Notes
to the Consolidated Financial Statements
September
30, 2016
(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 disclosures 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 statements
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, 2015. The interim results for the period ended September 30, 2016 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 GEP called GE Professionals DMCC. GEP is the parent company of its
100% subsidiary GE Professionals DMCC (Dubai). On June 10, 2016, GEI incorporated its wholly owned subsidiary, called GEP Equity
Holdings Limited, under the laws of the Republic of Seychelles.
Revenue
is generated from business consulting services and employment placements.
Note
3 - 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.
As
reflected in the accompanying consolidated financial statements, the Company had a net (loss) / income of $(65,130) and $261,808
for the three and nine months ended September 30, 2016 respectively, net cash used by operations of $251,661 for the nine months
ended September 30, 2016; and a working capital deficit of $1,625,662 and stockholders´ equity of $1,471,605 as of September
30, 2016. Some of these factors raise substantial doubt about the Company’s ability to continue as a going concern.
The
ability for the Company to continue its operations is primarily dependent on:
|
a)
|
Continually
engaging with new clients which over the years have become consistent.
|
|
|
|
|
b)
|
Consummating
and executing current engagements.
|
Whilst
the Company´s current engagements are being consummated and executed, the Company may also have to resort to borrowing additional
funds with certain related parties, such as management, and also third party funders on a non-discounted basis (if for shares,
on a fixed price basis) to sustain the Company’s existence. In addition, in the event that operating cash flows are slowed,
the Company would reduce its overheads wherever possible and any monies owed to the management can also be forgiven, if necessary.
Global
Equity International, Inc. and Subsidiary
Notes
to the Consolidated Financial Statements
September
30, 2016
(Unaudited)
The
Company´s deferred revenue, $225,000 at September 30, 2016, is non-refundable hence once certain contractual milestones
are achieved or contractual terms pass over time, as applicable, on each individual engagement a proportion of deferred revenue
will become revenue for the Company and therefore no cash outlays are required for these liabilities.
It
is important to note that the two largest debts (The Able Foundation loan & Eden loan) stated on our current liabilities are
non-collateralized and non-convertible loans. However, Able Foundation has a judgment against the Company which is currently under
appeal (See Note 10).
Note
4 - Summary of Significant Accounting Policies
Principles
of Consolidation
Global
Equity International Inc. is the parent company of its two 100% subsidiaries called Global Equity Partners Plc. and GEP Equity
Holdings Limited. 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 consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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 receivable, estimates of fair value of securities received for services, estimates of fair value of
securities held, depreciation of fixed assets, valuation allowance on deferred tax assets, derivative valuations, and equity valuations
for non-cash equity grants.
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 Company´s headquarters are based in Dubai.
Cash
The
Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At September
30, 2016 and at December 31, 2015, respectively; the Company had no cash equivalents.
Global
Equity International, Inc. and Subsidiary
Notes
to the Consolidated Financial Statements
September
30, 2016
(Unaudited)
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 Arab Emirates 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 using spot rate prevailing at each historical transaction date. 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. Gains and losses resulting from foreign currency transactions are included in the statement
of operations.
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
unrealized 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.
(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 statement. 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 nine months ended September 30, 2016 or 2015.
Global
Equity International, Inc. and Subsidiary
Notes
to the Consolidated Financial Statements
September
30, 2016
(Unaudited)
Fixed
Assets
Fixed
assets are 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.
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 over the life of the debt. If a conversion of the underlying debt occurs, a proportionate
share of the unamortized amounts is immediately expensed.
Debt
Issue Costs
The
Company may pay debt issue costs in connection with raising funds through the issuance of debt whether convertible or not. These
costs are recorded as debt discounts and are amortized over the life of the debt to the statement of operations as amortization
of debt discount.
Original
Issue Discount
If
debt is issued with an original issue discount, the original issue discount is recorded to debt discount, reducing the face amount
of the note and is amortized over the life of the debt to income statement as amortization of debt discount. If a conversion of
the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
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 September 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. Upon conversion of a note where the embedded conversion
option has been bifurcated and accounted for as a derivative liability, the Company records the shares at fair value and relieves
all related notes, derivatives and debt discounts and a net gain or loss on debt extinguishment is recorded.
Global
Equity International, Inc. and Subsidiary
Notes
to the Consolidated Financial Statements
September
30, 2016
(Unaudited)
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.
We
receive consideration in the form of cash and/or securities.
We
recognize cash consideration as revenues as the services are performed either on a pro rata basis or on a milestone basis.
Securities
received as consideration are often earned at a point in time when the specified event occurs and the securities are issued to
us. Therefore, we measure and recognize these securities received at fair value on the date of receipt. If securities are received
in advance of completion of our services, the fair value will be recorded as deferred revenue and recognized as revenue as the
services are completed.
All
revenues are generated from clients whose operations are based outside of the United States.
