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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 MARCH 31, 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)



1720 Hampton Drive
Coquitlam, British Columbia
Canada V3E 3C9(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 [ x ] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of March 31, 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 March 31, 2001, and the related statements of operations, stockholders' equity, and cash flows for the three months ended March 31, 2001 and 2000 and for the period from December 21, 1998 (inception) to March 31, 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 AccountantsSpokane, Washington
May 18, 2001





F-1



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GEM INTERNATIONAL (USA), INC.
(A Development Stage Company)
BALANCE SHEETS

|                                     |                                                                                                          | March 31, 2001 (Unaudited)          |                           | December 31, 2000  
|------------------------------------ | -------------------------------------------------------------------------------------------------------- | ----------------------------------- | ------------------------- | -------------------
|ASSETS                               |                                                                                                          |                                     |                           |                    
|                                     | CURRENT ASSETS                                                                                           |                                     |                           |                    
|                                     | Cash and cash equivalents                                                                                | $                                   | 529                       | $                  
|                                     | Accounts receivable                                                                                      |                                     | 360                       |                    
|                                     | Inventory                                                                                                |                                     | 6,677                     |                    
|                                     | Note receivable, related party                                                                           |                                     | 39,158                    |                    
|                                     | Accrued interest receivable                                                                              |                                     | 685 ------------          |                    
|                                     |                                                                                                          | Total Current Assets                |                           | 47,409 ------------
|                                     | PROPERTY, PLANT AND EQUIPMENT                                                                            |                                     |                           |                    
|                                     | Office equipment                                                                                         |                                     | 18,354                    |                    
|                                     | Accumulated depreciation                                                                                 |                                     | (5,752)------------       |                    
|                                     |                                                                                                          | Total Property, Plant and Equipment |                           | 12,602 ------------
|                                     | TOTAL ASSETS                                                                                             | $                                   | 60,011 =======            | $                  
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                                                                                          |                                     |                           |                    
|                                     | CURRENT LIABILITIES                                                                                      |                                     |                           |                    
|                                     |                                                                                                          | Accounts payable                    | $                         | 15,698             
|                                     |                                                                                                          | Note payable, related party         |                           | 39,329 ------------
|                                     |                                                                                                          |                                     | Total Current Liabilities |                    
|                                     | COMMITMENTS AND CONTINGENCIES                                                                            |                                     | - ------------            |                    
|                                     | STOCKHOLDERS' EQUITY                                                                                     |                                     |                           |                    
|                                     | 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                                                                               |                                     | 112,604                   |                    
|                                     | Deficit accumulated during development stage                                                             |                                     | (108,039) ------------    |                    
|                                     |                                                                                                          | Total Stockholders' Equity          |                           | 4,984 ------------ 
|                                     | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                               | $                                   | 60,011 =======            | $                  



See accompanying notes and accountant's review report.

F-2



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GEM INTERNATIONAL (USA), INC.
(A Develpoment Stage Company)
STATEMENTS OF OPERATIONS



|                                                                       |                               | Three Months Ended  |                            |                     
|---------------------------------------------------------------------- | ----------------------------- | ------------------- | -------------------------- | --------------------
|                                                                       | March 31, 2001 (Unaudited)    |                     | March 31, 2000 (Unaudited) |                     
|REVENUES                                                               | $                             | -                   | $                          | 16,882              
|COST OF REVENUES                                                       |                               | - ------------      |                            | 13,092 ------------ 
|GROSS PROFIT                                                           |                               | - ------------      |                            | 3,790 ------------  
|GENERAL AND ADMINISTRATIVE EXPENSES                                    |                               |                     |                            |                     
|                                                                       | Advertising                   |                     | -                          |                     
|                                                                       | Depreciation                  |                     | 767                        |                     
|                                                                       | Bad debt                      |                     | -                          |                     
|                                                                       | Bank charges                  |                     | 26                         |                     
|                                                                       | Excise and duty charges       |                     | -                          |                     
|                                                                       | Freight                       |                     | -                          |                     
|                                                                       | Licenses and fees             |                     | 370                        |                     
|                                                                       | Management fees               |                     | -                          |                     
|                                                                       | Office expense                |                     | 608                        |                     
|                                                                       | Professional expense          |                     | 139                        |                     
|                                                                       | Rent and storage              |                     | -                          |                     
|                                                                       | Research and marketing        |                     | -                          |                     
|                                                                       | Telephone and utilities       |                     | -                          |                     
|                                                                       | Travel                        |                     | -                          |                     
|                                                                       | Web site expenses             |                     | - ------------             |                     
|                                                                       | Total Expenses                |                     | 1,910 ------------         |                     
|LOSS FROM OPERATIONS                                                   |                               | (1,910)------------ |                            | (19,403)------------
|OTHER INCOME (EXPENSES)                                                |                               |                     |                            |                     
|                                                                       | Interest income               |                     | 685                        |                     
|                                                                       | Other income                  |                     | -                          |                     
|                                                                       | Interest expense              |                     | (550) ------------         |                     
|                                                                       | Total Other Income (Expenses) |                     | 135 ------------           |                     
|LOSS BEFORE INCOME TAXES                                               |                               | (1,775)             |                            | (19,815)            
|INCOME TAXES                                                           |                               | - ------------      |                            | - ------------      
|NET LOSS                                                               | $                             | (1,775)=======      | $                          | (19,815) =======    
|BASIC AND DILUTED NET LOSS PER
COMMON SHARE                            | $                             | Nil =======         | $                          | (0.01)=======       
|WEIGHTED AVERAGE NUMBER OF BASIC AND DILUTED COMMON SHARES OUTSTANDING |                               | 4,190,000 =======   |                            | 3,211,978 =======   

