjustments that could arise as a result of this uncertainty.
 
 In addition, Consolidated Gems is reliant on loans and advances from corporations affiliated with the Company. Based on discussions with these affiliate companies, the Company believes this source of funding will continue to be available. Other than the arrangements noted above, the Company has not confirmed any other arrangement for ongoing funding. As a result the Company may be required to raise funds by additional debt or equity offerings in order to meet its cash flow requirements during the forthcoming year. However, there can be assurance that the Company’s fund raising efforts will be successful.
 
As set out in Notes to Financial Statements – Affiliate Transactions, the Company is managed by AXIS.  Certain costs and expenses are incurred by the Company and certain costs and expenses are incurred by AXIS on behalf of the Company and billed to the Company by AXIS.  The total amount of expenses billed to the Company by AXIS for the six months ended June 30, 2014 was A$49,858 (2013: A$672,562).

 
 
10

 
 
RESULTS OF OPERATIONS
 
Three Months Ended June 30, 2014 vs. Three Months Ended June 30, 2013.
 
Costs and expenses decreased from A$573,666 in the three months ended June 30, 2013 to A$23,234 in the three months ended June 30, 2014.
 
The decrease in costs and expenses is a net result of:
 
a)
a decrease in legal, accounting and professional expense from A$13,830 for the three months ended June 30, 2013 to A$9,431 for the three months ended June 30, 2014. Included within legal, accounting and professional expense for the three months ended June 30, 2014 is A$1,998 (2013: A$5,008) for costs associated with the Company’s SEC compliance obligations; A$507 (2013: A$1,393) which relates to stock agent transfer fees; and accounting fees for the three months ended June 30, 2014 is A$6,926 (2013: A$7,429).
 
b)
a decrease in administrative expense from A$15,447 in the three months ended June 30, 2013 to A$9,896 in the three months ended June 30, 2014, primarily as a result of a decrease in wages and salaries expenditure.
 
c)
a decrease in exploration expenditure expense from A$544,389 for the three months ended June 30, 2013 to A$3,907 for the three months ended June 30, 2014. The decrease is primarily due the Company commencing exploration activities during the three months ended June 30, 2013.  The Company is currently assessing the results of those activities resulting in reduced exploration activities in comparison to the prior period.
 
As a result of the foregoing, the loss from operations decreased from A$573,666 for the three months ended June 30, 2013 to a loss from operations of A$23,234 for the three months ended June 30, 2014.
 
A foreign currency exchange loss of A$8,561 for the three months ended June 30, 2013 compared to a foreign currency exchange loss of A$1,745 for the three months ended June 30, 2014 was recorded as a result of the movement in the US dollar versus the Australian dollar.
 
The net loss was A$24,979 for the three months ended June 30, 2014 compared to a net loss of A$582,227 for the three months ended June 30, 2013.
 
Six Months Ended June 30, 2014 vs. Six Months Ended June 30, 2013.
 
Costs and expenses decreased from A$597,836 in the six months ended June 30, 2013 to A$52,326 in the six months ended June 30, 2014.
 
The increase in costs and expenses is a net result of:
 
a)
a decrease in legal, accounting and professional expense from A$24,065 for the six months ended June 30, 2013 to A$18,833 for the six months ended June 30, 2014. Included within legal, accounting and professional expense for the six months ended June 30, 2014 is A$4,106 (2013: A$7,782) for costs associated with the Company’s SEC compliance; accounting fee costs for the six months ended June 30, 2014 is A$13,426 (2013: A$14,627); and A$784 (2013: A$1,656) which relates to stock agent transfer fees.
 
b)
A decrease in administrative expense from A$29,382 in the six months ended June 30, 2013 to A$22,860 in the six months ended June 30, 2014. Included within administrative expenses for the six months ended June 30, 2014 are: A$16 (2013: A$900) for accounting support fees; A$14,466 (2013: A$12,673) for XBRL conversion costs; A$390 (2013: A$420) for bank charges; insurance costs of A$3,847 (2013: A$948); A$421 (2013: A$571) for storage costs; A$4,213 (2013: A$11,367) for wages and salaries expenditure and A$0 (2013: A$821) travel costs.
 
c)
A decrease in exploration expenditure expense from A$544,389 for the six months ended June 30, 2013 to A$10,633 for the six months ended June 30, 2014. The decrease is primarily due the Company commencing exploration activities during the six months ended June 30, 2013.  The Company is currently assessing the results of those activities resulting in reduced exploration activities in comparison to the prior period.
 