At
September 30, 2016, the Company had the following concentrations of accounts receivable with customers:
Customer
|
|
September 30, 2016
|
|
|
|
|
|
PDI
|
|
|
43
|
%
|
EEC
|
|
|
57
|
%
|
|
|
|
100
|
%
|
For
the nine months ended September 30, 2016 and 2015, the Company had the following concentrations of revenues with customers:
Customer
|
|
September 30, 2016
|
|
|
September 30, 2015
|
|
|
|
|
|
|
|
|
SAC
|
|
|
0
|
%
|
|
|
2.
62%
|
|
MED
|
|
|
0
|
%
|
|
|
1.31
|
%
|
TAM
|
|
|
0
|
%
|
|
|
2.62
|
%
|
EER
|
|
|
0
|
%
|
|
|
1.31
|
%
|
MGP
|
|
|
0
|
%
|
|
|
2.62
|
%
|
ALP
|
|
|
0
|
%
|
|
|
4.29
|
%
|
UNI
|
|
|
13.10
|
%
|
|
|
8.84
|
%
|
DUO
|
|
|
8.11
|
%
|
|
|
43.11
|
%
|
PDI
|
|
|
21.89
|
%
|
|
|
33.27
|
%
|
QFS
|
|
|
37.89
|
%
|
|
|
0
|
%
|
INSCX
|
|
|
2.83
|
%
|
|
|
0
|
%
|
GPL
|
|
|
4.25
|
%
|
|
|
0
|
%
|
EEC
|
|
|
5.9
|
%
|
|
|
0
|
%
|
UGA
|
|
|
4.25
|
%
|
|
|
0
|
%
|
SCL
|
|
|
1.42
|
%
|
|
|
0
|
%
|
TLF
|
|
|
0.35
|
%
|
|
|
0
|
%
|
|
|
|
100
|
%
|
|
|
100
|
%
|
Global
Equity International, Inc. and Subsidiary
Notes
to the Consolidated Financial Statements
September
30, 2016
(Unaudited)
Deferred
Revenue
Deferred
revenue represents fees that have been received by the Company for requested services that have not been completed. Following
table illustrates the movement in deferred revenue during the nine months ended September 30, 2016:
Balance, December 31, 2015
|
|
$
|
839,130
|
|
New payments received during the period
|
|
|
120,000
|
|
Cash deferred revenue recognized as revenue during the period
|
|
|
(457,500
|
)
|
Securities deferred revenue recognized as revenue during the period
|
|
|
(276,630
|
)
|
Balance, September 30, 2016
|
|
$
|
225,000
|
|
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 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.
Share
based payments, excluding restricted stock, are valued using a Black-Scholes pricing model.
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
The basic net 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
net earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of shares of common stock
and common stock equivalents outstanding during the period.
As at September 30, 2016, the Company had
a common stock equivalent in the form of a fixed price convertible note, which, if exercisable, would be dilutive. See Note 7(D)
The Following table reconciles the dilutive
weighted average number of shares outstanding for the nine months ended September 30, 2016:
Weighted average common shares
– Basic:
|
|
784,687,141
|
|
Shares underlying
convertible debt:
|
|
6,108,823
|
|
Weighted average common shares – Diluted:
|
|
790,795,964
|
|
Global
Equity International, Inc. and Subsidiary
Notes
to the Consolidated Financial Statements
September
30, 2016
(Unaudited)
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 measures its derivative liabilities at fair market value on a recurring basis and measures its non-marketable securities
at fair value on a non-recurring basis. Consequently, the Company may have gains and losses reported in the statement of operations.
The
following is the Company’s assets and liabilities measured at fair value on a recurring and nonrecurring basis at September
30, 2016 and December 31, 2015, using quoted prices in active markets for identical assets (Level 1), significant other observable
inputs (Level 2), and significant unobservable inputs (Level 3):
|
|
September 30, 2016
|
|
|
December 31, 2015
|
|
Level 3 – Non-Marketable Securities – Non-recurring
|
|
$
|
3,085,322
|
|
|
$
|
2,650,471
|
|
Global
Equity International, Inc. and Subsidiary
Notes
to the Consolidated Financial Statements
September
30, 2016
(Unaudited)
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 publicly
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 investments
in equity securities held in private companies.
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 nine months ended September 30, 2016 were as follows:
Balance, December 31, 2015
|
|
$
|
2,650,471
|
|
Realized and unrealized gains (losses)
|
|
|
-
|
|
Securities received for services during the period
|
|
|
453,965
|
|
Securities paid for services during the period
|
|
|
(19,114
|
)
|
Impairment loss
|
|
|
-
|
|
Balance, September 30, 2016
|
|
$
|
3,085,322
|
|
Reclassification
Certain
amounts in the December 31, 2015 balance sheet have been reclassified to conform to the current period´s presentation. Accrued
liabilities amounting to $184,656 were previously included in the accounts payable.