See accompanying notes and accoountant's review report.

F-3



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GEM INTERNATIONAL (USA), INC
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY



|                                                                   | Common Stock      | Additional |              | Accumulated Deficit During |                 |            
|------------------------------------------------------------------ | ----------------- | ---------- | ------------ | -------------------------- | --------------- | -----------
|Number                                                             |                   |            |              | Paid-in                    |                 | Development
|of Shares                                                          |                   | Amount     |              | Capital                    |                 | Stage      
|Stock issued in April 1999 at an
average price of $0.003 per share | 3,190,000         | $          | 319          | $                          | 8,991           | $          
|Cash contributed for start-up costs                                | -                 |            | -            |                            | 213             |            
|Imputed interest on loan from shareholder                          | -                 |            | -            |                            | 751             |            
|Net loss for the year ending December 31, 1999                     | - ----------      |            | - ---------- |                            | - ----------    |            
|Balance at December 31, 1999                                       | 3,190,000         |            | 319          |                            | 9,955           |            
|Stock issued for cash at $0.10 per share                           | 1,000,000         |            | 100          |                            | 99,900          |            
|Imputed interest on loan from shareholder                          | -                 |            | -            |                            | 2,199           |            
|Net loss for the year ended December 31, 2000                      | -                 |            | -            |                            | -               |            
|Balance at December 31, 2000                                       | 4,190,000         |            | 419          |                            | 112,054         |            
|Imputed interest on loan from shareholder                          | -                 |            | -            |                            | 550             |            
|Net loss for the period ended March 31, 2001                       | - ----------      |            | - ---------- |                            | - ----------    |            
|Balance at March 31, 2001 (Unaudited)                              | 4,190,000 ======= | $          | 419 =======  | $                          | 112,604 ======= | $          







See accompanying notes and accountant's review report.

F-4



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GEM INTERNATIONAL (USA), INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS



|                                      |                                                                             | Three Months Ended March 31, 2001 (Unaudited)    |                     | Three Months Ended March 31, 2000 (Unaudited) |                      | From Inception (December 21, 1998) to March 31, 2001 (Unaudited)
|------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------------------ | ------------------- | --------------------------------------------- | -------------------- | ----------------------------------------------------------------
|CASH FLOWS FROM OPERATING ACTIVITIES: |                                                                             |                                                  |                     |                                              
|                                      | Net loss                                                                    | $                                                | (1,775)             | $                                             | (19,815)             | $                                                               
|                                      | Adjustments to reconcile net loss to net cash used by operating activities: |                                                  |                     |                                               |                      |                                                                 
|                                      |                                                                             |                                                  |                     |                                               |                      |                                                                 
|                                      | Depreciation expense                                                        |                                                  | 767                 |                                               | 837                  |                                                                 
|                                      | Imputed interest                                                            |                                                  | 550                 |                                               | 550                  |                                                                 
|                                      | Change in assets and liabilities:                                           |                                                  |                     |                                               |                      |                                                                 
|                                      | Accounts receivable                                                         |                                                  | -                   |                                               | (15,660)             |                                                                 
|                                      | Accrued interest income                                                     |                                                  | 779                 |                                               | (138)                |                                                                 
|                                      | Inventory                                                                   |                                                  | -                   |                                               | (6,677)              |                                                                 
|                                      | Accounts payable                                                            |                                                  | (3,112)------------ |                                               | 4,368 ------------   |                                                                 
|                                      | Net cash used by operating activities                                       |                                                  | (2,791)------------ |                                               | (36,535)------------ |                                                                 
|CASH FLOWS FROM INVESTING ACTIVITIES: |                                                                             |                                                  |                     |                                              
|                                      | Purchase computer and office equipment                                      |                                                  | (400)               |                                               | (5,093)              |                                                                 
|                                      | Investment in short-term note receivable                                    |                                                  | -                   |                                               | -                    |                                                                 
|                                      | Payments received from short term note receivable                           |                                                  | 2,367 ------------  |                                               | - ------------       |                                                                 
|                                      |                                                                             | Net cash provided (used) by investing activities |                     | 1,967 ------------                            |                      | (5,093) ------------                                            
|CASH FLOWS FROM FINANCING ACTIVITIES: |                                                                             |                                                  |                     |                                              
|                                      | Proceeds from sales of common stock                                         | -                                                |                     | 100,000                                       |                      | 109,310                                                         
|                                      | Proceeds from related party loan                                            |                                                  | - ------------      |                                               | - ------------       |                                                                 
|                                      | Net cash provided by financing activities                                   |                                                  | - ------------      |                                               | 100,000 ------------ |                                                                 
|                                      | Net increase in cash and cash equivalents                                   |                                                  | (824)               |                                               | 58,372               |                                                                 
|                                      | Cash and cash equivalents beginning of period                               |                                                  | 1,353 ------------  |                                               | 841 ------------     |                                                                 
|                                      | Cash and cash equivalents at end of period                                  | $                                                | 529 ========        | $                                             | 59,213 ========      | $                                                               
|Supplemental cash flow disclosures:   |                                                                             |                                                  |                     |                                               |                      |                                                                 
|                                      | Income taxes paid                                                           | $                                                | -                   | $                                             | -                    | $                                                               
|                                      | Interest paid                                                               | $                                                | -                   | $                                             | -                    | $                                                               
|Non-cash items:                       |                                                                             |                                                  |                     |                                               |                      |                                                                 
|                                      | Capital contribution for imputed interest                                   | $                                                | 550                 | $                                             | 550                  | $                                                               

