UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30,
2015
or
[ ] TRANSITION REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION FROM ______
TO ______.
Commission File Number: 0-54557
GLOBAL EQUITY INTERNATIONAL, INC.
(Exact name of registrant as specified in its
charter)
Nevada |
|
27-3986073 |
(State
or other Jurisdiction of
Incorporation or Organization) |
|
(I.R.S.
Employer
Identification No.) |
X3
Jumeirah Bay, Office 3305,
Jumeirah Lake Towers, Dubai, UAE |
|
|
(Address
of principal executive offices) |
|
(Zip
code) |
Registrant’s telephone number: +971 (0)
42767576
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant
has submitted electronically and posted on its Website, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act.
Large
accelerated filer [ ] |
|
Accelerated
filer [ ] |
Non-accelerated
filer [ ] |
|
Smaller
reporting company [X] |
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant
filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of
each of the issuer’s classes of common equity, as of the latest practicable date: As of August 12, 2015, there were 482,340,750
outstanding shares of the Registrant’s Common Stock, $.001 par value.
INDEX
PART I – FINANCIAL
INFORMATION
Item 1. Financial Statements.
Global Equity International,
Inc. and Subsidiaries
Consolidated Financial
Statements
June 30, 2015
(Unaudited)
CONTENTS
Global Equity International,
Inc. and Subsidiaries
Consolidated
Balance Sheets
| |
June
30, 2015 | | |
December
31, 2014 | |
| |
(Unaudited)
| | |
| |
Assets | |
| | | |
| | |
| |
| | | |
| | |
Current
Assets | |
| | | |
| | |
Cash | |
$ | 734 | | |
$ | 19,026 | |
Accounts receivable | |
| 2,520 | | |
| 2,520 | |
Prepaids | |
| 31,667 | | |
| 6,248 | |
Other current assets | |
| 6,744 | | |
| 9,481 | |
Loans receivable | |
| 10,825 | | |
| 10,825 | |
Total
current assets | |
| 52,490 | | |
| 48,100 | |
| |
| | | |
| | |
Investments,
cost | |
| 868,500 | | |
| 3,000 | |
| |
| | | |
| | |
Fixed
assets, net | |
| 25,751 | | |
| 30,224 | |
| |
| | | |
| | |
Total
assets | |
$ | 946,741 | | |
$ | 81,324 | |
| |
| | | |
| | |
Liabilities,
Redeemable Preferred Stock and Stockholders’ Deficit | |
| | | |
| | |
| |
| | | |
| | |
Current
Liabilities | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | 303,249 | | |
$ | 114,191 | |
Accounts payable - related parties | |
| 478,162 | | |
| 360,984 | |
Deferred revenue | |
| 707,015 | | |
| 462,015 | |
Loans payable - related parties | |
| 101,517 | | |
| 58,595 | |
Accrued interest | |
| 845,446 | | |
| 657,918 | |
Loans payable | |
| 551,796 | | |
| 440,018 | |
Converitble notes payable - net of unamortized discount
of $4,170 and $87,064, respectively | |
| 14,519 | | |
| 79,936 | |
Embedded conversion option derivative liabilities | |
| 79,148 | | |
| 301,937 | |
Convertible loan payable - related party - net of unamortized
discount of $135,196 and $0 respectively | |
| 166,793 | | |
| - | |
Embedded conversion option derivative liabilities
- related party notes | |
| 652,153 | | |
| - | |
Total
current liabilities | |
| 3,899,798 | | |
| 2,475,594 | |
| |
| | | |
| | |
Long term liabilities
| |
| | | |
| | |
Convertible loan payable - related party - net of unamortized discount
of $0 and $268,189, respectively
| |
| - | | |
| 33,800 | |
Embedded conversion option derivative liabilities
- related party notes
| |
| - | | |
| 393,510 | |
Total liabilities
| |
| 3,899,798 | | |
| 2,902,904 | |
| |
| | | |
| | |
Redeemable Series A, Convertible Preferred Stock: 5,000,000
shares authorized; 0 and 1,983,332 issued and outstanding, respectively. | |
| - | | |
| 1,020,000 | |
| |
| | | |
| | |
Commitments
and contingencies (Note 7) | |
| | | |
| | |
| |
| | | |
| | |
Stockholders’
Deficit | |
| | | |
| | |
| |
| | | |
| | |
Common stock: 500,000,000 shares authorized; $0.001
par value 154,577,729 and 36,271,148 shares issued and outstanding, respectively. | |
| 154,578 | | |
| 36,271 | |
Additional paid in capital | |
| 4,667,180 | | |
| 3,472,904 | |
Stock payable | |
| 82,850 | | |
| 82,850 | |
Accumulated deficit | |
| (7,857,665 | ) | |
| (7,434,650 | ) |
Other comprehensive gain | |
| - | | |
| 1,045 | |
Total
stockholders’ deficit | |
| (2,953,057 | ) | |
| (3,841,580 | ) |
| |
| | | |
| | |
Total
liabilities, redeemable preferred stock & stockholders’ deficit | |
$ | 946,741 | | |
$ | 81,324 | |
The accompanying notes are
an integral part of these consolidated financial statements.
Global Equity International,
Inc. and Subsidiaries
Consolidated
Statement of Operations
For the three and six
months ended June 30, 2015 and June 30, 2014 (Unaudited)
| |
For
the three months ended, | | |
For
the six months ended, | |
| |
June
30, 2015 | | |
June
30, 2014 | | |
June
30, 2015 | | |
June
30, 2014 | |
| |
| | | |
| | | |
| | | |
| | |
Revenue | |
$ | 1,140,500 | | |
$ | 55,000 | | |
$ | 1,155,500 | | |
$ | 161,000 | |
| |
| | | |
| | | |
| | | |
| | |
General and administrative expenses | |
| 52,209 | | |
| 53,633 | | |
| 136,443 | | |
| 106,899 | |
Salaries | |
| 222,698 | | |
| 222,783 | | |
| 492,596 | | |
| 387,718 | |
Professional services | |
| 89,755 | | |
| 63,665 | | |
| 205,458 | | |
| 100,433 | |
Depreciation | |
| 2,829 | | |
| 506 | | |
| 5,581 | | |
| 977 | |
Total
operating expenses | |
| 367,491 | | |
| 340,587 | | |
| 840,078 | | |
| 596,027 | |
| |
| | | |
| | | |
| | | |
| | |
Net
income / (loss) from operations | |
| 773,009 | | |
| (285,587 | ) | |
| 315,422 | | |
| (435,027 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other
income (expense): | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| (147,050 | ) | |
| (184,147 | ) | |
| (204,676 | ) | |
| (342,343 | ) |
Finance Charges | |
| (18,553 | ) | |
| - | | |
| (111,779 | ) | |
| - | |
Amortization of debt discount | |
| (85,115 | ) | |
| (59,896 | ) | |
| (215,887 | ) | |
| (65,385 | ) |
Gain on settlement of liabilities | |
| - | | |
| 16,560 | | |
| - | | |
| 16,560 | |
Gain (Loss) on derivative liability | |
| (227,000 | ) | |
| (226,023 | ) | |
| (319,857 | ) | |
| (226,023 | ) |
Gain (Loss) on conversion of notes | |
| 25,713 | | |
| - | | |
| 61,787 | | |
| - | |
Gain on debt extinguishment | |
| 52,314 | | |
| - | | |
| 52,314 | | |
| - | |
Exchange rate loss | |
| (516 | ) | |
| (153 | ) | |
| (340 | ) | |
| (153 | ) |
Total
other income (expense) | |
| (400,207 | ) | |
| (453,659 | ) | |
| (738,438 | ) | |
| (617,344 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net
income (loss) | |
$ | 372,802 | | |
$ | (739,246 | ) | |
$ | (423,016 | ) | |
$ | (1,052,371 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average
number of common shares outstanding - basic | |
| 109,248,167 | | |
| 31,650,948 | | |
| 78,971,006 | | |
| 31,526,843 | |
Weighted average
number of common shares outstanding - dilutive | |
| 685,879,235 | | |
| 31,650,948 | | |
| 78,971,006 | | |
| 31,526,843 | |
| |
| | | |
| | | |
| | | |
| | |
Net
income (loss) per common share - basic | |
$ | 0.003 | | |
$ | (0.023 | ) | |
$ | (0.005 | ) | |
$ | (0.033 | ) |
Net
income (loss) per common share - dilutive | |
| 0.001 | | |
| (0.023 | ) | |
| (0.005 | ) | |
| (0.033 | ) |
The accompanying notes are
an integral part of these consolidated financial statements.
Global Equity International
Inc. and Subsidiaries
Consolidated
Statement of Cash Flows
For the six months period
ended June 30, 2015 and June 30, 2014 (Unaudited)
| |
For
the six months ended, | |
| |
June
30, 2015 | | |
June
30, 2014 | |
| |
| | |
| |
Cash
flows from operating activities | |
| | | |
| | |
Net loss | |
$ | (423,016 | ) | |
$ | (1,052,371 | ) |
| |
| | | |
| | |
Adjustments
to reconcile net loss to net cash provided by (used in) operating activities | |
| | | |
| | |
Depreciation | |
| 5,581 | | |
| 977 | |
Common stock issued for services
rendered | |
| - | | |
| 8,250 | |
Gain on conversion of notes | |
| (61,787 | ) | |
| - | |
Common stock issued for interest | |
| - | | |
| 65,785 | |
Securities received as payment
for services | |
| (865,500 | ) | |
| - | |
Loss on derivate liability - Notes
payable | |
| 319,857 | | |
| 226,023 | |
Gain on settlement of debt | |
| - | | |
| (16,560 | ) |
Gain on debt extinguishment | |
| (52,314 | ) | |
| - | |
Amortization of debt discount | |
| 215,887 | | |
| 65,385 | |
Finance Charges | |
| 111,779 | | |
| - | |
| |
| | | |
| | |
Changes
in operating assets and liabilities: | |
| | | |
| | |
Prepaids | |
| (25,417 | ) | |
| 14,945 | |
Accrued interest | |
| 204,677 | | |
| 276,558 | |
Accounts payable and accrued liabilities | |
| 189,760 | | |
| 24,168 | |
Accounts payable - related parties | |
| 117,178 | | |
| 164,342 | |
Deferred revenue | |
| 245,000 | | |
| (31,000 | ) |
Other current assets | |
| 2,736 | | |
| - | |
| |
| | | |
| | |
Net
cash used in operating activities: | |
| (15,579 | ) | |
| (253,498 | ) |
| |
| | | |
| | |
Cash
Flows used in investing activities: | |
| | | |
| | |
Office furniture and equiment, net | |
| (1,108 | ) | |
| - | |
| |
| | | |
| | |
Net
cash used in investing activities | |
| (1,108 | ) | |
| - | |
| |
| | | |
| | |
Cash
flows from financing activities: | |
| | | |
| | |
Proceeds from loans - related parties | |
| 42,922 | | |
| 700 | |
Proceeds for notes payable | |
| - | | |
| 208,000 | |
Repayment
of notes payable | |
| (43,482 | ) | |
| - | |
| |
| | | |
| | |
Net
cash (used in) provided by financing activities | |
| (560 | ) | |
| 208,700 | |
| |
| | | |
| | |
Net
decrease in cash | |
| (17,247 | ) | |
| (44,798 | ) |
| |
| | | |
| | |
Effect of Exchange Rates on Cash | |
| (1,045 | ) | |
| - | |
| |
| | | |
| | |
Cash
at Beginning of Period | |
| 19,026 | | |
| 48,856 | |
| |
| | | |
| | |
Cash at End
of Period | |
$ | 734 | | |
$ | 4,058 | |
| |
| | | |
| | |
Supplemental
disclosure of cash flow information: | |
| | | |
| | |
Cash paid for interest | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Cash paid for income taxes | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Supplemental
disclosure of non-cash investing and financing activities: | |
| | | |
| | |
| |
| | | |
| | |
Notes payable and interest converted into shares | |
$ | 121,979 | | |
$ | 32,500 | |
Debt discount recorded on notes payable | |
$ | - | | |
$ | 308,000 | |
Accounts payable settled in shares | |
$ | - | | |
$ | 8,250 | |
The accompanying notes are
an integral part of these consolidated financial statements.