Recent
Accounting Pronouncements
There
are no new accounting pronouncements that have any impact on the Company’s financial statements other than discussed below:
In
March 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-08,
“Principal versus
Agent Considerations (Reporting Revenue Gross versus Net),”
which makes targeted improvements to clarify the principal
versus agent assessment and are intended to make the guidance more operable and lead to more consistent application. The amendments,
however, do not eliminate the significant judgments related to principal versus agent assessments. This guidance is effective
for calendar year-end in 2018 for interim and annual reporting periods. The Company is currently evaluating the impact this guidance
will have on its Consolidated Balance Sheet.
Global
Equity International, Inc. and Subsidiary
Notes
to the Consolidated Financial Statements
September
30, 2016
(Unaudited)
In
May 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-12,
“Revenue from Contracts
with Customers (Topic 606)”
: Narrow-Scope Improvements and Practical Expedients, which provides clarifying guidance
in certain narrow areas and added some practical expedients. The standard and related amendments will be effective for financial
statements issued by public companies for interim and annual reporting periods beginning after December 15, 2017. Early adoption
of the standard is permitted, but not before the original date of financial statements issued by public companies for interim
and annual reporting periods beginning after December 15, 2016. We currently do not plan to early adopt this guidance and are
evaluating the potential impact of this guidance on our consolidated financial statements as well as transition methods.
Note
5 – Investments
The
Company holds following common equity securities in private and reporting companies as at September 30, 2016 and December 31,
2015:
|
|
9/30/2016
|
|
|
12/31/2015
|
|
|
|
Company
|
|
No. of Shares
|
|
|
Book value
|
|
|
No. of Shares
|
|
|
Book value
|
|
|
Status
|
M1 Lux AG
|
|
|
2,000,000
|
|
|
$
|
-
|
|
|
|
2,000,000
|
|
|
$
|
-
|
|
|
Private Company
|
Monkey Rock Group Inc.
|
|
|
1,500,000
|
|
|
$
|
-
|
|
|
|
1,500,000
|
|
|
$
|
-
|
|
|
Reporting Company – OTC
|
Voz Mobile Cloud Limited
|
|
|
3,200,000
|
|
|
$
|
-
|
|
|
|
3,200,000
|
|
|
$
|
-
|
|
|
Private Company
|
Arrow Cars International Inc.
|
|
|
3,000,000
|
|
|
$
|
3,000
|
|
|
|
3,000,000
|
|
|
$
|
3,000
|
|
|
Private Company
|
Direct Security Integration Inc.
|
|
|
400,000
|
|
|
$
|
-
|
|
|
|
400,000
|
|
|
$
|
-
|
|
|
Private Company
|
Duo World Inc.
|
|
|
3,481,133
|
|
|
$
|
880,850
|
|
|
|
3,460,000
|
|
|
$
|
865,000
|
|
|
Reporting Company – OTC
|
Primesite Developments Inc.
|
|
|
5,606,521
|
|
|
$
|
1,781,521
|
|
|
|
5,606,521
|
|
|
$
|
1,781,521
|
|
|
Private Company
|
Quartal Financial Solutions AG
|
|
|
2,271
|
|
|
$
|
419,365
|
|
|
|
-
|
|
|
|
-
|
|
|
Private Company
|
|
|
|
19,189,925
|
|
|
$
|
3,084,736
|
|
|
|
19,166,521
|
|
|
$
|
2,649,521
|
|
|
|
The
Company holds following preferred equity securities in private companies as at September 30, 2016 and December 31, 2015:
|
|
9/30/2016
|
|
|
12/31/2015
|
|
|
|
Company
|
|
No. of Shares
|
|
|
Book value
|
|
|
No. of Shares
|
|
|
Book value
|
|
|
Status
|
Duo World Inc.
|
|
|
136,600
|
|
|
$
|
136
|
|
|
|
500,000
|
|
|
$
|
500
|
|
|
Reporting Company – OTC
|
Primesite Developments Inc.
|
|
|
450,000
|
|
|
$
|
450
|
|
|
|
450,000
|
|
|
$
|
450
|
|
|
Private Company
|
|
|
|
586,600
|
|
|
$
|
586
|
|
|
|
950,000
|
|
|
$
|
950
|
|
|
|
On
February 08, 2016, the Company entered into an agreement with Yenom (Pvt.) Limited where the Company agreed to pay an equity commission,
for the introduction of a client to the Company, in the form of transfer of 363,400 preferred shares (valued at $0.005 per share)
of Duo World Inc. out of the 500,000 preferred shares which were owned by the Company at the year ended December 31, 2015. As
a result of this transfer, the Company’s investment in preferred shares of Duo World Inc. was reduced to 136,600 preferred
shares as on March 31, 2016 and a gain of $1,454 was recorded on transfer of this preferred stock.