See accompanying notes and accountnat's review report.

F-5



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GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 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 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 $1,775 for the period ended March 31, 2001, has an accumulated deficit of $108,039, 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.



F-6



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GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2001

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loss Per Share

Basic and diluted net 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 March 31, 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 $140,000 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.

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.

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.



F-7



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GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2001

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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. Receivables are shown net of allowance for bad debts of $0 as of March 31, 2001.

Provision for Taxes

At March 31, 2001, the Company had an accumulated net operating loss of approximately $108,000. No provision for taxes or tax benefit has been reported in the financial statements, as there is not a measurable means of assessing future profits or losses.

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.

Web Site Development

An outside consultant is planning and 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. During the three months ended March 31, 2001, the Company had not incurred any web site development costs.

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.



F-8



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GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2001

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Impaired Asset Policy

In March 1995, the Financial Accounting Standards Board issued a statement titled "Accounting for Impairment of Long-lived Assets." In complying with this standard, the Company reviews its long-lived assets quarterly to determine if any events or changes in circumstances have transpired which indicate that the carrying value of its assets may not be recoverable. The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by its assets to their respective carrying amounts. Asset values will be adjusted using the discounted future cash flows expected to be received for the assets.The Company does not believe any adjustments are needed to the carrying value of its assets at March 31, 2001.

Fair Value of Financial Instruments

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

Translation of Foreign Currency

The Company has adopted Financial Accounting Standard No. 52. Monetary assets and liabilities denominated in foreign currencies are translated into United States dollars at rates of exchange in effect at the balance sheet date. Non-monetary assets and liabilities and items recorded in the income statement arising from transactions denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Gains or losses are included in income for the year. For the three months ended March 31, 2001, the Company had no transaction gain or loss.

Derivative Instruments

In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." 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.

At March 31, 2001, the Company has not engaged in any transactions that would be considered derivative instruments or hedging activities.



F-9



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GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2001

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Interim Financial Statements

The interim financial statements as of and for the three months ended March 31, 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.

NOTE 3 - CONCENTRATION OF CREDIT RISK FOR CASH HELD AT BANKS

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.

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 $767 for the three months ended March 31, 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. 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, 2000, 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).

F-10



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GEM INTERNATIONAL (USA), INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2001

NOTE 6 - ADDITIONAL PAID-IN CAPITAL (Continued)

This transaction resulted in additional paid-in capital of $550 for the three months ended March 31, 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. Interest is being charged at 7% per annum on this uncollateralized obligation. The Company intends to collect on this note before the end of the third quarter of 2001. On March 31, 2001, the balance owing is $39,158, plus accrued interest. For additional related party transactions, see 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 $60,011 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.





F-11



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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.

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 March 31, 2001, the Company had revenue of $-0- bringing total revenue from sales to $-0- for the three months ended March 31, 2001, while the act loss amounted to $108,039 from inception to March 31, 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 March 31, 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 three months ended March 31, 2001 and March 31, 2000 totaled $-0-. Ibis was because the web-site had yet to generate revenues.

There was no operating expenses relating to the web-site for the three months ending March 31, 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.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There are no senior securities issued by the Company.



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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 March 31, 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 March 31, 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 15th day of August, 2001.



| | GEM INTERNATIONAL (USA), INC.
| | -----------------------------
| | BY:                          
| | BY: