Gemco Minerals, Inc. - FORM 10-Q

Attached files

file	filename
EX-31.1 - EXHIBIT 31.1 - Gemco Minerals, Inc.	gemco_10q-ex31x1.htm
EX-31.2 - EXHIBIT 31.2 - Gemco Minerals, Inc.	gemco_10q-ex31x2.htm
EX-32.1 - EXHIBIT 32.1 - Gemco Minerals, Inc.	gemco_10q-ex32x1.htm
EX-32.2 - EXHIBIT 32.2 - Gemco Minerals, Inc.	gemco_10q-ex32x2.htm

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the period ended August 31, 2009

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the transition period from______ to _______

Commission File Number 000-51523

GEMCO MINERALS INC.

(Exact name of registrant as specified in its charter)

Florida	98-0582366
(State or other jurisdiction of incorporation or organization)	IRS Employer Identification No.)

#203 – 20189 56th Avenue, Langley, British Columbia, Canada, V3A 3Y6

(Address of principal executive offices) (Zip Code)

866-848-2940

(Registrant's telephone number, including area code)

______________________

(Former name, former address and former fiscal year,

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 x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated

filer and large accelerated filer" in Rule 12b-2 of the Exchange Act:

Large Accelerated Filer o Accelerated Filer o

Non-accelerated Filer o Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes o No x

The number of shares of the registrant's Common Stock, $0.001 par value, outstanding as of October 15, 2009 was 29,455,839 shares.

C O N T E N T S

Part I. FINANCIAL INFORMATION	Page
Item 1. Financial Statements	F1-F15
Item 2. Management's Discussion and Analysis or Plan of Operation	2
Item 3. Quantitative and Qualitative Disclosures About Market Risk	9
Item 4. Controls and Procedures	9
Part II. OTHER INFORMATION
Item 1. Legal Proceedings	11
Item 2. Sales of Unregistered	12
Item 3. Defaults Upon Senior Securities	12
Item 4. Submission of Matters to a Vote of Security Holders	12
Item 5. Other Information	12
Item 6. Exhibits	12
SIGNATURES	13

Item 1. Financial Statements.

GEMCO MINERALS INC.
(An Exploration Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars)
(unaudited)


		August 31			May 31,
		2009			2009
					(Restated -
Assets					Note 10)
Current:
	Cash	$	69,887		$	903
	Deposits (Note 3)		44,970			-
	Note receivable (Note 4)		5,449			5,449
Total Current Assets			120,306			6,352

Other Assets:
Investments (Note 5)			20,805			-
Total Other Assets			20,805			-
Total Assets		$	141,111		$	6,352

Liabilities
Current:
	Accounts payable	$	42,380		$	42,316
	Due to related parties (Note 6(a))		34,355			35,254
	Due to shareholders (Note 6(b))		33,474			33,474
	Notes payable - related parties (Note 7)		476,636			441,796
	Notes payable (Note 8 (a))		269,431			299,585
Total Current Liabilities			856,275			852,426

Long Term:
Convertible note payable (Note 8(b))			224,854			-
Long Term Liabilities			224,854			-
Total Liabilities			1,081,129			852,426


Stockholders' Deficit
Common Stock
	Authorized -
50,000,000 Common shares with par value of $0.001
Issued and Outstanding -
	29,455,839 and 25,630,839 shares, respectively		29,456			25,631
	Additional paid-in capital		2,430,853			2,404,178
Other accumulated comprehensive loss			(93,614	)		(94,216	)
Deficit, accumulated during the exploration stage			(3,306,713	)		(3,181,666	)
Total Stockholders' Deficit			(940,018	)		(846,074	)
Total Liabilities and Stockholders' Deficit		$	141,111		$	6,352

(The Accompanying Notes are an Integral part of the Financial Statements)

F-1

GEMCO MINERALS INC.
(An Exploration Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. dollars)							Period from
(unaudited)							August 21, 1997
	Three Months			Three Months			(date of inception)
	Ended			Ended			through
	August 31			August 31			August 31
	2009			2008			2009
							(Restated)
							Note 10)

Revenue	$	-			-			61,770

Operating Expenses
Depreciation		-			2,184			254,547
General and administrative		91,362			75,776			2,222,207

Total operating expenses		91,363			77,960			2,476,754

Loss before Other Items		(91,363	)		(77,960	)		(2,414,984	)

Other Income (Expenses)
Interest and bank charges		(32,004	)		(15,379	)		(688,895	)
Loss on disposal of assets		-			-			(46,553	)
Interest on investment		12,191			-			99,095
Writedown of investment and investment interest		(13,871	)		-			(338,744	)
Writedown of mineral claims		-			-			(99,274	)
Writedown of equipment		-			-			(184,723	)
Writedown of liabilities		-			-			365,753
Loss on disposal of shares		-			-			(1,685	)

Total other income (expense)		(33,684	)		(15,379	)		(895,025	)
Loss before Minority Interest and Income Taxes	$	(125,047	)	$	(93,339	)	$	(3,310,009	)

Minority interest		-			-			3,296
Provision for income taxes		-			-			-

Net Loss for the period	$	(125,047	)	$	(93,339	)	$	(3,306,713	)
Other comprehensive income (loss)
Foreign currency adjustment		602			13,989			(93,614	)
Comprehensive income (loss)	$	(124,445	)	$	(79,350	)	$	(3,400,327	)

Net loss per share -
Basic and fully diluted	$	(0.00	)	$	(0.00	)

Weighted-average number of shares		27,502,578			23,026,800

(The Accompanying Notes are an Integral part of the Financial Statements)

F-2

GEMCO MINERALS INC.
(An Exploration Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. dollars)							Period from
(unaudited)							August 21, 1997
	Three Months			Three Months			(date of inception)
	Ended			Ended			through
	August 31			August 31			August 31
	2009			2008			2009
							(Restated)
							Note 10)
Operating Activities
Net loss for the period	$	(125,047	)	$	(93,339	)	$	(3,306,713	)

Adjustments to reconcile net loss to net cash used in
operating and financing activities:

Depreciation		-			2,184			254,547
Shares issued for services		5,000			39,750			478,960
Shares issued for debt consideration		17,500			-			22,500
Loss on disposal of assets		-			-			1,816
Writedown and loss on investments		1,680			-			276,680
Writedown of mineral claims		-			-			163,667
Writedown of equipment		-			-			153,036
Writedown of liabilities		-			-			(365,753	)

Changes in operating assets and liabilities
Deposits		(44,970	)		-			(50,419	)
Accounts payable and accrued liabilities		64			(1,860	)		292,759
Due to related parties		22,603			46,370			306,772

Net cash provided by (used in) operating activities		(123,171	)		(6,897	)		(1,772,148	)

Investing Activities
Investments disposition/(acquisition)		(22,485	)		-			(71,379	)
Equipment disposition/(acquisition)		-			-			(423,082	)
Mineral claims disposition/(acquisition)		-			-			(88,476	)
Net cash provided by (used in) investing activities		(22,485	)		-			(582,937	)

Financing Activities
Notes Payable		194,700			(8,020	)		2,172,168
Advances from related parties		19,337			-			47,367
Advances from shareholders		-			-			134,051
Proceeds from share subscriptions		-			-			165,000
Net cash provided by (used in) investing activities		214,037			(8,019	)		2,518,586
Foreign exchange included in other comprehensive loss		602			13,989			(93,614	)

Net Increase (Decrease) in Cash		68,984			(927	)		69,887

Cash, beginning		903			3,277			-
Cash, ending	$	69,887		$	2,350		$	69,887

Supplemental Disclosures
Interest paid	$	7,172		$	15,379		$	688,895
Non-Cash transactions:
Shares issued for services	$	5,000		$	39,750		$	478,960
Shares issued for settlement of debt	$	8,000		$	-		$	1,473,849
Shares issued for debt consideration	$	17,500		$	-		$	22,500
Shares issued for investment	$	-		$	-		$	275,000
Shares issued to acquire asset	$	-		$	-		$	15,000

(The Accompanying Notes are an Integral part of the Financial Statements)

F-3

GEMCO MINERALS INC.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months ended August 31, 2009

(Expressed in U.S. dollars)

(unaudited)

1.	Exploration Stage Company

Gemco Minerals Inc. (the “Company”) was incorporated in the State of Florida on August 21, 1997 and is an Exploration Stage Company, as defined by Statement of Financial Accounting Standard (“SFAS”) No.7 “Accounting and Reporting by Development Stage Enterprises”. The Company’s principal business is the acquisition and exploration of mineral resources. The Company has not presently determined whether its properties contain mineral reserves that are economically recoverable.

These condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has generated minimal revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations and to determine the existence, discovery and successful exploitation of economically recoverable reserves in its resource properties, confirmation of the Company’s interests in the underlying properties, and the attainment of profitable operations. As at August 31, 2009, the Company has a working capital deficit of $735,970 and has accumulated losses of $3,306,713 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

2.	Summary of Significant Accounting Policies

a)	Basis of Presentation and Consolidation

These condensed consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. These condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiary, Firstline Recovery Systems Inc. (“Firstline”), a company incorporated in the Province of British Columbia, Canada, on June 1, 1998 and its subsidiary EKG Minerals Inc. (“EKG”) a company incorporated in the Province of British Columbia, Canada, on October 8, 2004. All intercompany transactions and balances have been eliminated. The Company’s fiscal year end is May 31.

b)	Basis of Presentation

In the opinion of management, the accompanying balance sheets and related interim statements of income, cash flows, and stockholders' equity include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results and outcomes may differ from management's estimates and assumptions.

Interim results are not necessarily indicative of results for a full year. The information included in this Form l0-Q should be read in conjunction with information included in the Form I0-K.

F-4

GEMCO MINERALS INC.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months ended August 31, 2009

(Expressed in U.S. dollars)

(unaudited)

2.	Summary of Significant Accounting Principles (continued)

c)	Use of Estimates

The preparation of these condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to donated expenses, and deferred income tax asset valuations. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

d)	Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

e)	Basic and Diluted Net Income (Loss) Per Share

The Company computes net income (loss) per share in accordance with SFAS No. 128, "Earnings per Share" (SFAS 128). SFAS 128 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

f)	Financial Instruments

The fair values of cash, investments, accounts payable, accrued liabilities, amounts due to shareholders and amounts due to related parties, approximate their carrying values due to the immediate or short-term maturity of these financial instruments. Foreign currency transactions are primarily undertaken in Canadian dollars. The financial risk is the risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility to these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.

g)	Foreign Currency Transactions/Balances

The Company’s functional currency is the United States dollar. The condensed consolidated financial statements of the Company are translated to United States dollars in accordance with SFAS No. 52 “Foreign Currency Translation” (“SFAS No. 52). Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars. The Company has not, to the date of these condensed consolidated financials statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

The functional currency of the wholly owned subsidiary is the Canadian dollar. The financial statements of the subsidiary are translated to United States dollars in accordance with SFAS No. 52 using period-end rates of exchange for assets and liabilities, and average rates of exchange for the year for revenues and expenses. Translation gains (losses) are recorded in accumulated other comprehensive income (loss) as a component of stockholders’ equity. Foreign currency transaction gains and losses are included in current operations.

F-5

GEMCO MINERALS INC.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months ended August 31, 2009

(Expressed in U.S. dollars)

(unaudited)

2.	Summary of Significant Accounting Principles (continued)

h)	Mineral Property Costs

The Company is primarily engaged in the acquisition, exploration and development of mineral properties.

Mineral property acquisition costs are capitalized in accordance with EITF 04-2 when management has determined that probable future benefits consisting of a contribution to future cash inflows have been identified and adequate financial resources are available or are expected to be available as required to meet the terms of property acquisition and budgeted exploration and development expenditures. Mineral property acquisition costs are expensed as incurred if the criteria for capitalization are not met. In the event that mineral property acquisition costs are paid with Company shares, those shares are valued at market at the time the shares are due. Mineral property exploration costs are expensed as incurred.

When mineral properties are acquired under option agreements with future acquisition payments to be made at the sole discretion of the Company, those future payments, whether in cash or shares, are recorded only when the Company has made or is obliged to make the payment or issue the shares. Because option payments do not meet the definition of tangible property under EITF 04-2, all option payments are expensed as incurred.

When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves and pre feasibility, the costs incurred to develop such property are capitalized.

Estimated future removal and site restoration costs, when determinable are provided over the life of proven reserves on a units-of-production basis. Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology and industry standards. Any charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred.

i) Long-Lived Assets

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life.

Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

j) Comprehensive Loss

SFAS No. 130, “Reporting Comprehensive Income” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at August 31, 2009, the Company’s accumulated comprehensive loss was $93,614.

F-6

GEMCO MINERALS INC.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months ended August 31, 2009

(Expressed in U.S. dollars)

(unaudited)

2.	Summary of Significant Accounting Principles (continued)

k) Income Taxes

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted SFAS No. 109 “Accounting for Income Taxes” as of its inception. Pursuant to SFAS No. 109 the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

l)	Stock-based Compensation

Prior to January 1, 2006, the Company accounted for stock-based awards under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” using the intrinsic value method of accounting, under which compensation expense was only recognized if the exercise price of the Company’s employee stock options was less than the market price of the underlying common stock on the date of grant. Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123R “Share Based Payments”, using the modified retrospective transition method. The Company has not issued any stock options or share based payments since its inception. Accordingly, there was no effect on the Company’s reported loss from operations, cash flows or loss per share as a result of adopting SFAS No 123R.

m)	Recent Accounting Pronouncements

June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140” (“SFAS 166”). The provisions of SFAS 166, in part, amend the derecognition guidance in FASB Statement No. 140, eliminate the exemption from consolidation for qualifying special-purpose entities and require additional disclosures. SFAS 166 is effective for financial asset transfers occurring after the beginning of an entity’s first fiscal year that begins after November 15, 2009. The Company does not expect the provisions of SFAS 166 to have a material effect on the financial position, results of operations or cash flows of the Company.

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R) (“SFAS 167”). SFAS 167 amends the consolidation guidance applicable to variable interest entities. The provisions of SFAS 167 significantly affect the overall consolidation analysis under FASB Interpretation No. 46(R). SFAS 167 is effective as of the beginning of the first fiscal year that begins after November 15, 2009. SFAS 167 will be effective for the Company beginning in 2010. The Company does not expect the provisions of SFAS 167 to have a material effect on the financial position, results of operations or cash flows of the Company.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162” (“SFAS No. 168”). Under SFAS No. 168 the “FASB Accounting Standards Codification” (“Codification”) will become the source of authoritative U. S. GAAP to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. SFAS No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. On the effective date, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. SFAS No. 168 is effective for the Company’s interim quarterly period beginning July 1, 2009. The Company does not expect the adoption of SFAS No. 168 to have an impact on the financial statements.