Global
Equity International, Inc. and Subsidiary
Notes
to the Consolidated Financial Statements
September
30, 2016
(Unaudited)
On
March 29, 2016, the Company received 1,815 common shares valued at CHF 160 or $163.89 and 456 common shares valued at CHF 261
or $267.34 from a private company and client having a fair market value of $419,365 that is treated as a cost method investment.
The value of the cost method investment pertains to receipt of agreed common stock in a private company in which the best evidence
of value was based on the management representation of that private company.
On
April 27, 2016, the Company received 46,133 common shares valued at $0.75 per share from a private company and client having a
fair market value of $34,600 that is treated as a cost method investment. The value of the cost method investment pertains to
receipt of agreed 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
June 01, 2016, the Company paid an equity commission to a consultant, for the introduction of a client to the Company, in the
form of transfer of 25,000 common shares (valued at $0.75 per share) of Duo World Inc. out of the 46,133 common shares which were
received and owned by the Company on April 27, 2016. As a result of this transfer, the Company’s overall investment in common
shares of Duo World Inc. was reduced to 3,481,133 common shares as of September 30, 2016 and there was no gain / loss recorded
on transfer of this common stock.
At
September 30, 2016, there were no identifiable events or changes in circumstances that had a significant adverse effect on the
value of the investments; hence, no impairment is required as of September 30, 2016.
Note
6 – Fixed Assets
The
following table reflects net book value of fixed assets as of September 30, 2016 and December 31, 2015:
|
|
09/30/2016
|
|
|
12/31/2015
|
|
|
Useful Life
|
Furniture and Equipment
|
|
$
|
37,655
|
|
|
$
|
37,204
|
|
|
3 to 5 years
|
Accumulated depreciation
|
|
$
|
(25,710
|
)
|
|
$
|
(17,123
|
)
|
|
|
Net fixed assets
|
|
$
|
11,945
|
|
|
$
|
20,081
|
|
|
|
Depreciation
expense for the nine months ended September 30, 2016 and September 30, 2015, was $8,587 and $8,416, respectively.
Note
7 – Debt & Accounts Payables
(A)
Accounts Payables
The
following table represents breakdown of accounts payable as of September 30, 2016 and December 31, 2015, respectively:
|
|
9/30/2016
|
|
|
12/31/2015
|
|
Accrued salaries and benefits
|
|
$
|
82,691
|
|
|
$
|
79,386
|
|
Other payables & accrued liabilities
|
|
|
108,073
|
|
|
|
108,951
|
|
|
|
$
|
190,764
|
|
|
$
|
188,337
|
|
Global
Equity International, Inc. and Subsidiary
Notes
to the Consolidated Financial Statements
September
30, 2016
(Unaudited)
On
April 25, 2016, two of the Company’s consultants decided to convert their accrued fee balance amounting to $5,250 to the
common shares of the Company at $0.015 per share. As a result of this conversion, the Company issued following common stock to
its consultants:
|
●
|
100,000
common shares to a consultant, having a fair value of $0.0143 per share or $1,430 for his accrued fee balance of $1,500, thereby
recognizing a gain on conversion of $70.
|
|
|
|
|
●
|
250,000
common shares to a consultant, having a fair value of $0.0143 per share or $3,575 for his accrued fee balance of $3,750, thereby
recognizing a gain on conversion of $175.
|
On
September 30, 2016, three of the Company’s employees decided to convert their partial accrued salaries and expenses payable
balance amounting to $65,652 to the common shares of the Company at $0.02 per share. As a result of this conversion, the Company
issued following common stock to its employees:
|
●
|
900,000
common shares to Mr. Colin Copeland, having a fair value of $0.0205 per share or $18,450 for his accrued salary balance of
$18,000, thereby recognizing a loss on conversion of $450.
|
|
|
|
|
●
|
1,599,240
common shares to Mr. James Robert Payne, having a fair value of $0.0205 per share or $32,784 for his accrued salary balance
of $31,985, thereby recognizing a loss on conversion of $799.
|
|
|
|
|
●
|
783,335
common shares to Ms. Zara Victoria Clark, having a fair value of $0.0205 per share or $16,058 for his accrued salary balance
of $15,667, thereby recognizing a loss on conversion of $391.
|
(B)
Accounts Payable and Accrued Liabilities – Related Parties
The
following table represents the accounts payable and accrued expenses to related parties as of September 30, 2016 and December
31, 2015, respectively:
|
|
9/30/2016
|
|
|
12/31/2015
|
|
Accrued salaries
|
|
$
|
33,060
|
|
|
$
|
152,875
|
|
Expenses payable
|
|
|
12,105
|
|
|
|
50,734
|
|
|
|
$
|
45,165
|
|
|
$
|
203,609
|
|
On
May 31, 2016, Mr. Peter Smith, officer and director of the Company, decided to convert his partial accrued salary balance of $27,500
to the common shares of the Company at $0.0275 per share. As a result of this conversion, the Company issued 1,000,000 common
shares to Mr. Peter Smith having a fair value of $0.0248 per share or $24,800, thereby recognizing a gain on conversion of $2,700.
