U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of The Securities Exchange Act of 1934
GLOBAL EQUITY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Nevada 27-3986073
(State of Incorporation) (I.R.S. Employer Identification No.)
23 Frond "K" Palm Jumeirah, Dubai, UAE N/A
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: +971 (7) 204 7593
Copies to:
Pino Baldassarre
Corporate Secretary
907 South Riverside Drive
Indiatlantic, Florida 32903
Telephone: (321) 549-0628
Copies to:
David E. Wise, Esq.
Law Offices of David E. Wise, P.C.
9901 IH-10 West, Suite 800
San Antonio, Texas 78230
Telephone: (210) 558-2858/Facsimile: (210) 579-1775
Email: wiselaw@verizon.net
Securities to be registered under Section 12(b) of the Act: None
Name of Exchange on which each class is to be registered: Not applicable
Securities to be registered under Section 12(g) of the Exchange Act:
Common Stock, $.001
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
EXPLANATORY NOTE
We are filing this General Form for Registration of Securities on Form 10
to register our common stock, pursuant to Section 12(g) of the Securities
Exchange Act of 1934, as amended ("Exchange Act")
Once this registration statement is deemed effective, we will be subject to
the requirements of Regulation 13A under the Exchange Act, which will require us
to file annual reports on Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K, and we will be required to comply with all other
obligations of the Exchange Act applicable to issuers filing statements pursuant
to Section 12(g) of the Exchange Act.
FORWARD LOOKING STATEMENTS
There are statements in this Registration Statment that are not historical
facts. These "forward-looking statements" can be identified by use of
terminology such as "believe," "hope," "may," "anticipate," "should," "intend,"
"plan," "will," "expect," "estimate," "project," "positioned," "strategy" and
similar expressions. You should be aware that these forward-looking statements
are subject to risks and uncertainties that are beyond our control. For a
discussion of these risks, you should carefully read this entire Registration
Statement, especially the risks discussed under "Risk Factors." Although
management believes that the assumptions underlying the forward looking
statements included in this Registration Statement are reasonable, they do not
guarantee our future performance, and actual results could differ from
contemplated by these forward looking statements. The assumptions used for
purposes of the forward-looking statements specified in the following
information represent estimates of future events and are subject to uncertainty
as to possible changes in economic, legislative, industry, and other
circumstances. As a result, the identification and interpretation of data and
other information and their use in developing and selecting assumptions from and
among reasonable alternatives require the exercise of judgment. To the extent
that the assumed events do not occur, the outcome may vary substantially from
anticipated or projected results, and, accordingly, no opinion is expressed on
the achievability of those forward-looking statements. In the light of these
risks and uncertainties, there can be no assurance that the results and events
contemplated by the forward-looking statements contained in this Registration
Statement will in fact transpire. You are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of their dates. We do
not undertake any obligation to update or revise any forward-looking statements.
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TABLE OF CONTENTS
Item Number
and Caption Page
----------- ----
ITEM 1. BUSINESS........................................................... 1
ITEM 1A. RISK FACTORS....................................................... 6
ITEM 2. FINANCIAL INFORMATION.............................................. 8
ITEM 3. PROPERTIES......................................................... 10
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..... 11
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS................................... 12
ITEM 6. EXECUTIVE COMPENSATION............................................. 15
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE....................................................... 18
ITEM 8. LEGAL PROCEEDINGS.................................................. 19
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.................................... 19
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES............................ 20
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED............ 22
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.......................... 24
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................ 25
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE........................................... 26
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.................................. 26
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ITEM 1. BUSINESS
BACKGROUND
Global Equity International, Inc. ("Company") was incorporated on October
1, 2010, as a Nevada corporation, for the express purpose of acquiring Global
Equity Partners PLC, a corporation formed under the laws of the Republic of
Seychelles ("GEP") on September 2, 2009.
