UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10- Q


( Mark one)
☒ 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 
ACT OF 1934
 
For the Quarterly Period Ended March 31, 2016
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: 000-53735
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 1A, 42 Moray Street
 
Southbank, Victoria, Australia
3006
(Address of Principal Executive Offices)
(Zip Code)
   
Registrant’s telephone number, including area code: 001 (613) 8532 2838

(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.
☐   Yes  ☒   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).
☒ Yes  ☐   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  ☒
 
 Emerging growth company ☐  
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b2 of the Exchange Act).
☐   Yes  ☒   No
 
There were 199,873,683 shares of common stock outstanding on September 28, 2017.
 
 
 
Table Of Contents



   
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1


PART I – FINANCIAL INFORMATION

Item 1.
FINANCIAL STATEMENTS

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, 2015.

In the opinion of management, all adjustments, consisting of normal recurring adjustments necessary to present fairly the financial position of the Company as of March 31, 2016, the results of its operations for the three month periods ended March 31, 2016 and 2015 and the changes in its cash flows for the three month periods ended March 31, 2016 and 2015 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

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.



UNLESS OTHERWISE INDICATED, ALL FINANCIAL INFORMATION PRESENTED IS IN AUSTRALIAN DOLLARS.
 
2
 
CONSOLIDATED GEMS, INC.
Balance Sheet

 
March 31,
2016
(Unaudited)
December 31,
2015
 
 
A$
A$
     
ASSETS
   
     
Current Assets:
   
Cash
36,393
118
Receivables
2,544
-
Prepayments
89,029
-
Total Current Assets
127,966
118
     
     
Total Assets
127,966
118
     
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
   
     
Current Liabilities:
   
Accounts payable and accrued expenses
155,574
156,742
Advances from other
911,802
-
Total Current Liabilities
1,067,376
156,742
     
Non-Current Liabilities:
   
Advances from affiliate
382,759
1,088,175
Total Non-Current Liabilities
382,759
1,088,175
     
Total Liabilities
1,450,135
1,244,917
     
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)
(2,913,317)
(2,835,947)
Total Stockholders’ (deficit)
(1,322,169)
(1,244,799)
     
Total Liabilities and Stockholders’ (Deficit)
127,966
118
     
See notes to financial statements
   
 
3

CONSOLIDATED GEMS, INC.
Statement of Operations
(Unaudited)

   
For the three months ended
March 31
 
   
2016
   
2015
 
Revenues
 
 
A$-
   
 
A$-
 
                 
Cost and expenses
               
Legal, accounting and professional
   
33,184
     
10,188
 
Administration expense
   
44,687
     
1,926
 
     
77,871
     
12,114
 
                 
(Loss) from operations
   
(77,871
)
   
(12,114
)
Foreign currency exchange gain/(loss)
   
501
     
(109
)
(Loss) before income tax
   
(77,370
)
   
(12,223
)
Provision for income tax
   
-
     
-
 
                 
Net (loss)
   
(77,370
)
   
(12,223
)
                 
Basic net (loss) per Common Equivalent Shares
   
(0.00
)
   
(0.00
)
                 
Weighted number of common equivalent shares  (000’s)
   
175,315
     
175,315
 
                 
See notes to financial statements
               
 
4
 
CONSOLIDATED GEMS, INC.
Statement of Stockholders’ (Deficit)
for the three months ended March 31, 2016
 (Unaudited)
 

 
 
 
 
Shares
Common Stock
Amount
 
Additional
Paid-in
Capital
 
 
 
 
Accumulated
(Deficit)
 
 
 
Total
   
A$
A$
A$
A$
           
           
Balance December 31, 2015
175,315,350
16,825
1,574,323
(2,835,947)
(1,244,799)
           
Net (loss)
-
-
-
(77,370)
(77,370)
           
Balance, March 31, 2016
175,315,350
16,825
1,574,323
(2,913,317)
(1,322,169)
 
See notes to financial statements
 

5
 
CONSOLIDATED GEMS, INC.
Statements of Cash Flows
(Unaudited)

 
For the three months ended
March 31
 
2016
A$
2015
A$
     
CASH FLOWS FROM OPERATING ACTIVITIES
   
Net (Loss)
(77,370)
(12,223)
     
Adjustments to reconcile net (loss) to net cash (used) in operating activities
   
Foreign currency exchange (gain)/loss
501
109
Net change in receivables and deposits
(2,544)
(166)
Net change in prepayments
(89,029)
339
Net change in accounts payable and accrued expenses
(1,168)
9,269
     
Net Cash (used) in Operating Activities
(169,610)
(2,672)
     
CASH FLOWS FROM FINANCING ACTIVITIES
   
     
Advances from (repayments to) affiliate
(705,416)
2,601
Advances from other
911,802
-
     
Net Cash provided by Financing Activities
206,386
2,601
     
Effects of exchange rate on cash
(501)
(109)
     
Net  increase (decrease) in cash
36,275
(180)
     
Cash at Beginning of Period
118
2,172
     
Cash at End of Period
36,393
1,992
 
See notes to financial statements
 

6

CONSOLIDATED GEMS, INC.
Notes to Financial Statements
March 31, 2016
 
1.
ORGANIZATION AND BUSINESS
 
Consolidated Gems, Inc. ("Consolidated Gems” or the “Company"), is a Delaware corporation originally incorporated in Florida as We Sell for U Corp. 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 March 31, 2016.
 