On the same day, Mr. Enzo Taddei, officer and director of the Company, decided to convert his partial accrued salary balance of
$27,500 to the common shares of the Company at $0.0275 per share. As a result of this conversion, the Company issued 1,000,000
common shares to Mr. Enzo having a fair value of $0.0248 per share or $24,800, thereby recognizing a gain on conversion of $2,700.
On
June 15, 2016, all of the officers and directors of the Company decided to convert their partial accrued salaries balance amounting
to $250,000 to the common shares of the Company at $0.02 per share. As a result of this conversion, the Company issued 4,500,000
common shares each to Mr. Peter Smith and Mr. Enzo Taddei, having a fair value of $0.0201 per share or $251,250 for their accrued
salary balance of $180,000, thereby recognizing a loss on conversion of $900, and issued 3,500,000 common shares to Mr. Patrick
Dolan, having a fair value of $0.0201 per share or $70,350 for his accrued salary balance of $70,000, thereby recognizing a loss
on conversion of $350.
On
September 30, 2016, all of the officers and directors of the Company decided to convert their partial accrued salaries balance
amounting to $154,014 to the common shares of the Company at $0.02 per share. As a result of this conversion, the Company issued
following common stock to its officers and directors:
|
●
|
2,720,120
common shares to Mr. Peter Smith, having a fair value of $0.0205 per share or $55,762 for his accrued salary balance of $54,402,
thereby recognizing a loss on conversion of $1,360
|
|
|
|
|
●
|
3,656,697
common shares to Mr. Enzo Taddei, having a fair value of $0.0205 per share or $74,962 for his accrued salary balance of $73,134,
thereby recognizing a loss on conversion of $1,828, and
|
|
|
|
|
●
|
1,323,863
common shares to Mr. Patrick Dolan, having a fair value of $0.0205 per share or $27,139 for his accrued salary balance of
$26,477, thereby recognizing a loss on conversion of $662.
|
Global
Equity International, Inc. and Subsidiary
Notes
to the Consolidated Financial Statements
September
30, 2016
(Unaudited)
(C)
Notes Payable
Following
is the summary of all non-convertible notes, net of debt discount, including the accrued interest as at September 30, 2016:
Date of Note
|
|
Principal
(net
of debt discount)
|
|
|
Accrued Interest
|
|
|
Provision for potential damages
|
|
|
Total payable
|
|
October 9, 2013
|
|
$
|
120,420
|
|
|
$
|
106,196
|
|
|
$
|
184,656
|
|
|
$
|
411,272
|
|
October 17, 2013
|
|
|
319,598
|
|
|
|
160,402
|
|
|
|
-
|
|
|
|
480,000
|
|
November 26, 2013
|
|
|
-
|
|
|
|
37,971
|
|
|
|
-
|
|
|
|
37,971
|
|
April 29, 2016
|
|
|
129,167
|
|
|
|
-
|
|
|
|
-
|
|
|
|
129,167
|
|
August 25, 2016
|
|
|
132,083
|
|
|
|
-
|
|
|
|
-
|
|
|
|
132,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2016
|
|
$
|
701,268
|
|
|
$
|
304,569
|
|
|
$
|
184,656
|
|
|
$
|
1,190,493
|
|
|
●
|
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 September 30, 2016 is $106,196. The Company also accrued $184,656 provision for potential damages due to the
ongoing litigation in the Dubai Courts as of September 30, 2016 which is included in accrued liabilities in the accompanying
consolidated balance sheet. (See Note 10)
|
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
|
|
|
-
|
|
Potential damages accrued in 2015
|
|
|
184,656
|
|
Balance at December 31, 2015
|
|
$
|
411,272
|
|
Interest accrued during the period
|
|
|
-
|
|
Balance at September 30, 2016
|
|
$
|
411,272
|
|
|
●
|
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 principal plus 5% per month interest on or before January 18, 2014. The note holder received, as a form of guarantee,
1,600,000 shares of Direct Security Integration Inc. and the note holder is currently trying to sell these shares. The shares
used as a form of guarantee formed part of the assets of our Company.
|
Global
Equity International, Inc. and Subsidiary
Notes
to the Consolidated Financial Statements
September
30, 2016
(Unaudited)
On
September 18, 2015, the Company and the note holder agreed to amend the previous terms of the agreement and both parties agreed
on the new terms whereby the company is now liable to pay $500,000 as full and final payment of the October 17, 2013 loan principal,
accrued interest, and all other related penalties. This repayment will not accrue any further interest or penalties. As a result,
the Company has reversed the excess accrued interest and monitoring fee payable amounting to $660,578 recognized as a gain on
settlement; leaving the principal loan balance of $319,598 and accrued interest balance $180,402 of as on September 30, 2015.