GEP is a Dubai based private equity firm that provides investment and
consulting services, such as corporate restructuring, advice on management buy
outs, management recruitment, website design and development for corporate
marketing, investor and public relations, regulatory compliance and
introductions to financiers, to companies desiring to be listed on stock
exchanges in various parts of the world.
Our authorized capital consists of 70,000,000 shares of common stock, $.001
par value, and 5,000,000 shares of preferred stock, $.001 par value.
On November 15, 2010, we entered into a Plan and Agreement of
Reorganization ("Plan of Reorganization") with GEP and its sole shareholder,
Peter J. Smith, pursuant to which we would acquire 100% of the common stock of
GEP. We consummated the Plan of Reorganization effective December 31, 2010, by
issuing 20,000,000 shares of our common stock to Peter J. Smith, at which time
GEP became our wholly-owned subsidiary and Peter J. Smith was appointed as our
President, Chief Executive Officer and Director.
As a result of our acquisition of GEP, we provide investment services and
advice to companies desiring to have their shares listed on stock exchanges or
quoted on quotation bureaus in various parts of the world. We have offices in
the United States, Dubai, London and Marbella (Spain). We have affiliations with
firms located in some of the world's leading financial centers such as London,
New York, Frankfurt and Dubai.
Peter Smith founded Global equity partners Plc to assist small to medium
size businesses with management restructuring and corporate restructuring, in
general, and also to obtain, if requested by its clients, access to capital
markets via equity and debt financings.
We also look for promising small to medium size companies ($2,000,000 to
$10,000,000 in assets) and introduce them to private and institutional investors
in our network ("rol-a-dex") of over 179 financial introducers around the world.
Presently, GEP is our only operating business. Global Equity
International's present operations are limited to insuring compliance with
regional, state and national securities regulatory agencies and organizations.
In addition, GEI is charged with (i) handling our periodic obligations under the
Securities Exchange Act of 1934; (ii) managing our investor relations; and (iii)
raising debt and equity capital necessary to fund our operations and enhance and
grow our business.
We currently offer the following services to our clients:
* Corporate restructuring
* Management buy outs
* Management recruitment
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* Website design, development and marketing advice
* Investor and public relations
* Regulatory compliance
* Introductions to financiers
CORPORATE RESTRUCTURING SERVICES
We advise and assist our clients in determining the corporate structure
that is most suitable to their business models. We recommend management changes
where necessary. We also offer them corporate governance models customized to
their specific organizations and desired exchange listings. We also review and
analyze their balance sheets and capital structures and make recommendations on
debt consolidations, equity exchanges for debt, proper capital structures and
viability and timing of equity and debt offerings.
MANAGEMENT BUY OUTS
We assist our clients in every aspect of management buy outs from corporate
restructuring to debt financing and also introduce buyers and sellers to
financiers for private equity placements.
MANAGEMENT RECRUITING
We assist our clients with the recruitment of management and board members
through our various contacts around the world. Management recruitment and
retention is also an important part of our Corporate Restructuring Services and
these services often overlap.
WEBSITE DESIGN AND DEVELOPMENT
We recognize that in these times, successful business must have
comprehensive and professional internet profiles, interactive websites and
excellent feedback mechanisms. We will assist our clients in this area by
recommending third party consultants and organizations to design, develop and
manage their websites and social networking capabilities.
INVESTOR AND PUBLIC RELATIONS
Since our clients and future clients will likely desire to have their
shares listed or continue to be listed on a stock exchange or quoted on one of
the quotation bureaus, we will advise our clients on the necessary requirements
for communicating with their equity holders and stake holders, their customers
and potential customers. We will assist our clients in this area by recommending
third party financial professionals and investor relations and public relations
organizations to provide them with such services.
REGULATORY COMPLIANCE
We are organizing a cadre of third party securities attorneys and
accountants to assist our clients with their compliance with the many reporting
and other requirements of stock exchanges, quotation bureaus and securities
regulatory agencies and organizations in the states and countries where their
shares will be or are listed.