F-7

GEMCO MINERALS INC.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months ended August 31, 2009

(Expressed in U.S. dollars)

(unaudited)

2.	Summary of Significant Accounting Principles (continued)

m) Recent Accounting Pronouncements (continued)

In June 2009, the Securities and Exchange Commission’s Office of the Chief Accountant and Division of Corporation Finance announced the release of Staff Accounting Bulletin (SAB) No. 112. This staff accounting bulletin amends or rescinds portions of the interpretive guidance included in the Staff Accounting Bulletin Series in order to make the relevant interpretive guidance consistent with current authoritative accounting and auditing guidance and Securities and Exchange Commission rules and regulations. Specifically, the staff is updating the Series in order to bring existing guidance into conformity with recent pronouncements by the Financial Accounting Standards Board, namely, Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations, and Statement of Financial Accounting Standards No. 160, Non-controlling Interests in Consolidated Financial Statements. The statements in staff accounting bulletins are not rules or interpretations of the Commission, nor are they published as bearing the Commission's official approval. They represent interpretations and practices followed by the Division of Corporation Finance and the Office of the Chief Accountant in administering the disclosure requirements of the Federal securities laws.

In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. This FSP amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. This FSP shall be effective for interim reporting periods ending after June 15, 2009. The Company does not have any fair value of financial instruments to disclose.

In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. This FSP amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. The FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. The FSP shall be effective for interim and annual reporting periods ending after June 15, 2009. The Company currently does not have any financial assets that are other-than-temporarily impaired.

In April 2009, the FASB issued FSP No. FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies, to address some of the application issues under SFAS 141(R). The FSP deals with the initial recognition and measurement of an asset acquired or a liability assumed in a business combination that arises from a contingency provided the asset or liability’s fair value on the date of acquisition can be determined. When the fair value can-not be determined, the FSP requires using the guidance under SFAS No. 5, Accounting for Contingencies, and FASB Interpretation (FIN) No. 14, Reasonable Estimation of the Amount of a Loss. This FSP was effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after January 1, 2009. The adoption of this FSP has not had a material impact on our financial position, results of operations, or cash flows during the six months ended June 30, 2009.

In April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”). FSP FAS 157-4 provides guidance on estimating fair value when market activity has decreased and on identifying transactions that are not orderly. Additionally, entities are required to disclose in interim and annual periods the inputs and valuation techniques used to measure fair value. This FSP is effective for interim and annual periods ending after June 15, 2009. The Company does not expect the adoption of FSP FAS 157-4 will have a material impact on its financial condition or results of operation.

In October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active,” (“FSP FAS 157-3”), which clarifies application of SFAS 157 in a market that is not active. FSP FAS 157-3 was effective upon issuance, including prior periods for which financial statements have not been issued. The adoption of FSP FAS 157-3 had no impact on the Company’s results of operations, financial condition or cash flows.

F-8

GEMCO MINERALS INC.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months ended August 31, 2009

(Expressed in U.S. dollars)

(unaudited)

2.	Summary of Significant Accounting Principles (continued)

m) Recent Accounting Pronouncements (continued)

In December 2008, the FASB issued FSP No. FAS 140-4 and FIN 46(R)-8, “Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities.” This disclosure-only FSP improves the transparency of transfers of financial assets and an enterprise’s involvement with variable interest entities, including qualifying special-purpose entities. This FSP is effective for the first reporting period (interim or annual) ending after December 15, 2008, with earlier application encouraged. The Company adopted this FSP effective January 1, 2009. The adoption of the FSP had no impact on the Company’s results of operations, financial condition or cash flows.

In December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”). FSP FAS 132(R)-1 requires additional fair value disclosures about employers’ pension and postretirement benefit plan assets consistent with guidance contained in SFAS 157. Specifically, employers will be required to disclose information about how investment allocation decisions are made, the fair value of each major category of plan assets and information about the inputs and valuation techniques used to develop the fair value measurements of plan assets. This FSP is effective for fiscal years ending after December 15, 2009. The Company does not expect the adoption of FSP FAS 132(R)-1 will have a material impact on its financial condition or results of operation.

In September 2008, the FASB issued exposure drafts that eliminate qualifying special purpose entities from the guidance of SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” and FASB Interpretation 46 (revised December 2003), “Consolidation of Variable Interest Entities − an interpretation of ARB No. 51,” as well as other modifications. While the proposed revised pronouncements have not been finalized and the proposals are subject to further public comment, the Company anticipates the changes will not have a significant impact on the Company’s financial statements. The changes would be effective March 1, 2010, on a prospective basis.

In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, (“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the computation of earnings per share under the two-class method as described in FASB Statement of Financial Accounting Standards No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. We are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have material effect on our condensed consolidated financial position and results of operations if adopted.

In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts-and interpretation of FASB Statement No. 60”. SFAS No. 163 clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement of premium revenue and claims liabilities. This statement also requires expanded disclosures about financial guarantee insurance contracts. SFAS No. 163 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those years. SFAS No. 163 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.

In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS No. 162 sets forth the level of authority to a given accounting pronouncement or document by category. Where there might be conflicting guidance between two categories, the more authoritative category will prevail. SFAS No. 162 will become effective 60 days after the SEC approves the PCAOB’s amendments to AU Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.

F-9

GEMCO MINERALS INC.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months ended August 31, 2009

(Expressed in U.S. dollars)

2.	Summary of Significant Accounting Principles (continued)

m)	Recent Accounting Pronouncements (continued)

In March 2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133. This standard requires companies to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company has not yet adopted the provisions of SFAS No. 161, but does not expect it to have a material impact on its condensed consolidated financial position, results of operations or cash flows.

In December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110 regarding the use of a "simplified" method, as discussed in SAB No. 107 (SAB 107), in developing an estimate of expected term of "plain vanilla" share options in accordance with SFAS No. 123 (R), Share-Based Payment. In particular, the staff indicated in SAB 107 that it will accept a company's election to use the simplified method, regardless of whether the company has sufficient information to make more refined estimates of expected term. At the time SAB 107 was issued, the staff believed that more detailed external information about employee exercise behavior (e.g., employee exercise patterns by industry and/or other categories of companies) would, over time, become readily available to companies.

Therefore, the staff stated in SAB 107 that it would not expect a company to use the simplified method for share option grants after December 31, 2007. The staff understands that such detailed information about employee exercise behavior may not be widely available by December 31, 2007. Accordingly, the staff will continue to accept, under certain circumstances, the use of the simplified method beyond December 31, 2007. The Company currently uses the simplified method for “plain vanilla” share options and warrants, and will assess the impact of SAB 110 for fiscal year 2009. It is not believed that this will have an impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51. This statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the condensed consolidated entity that should be reported as equity in the condensed consolidated financial statements. Before this statement was issued, limited guidance existed for reporting noncontrolling interests. As a result, considerable diversity in practice existed. So-called minority interests were reported in the condensed consolidated statement of financial position as liabilities or in the mezzanine section between liabilities and equity. This statement improves comparability by eliminating that diversity. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier adoption is prohibited. The effective date of this statement is the same as that of the related Statement 141 (revised 2007). The Company will adopt this Statement beginning March 1, 2009. It is not believed that this will have an impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

In December 2007, the FASB, issued FAS No. 141 (revised 2007), Business Combinations. This Statement replaces FASB Statement No. 141, Business Combinations, but retains the fundamental requirements in Statement 141. This Statement establishes principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The effective date of this statement is the same as that of the related FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements. The Company will adopt this statement beginning March 1, 2009. It is not believed that this will have an impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

F-10

GEMCO MINERALS INC.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months ended August 31, 2009

(Expressed in U.S. dollars)

(unaudited)

2. Summary of Significant Accounting Principles (continued)

m)	Recent Accounting Pronouncements (continued)

In February 2007, the FASB, issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities—Including an Amendment of FASB Statement No. 115. This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. This option is available to all entities. Most of the provisions in FAS 159 are elective; however, an amendment to FAS 115 Accounting for Certain Investments in Debt and Equity Securities applies to all entities with available for sale or trading securities. Some requirements apply differently to entities that do not report net income. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of the previous fiscal year provided that the entity makes that choice in the first 120 days of that fiscal year and also elects to apply the provisions of SFAS No. 157 Fair Value Measurements. The Company will adopt SFAS No. 159 beginning March 1, 2008 and is currently evaluating the potential impact the adoption of this pronouncement will have on its condensed consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this statement does not require any new fair value measurements. However, for some entities, the application of this statement will change current practice. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year, including financial statements for an interim period within that fiscal year. The Company will adopt this statement March 1, 2008, and it is not believed that this will have an impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

m)	Reclassifications

Certain reclassifications have been made to the prior year’s condensed consolidated financial statements to conform to the current period’s presentation.