Global
Equity International, Inc. and Subsidiary
Notes to Consolidated
Financial Statements
June
30, 2015
(Unaudited)
Note
1 - Basis of Presentation
The
accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission
for interim financial information. Accordingly, they do not include all the information and footnotes necessary for a comprehensive
presentation of financial position, results of operations, or cash flows. It is management’s opinion, however, that all
material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement
presentation.
The
unaudited interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form
10-K, which contains the audited financial statements and notes thereto, together with the Management’s Discussion and Analysis,
for the year ended December 31, 2014. The interim results for the period ended June 30, 2015 are not necessarily indicative of
results for the full fiscal year.
Note
2 - Nature of Operations
Global
Equity Partners, Plc. (“GEP”), a private company, was organized under the laws of the Republic of Seychelles on September
2, 2009. Global Equity International Inc. (the “Company” or “GEI”), a reporting company since June 21,
2012, was organized under the laws of the state of Nevada on October 1, 2010. On November 15, 2010, GEP executed a reverse recapitalization
with GEI. On August 22, 2014, we formed a Dubai subsidiary of Global Equity Partners Plc. called GE Professionals DMCC. Global
Equity Partners Plc. is the parent company of its 100% subsidiary GE Professionals DMCC (Dubai).
Revenue
is generated from business consulting services, introduction fees, and equity participation.
Note
3 - Going Concern
As
reflected in the accompanying financial statements, the Company had a net loss of $423,016 and net cash used in operations of
$(15,579) for the six months ended June 30, 2015; and a working capital deficit of $3,847,308 and stockholders´ deficit
of $2,953,057 as of June 30, 2015. These factors raise substantial doubt about the Company’s ability to continue as a going
concern.
The
ability of the Company to continue its operations is dependent on Management’s plans, which include the raising of capital
through debt and/or equity markets, until such time that funds provided by operations are sufficient to fund working capital requirements.
The Company may need to incur liabilities with certain related parties to sustain the Company’s existence.
The
Company expects to expend funds to implement a marketing program to increase awareness of its business model, which includes,
but is not limited to, acquisition of private companies, with the intention of taking those companies public on recognized stock
exchanges around the global and possibly dual listing some of our clients on foreign stock exchanges. In the event that operating
cash flows are slowed or nonexistent, the Company plans to reduce its overhead wherever possible.
Depending
upon market conditions, the Company may not be successful in raising sufficient additional capital to achieve its business objectives.
In such event, the business, prospects, financial condition, and results of operations could be materially adversely affected;
hence there is substantial doubt about the Company’s ability to continue as a going concern.
The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business. These consolidated financial statements do not
include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be
necessary should the Company be unable to continue as a going concern.
Global
Equity International, Inc. and Subsidiary
Notes
to Consolidated Financial Statements
June
30, 2015
(Unaudited)
Note
4 - Summary of Significant Accounting Policies
Principles
of Consolidation
Global
Equity International Inc. is the parent company of its 100% subsidiary Global Equity Partners Plc and Global Equity Partners Plc.
is the parent company of its 100% subsidiary, GE Professionals DMCC (Dubai). All significant inter-company accounts and transactions
have been eliminated in consolidation.
Use
of Estimates
The
preparation of 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 disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect
of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered
in formulating its estimate could change in the near term due to one or more future non confirming events. Accordingly, the actual
results could differ from those estimates. Significant estimates in the accompanying financial statements include allowance for
doubtful accounts and loans, estimates of fair value of securities received for services, depreciation of fixed assets, derivative
valuations and equity valuations for non-cash transactions.
Risks
and Uncertainties
The
Company’s operations are subject to significant risk and uncertainties including financial, operational, competition and
potential risk of business failure. The risk of social and governmental factors is also a concern since the Company is headquartered
in Dubai.
Cash
The
Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At June
30, 2015 and at December 31, 2014, respectively; the Company had no cash equivalents.
Accounts
Receivable and Allowance for Doubtful Accounts
The
Company recognizes accounts receivable in connection with the services provided. The Company recognizes an allowance for doubtful
accounts based on an analysis of current receivables aging and expected future write-offs, as well as an assessment of specific
identifiable customer accounts considered at risk or uncollectible.
Foreign
currency policy
The Company’s
accounting policies related to the
consolidation and accounting
for foreign operations
are as follows: The accompanying consolidated financial statements are presented in U.S.dollars. The functional currency
of the Company’s Dubai subsidiary is the Dirham (AED). All foreign currency balances and transactions are translated into
United States dollars “$” and/or “USD” as the reporting currency. Assets and liabilities are translated
at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange
prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation
adjustments arising from the use of different exchange rates from period to period are included as a component of our stockholders’
equity (deficit) as “Accumulated other comprehensive income (loss).” Since the AED is tagged to the U.S.dollar, translation
gains and losses are always de minimis, therefore a statement of comprehensive income (loss) is not presented. Gains and losses
resulting from foreign currency transactions are included in the statement of operations.
Global
Equity International, Inc. and Subsidiary
Notes to Consolidated
Financial Statements
June
30, 2015
(Unaudited)
For
the three and six months ended June 30, 2015 and for the year ended December 31, 2014, our functional and operational currency
was the US Dollar.
Investments
(A)
Classification of Securities
Marketable
Securities
At
the time of the acquisition, a marketable security is designated as held-to-maturity, available-for-sale or trading, which depends
on the ability and intent to hold such security to maturity. Securities classified as trading and available-for-sale are reported
at fair value, while securities classified as held-to-maturity are reported at amortized cost.
Any
un-realized gains and losses are reported as a component of other comprehensive income (loss). Realized gains (losses) are computed
on a specific identification basis and are reflected in the statement of operations.
Cost
Method Investments
Securities
that are not classified as marketable securities are accounted for under the cost method. These securities are recorded at their
original cost basis and are subject to impairment testing.
At
June 30, 2013, the Company had investments in securities of two different Companies, having a cost of $163,000 that was treated
as a cost method investment. The value of the cost method investment pertains to the receipt of 9.2% of the common stock in a
private company in which the best evidence of value was the services rendered and a further 9.86% of the common stock in another
private company in which the best evidence of value was the services rendered.
At
June 30, 2013, there were identifiable events or changes in circumstances that had a significant adverse effect on the value of
one of the investments: hence the Company impaired $160,000 of the investments.
At
June 30, 2013, the Company received 2,000,000 shares from a private company and client having a cost of $2,000 that is treated
as a cost method investment. The value of the cost method investment pertains to the receipt of 8.55% of the common stock in a
private company in which the best evidence of value was the services rendered.
At
December 31, 2014, there were identifiable events or changes in circumstances that had a significant adverse effect on the value
of one of the investments; hence the Company impaired $2,000 of the investments.
On
April 28, 2015, the Company received 3,460,000 common shares from a private company and client having a fair market value of $865,000
that is treated as a cost method investment. The value of the cost method investment pertains to the receipt of 9.09% of the common
stock in a private company in which the best evidence of value was the last available price at which shares were sold in a private
placement. On April 28, 2015, the Company received 500,000 preferred
shares from the same private company and client having a fair market value of $500 that is treated as a cost method investment.
The value of the cost method investment pertains to the receipt of 10% of the preferred stock in this private company in which
the best evidence of value was the services rendered.
Global
Equity International, Inc. and Subsidiary
Notes
to Consolidated Financial Statements
June
30, 2015
(Unaudited)
(B)
Other than Temporary Impairment
The
Company reviews its equity investment portfolio for any unrealized losses that would be deemed other-than-temporary and require
the recognition of an impairment loss in income. If the cost of an investment exceeds its fair value, the Company evaluates, among
other factors, general market conditions, the duration and extent to which the fair value is less than cost, and the Company’s
intent and ability to hold the investments. Management also considers the type of security, related-industry and sector performance,
as well as published investment ratings and analyst reports, to evaluate its portfolio. Once a decline in fair value is determined
to be other than temporary, an impairment charge is recorded and a new cost basis in the investment is established. If market,
industry, and/or investee conditions deteriorate, the Company may incur future impairments. The Company did not record any permanent
impairment during the six months ended June 30, 2015 and 2014.
Fixed
Assets
Fixed
Assets are to be stated at cost of acquisition less accumulated depreciation. Depreciation is provided based on estimated useful
lives of the assets. Cost of improvements that substantially extend the useful lives of assets can be capitalized. Repairs and
maintenance expenses are to be charged to expense when incurred. In case of sale or disposal of an asset, the cost and related
accumulated depreciation are removed from the consolidated financial statements.
| |
| 06/30/2015 | | |
| 12/31/2014 | | |
Useful
Life |
Furniture and Equipment | |
$ | 37,203 | | |
$ | 36,095 | | |
3 to 5 years |
Accumulated depreciation | |
$ | (11,452 | ) | |
$ | (5,871 | ) | |
|
| |
| | | |
| | | |
|
Net fixed assets | |
$ | 25,751 | | |
$ | 30,224 | | |
|
Depreciation
expense for the six months ended June 30, 2015 and June 30, 2014, was $5,581and $977 respectively.
Beneficial
Conversion Feature
For
conventional convertible debt where the rate of conversion is below market value, the Company records any “beneficial conversion
feature” (“BCF”) intrinsic value as additional paid in capital and related debt discount.