In order to take advantage of management’s substantial experience in the location and development of mineral exploration properties, the Company planned to look for opportunities in the resources industry.
 
The Company had decided to expand its focus to include precious gems in order to generate value for shareholders and was assessing several gem opportunities. In March 2015, following a review of the results of exploration on the gem tenement, the Company decided to relinquish the exploration licence.
 
On March 8, 2016, the Company announced that it had entered into a term sheet with Noam Levavi and Eran Galil for the acquisition of all of the issued shares of Byondata (“Byondata”), a company incorporated under the laws of Israel. The Company had a 90 day period to conduct due diligence and negotiate a formal share sale agreement. Byondata had developed a unique platform as a service to create content-rich, immersive Virtual Reality (VR) experiences. In July 2016, the Company announced that the proposed acquisition of the all the shares in Byondata had been terminated. In January 2017, the Company announced it was looking for gold opportunities in Myanmar .
 
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.
 
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.
 
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 Use of 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.
 
The functional and reporting currency is the Australian dollar.
 
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.
 
7
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.
GOING CONCERN
 
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has not yet commenced revenue producing operations and had an accumulated deficit of A$2,913,317 as of March 31, 2016.. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company will require additional funding for operations and this additional funding may be raised through debt or equity offerings. The Company has a debt due to AXIS Consultants Pty Ltd (AXIS). AXIS provides management services to the Company and the cost of these services increases the amount of the debt. In addition, the Company has historically relied on loans and advances from corporations affiliated with the President of Consolidated Gems.  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. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
5.
AFFILIATE TRANSACTIONS
 
In January 2009, the Company entered into an agreement with AXIS Consultants Pty Ltd (“AXIS”) to provide geological, management and administration services to the Company. AXIS is affiliated through common management and is incorporated in Australia. The Company’s President and director, Mr. Gutnick, is also a director of AXIS and Mr. Lee is Chief Financial Officer and Secretary of the Company and is also Company Secretary of AXIS. The Company is one of nine affiliated companies under common management with AXIS. Each of the companies has some common Directors, officers and shareholders. In addition, each of the companies is substantially dependent upon AXIS for its senior management and administration staff. It has been the intention of the affiliated companies and respective Boards of Directors that each of such arrangements or transactions should accommodate the respective interest of the relevant affiliated companies in a manner which is fair to all parties and equitable to the shareholders of each. Currently, there are no material arrangements or planned transactions between the Company and any of the other affiliated companies other than AXIS.
 
The payable to affiliate at March 31, 2016 of A$382,759 is due to AXIS. During the three months ended March 31, 2016, AXIS provided services in accordance with the services agreement, incurred direct costs on behalf of the Company and advanced funds of A$111,383 and the Company repaid A$816,800 to AXIS. The Company intends to repay the advances from affiliate with funds raised either via additional debt or equity offerings, but as this may not occur within the next 12 months.  AXIS has 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.
 
6.
ADVANCES FROM OTHER PARTIES
 
During the 3 months ended March 31, 2016, the Company received funds from parties wishing to participate in a private placement transaction. The terms of the private placement had not been concluded at March 31, 2016 therefore the amount received of A$911,802 was treated as an advance form other parties. The private placement was concluded in the second quarter of fiscal 2016.
 
7.
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 US$1,703,000 as of December 31, 2015 which expire in years 2028 through 2034. 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.
 

8
The Company’s tax returns for all years since December 31, 2011 remain open to examination by the respective tax authorities.  There are currently no tax examinations in progress.
 
8.
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.

9.
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 which requires recognition or disclosure in the accompanying financial statements.
 
The Company issued 19,033,333 and 5,525,000 shares of common stock on April 13, 2016, and May, 20, 2016, raising A$765,652 and A$221,000 respectively.
 
On July 24, 2017, the Company entered into a Term Sheet with Lior Barash, Erez Glazer, Lior Wayn, and Lior Dolfin, (collectively, the ‘’Sellers”)  for the acquisition of all of the issued shares of the Cyber Security technology business “Attofensive”, a company incorporated under the laws of Israel. The Company has a 120 day period to conduct due diligence and negotiate a formal share sale agreement.
 