F-11

GEMCO MINERALS INC.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months ended August 31, 2009

(Expressed in U.S. dollars)

(unaudited)

Deposits

On August 4, 2009, the Company entered into an equipment sales agreement with Tash Industrial Design Inc., whereby Tash has designed, and is manufacturing a sand drying/screening plant for the purpose of processing minerals suitable for use as a sand blasting medium. As at August 31, 2009, the Company has made a deposit of $44,970 ($50,000CDN) on the contract. The machine is planned for delivery and installment in Sacramento late November 2009, pending further payments made to Tash pursuant to the agreement, including a balance of $125,000CDN prior to shipment and $25,000CDN after plant start-up.

4.	Note receivable

At May 31, 2009 the Company had a promissory note due to a non-related party with a principal balance of $5,449 ($6,500CDN), in relation to a reclamation deposit for its mineral exploration permit with the province of British Columbia for the Burns Mountain property. The note is unsecured, earning 0% interest and due May 4, 2010. At May 31, 2009, the imputed interest for this note receivable was computed to be $32 using an interest rate of 0.60%, however, management has not recorded the discount to the note receivable due to immateriality.

5.	Investments

(a)

On February 3, 2008, the Company accepted consideration in the form of a mortgage on industrial property, for the subscription of 750,000 shares at $0.37 per share, for a total value of $275,000. The mortgage is registered at $300,000, and carries an interest rate of 16% compounded monthly. The mortgage is a third mortgage against the property known as 2939 Shuswap Road, Kamloops, BC, Canada, and owned by Akal Forest Products Ltd. (Inc. No. BC0552200) and legally described as Lot C, DL 282, Kamloops Div., Yale District, Plan 37425 (PID No. 005-311-853).The Company’s intention is to liquidate the mortgage at the earliest reasonable opportunity to fund the Company. The mortgage has generated $78,246 in interest since inception of the mortgage ($13,871 during the three months ended August 31, 2009), which the Company has impaired in the financial statements until realization upon liquidation of the mortgage. The mortgage was due on demand as of February 5, 2009, and is now in default, however the Company continues to pursue all avenues available to liquidate the asset. At the year ended May 31, 2009, the Company evaluated the carrying value of the mortgage investment, considering current market and other conditions, and recorded an impairment charge of $275,000. The mortgage investment is carried at a value of $Nil as at August 31, 2009.

(b)

On July 31, 2009, the Company invested $22,485 ($25,000CDN) in a brokerage account with Forex Capital Markets for currency trading. As at August 31, 2009, the value of the investment account was $20,805, and the Company recorded a loss on investment of $1,680.

6.	Related Party Transactions

(a)	As at August 31, 2009, the Company owed $34,355 to various management and directors for funding of working capital. The amounts are unsecured, non-interest bearing, and due on demand.

(b)	As at August 31, 2009, the Company owed $33,474 to various shareholders of the Company for funding of working capital. The amounts are unsecured, non-interest bearing, and due on demand.

(c)	See Note 7 and Note 9.

F-12

GEMCO MINERALS INC.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months ended August 31, 2009

(Expressed in U.S. dollars)

(unaudited)

7.	Notes Payable – Related Parties

(a)

On January 15, 2007, the Company issued a promissory note to a director of the Company for proceeds of $88,961 (CDN$99,636). The note is unsecured, due interest of 12% per annum, and due on demand. On January 26, 2007, $44,643 (CDN$50,000) was converted into common shares of the Company at $0.25 per share, and on January 31, 2008 $30,000 (CDN$30,000) was also converted into common shares of the Company at $0.20 per share. During the twelve months ended May 31, 2008 and May 31, 2009, the principal balance of the note increased by $8,883 and $36,233 respectively. During the three months ended August 31, 2009, the principal balance of the note increased by $7,061, comprised of $1,939 in net draw downs from the Company and $9,000 in management fees accrued. During the period between January 16, 2007 to August 31, 2009, the principal balance of the note has increased by $34,108. At August 31, 2009, the principal balance of $123,069 and accrued interest of $33,654 remained outstanding.

(b)

On January 15, 2007, the Company issued a promissory note to a principal of the Company for proceeds of $100,833 (CDN$112,933). The note is unsecured, due interest of 12% per annum, and due on demand. On January 26, 2007, $44,643 (CDN$50,000) was converted into common shares of the Company at $0.25 per share, and on January 31, 2008 $30,000 (CDN$30,000) was also converted into common shares of the Company at $0.20 per share. During the twelve months ended May 31, 2008 and May 31, 2009, the principal balance of the note increased by $34,897 and $24,348 respectively. During the three months ended August 31, 2009, the principal balance of the note decreased by $3,587, comprised of $4,587 in net draw downs from the Company, $9,000 in management fees accrued and $8,000 converted into common shares of the Company at $0.04 per share on August 7, 2009. During the period between January 16, 2007 to May 31, 2009, the principal balance of the note has increased by $54,373. At August 31, 2009, the principal balance of $155,206 and accrued interest of $49,326 remained outstanding.

(c)

On March 20, 2009, the Company issued a promissory note to a director of the Company for proceeds of $4,610 (CDN$5,500). The note is unsecured, due interest of 15% per annum, and due on demand. At August 31, 2009, the principal balance of $4,610 and accrued interest of $314 remained outstanding.

(d)

On March 31, 2009, the Company issued a promissory note to a principal of the Company for proceeds of $87,594 (CDN$104,500). The note is due interest of 15% per annum payable monthly, for a term of one year, and is secured by 2,000,000 common shares of the Company and the proceeds from any liquidation of the Company’s mortgage investment. At August 31, 2009, the principal balance of $87,594 and accrued interest of $nil remained outstanding.

(e)

On June 4, 2009, the Company issued a promissory note to a director of the Company for proceeds of $22,036 (CDN$24,500). The note is unsecured, due interest of 15% per annum, and due on demand. At August 31, 2009, the principal balance of $22,036 and accrued interest of $826 remained outstanding.

8.	Notes Payable

(a)

At May 31, 2009 the Company had promissory notes outstanding with a principal balance of $173,645 and accrued interest of $125,940. The notes are unsecured, due interest ranging from 0-18% per annum, and due on demand. During the period ended August 31, 2009, the Company paid down and reduced notes payable in the amount of $31,310, and at August 31, 2009, the principal balance of $142,335 and accrued interest of $127,096 remained outstanding for the non-related current notes payable.