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INTRODUCTIONS TO FINANCIERS
After reviewing the business plans, prospects and problems that are unique
to each of clients, we will use our best efforts to introduce our clients to
various third party financial resources around the world who may be able to
assist them with their capital funding requirements.
As used throughout this Form 10 registration statement, references to
"Global Equity International," "GEI," "Company," "we," "our," "ours," and "us"
refer to Global Equity International, Inc. and our subsidiaries, unless the
context otherwise requires. In addition, references to "financial statements"
are to our consolidated financial statements contained herein, except as the
context otherwise requires. References to "fiscal year" are to our fiscal year
which ends on December 31 of each calendar year. Unless otherwise indicated, the
terms "Common Stock," "common stock" and "shares" refer to our shares of $.001
par value, common stock.
HISTORICAL BUSINESS TRANSACTED
2010 TRANSACTIONS
GEP completed two transactions in 2010. The first transaction involved M1
Luxembourg AG a Swiss company, that we helped get listed on the Frankfurt Open
Market, a German stock exchange.
M1 Luxembourg AG, through its subsidiaries, offers financial advisory
services. The firm's subsidiaries include Cannon Regus, Sumner Holdings, ISIS
financial Associates Ltd, Britannia Overseas Property, and M1 Lux (Cyprus) Ltd.
It provides mortgage, private banking, company formation, real estate management
and trust formation advisory services. Additionally, the firm offers property
documentation, education fees planning, retirement planning, healthcare
insurance policies and private wealth management advisory services. M1
Luxembourg AG is headquartered in Hunenberg, Switzerland.
Our contract with M1 Luxembourg AG originally called for us to receive a
cash fee of $200,000. However, we renegotiated our fee to take 2,000,000 shares
of the client's common stock, valued at $1,086,160.
The second transaction in 2010 involved consulting with Monkey Rock Group,
Inc. (MKRO.OB), a United States company operated by two British nationals.
Monkey Rock initially focused on organizing motorbike events, such as Sturgis,
South Dakota, which is one of the largest gatherings of bikers in the world with
an average of 400,000 bikers participating. GEP was engaged by Monkey Rock to
assist it in expanding in Europe and to assist with branding and marketing. GEP
introduced Monkey Rock to Brand Union, a division of WPP, one of the largest
advertising firms in the world.
In 2010, GEP received compensation from Monkey Rock of $15,000 in cash and
1,500,000 shares of common stock, valued at $975,000 at the time of issuance.
NEW BUSINESS TRANSACTED IN 2011
We currently have contracts with three companies: (1) RFC K.K., a Japan
based company; (2) Black Swan Data Limited, a United Kingdom based company; and
(3) Arrow Cars SL, a company that is currently based in Spain and is a national
rent a car business.
RFC K.K. has been in business for a little over three years and they are in
the online race simulation business. RFC K.K. has engaged us to assist them in
their expansion into the Middle Eastern and Asian markets. We have arranged
meetings between RFC K.K. a few high profile, potential Dubai based
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partners/investors. As of this time, RFC K.K. has not entered into any
agreements with these potential Dubai partners/investors, but has entered into a
preliminary verbal agreements with the Shanghai local government and Ferrari to
set up a Race Fight Club in Shanghai, Peoples Republic of China.
RFC K.K. has agreed to pay us a total of $240,000 over the intial 12 months
of our contract and then pay us $6,000 per month for the subsequent 12 months.
In addition, we have received a 10% equity stake in RFC K.K.
Black Swan Data Limited is a United Kingdom based company ("Black Swan")
that has developed algorithm based artificial intelligence that audits and
merges internal and external date feeds from various sources, such as sales and
transactional data, web and mobile statistics, consumer services data, social
network analysis and customer relationship management databases. Black Swan
engaged us to (i) assist it with recruiting and structuring its management with
very specific skill sets and job experience; and (ii) prepare a short list of
acquisition targets in the United Kingdom.
