UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Amendment
No. 2
to
Form
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): April 8, 2015
GLOBAL
EQUITY INTERNATIONAL, INC.
(Exact
name of registrant as specified in its charter)
Nevada |
|
000-54557 |
|
27-3986073 |
(State or other jurisdiction
of incorporation) |
|
(Commission
File Number) |
|
(I.R.S. Employer
Identification Number) |
X3
Jumeirah Bay, Office 3305, Jumeirah Lake Towers
Dubai,
UAE
(Address
of Principal Executive Offices) (Zip Code)
Registrant’s
telephone number, including area code: +971 (0) 42767576
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2., below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d 2(b))
[ ] Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.133-4(c))
Item
4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review
On
April 8, 2015, during the course of its audit of the financial statements of Global Equity International, Inc. (“Company”)
for the fiscal year ended December 31, 2014, the Company’s independent accountant, De Joya Griffith, advised the Company
that action should be taken and disclosure should be made to prevent future reliance on completed interim reviews related to previously
issued financial statements (e.g., Form 10-Qs for the fiscal quarters ended March 31, June 30 and September 30, 2014), for the
following reasons:
An
analysis of convertible notes for assessing derivative liability, interest expense, prepaid, certain fixed assets and revenue
policy was conducted and it was determined that significant adjustments were required to be made at each quarter ended March 31,
June 30 and September 30, 2014.
We
do not have an audit committee. However, our Chief Executive Officer, Enzo Taddei, discussed this matter with the Company´s
Chief Executive Officer and it was agreed that we had to file a Form 8-K stating that our investors and shareholders could not
rely on our interim 2014 financial statements.
Our
restatement adjustments for the three quarters ended March 31, June 30 and September 30, 2014, are discussed below.
Quantitative
information for Three Months ending on 3/31/2014
Balance
Sheet – March 31, 2014 |
| |
As
Previously Stated | | |
Restatement
Adjustments | | |
As
Restated | |
Assets | |
| | |
| | |
| |
Current Assets | |
| | | |
| | | |
| | |
Prepaids | |
$ | 8,167 | | |
$ | 5,802 | | |
$ | 13,969 | |
Other current
assets | |
| 466,027 | | |
| (13,826 | ) | |
| 452,201 | |
Total current assets | |
$ | 482,742 | | |
$ | (8,024 | ) | |
$ | 474,718 | |
Current Liabilities | |
| | | |
| | | |
| | |
Deferred revenue | |
$ | 169,750 | | |
$ | 46,250 | | |
$ | 216,000 | |
Accounts payable and accrued liabilities | |
| 50,064 | | |
| (700 | ) | |
| 49,364 | |
™Loans payable - related parties | |
| 57,194 | | |
| 700 | | |
| 57,894 | |
Accrued interest | |
| 238,651 | | |
| 36,078 | | |
| 274,729 | |
Total current liabilities | |
$ | 1,793,661 | | |
$ | 82,328 | | |
$ | 1,875,989 | |
Accumulated
deficit | |
$ | (5,435,292 | ) | |
$ | (90,352 | ) | |
$ | (5,525,644 | ) |
Total
stockholders’ deficit | |
$ | (2,643,048 | ) | |
$ | (90,352 | ) | |
$ | (2,733,400 | ) |
Profit
and Loss - Three Months - March 31, 2014 |
| |
As
Previously Stated | | |
Restatement
Adjustments | | |
As
Restated | |
Revenue | |
$ | 152,250 | | |
$ | (46,250 | ) | |
$ | 106,000 | |
General and administrative
expenses | |
$ | 45,241 | | |
$ | 8,024 | | |
$ | 53,265 | |
Total
Operating Expenses | |
$ | 247,414 | | |
$ | 8,024 | | |
$ | 255,438 | |
| |
| | | |
| | | |
| | |
Net
(loss) from operations | |
$ | (95,164 | ) | |
$ | (54,274 | ) | |
$ | (149,438 | ) |
Other income (expense): | |
| | | |
| | | |
| | |
Interest
Expense | |
$ | (122,118 | ) | |
$ | (36,078 | ) | |
$ | (158,196 | ) |
Total
(income) expense | |
$ | (127,607 | ) | |
$ | (36,078 | ) | |
$ | (163,685 | ) |
| |
| | | |
| | | |
| | |
Net
loss | |
$ | (222,771 | ) | |
$ | (90,352 | ) | |
$ | (313,123 | ) |
Comprehensive Loss: | |
| | | |
| | | |
| | |
Net loss | |
$ | (222,771 | ) | |
$ | (90,352 | ) | |
$ | (313,123 | ) |
Comprehensive
Loss | |
$ | (222,771 | ) | |
$ | (90,352 | ) | |
$ | (313,123 | ) |
Statement
of Cash Flows - For the Three Months ended March 31, 2014 |
| |
As
Previously Stated | | |
Restatement
Adjustments | | |
As
Restated | |
Cash flows from operating
activities | |
| | | |
| | | |
| | |
Net profit (loss) | |
$ | (222,771 | ) | |
$ | (90,352 | ) | |
$ | (313,123 | ) |
Changes in operating
assets and liabilities: | |
| | | |
| | | |
| | |
Prepaids, cash | |
| 25,632 | | |
| (5,802 | ) | |
| 19,830 | |
Accrued interest | |
| 122,119 | | |
| 36,078 | | |
| 158,197 | |
Accounts payable and accrued liabilities | |
| 11,076 | | |
| (700 | ) | |
| 10,376 | |
Accounts payable - related parties | |
| 100,232 | | |
| 700 | | |
| 100,932 | |
Deferred revenue | |
| (77,250 | ) | |
| 46,250 | | |
| (31,000 | ) |
Other current assets | |
| (13,826 | ) | |
| 13,826 | | |
| - | |
Explanations
of Restatement Adjustments in Q1 2014:
Prepayments
and Other Current Assets:
We
adjusted our other current assets by $13,826 as at March 31, 2014, of which $8,024 was rent that we had prepaid and never expensed
and $5,802 was a transfer to prepaid account.