On
December 21, 2015, the company repaid first installment of the accrued interest amounting to $20,000; leaving the accrued interest
balance of $160,402 and principal loan balance $319,598 of as on December 31, 2015. The remaining installments totaling to $480,000,
as per the amended agreement, have not been paid as of September 30, 2016 and the total outstanding balance owed to the lender
is also $480,000 as of September 30, 2016.
Loan granted in 2013
|
|
$
|
319,598
|
|
Interest accrued in 2013
|
|
|
39,602
|
|
Balance at December 31, 2013
|
|
$
|
359,200
|
|
Interest accrued in 2014
|
|
|
390,197
|
|
Balance at December 31, 2014
|
|
$
|
749,397
|
|
Monitoring fee accrual
|
|
|
124,175
|
|
Interest accrued in 2015
|
|
|
287,006
|
|
Interest repayment
|
|
|
(20,000
|
)
|
Excess interest and monitoring fee gain
|
|
|
(660,578
|
)
|
Balance at December 31, 2015
|
|
$
|
480,000
|
|
Interest accrued during the period
|
|
|
-
|
|
Balance at September 30, 2016
|
|
$
|
480,000
|
|
|
●
|
On
April 29, 2016, the Company secured a six month non-convertible loan for $135,000 carrying an original issue discount of $30,000.
In addition, the company agreed to pay $5,000 to the note holder to cover their legal costs. The interest will not be accrued
on the outstanding principal balance unless an event of default occurs. During the nine months ended September 30, 2016, $4,167
of the debt issuance costs and $25,000 of the debt discount balance was amortized to income statement, leaving an unamortized
issue cost and discount balance of $5,833.
|
Principal loan amount
|
|
$
|
135,000
|
|
Original issue discount
|
|
|
(30,000
|
)
|
Issuance costs
|
|
|
(5,000
|
)
|
Amortization of OID and issuance costs during the period
|
|
|
29,167
|
|
Balance at September 30, 2016
|
|
$
|
129,167
|
|
(Net of unamortized discount and issue costs of $5,833)
|
|
|
|
|
Global
Equity International, Inc. and Subsidiary
Notes
to the Consolidated Financial Statements
September
30, 2016
(Unaudited)
Subsequent
to the nine months ended September 30, 2016, the Company amortized remaining debt discount and issue cost balance of $5,833 making
the note payable balance amounting to $135,000 and repaid the full amount of this loan note in cash on October 12, 2016. (See
Note 11)
|
●
|
On
August 25, 2016, the Company secured a six month non-convertible loan for $167,500 carrying an original issue discount of
$37,500. In addition, the company agreed to pay $5,000 to the note holder to cover their legal costs and the interest will
not be accrued on the outstanding principal balance unless an event of default occurs. Only in the event of a default hence
non-repayment of the Note at the maturity date, the lender would have the right to convert all or any part of the outstanding
balance into common shares of the Company at a conversion price equal to 70% of the average of 3 lowest VWAPS in the 20 trading
days immediately preceding the applicable conversion.
|
During
the nine months ended September 30, 2016, $833 of the debt issuance costs and $6,250 of the debt discount balance was amortized
to income statement, leaving an unamortized issue cost and discount balance of $35,417.
Principal loan amount
|
|
$
|
167,500
|
|
Original issue discount
|
|
|
(37,500
|
)
|
Issuance costs
|
|
|
(5,000
|
)
|
Amortization of OID and issuance costs during the period
|
|
|
7,083
|
|
Balance at September 30, 2016
|
|
$
|
132,083
|
|
(Net of unamortized discount and issue costs of $35,417)
|
|
|
|
|
(D)
Fixed Price Convertible Note Payable
|
●
|
On
August 27, 2015, the Company secured a six month non-convertible loan for $135,000 carrying an original issue discount of
$30,000. In addition, the company agreed to pay $5,000 to the note holder to cover their legal costs and the interest will
not be accrued on the outstanding principal balance unless an event of default occurs.
|
During
the three months ended March 31, 2016, $1,667 of the debt issuance cost discount and $10,000 of the original issue discount was
amortized to income statement, leaving an unamortized issue cost and discount balance of $0.
On
March 18, 2016, the Company entered into an exchange agreement with the same lender whereby original purchase agreement dated
August 27, 2015 was exchanged with the new agreement to extend the loan repayment term until April 17, 2016. The total exchange
price for $135,000 of principal of the Old Note was as follows:
●
$135,000 principal of New Note, and
●
an issuance of 1,000,000 common shares to the lender as exchange shares.