(b)

On July 6, 2009, the Company issued a promissory note for proceeds of $224,854 ($250,000CDN) to a non-related party. The note is due interest of 20% per annum payable monthly, for a term of two years, and is secured by 2,500,000 common shares of the Company. In conjunction with the loan, the Company paid a 5% cash finder’s fee of $11,243, and issued an additional 1,100,000 in shares, as described in Note 9(j). The lender at any time may convert the loan amount into the registrant's common stock at $1.00 per share. In the event the registrant's common stock has had a market price greater than $1.50 per share for at least ninety consecutive days, the lender must exercise its conversion option with thirty days notice by the registrant that the stock has had the $1.50 market price for at least ninety days or the conversion option will automatically terminate. An equity value of $319 was computed for the loan conversion option using the Black and Scholes model with a 1.29% interest rate and a 135% annualized volatility rate. Due to immaterial, the equity value of the loan conversion option has not been recorded. At August 31, 2009, the principal balance of $224,854 and accrued interest of $Nil remained outstanding for the non-related long-term notes payable.

F-13

GEMCO MINERALS INC.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months ended August 31, 2009

(Expressed in U.S. dollars)

(unaudited)

9.	Common Stock

(a)	On August 20, 2008, the Company issued 265,000 common restricted shares to three non-related parties for consulting services. The shares were recorded at the deemed price of $0.15 per share for a total value of $39,750.

(b)

On May 26, 2009, the Company issued 250,000 common restricted shares to a related party as part of the consideration for funds loaned to the Company as disclosed in Note 7(d). In addition, 2,000,000 common restricted shares were allotted to the related party as security in escrow for said loan, and are held in trust. The security shares are to be held in trust until the loan is paid in full, upon which they will be returned to the Company and cancelled. The lender retains the voting rights of the security shares while they are in escrow. The consideration shares were recorded at the deemed price of $0.02 per share for a total value of $5,000, and the security shares were recorded at par value of $0.001 for a value of $2,000, which was offset in additional paid-in capital with negative $(2000) pending any future release or cancelation. This gives a net value of zero to these shares.

(c)

On July 8, 2009, the Company issued 3,600,000 common shares with relation to a promissory note for proceeds of $250,000 to a non-related party, as described in Note 8(b). The share issuance includes the following: 250,000 shares issued to the lender as consideration for funds loaned; 250,000 shares issued as a finder’s fee to a non-related party for attainment of the funds (the consideration and finder’s fee shares were recorded at the deemed price of $0.02 per share for a total value of $10,000); 600,000 shares issued to two related parties, in the amount of 300,000 shares each for their personal guarantees to the lender (the guarantee shares were recorded at the deemed price of $0.02 per share for a total value of $12,000); as security for the loan, the Company issued 2,500,000 shares of common stock registered to the Lender and delivered the shares to an escrow agent. The escrow agent shall return the shares to the Company upon repayment or deliver the shares to the lender in the event of default by the registrant or the loan guarantors. The Company retains the voting rights of the security shares so long as they are in escrow. (the security shares were recorded at par value of $0.001 for a value of $2,500, which was offset in additional paid-in capital with negative $2,500 pending any future release or cancelation. This gives a net value of zero to the security shares).

(d)	On August 7, 2009, the Company issued 25,000 common shares to a director of the Company as consideration for $22,036 (CDN$24,500) funds loaned in the form of a promissory note as described in Note 7(e). The shares were recorded at the market price of $0.02 per share for a value of $500.

(e)	On August 7, 2009, the Company issued 200,000 shares to a principal of the Company for conversion of a portion of their promissory note in the amount of $8,000 at $0.04 per share, as described in Note 7(b).

F-14

GEMCO MINERALS INC.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months ended August 31, 2009

(Expressed in U.S. dollars)

(unaudited)

10.	Restated Financial Statements

(a)

The Company has restated its financial statements for the year ended May 31, 2009, in conjunction with the PCAOB revocation of the registration of its prior auditor. The Company had its financials re-audited, during which it re-evaluated its impairment assessment of its investment, mineral claims and equipment assets in concurrence with its new audit firm. As a result, the Company determined that the investment should be written down further than the original impairment, to an impaired value of $nil, resulting in an additional impairment charge of $75,000. Management also determined that the equipment was obsolete with no future economic benefit to the Company, and impaired it for the net book value of $41,295, and that its mineral claims required impairment and were written down in the amount of $99,273. Correspondingly, in the Statement of Operations, writedown expenses were recorded for the investment, equipment and mineral claims impairments totaling $215,568. On review with the auditors it was also determined not to writedown the liabilities for statute barred notes payable at this time, and they were reinstated in the amount of $47,822. Minor adjustments resulted from the above adjustments, which netted $851 to comprehensive loss in the Statement of Cashflows. The above adjustments concurrently affected balances from the date of inception August 21, 1997 through to May 31, 2009 by the same amounts as denoted in the table below. The following is a comparison of the summarized financial statements of the Company before and after the restatement:

	Year Ended May 31, 2009									From Inception to May 31, 2009
	Original			Restated			Change			Original			Restated			Change

Total Assets	$	221,920		$	6,352		$	(215,568	)

Total Liabilities		804,603			852,426			47,822
Retained Earnings		(2,919,126	)		(3,181,666	)		(262,540	)

Total Liablities and Shareholder's Deficit	$	221,920		$	6,352			(215,568	)


Loss from Operations	$	(225,516	)	$	(225,516	)	$	-		$	(2,323,622	)	$	(2,323,622	)	$	-
Total Other Income (Expense)		(234,947	)		(497,487	)		(262,540	)		(595,504	)		(858,044	)		(262,540	)

Net Loss	$	(460,463	)	$	(723,003	)	$	(262,540	)	$	(2,919,126	)	$	(3,181,666	)	$	(262,540	)
Net Loss per Share	$	(0.02	)	$	(0.02	)	$	-


Operating Activities	$	(171,506	)	$	(171,506	)	$	-		$	(1,648,977	)	$	(1,648,977	)	$	-
Investing Activities		11,705			9,889			(1,816	)		(558,636	)		(560,452	)		(1,816	)
Financing Activities		131,881			134,548			2,667			2,301,882			2,304,549			2,667
Comprehensive Loss		25,547			24,696			(851	)		(93,365	)		(94,216	)		(851	)
Cash Ending	$	903		$	903		$	-		$	903		$	903		$	-

F-15

Item 2. Management's Discussion and Analysis or Plan of Operation.

Overview

The following discussion and analysis of the operations, results, and financial position of Gemco Minerals Inc. (“Gemco”,“We” or the “Company”), for the three months ended August 31, 2009 should be read in conjunction with the August 31, 2009 Consolidated Financial Statements and the related Notes. These documents are available at www.sedar.com. The Company is traded on the Nasdaq OTC Exchange under the symbol GMML. The effective date of this report is October 14, 2009.

Corporate Organization

The Company was incorporated in the State of Florida on August 21, 1997 under the name of Project I Corp. On October 18, 2001 the Company changed its name to Firstline Environmental Solutions Inc. and traded under the symbol FEMS. On July 18, 2002 Firstline Environmental Solutions Inc., conducted a reverse takeover with Firstline Recovery Systems Inc., which is now a wholly owned subsidiary of the Company. On March 24, 2006, the Company changed its name to Gemco Minerals, Inc. and in accordance with the name change, the Company's common stock has assigned 368634 10 1 as its new Cusip Number and effective April 10, 2006, the Company's trading symbol was changed to GMML. Our statutory registered agent's office is located at #210 - 7695 SW - 104 Street, Miami, FL 33156 and our business office is located at #203 – 20189 56th Ave, Langley, BC, V3A 3Y6. Our telephone number is 866-848-2940.