The purchase price is up to a maximum USD$20,000,000 which is to be satisfied as follows:

a)
The sum of USD$25,000 payable to the Sellers for due diligence expenses, 30 business days from the execution of the Term Sheet;

b)
 A further USD$25,000 each month after the date in a) above for due diligence expenses, for 3 months,  payable to the Sellers for working capital purposes;

c)
An issue of fully paid ordinary shares of common stock of the Company to the value of USD$5,000,000 (less any payments made to The Sellers under (a) and (b) above) to the Sellers at an issue price of USD$0.10 per share of common stock (Consideration Shares);

d)
The issue to the Sellers of shares of common stock to the equivalent to USD$5,000,000 at the issue price of USD$0.20, subject to the Sellers achieving sales revenue of USD$100,000 within twelve months after the first anniversary of Completion;

e)
The issue to the Sellers of shares of common stock to the equivalent to USD$5,000,000 at the issue price of USD$0.20, subject to the Sellers achieving sales revenue of USD$1,000,000 within twelve months after the first anniversary of Completion; and

f)
The issue to the Sellers of shares of common stock to the equivalent to USD$5,000,000 at the issue price of USD$0.20, subject to the Sellers achieving sales revenue of USD$2,500,000 within twelve months after the first anniversary of Completion.

If the Transaction is terminated or is in the reasonable opinion of the Company unable to proceed at any point, the Company and the Sellers have agreed to convert any monies paid to the Sellers under (a) and (b) above into convertible securities in Attofensive .

As part of the agreement and as a condition to completion, the Company will raise USD$5,000,000.

Pending completion, the Sellers are required to carry on business in the ordinary course.

Prior to completion the Sellers are to discharge all encumbrances, mortgages, liens, bank loans and other security holdings except the business may have liabilities of no more than $200,000 from past activities.
 
In September 2017 the Company placed 461,538 shares of common stock at a price of AUD$0.065 per shares for total proceeds of AUD$30,000.
 
9

Item 2.       MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 
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, 2015.
 
  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. Joseph Gutnick resigned as a director in September 2015 and was replaced by Mordechai Gutnick.
 
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$2,913,317 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 planned to look for opportunities in the resources industry.
 
As a result of management’s decision to refocus its efforts from energy opportunities to explore opportunities in the resources industry, effective March 31, 2013, the Company ceased reporting as a development stage company.  Since April 1, 2013, the Company had been evaluating potential gem related projects and had been granted an exploration tenement in New South Wales, Australia. Accordingly, from April 1, 2013 the Company had been classified as an exploration stage company. In March 2015, following a review of the results of exploration on the gem tenement, the Company decided to relinquish the exploration licence.
 
On March 8, 2016, the Company announced that it had entered into a term sheet with Noam Levavi and Eran Galil for the acquisition of all of the issued shares of Byondata (“Byondata”), a company incorporated under the laws of Israel. The Company haD a 90 day period to conduct due diligence and negotiate a formal share sale agreement. Byondata had developed a unique platform as a service to create content-rich, immersive Virtual Reality (VR) experiences. In July 2016, the Company announced that the proposed acquisition of the all the shares in Byondata had been terminated.
 
RESULTS OF OPERATIONS
 
Costs and expenses are incurred in both Australian and US dollars. Costs incurred in US dollars are converted to Australian dollars. The Australian dollar has fallen by approximately 12% against the US dollar over the past 12 months and therefore the comparison of amounts for the three month period ended March 31, 2016 versus the three month period ended March 31, 2015 does not provide a true comparison of the movement as it may have been heavily influenced by the movement in the exchange rate depending on whether the cost or expenses was initially incurred in US dollars or Australian dollars.
 
Three Months Ended March 31, 2016 vs. Three Months Ended March 31, 2015.
 
Costs and expenses increased from A$12,114 in the three months ended March 31, 2015 to A$77,871 in the three months ended March 31, 2016.
 
10
 
The increase in costs and expenses is a net result of:
 
a)
an increase in legal, accounting and professional expense from A$10,188 the three months ended March 31, 2015 to A$33,184 for the three months ended March 31, 2016. Included within legal, accounting and professional expense for the three months ended March 31, 2016 is A$2,400 (2015: A$1,736) which relates to stock agent transfer fees; audit fees of A$9,917 (2015: A$8,453), franchise tax of A$871 (2015: A$nil), legal fees of A$806 (2015: A$nil), and consulting fees of A$19,190 (2015: A$nil).
 
b)
an increase in administrative expense from A$1,926 in the three months ended March 31, 2015 to A$44,687 in the three months ended March 31, 2016, primarily as a result of an increase in the cost of services provided by AXIS in accordance with the service agreement.  Included within the administrative expenses is an amount of A$20,438 (2015: A$1,821) billed to us by AXIS. We incurred A$17,500 (2015: A$nil) in public relations costs; A$14,991 (2015: A$nil) in salaries charged to us by AXIS; and A$10,866 (2015: A$nil) in travel costs.
 