Other
current assets – As previously stated | |
$ | 466,027 | |
Other
current assets – Restated Balance | |
$ | 452,201 | |
Restatement
Adjustments | |
$ | 13,826 | |
| |
| | |
Breakdown
of Restatement Adjustments: | |
| | |
Prepaid rent expensed
out | |
$ | 8,024 | |
Other
current asset balance transferred to Prepaids | |
$ | 5,802 | |
Total | |
$ | 13,826 | |
Prepaids
– As previously stated | |
$ | 8,167 | |
Prepaids
– Restated Balance | |
$ | 13,969 | |
Restatement
Adjustments | |
$ | 5,802 | |
| |
| | |
Breakdown
of Restatement Adjustments: | |
| | |
Other
current asset balance transferred to Prepaids | |
| 5,802 | |
Total | |
$ | 5,802 | |
Revenue
recognition policy:
We
had previously accounted for revenue and deferred revenue by taking an estimated timeframe for work contractually agreed to be
completed and dividing the amount received from each client into this estimated number of months and account for this amount on
a month to month basis.
Our
auditors brought to our attention that our method of booking income was not US GAAP compliant. Therefore, we analyzed the individual
milestones contemplated on our contractual agreements. Once analyzed, we quantified each milestone and then accounted for the
milestones effectively completed. This created a change of $46,250 in both our revenue and deferred revenue for the three months
ending on March 31, 2014.
Accounts
payable and Loans payable - related parties:
Restatement
adjustment relating to Accounts Payable and Loans Payable – related parties amounting to $700 was related to a travel expenses
incurred by our CFO, Enzo Taddei for business purposes. These expenses were accounted for as accounts payable instead of a related
party loan. So, we rectified this transaction and reclassified $700 as loan payable – related parties instead of Accounts
Payable.
Accrued
interest:
There
was some miscommunication between our Company and a noteholder called Eden as to certain penalties that we had to accrue due to
the loan being in default. As a result of this miscommunication, we never booked the $36,078 of extra interest and penalties for
3 months ending on March 31, 2014. This was the reason for restatement adjustment of $36,078 in Interest expense and Accrued Interest
accounts.
Quantitative
information for Six Months ending on 6/30/2014
Balance
Sheet - June 30, 2014 |
Assets | |
As
Previously Stated | | |
Restatement
Adjustments | | |
As
Restated | |
Current Assets | |
| | | |
| | | |
| | |
Prepaids | |
$ | 28,653 | | |
$ | (10,699 | ) | |
$ | 17,954 | |
Total
current assets | |
$ | 493,432 | | |
$ | (10,699 | ) | |
$ | 482,733 | |
Total
assets | |
$ | 505,272 | | |
$ | (10,699 | ) | |
$ | 494,573 | |
Current Liabilities | |
| | | |
| | | |
| | |
Deferred revenue | |
$ | 31,000 | | |
$ | 185,000 | | |
$ | 216,000 | |
Accrued interest | |
| 308,198 | | |
| 94,203 | | |
| 402,401 | |
Notes payable - net of unamortized discount | |
| 1,178,742 | | |
| (178,984 | ) | |
| 999,758 | |
Derivative Liability
on notes payable | |
| - | | |
| 534,023 | | |
| 534,023 | |
Total current liabilities | |
$ | 1,979,123 | | |
$ | 634,242 | | |
$ | 2,613,365 | |
Subscription Receivable | |
$ | - | | |
$ | (100,000 | ) | |
$ | (100,000 | ) |
Accumulated deficit | |
| (5,719,949 | ) | |
| (544,941 | ) | |
| (6,264,890 | ) |
Other Comprehensive
gain (loss) | |
| - | | |
| - | | |
| - | |
Total
stockholders’ deficit | |
$ | (2,818,326 | ) | |
$ | (644,941 | ) | |
$ | (3,463,267 | ) |
Profit
and Loss - Six Months - June 30, 2014 | |
| |
As
Previously Stated | | |
Restatement
Adjustments | | |
As
Restated | |
Revenue | |
$ | 346,000 | | |
$ | (185,000 | ) | |
$ | 161,000 | |
General
and administrative expenses | |
$ | 96,200 | | |
$ | 10,699 | | |
$ | 106,899 | |
Total
Operating Expenses | |
$ | 585,328 | | |
$ | 10,699 | | |
$ | 596,027 | |
| |
| | | |
| | | |
| | |
Net
(loss) from operations | |
$ | (239,328 | ) | |
$ | (195,699 | ) | |
$ | (435,027 | ) |
Other income (expense): | |
| | | |
| | | |
| | |
Interest Expense | |
$ | (258,651 | ) | |
$ | (83,692 | ) | |
$ | (342,343 | ) |
Amortization of debt discount | |
| (25,858 | ) | |
| (39,527 | ) | |
| (65,385 | ) |
Gain (loss) on
Derivative Liability | |
| - | | |
| (226,023 | ) | |
| (226,023 | ) |
Total
income (expense) | |
$ | (268,102 | ) | |
$ | (349,242 | ) | |
$ | (617,344 | ) |
| |
| | | |
| | | |
| | |
Net
loss | |
$ | (507,430 | ) | |
$ | (544,941 | ) | |
$ | (1,052,371 | ) |
Comprehensive Loss: | |
| | | |
| | | |
| | |
Net loss | |
$ | (507,430 | ) | |
$ | (544,941 | ) | |
$ | (1,052,371 | ) |
Comprehensive
Loss | |
$ | (507,430 | ) | |
$ | (544,941 | ) | |
$ | (1,052,371 | ) |
Statement
of Cash Flows For the Six Months ended June 30, 2014 | |
| |
As
Previously Stated | | |
Restatement
Adjustments | | |
As
Restated | |
Cash flows from operating
activities | |
| | | |
| | | |
| | |
Net profit (loss) | |
$ | (507,430 | ) | |
$ | (544,941 | ) | |
$ | (1,052,371 | ) |
Adjustments to reconcile
net loss to net | |
| | | |
| | | |
| | |
cash used in operating
activities | |
| | | |
| | | |
| | |
Gain (loss) on derivate liability -
Notes payable | |
| - | | |
| 226,023 | | |
| 226,023 | |
Amortization of debt discount | |
| 25,858 | | |
| 39,527 | | |
| 65,385 | |
Changes in operating
assets and liabilities: | |
| | | |
| | | |
| | |
Prepaids, cash | |