Our Current Business

Mining – Precious Metals

We are engaged in the acquisition and exploration of mineral properties in the Province of British Columbia. Our primary focus is the exploration of our Burns Group Property, located 45 miles east of Quesnel, British Columbia. Our plan of operations is to carry out mineral exploration activities at the Burns Group property as advised by a combination of professional recommendations located in historical documents as well as recent recommendations made in Gemco Minerals Inc. most recently published NI43-101 technical report for the property dated December 15, 2007.

We are an exploration stage company and all of our properties are presently in the exploration stage. To date, we do not have any commercially viable reserves on any of our properties. There is no assurance that a commercially viable mineral deposit exists on any of our mineral properties.

Further exploration will be required before a final evaluation as to the economic and legal feasibility of mining of any of our properties is determined. There is no assurance that further exploration will result in a final evaluation that a commercially viable mineral deposit exists on any of our mineral properties.

Burns Group

We continue to expand our Burns Group property by acquiring strategically located mineral claims adjacent to our existing property. The most recent acquisition occurred in May and June 2006 when Gemco acquired an additional 2,792 acres (1,129 hectares) of mineral tenure to bring the Burns Group property to a total of 12,685 contiguous acres (5,134 hectares).

The Company first commenced its work program on the Burns Group property in June 2006. Trenching, geochemistry and SP geophysical surveys were conducted over soil anomalies near Oregon Gulch. Dip needle and SP geophysical surveys combined with general reconnaissance exploration in the vicinity of the Perkins Showing and Perkins Gulch were also reported. Assessment reports for the 2006 season were submitted to the Ministry of Energy, Mines and Petroleum Resources by Angelique Justason and Brad Davies.

Robert “Ned” Reid, PGeo, and Angelique Justason published Gemco Minerals Inc. NI43-101 technical report titled “Summary of Mineral Exploration Activities at the Mount Burns Claim Group” dated December 15, 2007. On the recommendations of the NI43-101 technical report, Gemco will be conducting a trenching program to define previously outlined geochemical and geophysical anomalies at the Foster’s East and Mount Burns grids. Advanced exploration activities, such as drilling, are also planned for the near future while reconnaissance work continues peripheral to the known showings.

In the 2007 and 2008 seasons, Gemco contracted Tenorex GeoServices to begin the expansion of the Burns Grid adjacent several surface workings and the historical Perkins showing where, in 1902, 10 tonnes of rock was processed and produced 311 grams gold as described in Gemco’s NI43-101 report published in December 2007. 2.4 line kilometers (Lkm) of self-potential geophysical surveys were conducted over a portion of the 9.0 Lkm of new grid (south of the 2002 grid) in an effort to locate an extension of the known mineralization: an assessment report outlining the findings and subsequent recommendations was submitted to the Ministry of Energy, Mines and Petroleum Resources.

In March 2009, Tenorex GeoServices also conducted a reconnaissance beep mat geophysical survey on over 50 line kilometers of snow packed trails across the property. Prospective conductive targets were mapped and a preliminary technical report is currently being compiled and will be submitted to the Ministry of Energy, Mines and Petroleum Resources.

An internal report was also made by Tenorex GeoServices summarizing the professional recommendations of various geologists working on the property from 2000 through to 2007 in an effort to define a strategic and focused field program for the Burns Group Gold Property. With this report and the recommendations presented within the NI43-101 technical report an aggressive and detailed exploration program was outlined, and includes the following:

·	Continue expansion of the geo-grid on Mount Burns

·	Establish survey control on the property

·	Trail upgrade and maintenance program

·	Detailed geologic mapping

·	50 line kilometers of self-potential geophysical surveying

·	Beep mat reconnaissance surveys of key areas at previously defined airborne geophysical anomalies in addition to surveying all roads and trails

·	Follow up on geophysical surveys with trenching and channel sampling projects

·	Conduct a surface diamond drill hole program in key target areas

·	Expand grassroots prospecting to the more remote perimeter of the property

·	Compile all historical and current exploration / mining data into an online interactive map-server application for use by company geologists and the public

Detailed research and the compilation of archived historical reports and maps are also ongoing. The research continues to significantly advance the knowledge and value of the Burns Group gold/silver property.

On May 15, 2009, the Company received its permit MX 11-143 approval #09-1101731-0515 to carry out the above noted exploration activities on the Burns property Fosters east grid adjacent to the Oregon Gultch to extend the grid, with 400m trenching, SP geophysics, advanced geological surveying and mapping and geochem for additional lab analysis. The Company’s annual assessment fees for the 5,134 hectare Burns property are $8 per hectare per annum. Gemco has always performed work programs in excess of the annual $41,072, as summarized above and in detail in its 43-101 technical report. All of Gemco’s mineral tenures with the British Columbia Mineral Titles Branch are in status of good standing.

Placer Leases

Gemco also has 100% interest in two placer properties in the Cariboo region: namely the Hawk LPM (lease of placer minerals) located four kilometers from Barkerville and the Joytown LPM which is located near the headwaters of Cunningham Creek. The Company has not carried out nor planned any exploration work on these properties and they were written down to $Nil value at May 31, 2009.

Mexico Placer Property

In May 2006, Gemco entered into a 50/50 joint venture partnership with Mexican registered Canamex Corporation. Canamex has been in the precious metal extraction research industry over the last twelve years. Gemco’s initial joint venture with Canamex involved testing on a 250 hectare placer claim for its industrial minerals and gold values. The property has access and foreshore rights to the Pacific Ocean and is located on the Baja Peninsula of Mexico.

In January 2007, Canamex assigned its interest to two additional placer claims in the Ensenada region of Baja California in the Exchange for 3% of the net sales of all industrial minerals extracted and a 3% net smelter royalty. As further consideration, 300,000 common shares were issued and held in trust, which are to be released upon verifying the claims can be brought to a commercially viable and completion of legal assignment of property rights. These properties consist of over 600 hectares, are approximately 27 kms in length of a dry arroyo with varying widths and several meters in depth. Preliminary testing showed estimates of a potential recovery of 5 million tonnes of alluvial magnetite and ilmenite mineral product.

In June 2007, the Company mandated Mr. Jaime Noguera Perez of Estero Servicios Ambientales Engineering (Estero) to conduct a works program to collect, review and evaluate existing geological information, conduct all field work, geological mapping, sourcing all information on applicable regulations and requirements for permits to extract up to 300,000 tons of material the first year of operation and up to two million tons per year thereafter. In August 2007, the Company received a progress report from Estero indicating that all field work has been completed and Estero began preparing an executive report for submission to the Mining office in Mexico City for final approval and attainment of permits to undertake mining operations. Gemco incorporated a wholly owned subsidiary in Mexico, named Black Stone Industries S.A. de C.V., which will carry out all future business activities on behalf of Gemco in Mexico.

The Company has expended over $82,000 to date on its Mexico property for costs including; the environmental study, management of the claims, attainment of permits, consulting and regulatory fees. Canamex recently advised it has received the mining permits from the mining office to extract 300,000 tons of material the first year, and two million tons every year thereafter. On final verification, all permits and licenses will be assigned over to Black Stone Industries, and Gemco will release the 300,000 shares from trust. Further, upon Black Stone Industries receiving the final mining permits and 100% control of the Claims a balance of $20,000 will be paid to Canamex for additional costs incurred. On consummation of the above, the Company plans to engage an independent firm to prepare an in-depth 43-101 technical report to meet standards and requirements for raising capital.