As a result of the foregoing, the loss from operations increased from A$12,114 for the three months ended March 31, 2015 to A$77,871 for the three months ended March 31, 2016.
 
A foreign currency exchange loss of A$109 for the three months ended March 31, 2015 compared to a foreign currency exchange gain of A$501 for the three months ended March 31, 2016 was recorded as a result of the movement in the US dollar versus the Australian dollar.
 
The net loss was A$77,370 for the three months ended March 31, 2016 compared to a net loss of A$12,223 for the three months ended March 31, 2015.
 
Liquidity and Capital Resources
 
For the three months ended March 31, 2016, net cash used in operating activities was A$170,612 consisting of the net loss of A$77,370 offset by a non-cash charge for foreign currency exchange gain of A$501, an increase in receivables and deposits of A$2,544, a decrease in accounts payable and accrued expenses of A$1,168, and an increase in prepayments of A$89,029. For the three months ended March 31, 2016, net cash provided by financing activities was A$206,386 consisting of an decrease in payable to affiliates of A$705,416 and an increase in advances from other of A$911,802.
 
As of March 31, 2016, the Company had short-term obligations of A$1,067,376 comprising accounts payable and accrued expenses and advance from other, and had long-term obligations of A$382,759 comprising advances payable to an affiliate.
 
For the three months ends March 31, 2016, AXIS charged the Company A$51,284 for management and administration services; provided funding of A$60,100 and the Company repaid AXIS A$816,800. The net amount owed by the Company to AXIS at March 31, 2016 of A$382,759 is included under non-current liabilities.
 
The Company has funded operations since inception through advances from affiliated entities. The Company’s ability to continue operations through 2016 is dependent upon future funding from affiliated entities, capital raisings, or its ability to commence revenue producing operations and positive cash flows, of which there can be no assurance. AXIS has advised it does not currently intend to require repayment of these advances prior to March 31, 2017, accordingly the Company has decided to classify the amounts payable as non-current in the accompanying balance sheets.
 
The Company continues to search for additional sources of capital, as and when needed; however, there can be no assurance funding will be successfully obtained. Even if it is obtained, there is no assurance that it will not be secured on terms that are highly dilutive to existing shareholders.
 
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.
 
In January 2017, the Company announced it was looking for gold opportunities in Myanmar.
 
The accompanying financial statements have been prepared in conformity with US GAAP, which contemplates continuation of Consolidated Gems as a going concern. However, Consolidated Gems has limited assets, has not yet commenced revenue producing operations and has sustained recurring losses since inception.
 
Our budget for general and administration and for professional expenses for the remainder of fiscal 2016 is A$0.01 million. Once we have identified a specific exploration or mining project we will also need to prepare a budget for these activities.  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.
 
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.
 
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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, 2015,
·
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,
·
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, 2015, 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.
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
 
At March 31, 2016, the Company had no outstanding loan facilities.
 
Item 4.
Controls and Procedures.
 
(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 first quarter of 2016 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 March 31, 2016, that our disclosure controls and procedures were effective in achieving that level of reasonable assurance.
 
12
 
PART II – OTHER INFORMATION
 
Item 1.
Legal Proceedings.
 
Not Applicable
 
Item 1A.
Risk Factors.
 
Not Applicable
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
 
Not Applicable
 
Item 3.
Defaults Upon Senior Securities.
 
Not Applicable
 
Item 4.
Mining Safety Disclosures.
 
Not Applicable
 
Item 5.
Other Information.
 
Not Applicable
 
Item 6.
Exhibits.
 
(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 Mordechai Zev 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 Mordechai Zev 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 March 31, 2016 formatted in Extensible Business Reporting Language (XBRL):  (i) the Balance Sheet, (ii) the Statement of Operations, (iii) Statement of Stockholders’ (Deficit), (iv) the Statement 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.
 
13
 
FORM 10-Q

SIGNATURES
 
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/ Mordechai Z Gutnick 
     
    Mordechai Z 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:  October 4, 2017
 
14
 
EXHIBIT INDEX
 

Exhibit No.                                      Description


 
101
The following materials from the Consolidated Gems, Inc. Quarterly Report on Form 10-Q for the nine months ended March 31, 2016 formatted in Extensible Business Reporting Language (XBRL):  (i) the Balance Sheet, (ii) the Statement of Operations, (iii) the Statement of Stockholders’ (deficit), (iv) the Statement 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.
 

 
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