When
the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective
debt instrument. The discount is amortized to interest expense over the life of the debt.
Debt
issue costs and debt discount
The
Company may pay debt issue costs, and record financing costs and debt discounts in connection with raising funds through the issuance
of convertible debt. These costs are amortized over the life of the debt to interest expense. If a conversion of the underlying
debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Global
Equity International, Inc. and Subsidiary
Notes
to Consolidated Financial Statements
June
30, 2015
(Unaudited)
Original
issue discount
For
certain convertible debt issued, the Company provides the debt holder with an original issue discount. The original issue discount
is recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt.
Valuation
of Derivative Instruments
ASC
815 “Derivatives and Hedging” requires that embedded derivative instruments be bifurcated and assessed, along with
free-standing derivative instruments such as warrants, on their issuance date and measured at their fair value for accounting
purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula. At June 30, 2015,
the Company adjusted its derivative liability to its fair value, and reflected the change in fair value, in its consolidated statement
of operations and comprehensive loss as gain (loss) on derivatives.
Revenue
Recognition
We
recognize revenue from the services we provide in accordance with ASC Topic 605, Revenue Recognition. ASC Topic 605 sets
forth guidance as to when revenue is realized or realizable and earned, which is generally when all of the following criteria
are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been performed; (3) the
seller’s price to the buyer is fixed or determinable; and (4) collectability is reasonably assured. Generally, the contract
terms for these services are relatively short in duration, and we recognize revenue as the services are performed either on pro
rata basis or on stage of completion basis.
We
also receive securities from customers as a result of professional services provided. We recognize and measure these non-cash
securities at fair value of the securities received.
All revenues are generated from customers
whose operations are based outside of the United states.
At
June 30, 2015 and December 31, 2014, the Company had the following concentrations of accounts receivables with customers:
Customer
| | |
June
30, 2015 | | |
December 31, 2014 | |
| | |
| | | |
| | |
ACI | | |
| 100
| % | |
| 100
| % |
For
the six months ended June 30, 2015 and 2014, the Company had the following concentrations of revenues with customers:
Customer | | |
June
30, 2015 |
| | |
June
30, 2014 |
|
| | |
| | |
|
STV | | |
| 0 | % | |
| 15.53 | % |
PCI | | |
| 0 | % | |
| 18.63 | % |
YMD | | |
| 0 | % | |
| 15.53 | % |
IOA | | |
| 0 | % | |
| 15.53 | % |
SAC | | |
| 1.30 | % | |
| 34.78 | % |
TAM | | |
| 5.19 | % | |
| 0 | % |
EER | | |
| 2.60 | % | |
| 0 | % |
MGP | | |
| 5.19 | % | |
| 0 | % |
UNI | | |
| 3.46 | % | |
| 0 | % |
DUO | | |
| 82.26 | % | |
| 0 | % |
| | |
| 100 | % | |
| 100 | % |
Global
Equity International, Inc. and Subsidiary
Notes
to Consolidated Financial Statements
June
30, 2015
(Unaudited)
During
the six months ended June 30, 2015, the Company received $865,500 in equity securities in a private company in exchange for services
performed. The valuation was based on 3,460,000 common shares valued at $0.25 per share based on a contemporaneous private placement
of the customer’s shares and 500,000 preferred shares valued at $0.001 per share.
The
Company currently holds the following common equity securities in private and also reporting companies:
Company | |
No.
Shares | | |
Status |
M1 Lux AG | |
| 2,000,000 | | |
Private Company |
Monkey Rock Group Inc. | |
| 1,500,000 | | |
Reporting Company – OTC |
Voz Mobile Cloud Limited | |
| 3,200,000 | | |
Private Company |
Arrow Cars International Inc. | |
| 3,000,000 | | |
Reporting Company – OTC |
Direct Security Integration Inc. | |
| 400,000 | | |
Private Company |
Duo World Inc. | |
| 3,460,000 | | |
Private Company |
| |
| 13,560,000 | | |
|
The
Company currently holds the following preferred equity securities:
Company | |
No.
Shares | | |
Status |
Duo World Inc. | |
| 500,000 | | |
Private Company |
| |
| 500,000 | | |
|
Deferred
Revenue
Deferred
revenue represents fees that have been received by the Company for requested services that have not been completed. As at June
30, 2015, the Company recognized $275,000 of deferred revenue as revenue; leaving the deferred revenue balance of $707,015 (which
includes $360,000 of deferred revenue received during the years ended 2013 and 2014).
Share-based
payments
The
Company recognizes all forms of share-based payments to employees, including stock option grants, warrants and restricted stock
grants at their fair value on the grant date, which is based on the estimated number of awards that are ultimately expected to
vest.
Share
based payments, excluding restricted stock, are valued using a Black-Scholes pricing model. Share
based payment awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered
or the fair value of the share-based payment, whichever is more readily determinable as of the measurement date. Amounts received
prior to the measurement date are adjusted to fair value at each reporting period until a measurement date is achieved. The
grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period.
Global
Equity International, Inc. and Subsidiary
Notes
to Consolidated Financial Statements
June
30, 2015
(Unaudited)
When
computing fair value, the Company considered the following variables:
|
● |
The
risk-free interest rate assumption is based on the U.S. Treasury yield for a period consistent with the expected term of the
share based payment in effect at the time of the grant. |
|
|
|
|
● |
The
expected term is developed by management estimate. |
|
|
|
|
● |
The
Company has not paid any dividends on common stock since inception and does not anticipate paying dividends on its common
stock in the near future. |
|
|
|
|
● |
The
expected volatility is based on management estimates which are based upon our historical volatility. |
|
|
|
|
● |
The
forfeiture rate is based on historical experience |
Earnings
per Share
Basic
earnings (loss) per share are computed by dividing net income (loss) by weighted average number of shares of common stock outstanding
during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average
number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.
Common stock equivalents include embedded conversion options convertible into 576,631,068 common shares available to our convertible
note holders, which, if exercised, maybe dilutive.
Fair
Value of Financial Assets and Liabilities
The
Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance
on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability,
as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that
market participants would use in pricing an asset or liability.
The
authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring
or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical
levels of inputs to measure fair value:
|
● |
Level
1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. |
|
|
|
|
● |
Level
2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar
assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities;
or inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
|
|
|
|
● |
Level
3: Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair
value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. |
The
carrying amounts reported in the balance sheet for prepaid expenses, accounts receivable, accounts payable, accounts payable to
related parties and loans payable to related parties, approximate fair value based on the short-term nature of these instruments.
The
Company has assets and liabilities measured at fair market value on a recurring basis. Consequently, the Company had gains and
losses reported in the statement of operations.
Global
Equity International, Inc. and Subsidiary
Notes to Consolidated
Financial Statements
June
30, 2015
(Unaudited)
The
following is the Company’s assets and liabilities measured at fair value on a recurring and nonrecurring basis at June 30,
2015 and December 31, 2014, using quoted prices in active markets for identical assets (Level 1); significant other observable
inputs (Level 2); and significant unobservable inputs (Level 3):
| |
June
30, 2015 | | |
December 31, 2014 | |
| |
| | |
| |
Level 1 – Cash | |
$ | 734 | | |
$ | 19,026 | |
Level 3 – Non-Marketable Securities | |
| 868,500 | | |
| 3,000 | |
Level 3 – Derivative liabilities | |
| (731,301 | ) | |
| (695,447 | ) |
The
following section describes the valuation methodologies the Company uses to measure financial instruments at fair value:
Marketable
Securities — The Level 2 position consists of the Company’s investment in equity securities of stock held in publically
traded companies. The valuation of these securities is based on significant inputs that are observable or can be derived from
or corroborated by observable market data. These valuations are typically based on quoted prices in active markets. The Company´s
investments in equity securities are in relatively inactive markets.
Non-Marketable
Securities at Fair Value on a Nonrecurring Basis — Certain assets are measured at fair value on a nonrecurring basis.
The level 3 position consist of investments accounted for under the cost method. The Level 3 position consists of investment in
an equity security held in a private company.
Management
believes that an “other-than-temporary impairment” would be justified, as according to ASC 320-10 an investment is
considered impaired when the fair value of an investment is less than its amortized cost basis. The impairment is considered either
temporary or other-than-temporary. The accounting literature does not define other-than-temporary. It does, however, state that
other-than-temporary does not mean permanent; although, all permanent impairments are considered other-than-temporary. The literature
does provide some examples of factors which may be indicative of an “other-than-temporary impairment”, such as:
|
● |
the
length of time and extent to which market value has been less than cost; |
|
|
|
|
● |
the
financial condition and near-term prospects of the issuer; and |
|
|
|
|
● |
the
intent and ability of the holder to retain its investment in the issuer for a period of time sufficient to allow for any anticipated
recovery in market value. |
Management
believes that the fair value of its investment has been correctly measured, as the length of time that the stock has been less
than cost is nominal.
Changes
in Level 3 assets measured at fair value, for the six months ended June 30, 2015 and the year ended December 31, 2014, were as
follows:
Balance, December 31,
2014 | |
$ | 3,000 | |
Realized and unrealized gains (losses) | |
| - | |
Purchases, sales and settlements | |
| 865,500 | |
Impairment loss | |
| - | |
Balance, June 30, 2015 | |
$ | 868,500 | |
Derivative
liabilities — These instruments result from certain of our notes which are convertible based on a discount to the market
value of our common stock. These instruments were valued using pricing models which incorporate the Company’s stock price,
volatility, U.S. risk free rate, dividend rate and estimated life.
Global
Equity International, Inc. and Subsidiary
Notes
to Consolidated Financial Statements
June
30, 2015
(Unaudited)
The
table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities (derivative
liabilities) for the six months ended June 30, 2015.
Balance, December 31,
2014 | |
$ | 695,447 | |
Initial derivatives recorded from 1/1/15 to 6/30/15 | |
| - | |
Changes in fair value from 1/1/15 to 6/30/15 | |
| 319,857 | |
Reduction of derivative from debt conversions or paybacks | |
| (284,003 | ) |
Reclassifications to/from APIC for change in status | |
| - | |
Balance, June 30, 2015 | |
$ | 731,301 | |
Loans
Receivable
On
March 22, 2013 the Company granted a loan to a third party, Dreamscapes Properties International Inc. The principal amount loaned
was $6,000, the agreed interest rate was 5% per annum and the loan would have to be repaid no later than one year from the date
that the loan was granted. This loan is currently in default. The Company plans to speak to Dreamscapes Properties International
Inc. with a view to discuss a payment plan over the next 6 months.