Black Swan Data Limited has agreed to pay us an initial fee of $40,000 and
then a subsequent fee six months later of $140,000; and then a $7,500 per month
consulting fee for the next 24 months. In addition, we have received a 10%
equity stake in Black Swan data Limited.
Arrow Cars SL is currently based in southern Spain and has been in business
since 2008. Arrow Cars SL is a national rent a car business operating only in
Spain. Arrow Cars Sl has engaged us to consult with them and to design a three
year strategy to expand their business model into other high density tourist
areas of Spain, Portugal and southern France, with the objective of opening a
similar business in the United States, primarily in Florida.
Arrow Cars SL has agreed to pay us an initial fee of $20,000 and then a
subsequent aggregate fee of $115,000 over the subsequent twelve months. In
addition, we have received a 10% equity stake in Arrow Cars SL.
We have three distinct divisions (none of which will be treated as a
segment for financial reporting purposes):
1. Introducers Network. We have developed and continue to develop a number
of finance professionals, accountants, attorneys and financial advisers who will
introduce us to their clients. We will review businesses introduced to us be
these introducers and we will compensate them on some "to be determined" basis
in the event that we are engaged by to assist the companies they introduce to
us.
2. Project Review. Our management team and advisors will carefully review
and vet each business plan and opportunity submitted to us. Our management team
and advisors will determine which services we can offer these clients and assess
the potential propositions to best assist our clients in achieving their goals.
3. Placing. Working with our business associates in Frankfurt, London,
Miami, New York and Toronto, we will use our best efforts to assist our clients
with listings on stock exchanges in these cities in order to maximize their
exposure to capital markets and to access funding via debt and equity offerings.
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FUTURE PLANS
We hope to sign up four new clients per year, assuming we have the
financial resources to do so. Based on our current cash position and deal flow,
we believe we have sufficient funds to operate for the next 24 months and to
take care of our three existing clients and possibly three more.
EMPLOYEES; IDENTIFICATION OF A SIGNIFICANT EMPLOYEE
We currently have three employees, other than our three officers and
directors. Peter J. Smith, our President, and Enzo Taddei, our Chief Financial
Officer, each have employment agreements with the Company. See "MANAGEMENT." We
intend to hire additional employees when they are needed.
COMPETITION
We face intense competition in every aspect of our business, and
particularly from other firms which offer management, compliance and other
consulting services to private and public companies. We would prefer to accept a
relatively low cash component as our fee for management consulting and
regulatory compliance services and take a greater portion of our fee in the form
of restricted shares of our private clients' common stock. We also face
competition from a large number of consulting firms, investment banks, venture
capitalists, merchant banks, financial advisors and other management consulting
and regulatory compliance services firms similar to ours. Many of our
competitors have greater financial and management resources and some have
greater market recognition than we do.
REGULATORY REQUIREMENTS
We are not required to obtain any special licenses, nor meet any special
regulatory requirements before establishing our business, other than a simple
business license. If new government regulations, laws, or licensing requirements
are passed that would restrict or eliminate delivery of any of our intended
products, then our business may suffer. Presently, to the best of our knowledge,
no such regulations, laws, or licensing requirements exist or are likely to be
implemented in the near future that would reasonably be expected to have a
material impact on or sales, revenues, or income from our business operations.
We are not a broker-dealer or investment advisor.
VOLUNTARY FILING
We are voluntarily filing this Registration Statement with the U.S.
Securities and Exchange Commission and we are under no obligation to do so under
the Securities Exchange Act of 1934.
REPORTS TO SECURITY HOLDERS
1. We will be subject to the informational requirements of the Exchange
Act. Accordingly, we will file annual, quarterly and periodic reports,
proxy statements, information statements and other information with
the SEC.
2. The public may read and copy any materials the Company files with the
SEC at the SEC's Public Reference Room at 100 F Street, NE, Room 1580,
Washington, D.C. 20549. The public may call the SEC at 1-800-SEC-0330
for further information on the Public Reference Room. Our SEC filings
will also be available to the public at the SEC's web site at
http://www.sec.gov.