| 5,146 | | |
| 9,799 | | |
| 14,945 | |
Accrued interest | |
| 191,667 | | |
| 84,891 | | |
| 276,558 | |
Accounts payable and accrued liabilities | |
| 24,466 | | |
| (298 | ) | |
| 24,168 | |
Deferred revenue | |
| (216,000 | ) | |
| 185,000 | | |
| (31,000 | ) |
Explanations
of Restatement Adjustments for Q2 2014:
Prepayments:
We
adjusted our prepaid assets by $10,699 as at June 30, 2014 which was rent expense that we had prepaid and never expensed. So,
this restatement adjustment related to amortization of prepaid rent for the six months ending on June 30, 2014.
Revenue
recognition policy:
We
had previously accounted for revenue and deferred revenue by taking an estimated timeframe for work contractually agreed to be
completed and dividing the amount received from each client into this estimated number of months and account for this amount on
a month to month basis.
Our
auditors brought to our attention that our method of booking income was not US GAAP compliant. Therefore, we analyzed the individual
milestones contemplated on our contractual agreements. Once analyzed, we quantified each milestone and then accounted for the
milestones effectively completed. This created a change of $185,000 in both our revenue and deferred revenue for the six months
ending on June 30, 2014.
Accrued
interest:
There
was some miscommunication between our Company and a note holder called Eden as to certain penalties that we had to accrue due
to the loan being in default. As a result of this miscommunication, we never booked the $83,692 of extra interest and penalties
for six months ending on June 30, 2014. We also had a $10,511 oversight regarding the original issue discount (“OID”)
to be accrued regarding our note with JMJ Financial.
Breakdown
of restatement adjustments of accrued interest on related loan notes as on June 30, 2014 was as follows:
Description | |
As
previously stated | | |
Restated
Balance | | |
Restatement
Adjustments | |
| |
| | |
| | |
| |
JMJ Financial | |
$ | 1,222 | | |
$ | 11,733 | | |
$ | 10,511 | |
Eden | |
| 135,482 | | |
| 219,174 | | |
| 83,692 | |
| |
| | | |
| | | |
$ | 94,203 | |
Convertible
notes and derivative liability:
We
evaluated the terms and conditions of the notes at the quarter end. Because the economic characteristics and risks of the equity
linked conversion options were not clearly and closely related to a debt-type host, the conversion features required classification
and measurement as derivative financial instruments. The accounting treatment of derivative financial instruments requires that
the Company record the initial fair value of the derivative first by allocating the fair value of the embedded derivative as a
reduction to the face value of the debt recorded as a contra liability or debt discount to be accreted over the term of the note.
On each reporting date, the fair value of the embedded derivative is calculated with changes in value recorded to other expense.
By
following the above evaluation, there was a restatement adjustment of $(178,984) in Notes payable which was mainly related to
unamortized debt discount balance. We also recognized the respective derivative liability on each convertible note amounting to
$534,023 as at June 30, 2014 by following Black Scholes option pricing model.
The
breakdown of the restatement adjustments relating to Notes payable – net of unamortized debt discount was as follows:
Notes Payable – As
previously stated | |
$ | 1,178,742 | |
Prepaids –
Restated Balance | |
$ | 999,758 | |
Restatement
Adjustments | |
$ | (178,984 | ) |
| |
| | |
Breakdown of Restatement Adjustments:
| |
| | |
Notes Payable | |
$ | 75,266 | |
Un-amortized
debt discount balance (see below) | |
| (254,250 | ) |
Total | |
$ | (178,984 | ) |
The
breakdown of the restatement adjustments relating to unamortized debt discount and derivative liability on notes payable as at
June 30, 2014 was as follows:
Description | |
Unamortized
debt discount
balance | | |
Derivative
Liability on notes payable | |
| |
| | |
| |
LG Capital LLC | |
$ | 83,229 | | |
$ | 160,406 | |
Adar Bay LLC | |
| 83,229 | | |
| 160,406 | |
JMJ Financial | |
| 53,646 | | |
| 132,911 | |
Asher Enterprises
Inc | |
| 34,146 | | |
| 80,300 | |
Restatement
Adjustments | |
$ | 254,250 | | |
$ | 534,023 | |
On
May 1, 2014 , the Company issued a $100,000 convertible promissory note (the “LG Note”) to LG Capital Funding, LLC,
a New York limited liability company (the “Lender”). The LG Note provided for up to an aggregate of $100,000
in gross proceeds. The LG Note was due to mature on May 1, 2015, accrues interest of 8% and is convertible into shares of
common stock any time after 180 days of May 1, 2014, at a conversion price equal to 60% of lowest daily Volume Weighted Average
Price (“VWAP”) of the common stock as reported on the National Quotations Bureau OTCQB on which the Company’s
shares are traded or any exchange upon which the common stock may be traded in the future, for the twenty prior trading days,
including the day upon which a Notice of Conversion is received by the Company. Accrued interest shall be paid in shares of common
stock at any time at the discretion of the Lender pursuant to the conversion terms above. The first LG Note may be prepaid
within 180 days with penalty. The note may not be prepaid after the 180th day.
The
principal amount of $50,000 under the second note shall be received by the Company no later than January 1, 2015. All principal
under this Note shall be due and payable no later than July 1, 2015. This Full Recourse Note shall bear simple interest at the
rate of 8%. This second Note was booked as contra equity under “Subscriptions Receivable”.
The
fair value of the derivative liability as at June 30, 2014, was determined using the Black Scholes option pricing model with a
quoted market price of $0.24, a conversion price of $0.132, expected volatility of 295.8%, no expected dividends, a remaining
term of 10 months and a risk-free interest rate of 0.07% resulting in a fair value per share of $0.2091 multiplied by the 767,190
shares that would be issued if the Note was exercised as of June 30, 2014.
As
of June 30, 2014, a total interest of $666 was accrued and a total of $16,438 debt discount was amortized leaving an unamortized
balance of $83,229. The fair value of derivative liability as on June 30, 2014, is recorded at $160,406, thereby recognizing a
net loss on derivative liability as of June 30, 2014 of ($60,406).
On
May 1, 2014, the Company issued a $100,000 convertible promissory note (the “AB Note”) to Adar Bay, LLC, a New York
limited liability company (the “Lender”). The AB Note provided for up to an aggregate of $100,000 in gross proceeds.
The AB Note was due to mature on May 1, 2015, accrues interest of 8% and is convertible into shares of common stock any time
after 180 days of May 1, 2014, at a conversion price equal to 60% of lowest daily Volume Weighted Average Price (“VWAP”)
of the common stock as reported on the National Quotations Bureau OTCQB on which the Company’s shares are traded or any
exchange upon which the common stock may be traded in the future, for the twenty prior trading days, including the day upon which
a Notice of Conversion is received by the Company. Accrued interest shall be paid in shares of common stock at any time at the
discretion of the Lender pursuant to the conversion terms above. The first AB Note may be prepaid within 180 days with penalty.
The note may not be prepaid after the 180th day.
The
First Note matures on May 1, 2015, accrues interest of 8% and is convertible into shares of common stock any time 180 days after
May 1, 2014, at a conversion price equal to 60% of lowest daily VWAP of the Common Stock as reported on the National Quotations
Bureau OTCQB which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future,
for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company. Accrued interest
shall be paid in shares of common stock at any time at the discretion of the Lender pursuant to the conversion terms above. The
First Note may be prepaid within 180 days with penalty. The First Note may not be prepaid after the 180th day.
The
principal amount of $50,000 under the second note shall be received by the Company no later than January 1, 2015. All principal
under this Note shall be due and payable no later than July 1, 2015. This full recourse note shall bear simple interest at the
rate of 8%. This second Note was booked as contra equity under “Subscriptions Receivable”.
The
fair value of the derivative liability as of June 30, 2014, was determined using the Black Scholes option pricing model with a
quoted market price of $0.24, a conversion price of $0.132, expected volatility of 295.8%, no expected dividends, a remaining
term of 10 months and a risk-free interest rate of 0.07% resulting in a fair value per share of $0.2091 multiplied by the 767,190
shares that would be issued if the Note was exercised as of June 30, 2014.
As
of June 30, 2014, a total interest of $666 was accrued and a total of $16,438 debt discount was amortized leaving an unamortized
balance of $83,229. The fair value of derivative liability as on June 30, 2014, is recorded at $160,406, thereby recognizing a
net loss on derivative liability as of June 30, 2014 of ($60,406).
On
June 12, 2014, the Company issued a $250,000 convertible promissory note (the “JMJ Note”) to JMJ Financial, a Nevada
sole proprietorship (the “Lender”). The JMJ Note provides up to an aggregate of $250,000 in gross proceeds. The
JMJ Note matures on June 12, 2016, accrues interest of 12% and is convertible into shares of common stock any time after
the agreement was signed. The conversion price is the lesser of $.30 or 60% of the lowest trade price in the 25 trading days previous
to the conversion. The Note also contemplated a further 10% discount to market if the shares were not deliverable by DWAC. Accrued
interest shall be paid in shares of common stock at any time at the discretion of the Lender pursuant to the conversion terms
above. This Note may be prepaid interest free within 90 days with the accrued interest at 12% per annum and the OID proportional
to $25,000. The note may not be prepaid after the 91st day. The Company opted to receive only $55,000 of the possible $250,000.
The
fair value of the derivative liability as at June 30, 2014, was determined using the Black Scholes option pricing model with a
quoted market price of $0.24, a conversion price of $0.132, expected volatility of 401.89%, no expected dividends, over remaining
term of 1.93 years and a risk-free interest rate of 0.110% resulting in a fair value per share of $0.2391 multiplied by 555,848
shares that would be issued if the Note was exercised as of June 30, 2014.