In
October 2014, the Company granted a loan to another third party. The principal amount loaned was $4,825. It was agreed that no
interest would be paid and that the loan would have to be repaid no later than one year from the date that the loan was granted.
Recent
Accounting Pronouncements
There
are no new accounting pronouncements that have any impact on the Company’s financial statements other than discussed below:
In
April 2015, the Financial Accounting Standards Board issued Accounting Standards Update No. 2015-03, “Simplifying the
Presentation of Debt Issuance Costs,” which changes the presentation of debt issuance costs in financial statements.
Under this guidance such costs would be presented as a direct deduction from the related debt liability rather than as an asset.
This guidance is effective for interim and annual reporting periods beginning after December 15, 2015. The Company is currently
evaluating the impact this guidance will have on its Consolidated Balance Sheet.
Note
5 - Debt
(A)
Accounts payable – related parties
The
following table represents the accounts payable to related parties as of June 30, 2015 and December 31, 2014, respectively:
| | |
| 6/30/2015 | | |
| 12/31/2014 | |
Salaries | | |
$ | 451,428 | | |
$ | 353,913 | |
Expenses | | |
| 26,734 | | |
| 7,071 | |
| | |
$ | 478,162 | | |
$ | 360,984 | |
As
discussed in note No. 5(C), the Company converted $324,475 of related party accounts payable into a convertible loan during the
year ended December 31, 2013.
Global
Equity International, Inc. and Subsidiary
Notes to Consolidated
Financial Statements
June
30, 2015
(Unaudited)
(B)
Related party – short term loans payable
The
Company received loans from its officers and directors. The loans are non-interest bearing, unsecured and due on demand. The following
table represents the loans payable activity as of June 30, 2015 and as of December 31, 2014, respectively:
Loans payable –
related party – December 31, 2014 | |
$ | 58,595 | |
Proceeds from loans | |
| 42,922 | |
Repayments | |
| - | |
Loans payable – related party
– June 30, 2015 | |
$ | 101,517 | |
(C)
Related party – short term convertible notes
The
Company had accrued salary to the officers and directors of the Company based on the terms of the employment agreements entered
into with each officer. As at December 31, 2012, $209,475 was due to the Chief Executive Officer and $115,000 was due to the Chief
Financial Officer. During the quarter ended March 31, 2013, the Company converted these amounts to Convertible Loans Payable.
These amounts had a term of two years from March 31, 2013 and were repayable on demand having accrued interest at 10% on the loan
period. The agreements also gave an option to the officers of the Company to convert all or part of the debt that the Company
maintains with them into restricted shares at $1.20 per share.
On
November 15, 2014, the board of directors agreed to modify the conversion terms of the loan and extend the term until December
31, 2015. The new conversion terms are as follows: 50% of the average 10 day closing price prior to the conversion. This modification
caused the initial notes to be deemed extinguished. The company has accounted for the corresponding debt discount, derivate liability
and gain on extinguishment attached to these notes.
During
the six months ending on June 30, 2015, a total interest of $15,183 was accrued and a total of $132,993 debt discount was amortized
leaving an unamortized balance of $135,196. The fair value of derivative liability as on June 30, 2015 is recorded at $652,153,
thereby recognizing a net loss on derivative liability for the six months ending on June 30, 2015 of $258,643.
The
principal balance outstanding of the loan payable account (net of unamortized debt discount of $135,196) as at June 30, 2015 is
$166,793.
(D)
Notes payable
On
October 9, 2013, the Company secured a two month loan for GBP 75,000 (equivalent to $120,420) with the understanding that the
Company will issue 10,000 common restricted shares, issued to the lender on December 7, 2013, and also repay 35,000 GBP (equivalent
to $56,196) in lieu of interest. As the principal and interest was not paid back to the lender on time, the Company compensated
the lender with an additional 20,000 common restricted shares and for this the lender agreed to a five month extension. This stock
compensation was issued to the lender also on December 12, 2013. This loan is currently in default. Total accrued interest as
at June 30, 2015 is $106,196.
Loan granted in 2013 | |
$ | 120,420 | |
Interest accrued in 2013 | |
| 56,196 | |
Balance at December 31, 2013 | |
$ | 176,616 | |
| |
| | |
Interest accrued in 2014 | |
| 50,000 | |
Balance at December 31, 2014 | |
$ | 226,616 | |
| |
| | |
Interest accrued in 2015 | |
| - | |
Balance at June 30, 2015 | |
$ | 226,616 | |
Global
Equity International, Inc. and Subsidiary
Notes
to Consolidated Financial Statements
June
30, 2015
(Unaudited)
On
October 17, 2013, the Company secured a three month bridge loan for 200,000 GBP (equivalent to $319,598) with the agreement to
repay the principle plus 5% per month interest on or before January 18, 2014. This loan is currently in default. At June 30, 2015,
our Company and the note holder are in dispute regarding the interest that is effectively payable. Also, the note holder received
the 1,600,000 shares of Direct Security Integration Inc. that were pledged in a private company and the note holder is currently
trying to sell these shares. The shares pledged formed part of the assets of our company. Total accrued interest and a monitoring
fee payable as at June 30, 2015 is $609,775 and $111,778, respectively.
Loan granted in 2013 | |
$ | 319,598 | |
Interest accrued in 2013 | |
| 39,602 | |
Balance at December 31, 2013 | |
$ | 359,200 | |
| |
| | |
Interest accrued in 2013 | |
| 390,197 | |
Balance at December 31, 2014 | |
$ | 749,397 | |
| |
| | |
Monitoring fee accrual | |
| 111,778 | |
Interest accrued in 2015 | |
| 179,976 | |
Balance at June 30, 2015 | |
$ | 1,041,151 | |
(E) Convertible
notes and derivative liability
We
have evaluated the terms and conditions of the notes. Because the economic characteristics and risks of the equity linked conversion
options are not clearly and closely related to a debt-type host, the conversion features require 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 income (expense).
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 up to an aggregate of $100,000 in gross
proceeds. The LG Note matured on May 1, 2015, having accrued interest of 8% and was 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 exchange which the Company’s shares were traded or any exchange upon which the Common Stock
might be traded in the future, for the twenty prior trading days including the day upon which a Notice of Conversion was received
by the Company. Accrued interest was paid back in shares of common stock 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 was to be received by the Company no later than January 1, 2015. All principal
under this Note was due and payable no later than July 1, 2015. This Full Recourse Note would have accrued simple interest at
the rate of 8%. On December 19, 2014 the noteholder decided not to lend any further amounts against the second note, so this amount
was not received by the company. As such the second note and corresponding subscription receivable was cancelled during the year
ended December 31, 2014.
Global
Equity International, Inc. and Subsidiary
Notes to Consolidated
Financial Statements
June
30, 2015
(Unaudited)
The
fair value of the derivative liability as at June 30, 2015, was determined using the Black Scholes option pricing model with a
quoted market price of $0.0015 per share, a conversion price of $0.00063 per share, expected volatility of 199.57%, no expected
dividends, a remaining term of 16 days and a risk-free interest rate of 0.010% resulting in a fair value per share of $0.0009
multiplied by the 18,903,861 shares that would be issued if the Note was exercised on the Effective Date.
During
the six months ended June 30, 2015, the Company repaid $39,165 in principal and $2,997 of accrued interest by the issuance of
44,472,494 shares of common stock priced between $0.0011 to $0.0067 per share. As a result, a total of $16,575 of debt discount
was amortized and $11,193 was recognized as net gain on conversion into stock.
During
the six months ending on June 30, 2015, a total interest of $1,394 was accrued and a total of $16,575 debt discount was amortized
leaving an unamortized balance of $0. The fair value of derivative liability as on June 30, 2015 is $16,476, recognizing a net
loss on derivative liability for the six months period ending June 30, 2015 of $12,389.
On
May 1, 2014, the Company entered into a Securities Purchase Agreement with Adar Bay, LLC (“Adar Bay”) providing for
the purchase of a Convertible Redeemable Note (the “AB Note”) in the aggregate principal amount of $100,000. The AB
Note provided up to an aggregate principal amount of $100,000 (with the first note being in the amount of $50,000 and the second
note being in the amount of $50,000 (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise
with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock, $0.001
par value per share, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions
set forth in such Note. The first of the two notes (the “First Note”) shall be paid for by the Buyer as set forth
herein. The second note (the “Second Note”) shall initially be paid for by the issuance of an offsetting $50,000 secured
note issued to the Company by the Buyer (“Buyer Note”), provided that prior to conversion of the Second Note, the
Buyer must have paid off the Buyer Note in cash such that the Second Note may not be converted until it has been paid for in cash.
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 exchange 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 was to be received by the Company no later than January 1, 2015. All principal
under this Note would be due and payable no later than July 1, 2015. This Full Recourse Note would have accrued simple interest
at the rate of 8%. This amount was not received and as on December 24, 2014 the noteholder decided not to lend any further amounts.
As such the second note and corresponding subscription receivable was cancelled during the year ended December 31, 2014.
The
fair value of the derivative liability as at June 30, 2015, was nil as this loan was fully converted into shares at the quarter
ending on March 31, 2015.
During
the six months ended June 30, 2015, the Company repaid $37,000 in principal and $2,855 of accrued interest by the issuance of
24,570,088 shares of common stock priced between $0.0024 to $0.0057 per share. As a result, $14,641was recognized as net gain
on conversion into stock.
During
the six months ending on June 30, 2015, a total interest of $652 was accrued and a total of $14,421 debt discount was amortized
leaving an unamortized balance of $0. The company recognized a net loss on derivative liability during the six months ending on
June 30, 2015 of $(157).
Global
Equity International, Inc. and Subsidiary
Notes
to Consolidated Financial Statements
June
30, 2015
(Unaudited)
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 Deposits/Withdrawals
at Custodian (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 91th 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, 2015, was determined using the Black Scholes option pricing model with a
quoted market price of $0.0015, a conversion price of $0.0006, expected volatility of 366.59%, no expected dividends, a remaining
term of 11.5 months and a risk-free interest rate of 0.280% resulting in a fair value per share of $0.0014 multiplied by the 43,710,750
shares that would be issued if the Note was exercised on the Effective Date.
During
the six months ended June 30, 2015, the Company repaid $39,646 in principal by the issuance of 49,264,000 shares of common stock
priced between $0.0010 to $0.0065 per share. As a result, a total of $30,635 of debt discount was amortized and $35,952 was recognized
as net gain on conversion into stock.
During
the six months ended June 30, 2015, a total debt discount of $30,635 was amortized leaving an unamortized balance of $4,170. The
fair value of derivative liability as on June 30, 2015 is recorded at $62,672, thereby recognizing a net loss on derivative liability
during the six months ending on June 30, 2015 of $48,982.