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ITEM 1A. RISK FACTORS
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. IF ANY OF THE
FOLLOWING RISKS ACTUALLY MATERIALIZES, OUR BUSINESS, FINANCIAL CONDITION AND
RESULTS OF OPERATIONS WOULD SUFFER AND OUR SHAREHOLDERS COULD LOSE ALL OR PART
OF THEIR INVESTMENT IN OUR SHARES.
RISKS ASSOCIATED WITH OUR COMPANY
WHILE WE HAVE TWO YEARS OF OPERATING HISTORY AND HAVE ACCUMULATED PROFITS,
THERE IS NO ASSURANCE THAT OUR FUTURE OPERATIONS WILL RESULT IN PROFITABLE
REVENUES. IF WE CANNOT GENERATE SUFFICIENT REVENUES TO OPERATE PROFITABLY, WE
WILL CEASE OPERATIONS AND YOU WILL LOSE YOUR INVESTMENT.
We were incorporated in Nevada on October 1, 2010, and our wholly-owned
subsidiary, GE Partners Plc, was formed on September 2, 2009. We have been
profitable in the past; however, there is no assurance that our future
operations will result in profitable revenues. If we cannot generate sufficient
revenues to operate profitably, we will cease operations and you will lose your
investment in our Company. Our ability to achieve and maintain profitability and
positive cash flow is dependent, among other things, upon:
* our ability to attract clients who will buy our services from us; and
* our ability to generate revenues through the sale of our services.
AS A RESULT OF OUR INTENSELY COMPETITIVE INDUSTRY, WE MAY NOT GAIN ENOUGH
MARKET SHARE TO BE PROFITABLE.
The corporate consulting business is intensely competitive and due to our
small size and limited resources, we may be at a competitive disadvantage,
especially as a public company. There are several firms offering similar
services. Many of our competitors have proven track records and substantial
human and financial resources, as opposed to our Company who has limited human
resources and little cash. Also, the financial burden of being a public company,
which will cost us approximately $40,000 per year in auditing fees and legal
fees to comply with our reporting obligations under the Securities Exchange Act
of 1934 and compliance with the Sarbanes-Oxley Act of 2002, will strain our
finances and stretch our human resources to the extent that we may have to price
our social networking services and advertising fees higher than our non-publicly
held competitors just to cover the costs of being a public company.
WE ARE VULNERABLE TO THE CURRENT ECONOMIC CRISIS WHICH MAY NEGATIVELY
AFFECT OUR PROFITABILITY AND ABILITY TO CARRY OUT OUR BUSINESS PLAN.
We are currently in a severe worldwide economic recession. Runaway deficit
spending by the United States government and other countries further exacerbates
the United States and worldwide economic climate and may delay or possibly
deepen the current recession. Currently, a lot of economic indicators such as
rising gasoline and commodity prices, suggest higher inflation, dwindling
consumer confidence and substantially higher taxes. Demand for the services we
offer tends to decline during recessionary periods when disposable revenue is
lower and may impact sales of our services. In addition, sudden disruptions in
business conditions as a result of a terrorist attack similar to the events of
September 11, 2001, including further attacks, retaliation and the threat of
further attacks or retaliation, war, civil unrest in the Middle East, adverse
weather conditions or other natural disasters, such as Hurricane Katrina,
pandemic situations or large scale power outages can have a short term or,
sometimes, long term impact on spending. The worldwide recession is placing
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severe constraints on the ability of all companies, particularly smaller ones,
to raise capital, borrow money, operate effectively and profitably and to plan
for the future.
BECAUSE SOME OF OUR OFFICERS AND DIRECTORS WILL ONLY BE DEVOTING LIMITED
TIME TO OUR OPERATIONS, OUR OPERATIONS MAY BE SPORADIC WHICH MAY RESULT IN
PERIODIC INTERRUPTIONS OR SUSPENSIONS OF OPERATIONS. THIS ACTIVITY COULD PREVENT
US FROM ATTRACTING CUSTOMERS AND RESULT IN A LACK OF REVENUES THAT MAY CAUSE US
TO SUSPEND OR CEASE OPERATIONS.