As
of June 30, 2014, a total interest expense of $11,733, an accrued interest of $11,733 was recognized and a total of $1,354 debt
discount was amortized leaving an unamortized balance of $53,646. The fair value of derivative liability as on June 30, 2014,
is recorded at $132,911, thereby recognizing a net loss on derivative liability as of June 30, 2014 of ($77,911).
On
April 1, 2014, the Company secured a nine month convertible note for $53,000 with an 8% interest rate due on December 10, 2014.
The terms of the conversion were at a 42% discount to market based on an average price calculated on the 10 trading days prior
to the conversion date. If the Company opted to pay the loan back on or before the maturity date, instead of converting the note
into equity, the Company shall make payment to the holder of an amount in cash equal to 130% of total amount due inclusive of
principal and interest accrued.
The
fair value of the derivative liability as at June 30, 2014, was determined using the Black Scholes option pricing model with a
quoted market price of $0.24, a conversion price of $0.1277, expected volatility of 338.75%, no expected dividends, over remaining
term of 5.5 months and a risk-free interest rate of 0.040% resulting in a fair value per share of $0.1934 multiplied by 415,172
shares that would be issued if the Note was exercised as of June 30, 2014.
As
of June 30, 2014, a total interest expense of $1,060, an accrued interest of $1,060 was recognized and a total of $18,854 debt
discount was amortized leaving an unamortized balance of $34,146. The fair value of derivative liability as on June 30, 2014,
is recorded at $80,300, thereby recognizing a net loss on derivative liability as at June 30, 2014 of ($27,300).
Quantitative
information for Nine Months ending on 9/30/2014
Balance
Sheet – September 30, 2014 |
| |
As
Previously Stated | | |
Restatement
Adjustments | | |
As
Restated | |
Assets | |
| | | |
| | | |
| | |
Current Assets | |
| | | |
| | | |
| | |
Prepaids | |
$ | 62,429 | | |
$ | (42,033 | ) | |
$ | 20,396 | |
Other current assets | |
| 452,201 | | |
| - | | |
| 452,201 | |
Loans receivable | |
| 6,000 | | |
| - | | |
| 6,000 | |
Total current assets | |
$ | 540,302 | | |
$ | (42,033 | ) | |
$ | 498,269 | |
Fixed assets, net | |
$ | 22,404 | | |
$ | 8,496 | | |
$ | 30,900 | |
Total assets | |
$ | 567,706 | | |
$ | (33,537 | ) | |
$ | 534,169 | |
Current Liabilities | |
| | | |
| | | |
| | |
Deferred revenue | |
$ | 250,000 | | |
$ | 210,000 | | |
$ | 460,000 | |
Accounts payable - related parties | |
| 331,985 | | |
| (22,750 | ) | |
| 309,235 | |
Accrued interest | |
| 378,979 | | |
| 147,945 | | |
| 526,924 | |
Notes payable - net of unamortized discount | |
| 1,128,951 | | |
| (119,756 | ) | |
| 1,009,195 | |
Derivative Liability on notes payable | |
| - | | |
| 473,020 | | |
| 473,020 | |
Total current liabilities | |
$ | 2,220,133 | | |
| 688,459 | | |
$ | 2,908,592 | |
Additional paid in capital | |
$ | 2,963,638 | | |
$ | 16,667 | | |
$ | 2,980,305 | |
Subscription Receivable | |
| - | | |
| (100,000 | ) | |
| (100,000 | ) |
Accumulated deficit | |
| (6,076,550 | ) | |
| (638,574 | ) | |
| (6,715,124 | ) |
Other Comprehensive gain (loss) | |
| - | | |
| (89 | ) | |
| (89 | ) |
Total stockholders’ deficit | |
$ | (2,996,902 | ) | |
$ | (721,996 | ) | |
$ | (3,718,898 | ) |
Total liabilities, redeemable preferred
stock & stockholders’ deficit | |
$ | 567,706 | | |
$ | (33,537 | ) | |
$ | 534,169 | |
Profit
and Loss - Nine Months - September 30, 2014 |
| |
As
Previously Stated | | |
Restatement
Adjustments | | |
As
Restated | |
Revenue | |
$ | 555,000 | | |
$ | (210,000 | ) | |
$ | 345,000 | |
General and administrative
expenses | |
$ | 226,463 | | |
$ | 10,699 | | |
$ | 237,162 | |
Total Operating
Expenses | |
$ | 1,079,115 | | |
$ | 10,699 | | |
$ | 1,089,814 | |
Net (loss) from
operations | |
$ | (524,115 | ) | |
$ | (220,699 | ) | |
$ | (744,814 | ) |
Other income (expense): | |
| | | |
| | | |
| | |
Interest Expense | |
$ | (329,432 | ) | |
$ | (137,434 | ) | |
$ | (466,866 | ) |
Amortization of debt discount | |
| (26,567 | ) | |
| (115,422 | ) | |
| (141,989 | ) |
Gain (loss) on
Derivative Liability | |
| - | | |
| (165,020 | ) | |
| (165,020 | ) |
Total income
(expense) | |
$ | (339,915 | ) | |
$ | (417,876 | ) | |
$ | (757,791 | ) |
Net loss | |
$ | (864,030 | ) | |
$ | (638,575 | ) | |
$ | (1,502,605 | ) |