Natural Mineral Products

The Company continues in the business development for the magnetite natural mineral product trade named “Eco-Blast”, as well as its Ilmenite “Talon Blast Abrasive” mineral product. These are environmentally safe products used in the industrial abrasive industry as outlined further below. Recent environmental regulations throughout North America have restricted the use of traditional abrasives like silica-sand and some slags. This is particularly true in the blast cleaning (sand blasting) market where 5 million tons of abrasives are used each year. Magnetite and Ilmenite have emerged as less health damaging and more environmentally friendly alternatives to the traditional non-recyclable abrasives. The specific particle size of natural magnetite product performs optimally in blast cleaning applications and can be recycled. ECO-Blast and Talon Blast Abrasive are the branded blast abrasives of the Company using magnetite and Ilmenite blends.

Tests have shown these products to be effective replacements for more traditional blast mediums in terms of cost and performance and significantly superior in terms of environmental impact and recyclability. Powertech Labs Inc. conducted an analysis on the magnetite product, which approved the product for use by the BC Ministry of Environment and Parks. A number of comparison demonstration tests were also conducted by Ross-Rex Industries Inc. using Talon blast and competitive/alternative products and the results have been very positive as posted on Gemco’s website.

Our wholly owned subsidiary, Firstline Recovery Systems Inc. was handling business development for the magnetite natural mineral product trade named Eco-Blast and/or Talon Blast, an environmentally safe product used in the industrial abrasive industry as outlined above. Although Firstline previously entered into an exclusive supply agreement with Teichert and Son Inc., a California corporation doing business as Teichert Aggregates, and an agreement for sale with R.A. Temple Inc. (Temple), a California corporation, these contracts recently lapsed due to Firstline’s inability to obtain the required CARB product approval, negotiate with a U.S. company for a site on which to locate the drying and bagging facility and to arrange sufficient financing to carry out the project. Therefore, Gemco has recently undertaken to negotiate new agreements on similar terms with both Teichert and Temple. Commitments have been attained with both companies and Gemco is coordinating to complete the new agreements within the first four months of the fiscal year.

The exclusive supply agreement with Teichert, originally announced May 27, 2008, pertains to the exclusive distribution rights of the minerals known as Ilmenite and Magnetite. Teichert produces Ilmenite and Magnetite as a by-product from its aggregate mining operations, and currently has an estimated 25,000 tons stored on-site in Central California.

These rights allow the Company to distribute and sell this product as a blast medium in the industrial abrasive industry in both Western U.S. and Canada. The Term of the Agreement is for a period of 5 years with an option for an additional 5 years, if agreeable by both parties. As part of the Agreement, the Company is required to purchase a minimum tonnage per contract year in order to maintain fixed pricing terms.

The effective commencement date of production is dependent on the Company first obtaining California Air Regulation Board (CARB) approval for the use of these products as a blast medium and then establishing a drying, screening and bagging plant at a nearby location. In conjunction with Teichert, the Company has initiated the CARB test and the Company’s management is negotiating with a U.S. company for a site on which to locate the drying and bagging facility.

The agreement for sale with Temple, originally announced December 2, 2008,pertains to the sale of ilmenite and magnetite industrial minerals (the Product) with R.A. Temple Inc. (Temple), a California corporation. The Product is to be sourced from the Company’s location in Sacramento, California, under its Exclusive Supply Agreement with Teichert and will be sold under the Company’s Black Talon brand name.

Under the Agreement Temple may purchase up to 7,000 tons of ilmenite and magnetite per annum, from the commencement date, on a pre-determined pricing framework for a period of five years. The commencement date of the first shipment was originally scheduled for no later April 1, 2009, and Gemco has attained commitment from Temple to extend the first shipment date from April 1, 2009 until such time that Gemco is scheduled to start production on or before December 1, 2009, which provides time to complete the California Air Regulation Board (CARB) standard approval for the use of this product as a blast medium and to establish a drying, screening and bagging plant at a nearby location.

Temple has supplied both blast abrasives and equipment to the metal finishing and water-jet cutting industry in the western region of the United States for over 28 years. As part of the Agreement, the Company also grants Temple exclusive distributorship for the Product in the State of Nevada and Northern California.

Results of Operations - Gemco Minerals Inc.

Three Months Ended August 31, 2009

During the three months ended August 31, 2009 the Company recorded an operating loss of $91,363 as compared to an operating loss of $77,960 for the three months ended August 31, 2008, and recorded a net loss after other items of $125,047 as compared to a net loss of $93,339 for the three months ended August 31, 2008. This is an increase in operating loss of $13,403 and an increase in the net loss of $31,708. The net loss represents $nil per common share. The Company incurred $91,363 in operating expenses which consist mainly of: mineral property costs of $24,767 (2008 - $11,228), management and consulting fees of $20,249 (2008 - $48,000), investor relations of $12,000 (2008 - $9,750) and professional fees of $16,316 (2008 - $3,500). The Company also recorded other items totaling $33,684 for the three months ended August 31, 2009, which is an increase of $18,305 compared to the $15,379 in other items for the three months ending August 31, 2008. This included interest and bank charges of $32,004. Other items also included $1,680 for a loss on investment and $12,191 for the interest generated on the mortgage investment, with a corresponding writedown for impairment, as described in Note 4 of the financial statements.

The Company has not yet generated any revenues from its Mineral Exploration Program. Our ability to emerge from the exploration stage and conduct mining operations is dependent, in large part, upon our raising additional equity financing

As of August 31, 2009, Gemco had total liabilities of $1,081,129, which is an increase of $228,703 as compared to $852,426 liabilities recorded at May 31, 2009. The increase in liabilities is due primarily to issuance of a long-term note payable in July 2009. The Company’s current liabilities remained relatively the same as the prior year end and consist of $42,380 in accounts payable, $34,355 due to related parties, $33,474 due to shareholders and $746,067 in notes payable, of which $476,636 are due to related parties. The Company issued a two year promissory note in July 2009 and now has a long-term liability in the amount of $224,854.

The Company's current assets at August 31, 2009, consisted of $69,887 in cash which increased by $68,984 from $903 as at May 31, 2009, as well as note receivable of $5,448 and deposits in the amount of $44,971 for payments made on manufacture of industrial mineral processing equipment. Total assets as of August 31, 2009 were $141,111 with investments of $20,805 as disclosed in Note 5 of the financial statements.

Selected Annual Information

The following are highlights of financial data on the Company for the most recently completed three financial years:

	Fiscal Year Ended May 31,
	2009			2008			2007
Loss before Income Tax	$	723,003		$	(373,011	)	$	(97,937	)
Net Loss		723,003			(373,011	)		(97,937	)
Loss Per Share		(0.03	)		(0.02	)		(0.01	)
Total Assets		6,351			439,279			174,319
Total Liabilities		852,426			630,888			573,237

Liquidity and Capital Resources

The Company’s assets are recorded at the lower of cost or market value. The total assets at August 31, 2009 were $141,111. The Company had a working capital deficiency of $735,970 at August 31, 2009 compared to a working capital deficiency of $846,074 as of May 31, 2009. The reduction in the working capital deficiency is due primarily to the issuance of a long-term note payable as discussed above. The Company’s cash inflow has been generated mainly from shareholder loans, related party and short-term loans and subscription of common stock with minimal revenues and government incentive programs since inception.

Management continually reviews its overall capital and funding needs to ensure that the capital base can support the estimated needs of the business. These reviews take into account current business needs as well as the Company’s future capital requirements. Based upon these reviews, to take advantage of strong market conditions and to fully implement our expansion strategy, management believes that the Company will continue to increase our net capital through the proceeds from sales of our securities. The Company currently maintains minimal cash balances and is funded by management and shareholder loans to satisfy monthly cash requirements in the interim of raising external funding.