The
Company entered into Securities Purchase Agreement (the “Agreement”), dated as of September 25, 2014, with KMB Worldwide
Inc. On October 2, 2014, the Company received $32,500 from a secured nine month convertible loan signed on September 29, 2014.
The loan carried an 8% interest rate and was due on June 29, 2015. The terms of the conversion included 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 180 days, hence not converting the debt into equity, borrower should make payment to the holder of an amount
in cash equal to 130% of total amount due inclusive of principal and interest accrued. On March 24, 2015, this note, the 8% per
annum accrued interest and 130% premium was fully paid back to the noteholder.
During
the six months ended June 30, 2015, a total interest of $10,325 was accrued and a total of $21,259 debt discount was amortized
leaving an unamortized balance of $0. The fair value of the derivative liability as on June 30, 2015, was $0 as this loan was
fully paid back during the quarter ending on March 31, 2015 and the company recognized a gain of $51,612 on extinguishment of
derivative liability balance.
During
the quarter ended March 31, 2013, the Company converted $209,475 of unpaid salary to Convertible Loan Payable. This amount will
be advanced for a term of two years and is repayable on demand and will accrue interest at 10% on the loan period. The agreement
also gave an option to the company´s CEO to convert all or part of the debt that the Company maintains with them into restricted
shares at $1.20 per share.
Global
Equity International, Inc. and Subsidiary
Notes to Consolidated
Financial Statements
June
30, 2015
(Unaudited)
On
November 15, 2014 the board of directors agreed to modify the conversion terms of the loan and extend the term until December
31, 2015. The new conversion terms are now as follows: 50% of the average 10 day closing price prior to the conversion. This modification
caused the initial note to be deemed extinguished. The company has accounted for the corresponding debt discount, derivate liability
and gain on extinguishment attached to the note.
The
fair value of the derivative liability as at June 30, 2015, was determined using the Black Scholes option pricing model with a
quoted market price of $0.0015, a conversion price of $0.0006, expected volatility of 326.01%, no expected dividends, a remaining
term of 6 months and a risk-free interest rate of 0.280%, resulting in a fair value per share of $0.0013 multiplied by the 331,840,088
shares that would be issued if the Note was exercised on the Effective Date.
During
the six months ended June 30, 2015, a total interest of $9,802 was accrued and a total of $85,858 debt discount was amortized
leaving an unamortized balance of $87,281. The fair value of derivative liability as on June 30, 2015 is recorded at $421,019,
thereby recognizing a net loss on derivative liability during the six months ending on June 30, 2015 of $166,976.
During
the quarter ended March 31, 2013, the Company converted $115,000 of unpaid salary to Convertible Loan Payable. This amount will
be advanced for a term of two years and is repayable on demand and will accrue interest at 10% on the loan period. The agreement
also gave an option to the company´s CFO to convert all or part of the debt that the Company maintains with them into restricted
shares at $1.20 per share.
On
November 15, 2014 the board of directors agreed to modify the conversion terms of the loan and extend the term until December
31, 2015. The new conversion terms are now as follows: 50% of the average 10 day closing price prior to the conversion. This modification
caused the initial note to be deemed extinguished. The company has accounted for the corresponding debt discount, derivate liability
and gain on extinguishment attached to the note.
The
fair value of the derivative liability as at June 30, 2015, was determined using the Black Scholes option pricing model with a
quoted market price of $0.0015, a conversion price of $0.0006, expected volatility of 326.01%, no expected dividends, a remaining
term of 6 months and a risk-free interest rate of 0.280%, resulting in a fair value per share of $0.0013 multiplied by the 182,176,369
shares that would be issued if the Note was exercised on the Effective Date.
During
the six months ending on June 30, 2015, a total interest of $5,381 was accrued and a total of $47,135 debt discount was amortized
leaving an unamortized balance of $47,916. The fair value of derivative liability as on June 30, 2015 is recorded at $231,135,
thereby recognizing a net loss on derivative liability during the six months ending on June 30, 2015 of $91,667.
Note
6 - Equity and Stockholders’ Equity
(A)
Redeemable Preferred Stock
On
November 30, 2011, the Company authorized and designated 5,000,000 Series “A” convertible preferred shares. On November
13, 2012, the Company’s board of directors approved an amendment to the Certificate of Designation; to amend the voting
rights and conversion rights of the Company’s Series “A” preferred shares as follows:
|
● |
Voting
Rights:10 votes per share (votes along with common stock); |
|
|
|
|
● |
Conversion
Rights: Each share of Series “A” Preferred is convertible into ten (10) shares of common stock 1 day after the
second anniversary of issuance; |
|
|
|
|
● |
Dividend
Rights: None; |
|
|
|
|
● |
Liquidation
Rights: None |
Global
Equity International, Inc. and Subsidiary
Notes to Consolidated
Financial Statements
June
30, 2015
(Unaudited)
Under
Regulation S-X, Rule 5-02-28, preferred stock must be classified outside of stockholders’ equity when the stock is:
|
● |
Redeemable
at a fixed or determinable price on a fixed or determinable date, |
|
|
|
|
● |
Redeemable
at the option of the holder, or |
|
|
|
|
● |
Redeemable
based on conditions outside the control of the issuer. |
The
Series “A”, convertible preferred stock was redeemable on December 1, 2014 and it was presented on the balance sheets
as “Redeemable Preferred Stock” in a manner consistent with temporary equity as at December 31, 2014. There were no
other features associated with this class of redeemable preferred stock, which require disclosure. As at December 31, 2014, there
were 1,983,332 series A preferred shares issued and outstanding. The carrying amount and redemption amount was $1,020,000 as at
December 31, 2014.
On
May 19, 2015, the board of directors agreed to the non-redemption and returned the 1,983,332 series “A” preferred
shares of the Company to Treasury. Since the preferred shares were vested upon issuance in prior years, the cancellation of these
shares was considered a contribution back to the company at zero cost with no gain or loss recognized.
(B)
Common Stock
During
the six months ended June 30, 2015, the Company issued 118,306,581 common shares valued at their fair value of $292,582 in exchange
for conversion of promissory notes and accrued interest of $121,979 and related derivative liabilities of $232,390, thereby recognizing
a net gain on conversion of $61,787.
Effective
February 16, 2015, the Company amended its Articles of Incorporation (Article 3) to increase the number of shares of common stock
which the Company has the authority to issue from 70,000,000 to 500,000,000.
(C)
Notes Receivable Common
On
May 1, 2014, the Company entered into two Securities Purchase Agreement, one with Adar Bay LLC and the other with LG Capital Inc.,
each providing for the purchase of Convertible Redeemable Note. The aggregate principal amount of each note was $100,000. The
first note from each of the funders (“Buyers”) being in the amount of $50,000 each and the second (the “Second
Note”) shall initially be paid for by the issuance of an offsetting $50,000 secured note issued to the Company by the Buyer
(“Buyer Note”), provided that prior to conversion of the Second Note, the Buyer must have paid off the Buyer Note
in cash such that the Second Note may not be converted until it has been paid for in cash. The amount due under second note is
classified as Contra Equity account and presented under the statement of stockholders’ deficit. On December 19, 2014 and
December 24, 2014 respectively, the note holders unilaterally decided not to fund these second notes and hence the Second note
along with the buyers note stands cancelled leaving $0 balance in notes payable and in the Contra Equity Account as at December
31, 2014.
Global
Equity International, Inc. and Subsidiary
Notes
to Consolidated Financial Statements
June
30, 2015
(Unaudited)
Note
7 - Commitments and contingencies
On
April 24, 2013, the Company entered into an advertisement contract with Robert Sullivan. The Company is required to pay $30,000
in cash and issue 150,000 shares. During 2013 the Company paid $10,000 in cash, the balance of $20,000 was due within 60 days
of the signing of the agreement; this amount is unpaid as at June 30, 2015. The Company has guaranteed a value of $100,000 for
its shares at the time of legend removal. At June 30, 2015, the legend is still not removed. The Company has accrued for the shortfall
of $77,350 as a stock payable.
On
June 4, 2013, the Company secured a twelve month convertible loan for $50,000 with the understanding that the Company will issue
10,000 common restricted shares in lieu of interest. These shares are not issued as of June 30, 2015 and accounted for as Stock
Payable. The terms of the conversion will be either a $0.50 conversion price or a 25% discount to market based on an average price
calculated on the 10 trading days prior to the conversion date, whichever is the lowest. This loan note was adjusted against and
applied against the amount receivable for services rendered by the Company to the note holder on June 4, 2014. At June 30, 2015,
the Company has accrued for the $5,500 as a stock payable.
On
October 28, 2013, the Company entered into a lease agreement for its head office at Dubai for a period of two years amounting
to a rental of $31,850 per annum. This agreement is renewable for a further period of three years at 10% higher than the current
rent and same percentage for subsequent years.
On
October 9, 2013, the Company secured a two month loan for GBP 75,000 (equivalent to $120,420) and issued 10,000 restricted shares
of common stock to the lender, The Able Foundation, on December 7, 2013, and also repay 35,000 GBP (equivalent to $56,196) in
lieu of interest. As the principal and interest was not paid back to the lender on time, the Company compensated the lender with
an additional 20,000 restricted shares of common stock in consideration for a for a five month extension on the loan. This stock
compensation was issued to the lender also on December 12, 2013. The Company is currently in litigation, in the courts of Dubai,
regarding the Able Foundation loan. The plaintiff, Able Foundation, is requesting a settlement of $300,000 which is the $226,616
currently owed plus an additional $73,384 of damages. On, June 1, 2015, the Company (the defendant) retained the legal services
of a Dubai based law firm called Alsafar & Partners. These legal proceeding are currently ongoing. The Company intends
to vigorously defend the litigation. At this time, the Company cannot predict the outcome of the litigation.
Note
8 - Subsequent events
On
July 1, 2015, the Company issued 5,380,000 shares of restricted common stock valued at a fair value of $0.0015 per share or $8,070
to JMJ Financial upon conversion of $2,421 of debt.
On
July 2, 2015, our Company was engaged by a UK based company called Primesite Developments Limited that is seeking to raise capital
to exploit the many opportunities in the property development sector. Our mandate is to assist the Company on all aspects of restructuring
the company and an IPO on the US OTCQB market.
On
July 8, 2015, the Company issued 126,451,613 shares of restricted common stock valued at a fair value of $0.0019 per share or
$240,258 to Mr. Peter James Smith upon conversion of $98,000 of debt.
On
July 8, 2015, the Company issued 126,451,613 shares of restricted common stock valued at a fair value of $0.0019 per share or
$240,258 to Mr. Enzo Taddei upon conversion of $98,000 of debt.
On
July 9, 2015, the Company issued 20,500,000 shares of restricted common stock valued at a fair value of $0.0026 per share or $53,300
to JMJ Financial upon conversion of $9,225 of debt and accrued interest.