Weighted average number of common shares
outstanding - basic and diluted | |
| 31,866,476 | | |
| (339,633 | ) | |
| 31,526,843 | |
Net loss per
common share - basic and diluted | |
$ | (0.01 | ) | |
$ | (0.04 | ) | |
$ | (0.05 | ) |
Comprehensive Loss: | |
| | | |
| | | |
| | |
Net loss | |
$ | (864,030 | ) | |
$ | (638,575 | ) | |
$ | (1,502,605 | ) |
Comprehensive
Loss | |
$ | (864,030 | ) | |
$ | (638,575 | ) | |
$ | (1,502,605 | ) |
Statement
of Cash Flows For the Nine Months ended September 30, 2014. |
| |
As
Previously Stated | | |
Restatement
Adjustments | | |
As
Restated | |
Cash flows from operating activities
| |
| | | |
| | | |
| | |
Net profit (loss) | |
$ | (864,030 | ) | |
$ | (638,575 | ) | |
$ | (1,502,605 | ) |
Adjustments to reconcile net loss to
net cash used in operating activities | |
| | | |
| | | |
| | |
Gain (loss) on derivate liability -
Notes payable | |
| - | | |
| 165,020 | | |
| 165,020 | |
Amortization of debt discount | |
| 26,567 | | |
| 115,422 | | |
| 141,989 | |
Changes in operating assets and liabilities:
| |
| | | |
| | | |
| | |
Prepaids, cash | |
| (28,630 | ) | |
| 41,132 | | |
| 12,502 | |
Accrued interest | |
| 262,448 | | |
| 138,633 | | |
| 401,081 | |
Accounts payable and accrued liabilities | |
| 49,895 | | |
| (297 | ) | |
| 49,598 | |
Accounts payable - related parties | |
| 139,932 | | |
| (22,750 | ) | |
| 117,182 | |
Deferred revenue | |
| 3,000 | | |
| 210,000 | | |
| 213,000 | |
Net cash used
in operating activities: | |
| (173,688 | ) | |
| 8,585 | | |
| (165,103 | ) |
Cash Flows used in investing activities:
| |
| | | |
| | | |
| | |
Office furniture and equipment, net | |
| (16,216 | ) | |
| (8,496 | ) | |
| (24,712 | ) |
Net cash used
in investing activities | |
| (16,216 | ) | |
| (8,496 | ) | |
| (24,712 | ) |
Net increase
in cash | |
| (31,704 | ) | |
| 89 | | |
| (31,615 | ) |
Effect of Exchange
Rates on Cash | |
| - | | |
| (89 | ) | |
| (89 | ) |
Supplemental disclosure of non-cash
investing and financing activities: | |
| | | |
| | | |
| | |
Debt discount
recorded on notes payable | |
$ | 93,446 | | |
$ | 114,554 | | |
$ | 208,000 | |
Explanations
of Restatement Adjustments for Q3 2014:
Prepayments
and fixed assets:
We
adjusted our prepaid assets by $42,033, of which $10,699 was rent that we had prepaid and never expensed, $22,750 was prepaid
rent for our CEO as per his employment agreement that also did not get expensed due to an oversight and finally, we adjusted a
prepaid balance $8,584 which was a prepayment made that never got accounted for as a fixed asset.
Prepaids
– As previously stated | |
$ | 62,429 | |
Prepaids
– Restated Balance | |
$ | 20,396 | |
Restatement
Adjustments | |
$ | 42,033 | |
| |
| | |
Breakdown
of Restatement Adjustments: | |
| | |
Prepaid
rent expensed out | |
$ | 10,699 | |
Prepaid
rent adjusted against payable to related party | |
| 22,750 | |
Prepaid
balance transferred to fixed asset | |
| 8,584 | |
Total | |
$ | 42,033 | |
Fixed
Assets – As previously stated | |
$ | 22,404 | |
Fixed
Assets – Restated Balance | |
$ | 30,900 | |
Restatement
Adjustments | |
$ | 8,496 | |
| |
| | |
Breakdown
of Restatement Adjustments: | |
| | |
Prepaid
balance transferred to fixed asset | |
$ | 8,584 | |
Exchange
rate difference (OCI) | |
| (88 | ) |
Total | |
$ | 8,496 | |
Revenue
recognition policy:
We
had previously accounted for revenue and deferred revenue by taking an estimated timeframe for work contractually agreed to be
completed and dividing the amount received from each client into this estimated number of months and account for this amount on
a month to month basis.
Our
auditors brought to our attention that our method of booking income was not US GAAP compliant. Therefore, we analyzed the individual
milestones contemplated on our contractual agreements. Once analyzed, we quantified each milestone and then accounted for the
milestones that had been effectively completed. This created a change of $210,000 in both our revenue and deferred revenue.
Accrued
interest:
There
was some miscommunication between our Company and a note holder called Eden as to certain penalties that we had to accrue due
to the loan being in default. As a result of this miscommunication, we never booked the $137,434 of extra interest and penalties
for nine months ending on September 30, 2014. We also had a $10,511 oversight regarding the OID to be accrued regarding our note
with JMJ Financial.