The Company cannot currently meet its cash requirements without, future sale of shares or its current management and/or advances or loans from controlling shareholders or corporate officers to provide sufficient working capital to preserve the integrity of the corporate entity during the development phase. There is no assurance that the Company will be able to obtain additional funding through the sales of additional shares or, that such funding, if available, will be obtained on terms favorable to or affordable by the Company. It is the intent of management and controlling shareholders to generate sufficient working capital necessary to support and preserve the integrity of the corporate entity.

Forward-Looking Statements

From time to time, the Company may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause a deviation or divergence from the anticipated results or expectations contained in the forward looking statements and the Company's actual results. The risks and uncertainties that may affect the operations, performance, development and results of the Company's business include but are not limited to the following: lack of operating capital, revenue and capital resources; reliance upon joint venture members to provide technical and financial expertise to operations; the ability of the Company to access an economically viable energy deposit; the ability of the Company to recover natural resources, if found, and to deliver them to a refiner or distributor in an economically viable manner.

Risks and Uncertainties

Mining - The Company is engaged in mineral exploration and development, which involves a high degree of risk, and few properties are ultimately developed into producing mines. There is no assurance that the Company’s future exploration and development activities will result in any discoveries of commercial bodies of ore. Whether an ore body will be commercially viable depends on a number of factors including the particular attributes of the deposit such as size, grade and proximity to infrastructure, as well as mineral prices and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in a mineral deposit being unprofitable.

Cash Flows and Funding - The Company periodically requires equity financing to maintain its working capital position. There is no assurance that the Company will be able to obtain financing, as required, in the future.

Environmental and Permitting - Mineral exploration and development is subject to extensive regulation concerning environmental protection and there is no assurance the Company will be able to obtain all necessary permits and approvals in order to carry out its exploration activities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 4. Controls and procedures

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable assurance of achieving the desired control objectives, and we necessarily are required to apply our judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of August 31, 2009 and concluded that the disclosure controls and procedures were not effective because certain deficiencies involving internal controls constituted material weaknesses as discussed below. The material weaknesses identified resulted in the restatement of the previously reported financial statements and other related financial disclosure.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management, including our principal executive officer and principal accounting officer, conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on its evaluation, our management concluded that our internal controls over financial reporting were ineffective due to some material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. As of August 31, 2009, the following material weaknesses existed:

The Control Environment: We did not maintain effective entity-level controls as defined by the framework issued by COSO. Specifically, we did not sufficiently promote effective internal control over financial reporting throughout the organization and did not effectively segregate certain accounting duties due to the small size of our accounting staff, and maintain a sufficient number of adequately trained personnel necessary to maintain an internal audit function or anticipate and identify risks critical to financial reporting.

Information and Communication: We did not maintain effective communication and documentation of financial reporting policies and procedures to ensure the flow of information within the organization and with external parties, and to ensure appropriate systems were in place and configuring of certain transactions were properly processed and disclosed.

In order to mitigate these material weaknesses to the fullest extent possible, all financial reports are reviewed by the Chief Financial Officer, who has limited system access. In addition, meetings are held with the Board of Directors and the Audit Committee. If at any time we determine a new control can be implemented to mitigate these risks at a reasonable cost, it is implemented as soon as possible.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended August 31, 2009 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls. Our management, including our principal executive and financial officer, does not expect that our disclosure controls and procedures or our internal control will prevent all errors and all fraud. 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. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

The Company is currently named as a defendant or Respondent in two related legal proceedings.

On the 15th of April, 2008 an action was commenced by a shareholder of Akal Forest Products Ltd. against a group of defendants, including Gemco Minerals Inc. In that action the plaintiff alleges that Gemco Minerals Inc. entered into a non-arms length transaction with Hunter Corey Babcock, an officer and director of Akal Forest Products Ltd. pursuant to which transaction Gemco sold to Babcock a number of shares in Gemco Minerals Inc. That sale was secured by a mortgage and assignment of rents against Lands owned by Akal Forest Products Ltd.

Counsel has been retained and a statement of defense has been filed by Gemco Minerals Inc. denying that Gemco Minerals Inc. was anything other than a bona fide purchaser for value in that transaction.

On or about April 28, 2008 an interlocutory order, without notice, was granted by the Supreme Court of British Columbia restraining both Mr. Babcock and Gemco from transferring, mortgaging, or hypothecating any of the shares issued by Gemco to Mr. Babcock in relation the aforementioned mortgage and assignment of rents.

On the 22nd of July 2008, the first mortgage holder of the Akal Forest Products Ltd. Lands commenced a foreclosure proceeding in the Supreme Court of B.C. against Akal Forest Products Ltd. In that action Gemco Minerals Inc. is named as a third mortgage holder and Respondent in relation to the mortgage and assignment of rents granted by Akal Forest Products Ltd. as security for the Babcock purchase of Gemco shares. Counsel has been retained to protect the interests of Gemco in relation to its charges on the Akal Lands.

The Company’s mortgage was due on demand as of February 5, 2009, and is now in default. The Company has taken legal action and was awarded a court ordered conduct of sale by the Kamloops Supreme Court, whereby the Company will proceed with listing and disposing the property to the benefit of all secured on the property.

During the course of the listing, many proposals were discussed and although there were no written offers, a build-to-suit program was being negotiated with a potential tenant. However, the second mortgage holder concurrently petitioned the court for Conduct of Sale, without notification, and was awarded the Conduct of Sale to obtain an unconditional offer. The second mortgage holder is proceeding to list the property for sale.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the first quarter ended August 31, 2009, the Company issued a total of 3,825,000 common shares as follows.

(a)

On July 8, 2009, the Company issued 3,600,000 common shares with relation to a promissory note for proceeds of $250,000 to a non-related party. The share issuance includes the following: 250,000 shares issued to the lender as consideration for funds loaned; 250,000 shares issued as a finder’s fee to a non-related party for attainment of the funds; 600,000 shares issued to two related parties, in the amount of 300,000 shares each for their personal guarantees to the lender; as security for the loan, the Company issued 2,500,000 shares of common stock registered to the Lender and delivered the shares to an escrow agent. The escrow agent shall return the shares to the Company upon repayment or deliver the shares to the lender in the event of default by the registrant or the loan guarantors. The Company retains the voting rights of the security shares so long as they are in escrow.

(b)	On August 7, 2009, the Company issued 25,000 common shares to a director of the Company as consideration for $22,036 (CDN$24,500) funds loaned in the form of a promissory note.

(c)	On August 7, 2009, the Company issued 200,000 shares to a principal of the Company for conversion of a portion of their promissory note in the amount of $8,000 at $0.04 per share.

With respect to the unregistered sales made, the Company relied on Section 4(2) of the Securities Act of 1933, as amended. No advertising or general solicitation was employed in offering the securities. Of the securities issued, 825,000 were issued to related partied of the Company and 3,000,000 were issued to sophisticated, accredited investors who were provided all of the current public information available on the Company.

Item 3. Defaults Upon Senior Securities. None.

Item 4. Submission of Matters to a Vote of Security Holders. None

Item 5. Other Information. None

Item 6. Exhibits

Exhibit No.	Identification of Exhibit
31.1	Rule 13a-14(a) Certification of Tom Hatton, President and Chief Executive Officer
31.2	Rule 13a-14(a) Certification of Dorlyn Evancic, Treasurer, Chief Financial Officer
32.1	Certification Pursuant to 18 U.S.C. Section 1350 of Tom Hatton.
32.2	Certification Pursuant to 18 U.S.C. Section 1350 of Dorlyn Evancic.

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.

Gemco Minerals Inc.

DATE: October 16, 2009

By: /s/ TOM HATTON

Tom Hatton, President, Director

and Chief Executive Officer

Gemco Minerals, Inc. - FORM 10-Q - October 20, 2009

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