As a result of the foregoing, the loss from operations decreased from A$597,836 for the six months ended June 30, 2013 to a loss from operations of A$52,326 for the six months ended June 30, 2014.
 
 
11

 
 
A foreign currency exchange loss of A$8,561 for the six months ended June 30, 2013 compared to a foreign currency exchange loss of A$1,314 for the six months ended June 30, 2014 was recorded as a result of the movement in the US dollar versus the Australian dollar.
 
The net loss was A$53,640 for the six months ended June 30, 2014 compared to a net loss of A$606,397 for the six months ended June 30, 2013.
 
Liquidity and Capital Resources
 
For the six months ended June 30, 2014, net cash used in operating activities was A$48,439 consisting of the net loss of A$53,640 offset by a non-cash charge for foreign currency exchange loss of A$1,314, a decrease in accounts payable and accrued expenses of A$4,148, a decrease in prepayments of A$3,846 and a decrease in receivables of A$4,189. For the six months ended June 30, 2014, net cash provided by financing activities was A$49,858 consisting of an increase in payable to affiliate.
 
As of June 30, 2014, the Company had short-term obligations of A$50,510 comprising accounts payable and accrued expenses and had long-term obligations of A$1,022,696 comprising advances payable to an affiliate.
 
Our budget for general and administration and for professional expenses for fiscal 2014 is A$0.25 million and A$0.12 million for exploration expenses.  We are currently investigating capital raising opportunities which may be in the form of either equity or debt, to provide funding for working capital purposes. There can be no assurance that such a capital raising will be successful, or that even if an offer of financing is received by the Company, it is on terms acceptable to the Company. The Company has to perform minimum exploration work and expend minimum amounts of money on its tenements. The overall expenditure requirement tends to be limited in the normal course of the Company’s tenement portfolio management through expenditure exemption approvals, and expenditure reductions through relinquishment of parts or the whole of tenements deemed non prospective. Should the company wish to preserve interests in its current tenements the amount which may be required to be expended not later than one year is A$50,833.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of Consolidated Gems as a going concern. However, Consolidated Gems, Inc. has limited assets, has not yet commenced revenue producing operations and has sustained recurring losses since inception.
 
Information Concerning Forward Looking Statements
 
This report and other reports, as well as other written and oral statements made or released by us, may contain forward-looking statements. Forward-looking statements are statements that describe, or that are based on, our current expectations, estimates, projections and beliefs. Forward -looking statements are based on assumptions made by us, and on information currently available to us. Forward-looking statements describe our expectations today of what we believe is most likely to occur or may be reasonably achievable in the future, but such statements do not predict or assure any future occurrence and may turn out to be wrong. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. The words "believe", "anticipate", "intend", "expect", "estimate", "project", "predict", "hope", "should", "may", and "will", other words and expressions that have similar meanings, and variations of such words and expressions, among others, usually are intended to help identify forward-looking statements.
 
Forward-looking statements are subject to both known and unknown risks and uncertainties and can be affected by inaccurate assumptions we might make.  Risks, uncertainties and inaccurate assumptions could cause actual results to differ materially from historical results or those currently anticipated. Consequently, no forward-looking statement can be guaranteed.  The potential risks and uncertainties that could affect forward looking statements include, but are not limited to:
 
The risk factors set forth in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013,
 
The possibility that we do not find gems or other minerals or that the gems or other minerals we find are not commercially economical to mine,
 
The risks and hazards inherent in the mineral exploration and development business (including environmental hazards, industrial accidents, weather or geologically related conditions),
 
Changes in the market price of minerals or gems,
 
 
 
12

 
 
 
The effects of environmental and other governmental regulations,
 
The uncertainties inherent in our exploratory activities, including risks relating to permitting and regulatory delays,
 
Estimates of proven and probable reserves are subject to considerable uncertainty,
 
Movements in foreign exchange rates,
 
Increased competition, governmental regulation,
 
Performance of information systems,
 
Ability of the Company to hire, train and retain qualified employees,
 
In addition, other risks, uncertainties, assumptions, and factors that could affect the Company's results and prospects are described in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, including under the heading “Risk Factors” and elsewhere herein and therein and may further be described in the Company's prior and future filings with the Securities and Exchange Commission and other written and oral statements made or released by the Company.
 
We caution you not to place undue reliance on any forward-looking statements, which speak only as of the date of this document.  The information contained in this report is current only as of its date, and we assume no obligation to update any forward-looking statements.
 