Breakdown
of restatement adjustments of accrued interest on related loan notes as on September 30, 2014 was as follows:
Description | |
As
previously stated | | |
Restated
Balance | | |
Restatement
Adjustments | |
JMJ
Financial | |
$ | 1,552 | | |
$ | 12,063 | | |
$ | 10,511 | |
Eden | |
| 183,421 | | |
| 320,855 | | |
| 137,434 | |
| |
| | | |
| | | |
$ | 147,945 | |
Convertible
notes and derivative liability:
We
evaluated the terms and conditions of the notes at the quarter end. Because the economic characteristics and risks of the equity
linked conversion options were not clearly and closely related to a debt-type host, the conversion features required classification
and measurement as derivative financial instruments. The accounting treatment of derivative financial instruments requires that
the Company record the initial fair value of the derivative first by allocating the fair value of the embedded derivative as a
reduction to the face value of the debt recorded as a contra liability or debt discount to be accreted over the term of the note.
On each reporting date, the fair value of the embedded derivative is calculated with changes in value recorded to other expense.
By
following the above evaluation, there was a restatement adjustment of $119,756 in Notes payable which was mainly related to unamortized
debt discount balance. We also recognized the respective derivative liability on each convertible note amounting to $473,020 as
at September 30, 2014 by following Black Scholes option pricing model.
The
breakdown of the restatement adjustments relating to Notes payable – net of unamortized debt discount was as follows:
Notes
Payable – As previously stated | |
$ | 1,128,951 | |
Prepaids
– Restated Balance | |
$ | 1,009,195 | |
Restatement
Adjustments | |
$ | (119,756 | ) |
| |
| | |
Breakdown
of Restatement Adjustments: | |
| | |
Notes
Payable | |
$ | 58,556 | |
Un-amortized
debt discount balance (see below) | |
| (178,312 | ) |
Total | |
$ | (119,756 | ) |
The breakdown
of the restatement adjustments relating to un-amortized debt discount and derivative liability on notes payable as at June 30,
2014 was as follows:
Description | |
Unamortized
debt discount balance | | |
Derivative
Liability on notes payable | |
| |
| | |
| |
LG
Capital LLC | |
$ | 58,357 | | |
$ | 150,144 | |
Adar
Bay LLC | |
| 58,357 | | |
| 150,144 | |
JMJ
Financial | |
| 46,725 | | |
| 128,837 | |
Asher
Enterprises Inc | |
| 14,873 | | |
| 43,895 | |
Restatement
Adjustments | |
$ | 178,312 | | |
$ | 473,020 | |
On
May 1, 2014 , the Company issued a $100,000 convertible promissory note (the “LG Note”) to LG Capital Funding, LLC,
a New York limited liability company (the “Lender”). The LG Note provided for up to an aggregate of $100,000
in gross proceeds. The LG Note was due to mature on May 1, 2015, accrues interest of 8% and is convertible into shares of
common stock any time after 180 days of May 1, 2014, at a conversion price equal to 60% of lowest daily Volume Weighted Average
Price (“VWAP”) of the common stock as reported on the National Quotations Bureau OTCQB on which the Company’s
shares are traded or any exchange upon which the common stock may be traded in the future, for the twenty prior trading days,
including the day upon which a Notice of Conversion is received by the Company. Accrued interest shall be paid in shares of common
stock at any time at the discretion of the Lender pursuant to the conversion terms above. The first LG Note may be prepaid
within 180 days with penalty. The note may not be prepaid after the 180th day.
The
principal amount of $50,000 under the second note shall be received by the Company no later than January 1, 2015. All principal
under this Note shall be due and payable no later than July 1, 2015. This Full Recourse Note shall bear simple interest at the
rate of 8%. This second Note was booked in Q2 as contra equity under “Subscriptions Receivable”.
The
fair value of the derivative liability as at September 30, 2014, was determined using the Black Scholes option pricing model with
a quoted market price of $0.16, a conversion price of $0.0871, expected volatility of 277.36%, no expected dividends, a remaining
term of 7 months and a risk-free interest rate of 0.03% resulting in a fair value per share of $0.1266 multiplied by the 1,186,082
shares that would be issued if the Note was exercised as of September 30, 2014.
As
of September 30, 2014, a total interest of $1,666 was accrued and a total of $41,643 debt discount was amortized leaving an unamortized
balance of $58,357. The fair value of derivative liability as on September 30, 2014 is recorded at $150,144, thereby recognizing
a net loss on derivative liability as of September 30, 2014 of ($50,144).
On
May 1, 2014, the Company issued a $100,000 convertible promissory note (the “AB Note”) to Adar Bay, LLC, a New York
limited liability company (the “Lender”). The AB Note provided for up to an aggregate of $100,000 in gross proceeds.
The AB Note was due to mature on May 1, 2015, accrues interest of 8% and is convertible into shares of common stock any time
after 180 days of May 1, 2014, at a conversion price equal to 60% of lowest daily Volume Weighted Average Price (“VWAP”)
of the common stock as reported on the National Quotations Bureau OTCQB on which the Company’s shares are traded or any
exchange upon which the common stock may be traded in the future, for the twenty prior trading days, including the day upon which
a Notice of Conversion is received by the Company. Accrued interest shall be paid in shares of common stock at any time at the
discretion of the Lender pursuant to the conversion terms above. The first AB Note may be prepaid within 180 days with penalty.
The note may not be prepaid after the 180th day.
The
First Note matures on May 1, 2015, accrues interest of 8% and is convertible into shares of common stock any time 180 days after
May 1, 2014, at a conversion price equal to 60% of lowest daily VWAP of the Common Stock as reported on the National Quotations
Bureau OTCQB which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future,
for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company. Accrued interest
shall be paid in shares of common stock at any time at the discretion of the Lender pursuant to the conversion terms above. The
First Note may be prepaid within 180 days with penalty. The First Note may not be prepaid after the 180th day.