Some of our officers and directors will only be devoting limited time to
our operations. Because they will only be devoting limited time to our
operations, our operations may be sporadic and occur at times which are
convenient to them. As a result, operations may be periodically interrupted or
suspended, which could result in a lack of revenues and a possible cessation of
operations.
BECAUSE PETER J. SMITH, OUR PRESIDENT, OWNS 62.54% OF OUR TOTAL OUTSTANDING
COMMON STOCK AND 5,000,000 (100%) SHARES OF OUR TOTAL OUTSTANDING PREFERRED
STOCK, MR. SMITH WILL RETAIN CONTROL OF US AND WILL BE ABLE TO DECIDE WHO WILL
BE DIRECTORS AND YOU MAY NOT BE ABLE TO ELECT ANY DIRECTORS WHICH COULD DECREASE
THE PRICE AND MARKETABILITY OF OUR SHARES.
Peter J. Smith, our President, owns 62.54% of our total outstanding common
stock and 100% of our total outstanding preferred stock. As a result, Peter J.
Smith will own the vast majority of the shares of our Common Stock, all shares
of our preferred stock and super-voting rights attributable to his preferred
stock, which allow him to cast two (2) votes per share of preferred stock and he
will be able to elect all of our directors and control our operations, which
could decrease the price and marketability of our shares.
OUR SHAREHOLDERS MAY BE DILUTED SIGNIFICANTLY THROUGH OUR EFFORTS TO OBTAIN
FINANCING, FUND OUR OPERATIONS AND SATISFY OUR OBLIGATIONS THROUGH ISSUANCE OF
ADDITIONAL SHARES OF OUR COMMON STOCK.
We have no committed source of financing. We will likely have to issue
additional shares of our Common Stock to fund our operations and to implement
our plan of operation. Wherever possible, our board of directors will attempt to
use non-cash consideration to satisfy obligations. In many instances, we believe
that the non-cash consideration will consist of restricted shares of our common
stock. Our board of directors has authority, without action or vote of the
shareholders, to issue all or part of the 41,219,300 authorized, but unissued,
shares of our common stock. Future issuances of shares of our common stock will
result in dilution of the ownership interests of existing shareholders, may
further dilute common stock book value and that dilution may be material.
BECAUSE THERE IS NO PUBLIC TRADING MARKET FOR OUR COMMON STOCK, YOU MAY NOT
BE ABLE TO RESELL YOUR STOCK.
Our Common Stock is not presently quoted on the Over-the-Counter Bulletin
Board or traded in any market. Therefore, you may not be able to resell your
stock.
Because the SEC imposes additional sales practice requirements on brokers
who deal in our shares that are penny stocks, some brokers may be unwilling to
trade them. This means that you may have difficulty reselling your shares and
this may cause the price of our shares to decline.
Our shares would be classified as penny stocks and are covered by Section
15(g) of the Securities Exchange Act of 1934 and the rules promulgated
thereunder, which impose additional sales practice requirements on
brokers/dealers who sell our securities in this offering or in the aftermarket.
For sales of our securities, the broker/dealer must make a special suitability
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determination and receive from you a written agreement prior to making a sale
for you. Because of the imposition of the foregoing additional sales practices,
it is possible that brokers will not want to make a market in our shares. This
could prevent you from reselling your shares and may cause the price of our
shares to decline.
FINRA SALES PRACTICE REQUIREMENTS MAY LIMIT A STOCKHOLDER'S ABILITY TO BUY
AND SELL OUR STOCK.