On
July 10, 2015, the Company issued 12,161,491 shares of restricted common stock valued at a fair value of $0.0039 per share or
$47,430 to LG Capital LLC upon conversion of $6,932 of debt and accrued interest.
On
July 16, 2015, the Company issued 8,649,175 shares of restricted common stock valued at a fair value of $0.0040 per share or $34,597
to LG Capital LLC upon conversion of $4,930 of debt and accrued interest. This was the last note conversion from LG Capital.
On
July 22, 2015, the Company issued 20,550,000 shares of restricted common stock valued at a fair value of $0.0054 per share or
$110,970 to JMJ Financial upon conversion of $9,247.50 of accrued interest.
On
August 6, 2015, the Company issued 7,619,129 shares of restricted common stock valued at a fair value of $0.0049 per share or
$37,334 to JMJ Financial upon conversion of $5,333 of accrued interest. This was the last note conversion from JMJ Financial.
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary
Forward - Looking Statement
The
following discussion and analysis of the results of operations and financial condition of Global Equity International, Inc. should
be read in conjunction with the unaudited financial statements, and the related notes. References to “we,” “our,”
or “us” in this section refers to the Company and its subsidiaries. Our discussion includes forward-looking statements
based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions..
We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,”
“ongoing,” “expect,” “believe,” “intend,” “may,” “will,”
“should,” “could,” and similar expressions to identify forward-looking statements.
Certain
matters discussed herein may contain forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties
include, but are not limited to, the following:
|
· |
the volatile
and competitive nature of our industry, |
|
|
|
|
· |
the uncertainties
surrounding the rapidly evolving markets in which we compete, |
|
|
|
|
· |
the uncertainties
surrounding technological change of the industry, |
|
|
|
|
· |
our dependence
on its intellectual property rights, |
|
|
|
|
· |
the success of
marketing efforts by third parties, |
Should
one or more of these risks or uncertainties materialize or should any of the underlying assumptions prove incorrect, actual results
of current and future operations may vary materially from those anticipated.
For
the three months ended June 30, 2015 and June 30, 2014:
The Company had revenues
amounting to $1,140,500 and $55,000, for the three months ended June 30, 2015 and 2014, respectively.
| | |
June
30, 2015 | | |
June
30, 2014 | |
| | |
| | |
| |
Revenue | | |
$ | 1,140,500 | | |
$ | 55,000 | |
| | |
$ | 1,140,500 | | |
$ | 55,000 | |
The total revenue for
the three months ended June 30, 2015 amounted to $1,140,500. Following is the breakdown of this amount:
|
a) |
$865,500
in equity securities in a private company in exchange for services performed. The valuation was based on 3,460,000 common
shares at $0.25 per share and 500,000 preferred shares at $0.001 per share. This is also the main reason for increase in revenue
from prior three months ended on June 30, 2014. |
|
|
|
|
b) |
$275,000
was recognized as revenue from deferred revenue as we performed related services to the clients against payments received
in prior quarters. |
For the three months ended
June 30, 2015 and 2014, the Company had the following concentrations of revenues with customers:
Customer | | |
June
30, 2015 | | |
June
30, 2014 | |
| | |
| | |
| |
STV | | |
| 0 | % | |
| 45.45 | % |
PCI | | |
| 0 | % | |
| 54.55 | % |
TAM | | |
| 5.26 | % | |
| 0 | % |
EER | | |
| 2.63 | % | |
| 0 | % |
MGP | | |
| 5.26 | % | |
| 0 | % |
UNI | | |
| 3.51 | % | |
| 0 | % |
DUO | | |
| 83.34 | % | |
| 0 | % |
| | |
| 100 | % | |
| 100 | % |
The total operating expenditures
amounted to $367,491 and $340,587, for the three months ending on June 30, 2015 and 2014, respectively. The following table sets
forth the Company’s operating expenditure analysis for both periods:
| |
June
30, 2015 | | |
June
30, 2014 | | |
Change | |
| |
| | |
| | |
| |
General and administrative expenses | |
$ | 52,209 | | |
$ | 53,633 | | |
$ | (1,424 | ) |
Salaries | |
| 222,698 | | |
| 222,783 | | |
| (85 | ) |
Professional services | |
| 89,755 | | |
| 63,665 | | |
| 26,090 | |
Depreciation | |
| 2,829 | | |
| 506 | | |
| 2,323 | |
Total operating expenses | |
$ | 367,491 | | |
$ | 340,587 | | |
$ | 26,904 | |
During the three months
ended June 30, 2015, total operating expenses were increased by $26,904 from the previous three months ending on June 30, 2014.
The reason for this increase is mainly due to the increase in professional fees paid by the Company on behalf of new clients.
The net income (loss)
from operations for the three months ended June 30, 2015 and 2014 were $773,009 and $(285,587), respectively.
The Company’s other
income and (expenses) for the three months ended June 30, 2015 and 2014 were $(400,207) and $(453,659), respectively.
| |
June
30, 2015 | | |
June
30, 2014 | | |
Changes | |
Interest expense | |
$ | (147,051 | ) | |
$ | (184,147 | ) | |
$ | 37,096 | |
Finance Charges | |
| (18,553 | ) | |
| - | | |
| (18,553 | ) |
Amortization of debt discount | |
| (85,115 | ) | |
| (59,896 | ) | |
| (25,219 | ) |
Gain on settlement of liabilities | |
| - | | |
| 16,560 | | |
| (16,560 | ) |
Gain (loss) on derivative liability | |
| (227,000 | ) | |
| (226,023 | ) | |
| (977 | ) |
Gain (loss) on conversion of notes | |
| 25,713 | | |
| - | | |
| 25,713 | |
Gain on debt extinguishment | |
| 52,314 | | |
| - | | |
| 52,314 | |
Exchange rate loss | |
| (516 | ) | |
| (153 | ) | |
| (363 | ) |
Total other
income (expense) | |
$ | (400,207 | ) | |
$ | (453,659 | ) | |
$ | 53,452 | |
Our total other income
(expense) decreased mainly due to the decrease in interest expense and increase in gain on conversion of notes and gain on extinguishment
of debt. Gain on debt extinguishment includes extinguishment of derivative liability balance amounting to $51,612 relating to
early cash settlement of the KMB convertible note. The interest expense decreased due to the fact that a majority of our outstanding
convertible notes were converted into common stock of the Company during the three months ending on June 30, 2015, and the fact
that there were no new third party loans obtained by the Company during the three months ending on June 30, 2015.
The net income (loss)
for the three months ended June 30, 2015 and 2014 were $372,802 and $(739,246), respectively.
The Company had 154,577,729
and 32,005,918 shares issued and outstanding at June 30, 2015 and June 30, 2014 respectively. The weighted average number of shares
for the three months ended June 30, 2015 and June 30, 2014 was 109,248,167 and 31,650,948 respectively. The loss per share for
both periods was $0.003 and $(0.023) respectively.
For
the six months ended June 30, 2015 and June 30, 2014:
The Company had revenues
amounting to $1,155,500 and $161,000, for the six months ended June 30, 2015 and 2014, respectively.
| | |
June
30, 2015 | | |
June
30, 2014 | |
| | |
| | |
| |
Revenue | | |
$ | 1,155,500 | | |
$ | 161,000 | |
| | |
$ | 1,155,500 | | |
$ | 161,000 | |
The total revenue for
the six months ended June 30, 2015 amounted to $1,155,500. Following is the breakdown of this amount:
|
a) |
$865,500
in equity securities in a private company in exchange for services performed. The valuation was based on 3,460,000 common
shares at $0.25 per share and 500,000 preferred shares at $0.001 per share. This is also the main reason for increase in revenue
from prior six months ended on June 30, 2014. |
|
|
|
|
b) |
$290,000
was recognized as revenue from deferred revenue as we performed related services to the clients against payments received
in prior quarters. |
For the six months ended
June 30, 2015 and 2014, the Company had the following concentrations of revenues with customers:
Customer | | |
June
30, 2015 | | |
June
30, 2014 | |
| | |
| | |
| |
STV | | |
| 0 | % | |
| 15.53 | % |
PCI | | |
| 0 | % | |
| 18.63 | % |
YMD | | |
| 0 | % | |
| 15.53 | % |
IOA | | |
| 0 | % | |
| 15.53 | % |
SAC | | |
| 1.30 | % | |
| 34.78 | % |
TAM | | |
| 5.19 | % | |
| 0 | % |
EER | | |
| 2.60 | % | |
| 0 | % |
MGP | | |
| 5.19 | % | |
| 0 | % |
UNI | | |
| 3.46 | % | |
| 0 | % |
DUO | | |
| 82.26 | % | |
| 0 | % |
| | |
| 100 | % | |
| 100 | % |
The total operating expenditures
amounted to $840,078 and $596,027, for the six months ending on June 30, 2015 and 2014, respectively. The following table sets
forth the Company’s operating expenditure analysis for both periods:
| |
June
30, 2015 | | |
June
30, 2014 | | |
Change
| |
General and administrative expenses | |
$ | 136,443 | | |
$ | 106,899 | | |
$ | 29,544 | |
Salaries | |
| 492,596 | | |
| 387,718 | | |
| 104,878 | |
Professional services | |
| 205,458 | | |
| 100,433 | | |
| 105,025 | |
Depreciation | |
| 5,581 | | |
| 977 | | |
| 4,604 | |
Total operating expenses | |
$ | 840,078 | | |
$ | 596,027 | | |
$ | 244,051 | |
Total operating expenses
increased by $244,051 as we had more legal and professional fees to pay on behalf of new clients. We also have three more employees
which is the reason for an increase in salaries expense. Our general and administrative expenses also increased as a result of
our overall growing company structure.
The net income (loss)
from operations for the six months ended June 30, 2015 and 2014, were $315,422 and $(435,027), respectively.
The Company´s other
income and (expenses) for the six months ended June 30, 2015 and 2014, were $(738,438) and $(617,344), respectively.
| |
June
30, 2015 | | |
June
30, 2014 | | |
Change
| |
Interest expense | |
$ | (204,676 | ) | |
$ | (342,343 | ) | |
$ | 137,667 | |
Finance charges | |
| (111,779 | ) | |
| - | | |
| (111,779 | ) |
Amortization of debt discount | |
| (215,887 | ) | |
| (65,385 | ) | |
| (150,502 | ) |
Gain (loss) on settlement of liabilities | |
| - | | |
| 16,560 | | |
| (16,560 | ) |
Gain (loss) on derivative liability | |
| (319,857 | ) | |
| (226,023 | ) | |
| (93,834 | ) |
Gain (loss) on conversion of notes | |
| 61,787 | | |
| - | | |
| 61,787 | |
Gain on debt extinguishment | |
| 52,314 | | |
| - | | |
| 52,314 | |
Exchange rate loss | |
| (340 | ) | |
| (153 | ) | |
| (187 | ) |
Total other
income (expense) | |
$ | (738,438 | ) | |
$ | (617,344 | ) | |
$ | (121,094 | ) |
Our total other income
(expense) increased mainly due to the fact that a larger portion of our convertible notes was converted into our common stock
during the six months ended June 30, 2015. There were no such conversions executed during the six months ended on June 30, 2014.