Also,
in the new note, there was an addition of a conversion option that the lender has right at any time after the exchange date until
the outstanding balance has been paid in full, to convert all or any part of the outstanding balance into common shares of the
Company at a fixed conversion price of $0.025. There was no beneficial conversion feature as the conversion price was higher than
the current market value of the Company’s stock at that time. Since a conversion option was added to the note in the March
18, 2016 modification, this modification was accounted for as a debt extinguishment on that date and $25,200 was recognized as
loss on debt extinguishment based on the quoted trading price of $0.0252 per share.
Global
Equity International, Inc. and Subsidiary
Notes
to the Consolidated Financial Statements
September
30, 2016
(Unaudited)
On
April 28, 2016, St. George decided not to opt for converting the principal loan to common shares. Instead, on April 28, 2016,
the Company renegotiated the loan terms, further extending the repayment to July 1, 2016. The terms of this further extension
were a one-time 10% interest payment of $13,500 to be added to the principal of $135,000 and the issuance of 3,000,000 common
shares. The Company accounted for this further extension as a debt extinguishment of previous extension dated March 18, 2016 and
$58,200 was recognized as loss on debt extinguishment comprising of $13,500 of interest payment and $44,700 for issuance of 3,000,000
common shares of the Company valued at the quoted trading price of $0.0149 per share on the date of new exchange. (See Note 8
(b))
On
July 1, 2016, after receipt of $148,500 from Mammoth Corporation (New Lender), St. George (Previous Lender) assigned and transferred
to the Mammoth Corporation all of its rights, title and interest in and to the promissory note initially issued by the Company
to St. George Investments LLC in the amount of $148,500 dated April 28, 2016. The Company re-negotiated the loan terms with new
lender (Mammoth Corporation) after the above assignment and issued a restated 9 months convertible promissory note amounting to
$163,350 dated July 01, 2016. The terms of this exchanged note were a one-time 10% increase in the principal loan of $14,850,
making the principal sum from $148,500 to $163,350. The new lender also has a right, at any time after the issue date of revised
note until the outstanding balance has been paid in full, to convert all or any part of the outstanding balance into common shares
of the Company at a fixed conversion price of $0.017. Fair value of the Company’s stock as on the date of exchange was $0.0197.
This indicated a beneficial conversion feature (BCF) of the Note as the conversion price is lower than the fair value of the Company’s
stock as on July 01, 2016. The Company accounted for the difference arising due to BCF amounting to $25,944 as a debt discount
with a corresponding effect to additional paid in capital. Interest on unpaid principal balance shall not accrue during the term
of the note unless an event of default occurs. The Company accounted for this exchange as a debt extinguishment of previous note
dated April 28, 2016 and $14,850 was further recognized as loss on debt extinguishment.
On
September 16, 2016, the note holder decided to convert partial note balance amounting to $59,500 to the common shares of the Company
at the contractual fixed price of $0.017 per share. As a result of this conversion, the Company issued 3,500,000 common shares
to Mammoth Corporation.
During
the nine months ended September 30, 2016, the company amortized $14,948 of debt discount balance arising due to BCF, leaving un-amortized
debt discount balance of $10,996 as of September 30, 2016. The outstanding convertible note balance amounted to $103,850 as of
September 30, 2016.
Global
Equity International, Inc. and Subsidiary
Notes
to the Consolidated Financial Statements
September
30, 2016
(Unaudited)
Note
8 - Stockholders’ Equity
a)
Preferred Stock
On
November 30, 2011, the Company designated 5,000,000 of its authorized preferred stock as 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
|
On
July 15, 2015 the designation of the 5,000,000 Series “A” preferred shares was withdrawn.
On November 10, 2016, the Company
designated 45,000,000 of its authorized preferred stock as Series “B” convertible preferred shares. The Certificate
of Designation stated the following:
|
●
|
Voting Rights: 10
votes per share (votes along with common stock);
|
|
|
|
|
●
|
Conversion Rights:
Each share of Series “B” Preferred is convertible at any time, and from time to time, into ten (10) shares of
common stock 1 day after the first anniversary of issuance;
|
|
|
|
|
●
|
Dividend Rights:
In the event the Board of Directors declares a dividend on the common stock, each Series “B” Preferred share will
be entitled to receive an equivalent dividend as if the Series “B” Preferred share had been converted into common
stock prior to the declaration of such dividend.
|
|
|
|
|
●
|
Liquidation Rights:
None
|
b)
Common Stock
During
the nine months ended September 30, 2016, the Company issued a total of 33,333,255 common shares in the following manner:
|
●
|
350,000
common shares were issued having a fair value of $5,005 based on the quoted trading price of $0.0143 in settlement of fee
payables to the Company’s consultants amounting to $5,250, thereby recognizing a gain on conversion of $245. See Note
7 (A)
|
|
|
|
|
●
|
25,483,255
common shares were issued at a fair value of $526,007 in exchange for accrued salaries of $524,665, thereby recognizing a
net loss on conversion of $1,342. See Note 7 (A&B)
|
|
|
|
|
●
|
4,000,000
common shares were issued to St. George Investments LLC at a fair value of $69,900 as a modification fee for a loan note.