The
principal amount of $50,000 under the second note shall be received by the Company no later than January 1, 2015. All principal
under this Note shall be due and payable no later than July 1, 2015. This full recourse note shall bear simple interest at the
rate of 8%. This second Note was booked in Q2 as contra equity under “Subscriptions Receivable”.
The
fair value of the derivative liability as at September 30, 2014, was determined using the Black Scholes option pricing model with
a quoted market price of $0.16, a conversion price of $0.0871, expected volatility of 277.36%, no expected dividends, a remaining
term of 7 months and a risk-free interest rate of 0.03% resulting in a fair value per share of $0.1266 multiplied by the 1,186,082
shares that would be issued if the Note was exercised as of September 30, 2014.
As
of September 30, 2014, a total interest of $1,666 was accrued and a total of $41,643 debt discount was amortized leaving an unamortized
balance of $58,357. The fair value of derivative liability as on September 30, 2014, is recorded at $150,144, thereby recognizing
a net loss on derivative liability as of September 30, 2014 of ($50,144).
On
June 12, 2014, the Company issued a $250,000 convertible promissory note (the “JMJ Note”) to JMJ Financial, a Nevada
sole proprietorship (the “Lender”). The JMJ Note provides up to an aggregate of $250,000 in gross proceeds. The
JMJ Note matures on June 12, 2016, accrues interest of 12% and is convertible into shares of common stock any time after
the agreement was signed. The conversion price is the lesser of $.30 or 60% of the lowest trade price in the 25 trading days previous
to the conversion. The Note also contemplated a further 10% discount to market if the shares were not deliverable by DWAC. Accrued
interest shall be paid in shares of common stock at any time at the discretion of the Lender pursuant to the conversion terms
above. This Note may be prepaid interest free within 90 days with the accrued interest at 12% per annum and the OID proportional
to $25,000. The note may not be prepaid after the 91st day. The Company opted to receive only $55,000 of the possible $250,000.
The
fair value of the derivative liability as at September 30, 2014, was determined using the Black Scholes option pricing model with
a quoted market price of $0.16, a conversion price of $0.0871, expected volatility of 288.36%, no expected dividends, over remaining
term of 1.7 years and a risk-free interest rate of 0.130% resulting in a fair value per share of $0.153 multiplied by 842,195
shares that would be issued if the Note was exercised as of September 30, 2014.
As
of September 30, 2014, a total interest expense of $12,063, an accrued interest of $12,063 was recognized and a total of $8,275
debt discount was amortized leaving an unamortized balance of $46,725. The fair value of derivative liability as on September
30, 2014, is recorded at $128,837, thereby recognizing a net loss on derivative liability as of September 30, 2014 of ($73,837).
On
April 1, 2014, the Company secured a nine month convertible note for $53,000 with an 8% interest rate due on December 10, 2014.
The terms of the conversion were at a 42% discount to market based on an average price calculated on the 10 trading days prior
to the conversion date. If the Company opted to pay the loan back on or before the maturity date, instead of converting the note
into equity, the Company shall make payment to the holder of an amount in cash equal to 130% of total amount due inclusive of
principal and interest accrued.
The
fair value of the derivative liability as at September 30, 2014, was determined using the Black Scholes option pricing model with
a quoted market price of $0.16, a conversion price of $0.0909, expected volatility of 138.05%, no expected dividends, over remaining
term of 2.5 months and a risk-free interest rate of 0.130% resulting in a fair value per share of $0.0753 multiplied by 583,272
shares that would be issued if the Note was exercised as of September 30, 2014.
As
of September 30, 2014, a total interest expense of $2,120, an accrued interest of $2,120 was recognized and a total of $38,126
debt discount was amortized leaving an unamortized balance of $14,874. The fair value of derivative liability as on September
30, 2014, is recorded at $43,895, thereby recognizing a net loss on derivative liability as at September 30, 2014 of ($9,105).
The
Company has provided a copy of this Amendment No. 2 to Form 8-K Current Report to De Joya Griffith. We have also asked De Joya
Griffith to furnish to the Company as promptly as possible a letter addressed to the Commission stating whether the independent
accountant agrees with the statements made by the Company in this amended Current Report on Form 8-K, and, if not, stating the
respects in which it does not agree.
The
Company has received the letter from De Joya Griffith, a copy of which letter is attached hereto as Exhibit 7.
Item
9.01 |
|
Financial
Statements and Exhibits. |
|
|
|
(d) |
|
Exhibits |
Exhibit
No. |
|
Description
of Exhibits |
|
|
|
7 |
|
Letter, dated
May 8, 2015, from De Joya Griffith to the Commission |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this amended report to
be signed on its behalf by the undersigned hereunto duly authorized.
Dated:
May 8, 2015
|
GLOBAL EQUITY INTERNATIONAL, INC. |
|
|
|
|
By: |
/s/
Enzo Taddei |
|
|
Enzo Taddei |
|
|
Chief Financial Officer |
May 8,
2015
Securities
and Exchange Commission
100
F Street NE
Washington,
DC 20549
RE:
Global Equity International, Inc.
We
have read the statements that we understand Global Equity International, Inc. will include under Item 4.02 of the Form 8-K report
regarding the restatement of the Company’s Form 10-Qs for the fiscal quarters ended March 31, June 30 and September 30,
2014. We agree with such statements made regarding our firm.
Very
truly yours,
De
Joya Griffith, LLC
Certified
Public Accountants
Corporate
Headquarters:
De
Joya Griffith, LLC
2580
Anthem Village Drive, Henderson,
NV 89052 Phone: (702) 563-1600 Fax: (702) 920-8049
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