These note conversions caused an increase in amortization of debt discount. Loss on derivative liabilities also increased due
to the change in fair values of the derivative liabilities at each conversion and reporting date. Gain on debt extinguishment
includes extinguishment of derivative liability balance amounting to $51,612 relating to early cash settlement of KMB convertible
note. The interest expense decreased due to the fact that we paid back loans in cash and a majority of convertible notes were
converted into common stock of the Company. There were no new third party loans obtained by the Company during the six months
ended June 30, 2015. Financial charges amounting to $111,779 relates to accrual for Eden Loan monitoring fee as per the contract.
The net loss for the six
months ended June 30, 2015 and 2014 were $(423,016) and $(1,052,371), respectively.
The Company had 154,577,729
and 32,005,918 shares issued and outstanding at June 30, 2015 and June 30, 2014, respectively. The weighted average number of
shares for the six months ended June 30, 2015 and June 30, 2014 was 109,248,167 and 31,526,843 respectively. The loss per share
for both periods was $(0.004) and $(0.033), respectively.
LIQUIDITY AND CAPITAL RESERVES
Our
financial statements contained herein have been prepared assuming that the Company will continue as a going concern. The Company
had net income from operations of $773,009 and $315,422 for the three and six months ended June 30, 2015, respectively; a total
“Other Income (Expenses)” amounting to $(400,207) and $(738,438) for the three and six months ended June 30, 2015,
respectively; and net income (loss) of $372,802 and $(423,016) for the three and six months ended June 30, 2015, respectively.
The
Company had $734 in cash; net cash used in operations of $(15,579) for the six months ended June 30, 2015; working capital deficit
of $3,847,308 and stockholders’ deficit of $2,953,057 as of June 30, 2015.
While
the Company receives cash revenues periodically from its current clients, the ability of the Company to continue its operations
is dependent on Management’s plans, which may include raising capital through nonconvertible debt and/or equity markets,
until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to
incur liabilities with certain related parties to sustain the Company’s existence.
At
the date of this filing, the Company has paid off 100% of its discounted convertible loan notes, as follows:
|
1) |
LG
Capital LLC: Converted into equity. |
|
|
|
|
2) |
Adar
Bays LLC: Converted into equity. |
|
|
|
|
3) |
KMB
Worldwide Inc.: Paid in cash. |
|
|
|
|
4) |
JMJ
Financial: Converted into equity. |
The
fact that we now have no more discounted convertible loan notes should allow our common stock to trade in a more orderly manner.
Hopefully our common stock price will increase through our organic growth, which should improve our options to source funding
through the equity markets, if required.
Depending
on achievement of certain milestones and contractual agreements, the Company will be due further cash fees from current clients
amounting to $1,547,985.
Also,
of the cash fees paid to date, the Company has deferred a total $707,015 from cash fees received from four clients. These deferred
cash fees will be reflected on the Company´s income statement once certain milestones and contractual agreements have been
completed.
Client
Code | |
Fees
due over the life of the executed contracts | | |
Cash
fees deferred to date | |
SCI | |
$ | 170,000 | | |
$ | - | |
DUO | |
| 80,000 | | |
| 85,000 | |
MHB | |
| 235,000 | | |
| 130,000 | |
SAC | |
| 190,000 | | |
| 145,000 | |
UNI | |
| 752,985 | | |
| 347,015 | |
MAR | |
| 60,000 | | |
| - | |
SPP | |
| 60,000 | | |
| - | |
Total | |
$ | 1,547,985 | | |
$ | 707,015 | |
The
Company does not intend to obtain any further funding through convertible notes. Management also intends to convert, in due course,
all affiliate (Directors and officers) debt into restricted common shares of the Company, thus alleviating the necessity to repay
the affiliate debt in cash.
Depending upon market
conditions, the Company may not be successful in raising sufficient additional capital to achieve its business objectives. In
such event, the business, prospects, financial condition, and results of operations could be materially adversely, affected, hence,
there is a substantial doubt about the Company’s ability to continue as a going concern.
The accompanying consolidated
financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments relating
to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be
unable to continue as a going concern.
It is the Company’s
intention to seek additional non-discounted convertible debt financing, which we plan to use as additional working capital to
implement our marketing program to increase awareness of our business model and also to expand our operations via the acquisition
of companies that are in a similar space and industry as ours, although we have not identified any companies that we would consider
acquiring. However, we do not have any verbal or written agreements with anyone to provide us with debt financing. Any short fall
in our projected operating revenues will be covered by:
|
● |
The
cash fees that we expect to receive from the clients we currently have under contract. |
|
|
|
|
● |
Receiving
loans from one or more of our officers even though at the present time, we do not have verbal or written commitments from
any of our officers to lend us money. |
|
|
|
|
● |
Receiving
non-discounted convertible loans from third party investors. |
FUTURE PLANS
We currently have 19 active clients under
contract that are either seeking a listing on a recognized stock exchange or seeking funding for acquisition and growth:
1 |
Arrow Cars International
Inc |
2 |
Regis Card
Group Limited |
3 |
Scorpion
Performance (BTI) |
4 |
Medinas
Holdings BV |
5 |
Your MD |
6 |
Precious
Cells International Limited |
7 |
Duo World
Inc |
8 |
VT Hydrocarbon
Holdings (Pte.) |
9 |
Authenta
Trade |
10 |
ATC Enterprises
DMCC |
11 |
Unii Limited |
12 |
Magpie
Investment Holdings Ltd |
13 |
Energy
Equity Resources (Norway) Limited |
14 |
Scandinavian
AgriTex Co. Limited |
15 |
Mc Arthurs
Resources LLC |
16 |
Tam Mining
Limited |
17 |
Sunset
Pacific Petroleum International Ltd |
18 |
Primesite
Developments Limited |
19 |
Prima Oceanic
Dubai FZCO |
MILESTONES FOR 2015 /2016:
Our specific plan of operations and milestones
through August 2016 are as follows:
|
1) |
DEVELOP
THE INTRODUCER NETWORK FURTHER AND IN HOPES OF ATTRACTING NEW INTEREST FOR OUR SERVICES. |
We currently are relying
on introductions to potential clients by the following firms in Asia and Europe:
|
● |
Certain
registered investment houses and funds in London (United Kingdom). |
|
|
|
|
● |
An
Austrian management consultancy firm based in Vienna (Austria). |
|
|
|
|
● |
Various
investment banks based in Dubai (UAE) |
|
|
|
|
● |
Certain
Private Banks based in Amsterdam (Holland), Luxembourg (Luxembourg) and Zurich in Switzerland. |
|
|
|
|
● |
The
Colombo Stock Exchange in Sri Lanka. |
|
|
|
|
● |
Various
family offices in Dubai (UAE). |
We do not have any verbal
or written agreements with the firms identified above, as our relationship with each of them has been developed over the past
year or so.
We intend to develop relationships
with a further six “introducers” to potential new business for the Company before the end of December 2016.
We will continue to establish
a firm presence in Dubai, UAE where we are attracting clients, relationships and awareness. Our Dubai operation is currently a
branch office of the Company allowing us a license to trade in the area. This branch office will continue to recruit new members
of staff that will allow us to grow and become more efficient in Dubai.
|
2) |
OPEN
AN OFFICE IN THE US. |
During 2015 or early 2016,
we intend to open an office on the east coast of the USA in order to substantially expand our network of introducers to new business
and also professionals and consultants.
|
3) |
CREATE
A MORE EFFICIENT SYSTEM FOR REVIEWING PROSPECTIVE BUSINESSES. |
We will concentrate our
efforts on the quality of the company that is introduced to us. We will start off by sending the client a standard due diligence
list and request that they complete the list and send us the support for review. We will then follow-up the due diligence with
a “site visit” in order to properly understand our client’s business model and more importantly meet the principals
in person.
We will create a deeper
due diligence program allowing us to dig deep on any prospective client prior to engagement thus protecting the company from any
future problems by employing one new staff member that will be responsible for the due diligence analysis and creating a report
for our file on their findings.
|
4) |
EXPAND
OUR CONSULTANCY TO INCLUDE MORE MERGER AND ACQUISITION ACTIVITY. |
We intend to form relationships
with merger and acquisition specialists during 2015 which will hopefully enable us to:
|
● |
Find
potential merger and acquisition candidates. |
|
|
|
|
● |
Introduce
our clients to brokers and investment bankers. |
|
|
|
|
● |
Introduce
our clients to the appropriate professionals (attorneys and accountants) to assist them in a public offering or exchange listing. |
The only additional cost
for this activity will be a very small administrative burden for telephone calls and communications to be funded out of operational
income, mainly income receivable from clients currently under contract.
|
5) |
DEVELOP
IN HOUSE IT DEPARTMENT |
Commencing initially with
one member we will start to develop a proprietary program allowing us to easily monitor a client’s development status and
work in progress. We will also use this tool to manage our pipeline of clients and therefore it will become vital in our cash
flow forecasting.
|
6) |
EXPAND
ITS NEWLY FORMED HUMAN RESOURCES DEPARTMENT IN DUBAI. |
In July of 2015, the Company
created an in-house human resources department called “Kingsman James” (http://kingsmanjames.com/) with a view
to be able to provide its existing clients and other new clients with the possibility of restructuring their companies management
with seasoned professionals if required. We intend to continue expanding this human resources department throughout 2015 and 2016.
During 2015 or the early
part of 2016, when this option becomes feasible, we intend to try to become one of the first foreign companies to dual list on
Dubai NASDAQ; our plan is to carry out a public relations campaign alongside the dual listing process with the public relations
firm we have selected with a view to prepare a campaign that will have a maximum effect.
|
8) |
EXPAND
OUR NETWORK OF CONTACTS WITHIN THE INVESTMENT COMMUNITY IN DUBAI |
Our network of investment
companies in Dubai is currently small; however, we intend to substantially expand our Dubai network in order to enable us to make
introductions on a more institutional level. We intend to develop our network to at least twelve Investment Institutions who may
have interests in minority shareholding in companies from outside of the Middle East Region.