See Note 7(D)
|
|
|
|
|
●
|
3,500,000
common shares were issued to Mammoth Corporation at a fixed contractual conversion price of $0.017 per share as a result of
a partial conversion of a convertible note amounting to $59,500. See Note 7(D)
|
Note
9 – Related Party Transactions
Following
is the list of related parties and their relationships with the Company for the nine months ended September 30, 2016 and the year
ended December 31, 2015:
Name
|
|
Relationship
|
Mr.
Peter J. Smith
|
|
President,
Chief Executive Officer and Director
|
Mrs.
Angela G. Smith
|
|
Spouse
of Mr. Peter Smith
|
Mr.
Enzo Taddei
|
|
Chief
Financial Officer, Secretary and Director
|
Mr.
Patrick V. Dolan
|
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Managing
Director
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Alpha
1066, Inc.
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Majority
owned by two officers of the Company
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On
July 1, 2015, the Company entered into a consultancy agreement valued at $148,000 with a Nevada Corporation that is majority owned
by the two officers of the Company, Mr. Peter Smith and Mr. Enzo Taddei. During the nine months ended September 30, 2015, the
Company received $98,000 in cash in lieu of consultancy services provided as per the agreement, thereby recognizing it as revenue
from related party in the income statement for the nine months ended September 30, 2015.
As
discussed in Note 7(B), the company only owed accrued salaries and expenses to some of the above related parties as on September
30, 2016 and December 31, 2015.
Global
Equity International, Inc. and Subsidiary
Notes
to the Consolidated Financial Statements
September
30, 2016
(Unaudited)
Note
10 – Commitments and Contingencies
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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 repaid 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.
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The
plaintiff, the Able Foundation, is requesting a settlement of $411,272, which is the $226,616 currently owed, and an additional
$184,656 accrued in 2015 as a provision for potential damages (see Note 7(C)).
On,
June 1, 2015, the Company (the defendant) retained the legal services of a Dubai based law firm called Al Safar & Partners.
Currently, there is a judgment against the Company (the defendant) for the recovery of $411,272.
The
Company’s Dubai lawyers, Al Safar & Partners, have subsequently appealed this judgment based on the fact that they believe
from a legal stand point that:
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1)
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the
Company (the defendant) has not been heard, which is a violation of the fundamental principle of law “Audi Alteram Partem”.
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2)
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there
is no legal existence of Global Equity Partners Plc. in Dubai as it is a Republic of Seychelles corporation; hence the Courts
of Dubai have no jurisdiction in the matter.
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According
to the Dubai lawyers, the judgment issued against the Company (the defendant) by the Dubai First Instance Court bears no legality
and void therefore the Plaintiff´s claim should be rejected in its entirety.
These
legal proceedings and appeal are currently ongoing. The Company intends to vigorously defend the litigation. At September 30,
2016, the Company cannot predict the outcome of the litigation.
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On
October 7, 2015, the Company renewed its rent agreement for its head office in Dubai for a further period of two years. The
rental amount was agreed at $31,850 per annum for the first year (from November 2015 until October 2016) and $35,035 for the
second year (from November 2016 until October 2017). This rental agreement is renewable for a further one year and if renewed
the annual rent will suffer a 5% increase.
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On
September 30, 2016, the Board of Directors agreed to discontinue compensating the Company´s CEO for his personal rent
allowance in Dubai.
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Note
11 – Subsequent Events
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On
October 10, 2016, the Company sold 10,000,000 restricted common shares under SEC Rule 144 to a non-affiliated investor at
$0.0135 per share.
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On
October 12, 2016, the Company fully paid off a $135,000 six month loan note payable to St. George Investments LLC which was
signed on April 29, 2016.
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On
October 13, 2016, the Company secured six month non-convertible loan for $135,000 carrying an original issue discount of $30,000
and additional $5,000 to cover legal costs.
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On
November 10, 2016, the Company designated 45,000,000 of its authorized preferred stock as Series “B” convertible
preferred shares. (see Note 8a)
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On
November 11, 2016, Enzo Taddei, Patrick V. Dolan and Peter J. Smith, all Directors of the Company, offered to retire and exchange
an aggregate 450,000,000 shares of Common Stock owned by them for 45,000,000 Series “B” Preferred Stock. The Company
permitted Messrs. Taddei, Dolan and Smith to exchange 200,000,000, 50,000,000 and 200,000,000 shares of Common Stock, respectively,
for 20,000,000, 5,000,000 and 20,000,000 shares of Series “B” Preferred Stock, respectively. As the fair value
of the Common Shares retired was the same as the fair value of the Preferred Series “B” shares issued, there was
no accounting effect.
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