 
At June 30, 2014, the Company had no outstanding loan facilities.
 
 
(a)
Disclosure Controls and Procedures
 
Our principal executive officer and our principal financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as amended) as of the end of the period covered by this report. Based on that evaluation, such principal executive officer and principal financial officer concluded that, the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report at the reasonable level of assurance.
 
(b)
Changes in Internal Control Over Financial Reporting
 
There were no changes in our internal control over financial reporting during the second quarter of 2014 that materially affected, or are reasonably likely to materially affect, internal control over financial reporting.
 
(c)
Other
 
We believe that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.  Therefore, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Our disclosure controls and procedures are designed to provide such reasonable assurance of achieving our desired control objectives, and our principal executive officer and principal financial officer have concluded, as of June 30, 2014, that our disclosure controls and procedures were effective in achieving that level of reasonable assurance.
 
 
13

 
 
 

 
Item 1.
 
 
Not Applicable
 
Item 1A.
 
 
Not Applicable
 
Item 2.
 
 
Not Applicable
 
Item 3.
 
 
Not Applicable
 
Item 4.
 
 
Not Applicable
 
Item 5.
 
 
Not Applicable
 
Item 6.
 
 
(a)        Exhibit No.
Description
 
 
31.1
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Joseph Isaac Gutnick
 
31.2
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Peter James Lee
 
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley act of 2002 by Joseph Isaac Gutnick
 
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley act of 2002 by Peter James Lee
 
101
The following materials from the Consolidated Gems, Inc. Quarterly Report on Form 10-Q for the three months ended June 30, 2014 formatted in Extensible Business Reporting Language (XBRL):  (i) the Balance Sheets, (ii) the Statements of Operations, (iii) Statement of Stockholders’ (Deficit), (iv) the Statements of Cash Flows and (v) related notes.
     
   
#101.INS XBRL     Instance Document.
   
#101.SCH XBRL   Taxonomy Extension Schema Document.
   
#101.CAL XBRL   Taxonomy Extension Calculation Linkbase Document.
   
#101.LAB XBRL   Taxonomy Extension Label Linkbase Document.
   
#101.PRE XBRL    Taxonomy Extension Presentation Linkbase Document.
   
#101.DEF XBRL    Taxonomy Extension Definition Linkbase Document.
   
_________________
   
# Filed herewith.  In accordance with Rule 406T of Regulation S-T, these interactive data files are deemed “not filed” for purposes of section 18 of the Exchange Act, and otherwise are not subject to liability under that section.
 
 
14

 
 
FORM 10-Q

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

 
 
Consolidated Gems, Inc.
   
 
By:
/s/ Joseph I Gutnick
     
   
Joseph I. Gutnick
   
Chairman of the Board, President and  Chief Executive Officer
   
(Principal Executive Officer)
     
     
     
     
     
 
By:
/s/ Peter Lee
     
   
Peter Lee
   
Secretary and Chief Financial Officer
   
(Principal Financial Officer)
 
Date:  August 19, 2014
 

 
15

 
 
 

 
Exhibit No.
Description
     
 
31.1
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Joseph Isaac Gutnick
 
31.2
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Peter James Lee
 
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley act of 2002 by Joseph Isaac Gutnick
 
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley act of 2002 by Peter James Lee
     
 
101
The following materials from the Consolidated Gems, Inc. Quarterly Report on Form 10-Q for the nine months ended June 30, 2014 formatted in Extensible Business Reporting Language (XBRL):  (i) the Statements of Operations, (ii) the Balance Sheets, (iii) the Statement of Stockholders’ (deficit), (iv) the Statements of Cash Flows and (v) related notes.
     
   
#101.INS      XBRL Instance Document.
     
   
#101.SCH     XBRL Taxonomy Extension Schema Document.
     
   
#101.CAL     XBRL Taxonomy Extension Calculation Linkbase Document.
     
   
#101.LAB     XBRL Taxonomy Extension Label Linkbase Document.
     
   
#101.PRE      XBRL Taxonomy Extension Presentation Linkbase Document.
     
   
#101.DEF      XBRL Taxonomy Extension Definition Linkbase Document.
   
__________________
   
# Filed herewith.  In accordance with Rule 406T of Regulation S-T, these interactive data files are deemed “not filed” for purposes of section 18 of the Exchange Act, and otherwise are not subject to liability under that section.

 
16