At present we are being
received with open arms by the Dubai and Middle Eastern financial community; hence we have plans to host various hospitality events
for our current clients, our key contacts and upper management of the company.
|
9) |
EXPAND
OUR RANGE OF BUSINESS AND CONTACTS |
We intend to take our
consultancy service outside of the Middle East and Europe and into Asia and Sri Lanka. We will expand on a “Commission Only”
basis for the individuals or companies who take on our service to offer to their clients. Accountants, lawyers and finance professionals
are the target market for overlaying our service into their existing client banks in return for a percentage of fees received.
We also intend to add at least two new members to our administration team during the next 12 months.
We will continue the “Road
shows” in Dubai with the support of the Dubai NASDAQ for companies already listed in Sri Lanka and other parts of Asia who
could be seeking a dual listing in Dubai to provide liquidity and more capital raising options. We have commenced initial conversations
with a brokerage house in Sri Lanka to look at the clients they have that would be suitable for the Dubai market. We will initially
invite management of selected companies to Dubai for a two day event in conjunction with Nasdaq Dubai and a number of leading
Investment Institutions. The anticipated cost of this is to be met by the prospective clients themselves and sponsorship from
the institutions and Nasdaq Dubai.
|
11) |
FURTHER
EXPAND OUR RANGE OF BUSINESS AND CONTACTS |
During this year 2015,
we intend to cement in the relationships created. The target markets for attracting clients are: Thailand, Sri Lanka, China, Hong
Kong and Singapore. The foundation for this development commenced in 2013 and 2014.
To service the clients
generated from these markets we will spend time creating a network of service companies who we can utilize to assist us on a local
basis. We will explore the possibilities of dual listings for our clients in Singapore to allow us a local market for any Asian
clients we will attract and giving the company a firm foothold in the Asian territory.
Item 3. Quantitative
and Qualitative Disclosure about Market Risk.
Not applicable.
Item 4. Controls and
Procedures.
Evaluation of Disclosure Controls and
Procedures
As
of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation
of our Principal Executive Officer and Principal Financial Officer of the effectiveness of the design and operation of our disclosure
controls and procedures. Based on this evaluation, our Principal Executive Officer and Principal Financial Officer concluded that
our disclosure controls and procedures (as defined in Rules 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of
1934) were effective.
Changes in internal
control over financial reporting.
There were no changes
in our internal control over financial reporting during our last fiscal quarter that materially affected, or is reasonably likely
to materially affect, the Company’s internal control over financial reporting.
PART II – OTHER
INFORMATION
Item 1. Legal Proceedings.
On
October 9, 2013, the Company secured a two month loan for GBP 75,000 (equivalent to $120,420) and issued 10,000 restricted shares
of common stock to the lender, The Able Foundation, on December 7, 2013, and also repay 35,000 GBP (equivalent to $56,196) in
lieu of interest. As the principal and interest was not paid back to the lender on time, the Company compensated the lender with
an additional 20,000 restricted shares of common stock in consideration for a and for a five month extension on the loan. This
stock compensation was issued to the lender also on December 12, 2013. The Company is currently in litigation, in the courts of
Dubai, regarding the Able Foundation loan. The plaintiff, Able Foundation, is requesting a settlement of $300,000 which is the
$226,616 currently owed plus an additional $73,384 of damages. On, June 1, 2015, the Company (the defendant) retained the legal
services of a Dubai based law firm called Alsafar & Partners. These legal proceeding are currently ongoing. The Company
intends to vigorously defend the litigation. At this time, the Company cannot predict the outcome of the litigation.
Item 1A. Risk Factors.
Not applicable.
Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds.
On July 1, 2015, the Company
issued 5,380,000 shares of restricted common stock valued at a fair value of $0.0015 per share or $8,070 to JMJ Financial upon
conversion of $2,421 of debt.
On
July 8, 2015, the Company issued 126,451,613 shares of restricted common stock valued at a fair value of $0.0019 per share or
$240,258 to Mr. Peter James Smith upon conversion of $98,000 of debt.
On
July 8, 2015, the Company issued 126,451,613 shares of restricted common stock valued at a fair value of $0.0019 per share or
$240,258 to Mr. Enzo Taddei upon conversion of $98,000 of debt.
On July 9, 2015, the Company
issued 20,500,000 sh.ares of restricted common stock valued at a fair value of $0.0026 per share or $53,300 to JMJ Financial upon
conversion of $9,225 of debt and accrued interest.
On July 10, 2015, the
Company issued 12,161,491 shares of restricted common stock valued at a fair value of $0.0039 per share or $47,430 to LG Capital
LLC upon conversion of $6,932 of debt and accrued interest.
On July 16, 2015, the
Company issued 8,649,175 shares of restricted common stock valued at a fair value of $0.0040 per share or $34,597 to LG Capital
LLC upon conversion of $4,930 of debt and accrued interest. This was the last note conversion from LG Capital.
On July 22, 2015, the
Company issued 20,550,000 shares of restricted common stock valued at a fair value of $0.0054 per share or $110,970 to JMJ Financial
upon conversion of $9,247.50 of accrued interest.
On August 6, 2015, the
Company issued 7,619,129 shares of restricted common stock valued at a fair value of $0.0049 per share or $37,334 to JMJ Financial
upon conversion of $5,333 of accrued interest. This was the last note conversion from JMJ Financial.
The above securities were
issued by the Company in reliance on the exemption from registration provided by Section 4(a) (2) of the Securities Act of 1933,
as amended.
Item 3. Defaults upon
Senior Securities.
None.
Item 4. Mine Safety
Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
See Exhibit Index below
for exhibits required by Item 601 of regulation S-K.
EXHIBIT INDEX
Exhibit No. | | Description |
| | |
| | List
of Exhibits attached or incorporated by reference pursuant to Item 601 of Regulation
S-K: |
Exhibit |
|
Description |
|
|
|
31.1
* |
|
Certification
under Section 302 of Sarbanes-Oxley Act of 2002 |
|
|
|
31.2
* |
|
Certification
under Section 302 of Sarbanes-Oxley Act of 2002 |
|
|
|
32.1
* |
|
Certification
under Section 906 of Sarbanes-Oxley Act of 2002 |
|
|
|
32.2
* |
|
Certification
under Section 906 of Sarbanes-Oxley Act of 2002 |
SIGNATURES
Pursuant to the requirements of Section 13
or 15(d) 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.
|
GLOBAL
EQUITY INTERNATIONAL, INC. |
|
|
Date:
August 12, 2015 |
/s/
Peter J. Smith |
|
Peter
J. Smith |
|
President
and Chief Executive Officer |
|
(Principal
Executive Officer) |
|
|
Date:
August 12, 2015 |
/s/
Enzo Taddei |
|
Enzo
Taddei |
|
Chief
Financial Officer |
|
(Principal
Accounting and Financial Officer) |
Exhibit 31.1
GLOBAL EQUITY INTERNATIONAL, INC.
A Nevada corporation
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Section 302 Certification
I,
Peter J. Smith, certify that: |
|
|
1. |
I
have reviewed this quarterly report on Form 10-Q of Global Equity International, Inc. for the three months ended June 30,
2015. |
|
|
2. |
Based
on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report; |
|
|
3. |
Based
on my knowledge, the financial statements, and other financial information included in this interim report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report; |
|
|
4. |
I
am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15(f))
for the registrant and have: |
|
|
|
a) |
Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
me by others within those entities, particularly during the period in which this annual report is being prepared; |
|
|
|
|
b) |
Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
my supervision, 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; |
|
|
|
|
c) |
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based
on such evaluation; |
|
|
|
|
d) |
Disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and |
|
|
5. |
I
have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): |
|
|
|
a) |
All
significant deficiencies in the design of operation of internal controls which would adversely affect the registrant’s ability
to record, process, summarize and report financial data and have identified for the registrant’s auditors any material
weakness in internal controls; and |
|
|
|
|
b) |
Any
fraud, whether or not material, that involves management or other employees who have a significant role in the small business
issuer’s internal control over financial reporting. |
Date:
August 12, 2015 |
/s/
Peter J. Smith |
|
Peter
J. Smith |
|
President
and Chief Executive Officer |
|
(Principal
Executive Officer) |
Exhibit 31.2
GLOBAL EQUITY INTERNATIONAL, INC.
A Nevada corporation
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Section 302 Certification
I,
Enzo Taddei, certify that: |
|
1. |
I
have reviewed this quarterly report on Form 10-Q of Global Equity International, Inc. for the three months ended June 30,
2015. |
|
|
2. |
Based
on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report; |
|
|
3. |
Based
on my knowledge, the financial statements, and other financial information included in this interim report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report; |
|
|
4. |
I
am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15(f))
for the registrant and have: |
|
|
|
a. |
Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
me by others within those entities, particularly during the period in which this annual report is being prepared; |
|
|
|
|
b. |
Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
my supervision, 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; |
|
|
|
|
c. |
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based
on such evaluation; |
|
|
|
|
d. |
Disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and |
|
|
5. |
I
have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): |
|
|
|
a. |
All
significant deficiencies in the design of operation of internal controls which would adversely affect the registrant’s ability
to record, process, summarize and report financial data and have identified for the registrant’s auditors any material
weakness in internal controls; and |
|
|
|
|
b. |
Any
fraud, whether or not material, that involves management or other employees who have a significant role in the small business
issuer’s internal control over financial reporting. |
Date:
August 12, 2015 |
/s/
Enzo Taddei |
|
Enzo
Taddei |
|
Chief
Financial Officer |
|
(Principal
Accounting and Financial Officer) |
Exhibit 32.1
GLOBAL EQUITY INTERNATIONAL, INC.
A Nevada corporation
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
In connection with the
Quarterly Report of Global Equity International, Inc. (“Company”) on Form 10-Q for the quarter ended June 30, 2015,
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Peter J. Smith, President
and Chief Executive Officer, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report
fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this
written statement required by Section 906, or other document authentication, acknowledging, or otherwise adopting the signature
that appears in typed from within the electronic version of this written statement required by Section 906, has been provided
to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Date:
August 12, 2015 |
/s/
Peter J. Smith |
|
Peter
J. Smith |
|
President
and Chief Executive Officer |
|
(Principal
Executive Officer) |
Exhibit 32.2
GLOBAL EQUITY INTERNATIONAL, INC.
A Nevada corporation
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
In connection with the
Quarterly Report of Global Equity International, Inc. (“Company”) on Form 10-Q for the quarter ended June 30, 2015,
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Enzo Taddei, Chief Financial
Officer, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies
with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained
in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this
written statement required by Section 906, or other document authentication, acknowledging, or otherwise adopting the signature
that appears in typed from within the electronic version of this written statement required by Section 906, has been provided
to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Date:
August 12, 2015 |
/s/
Enzo Taddei |
|
Enzo
Taddei |
|
Chief
Financial Officer |
|
(Principal
Accounting and Financial Officer) |
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