The FINRA has adopted rules that require that in recommending an investment
to a customer, a broker-dealer must have reasonable grounds for believing that
the investment is suitable for that customer. Prior to recommending speculative
low priced securities to their non-institutional customers, broker-dealers must
make reasonable efforts to obtain information about the customer's financial
status, tax status, investment objectives and other information. Under
interpretations of these rules, FINRA believes that there is a high probability
that speculative low priced securities will not be suitable for at least some
customers. FINRA requirements make it more difficult for broker-dealers to
recommend that their customers buy our common stock, which may have the effect
of reducing the level of trading activity and liquidity of our common stock.
Further, many brokers charge higher transactional fees for penny stock
transactions. As a result, fewer broker-dealers may be willing to make a market
in our common stock, which may limit your ability to buy and sell our stock.
OUR ARTICLES OF INCORPORATION AUTHORIZES THE ISSUANCE OF PREFERRED STOCK.
Our Articles of Incorporation authorizes the issuance of up to 5,000,000
shares of preferred stock with designations, rights and preferences determined
from time to time by its Board of Directors. Accordingly, our Board of Directors
is empowered, without stockholder approval, to issue preferred stock with
dividend, liquidation, conversion, voting, or other rights which could adversely
affect the voting power or other rights of the holders of the common stock. In
the event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company.
THIS REGISTRATION STATEMENT CONTAINS FORWARD-LOOKING STATEMENTS AND
INFORMATION RELATING TO US, OUR INDUSTRY AND TO OTHER BUSINESSES.
These forward-looking statements in this registration statement are based
on the beliefs of our management, as well as assumptions made by and information
currently available to our management. When used in this registration statement,
the words "estimate," "project," "believe," "anticipate," "intend," "expect" and
similar expressions are intended to identify forward-looking statements. These
statements reflect our current views with respect to future events and are
subject to risks and uncertainties that may cause our actual results to differ
materially from those contemplated in our forward-looking statements. We caution
you not to place undue reliance on these forward-looking statements, which speak
only as of the date of this registration statement. We do not undertake any
obligation to publicly release any revisions to these forward-looking statements
to reflect events or circumstances after the date of this registration statement
or to reflect the occurrence of unanticipated events.
ITEM 2. FINANCIAL INFORMATION
The following discussion is intended to provide an analysis of our
financial condition and should be read in conjunction with our financial
statements and the notes thereto.
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RECENT ACCOUNTING PRONOUNCEMENTS
In May 2011, the FASB issued ASU 2011-04, "Amendments to Achieve Common
Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS
(International Financial Reporting Standard)." ASU 2011-04 attempts to improve
the comparability of fair value measurements disclosed in financial statements
prepared in accordance with U.S. GAAP and IFRS. Amendments in ASU 2011-04
clarify the intent of the application of existing fair value measurement and
disclosure requirements, as well as change certain measurement requirements and
disclosures. ASU 2011-04 is effective for the Company beginning January 1, 2012
and will be applied on a prospective basis. We do not believe that the adoption
of ASU 2011-04 will have material effect on our consolidated financial
statements.
BUSINESS DEVELOPMENT
RESULTS FOR THE YEAR ENDED DECEMBER 31 2010:
The Company had revenues totaling $2,061,160 and the general and
administration costs amounted to a total of $291,913.
The net profit was $1,769,247 and the unrealized gain on the available for
sale marketable securities owned by the Company amounted to $166,076, hence the
comprehensive income amounted to $1,935,323.
The Company did not pay any interest as interest was not due within the
fiscal year.
Based on 21,092,405 weighted average shares outstanding for the year ended
December 31 2010, the profit per share was $0.08.
RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30 2011:
The Company had revenues amounting to $96,542 for the nine months ended
September 2011 and the general and administration costs amounted to a total of
$222,692.
The net loss for the nine months ended September 30, 2011 was $(126,150)
and the unrealized loss on the available for sale marketable securities owned by
the Company amounted to $(1,308,459), hence the comprehensive loss amounted to
$(1,434,609).
The Company did not pay any interest as interest was not due within the
fiscal year.
Based on 28,720,833 weighted average shares outstanding, for the nine
months ended September 30, 2011, the loss per share was $(0.00).
LIQUIDITY AND CAPITAL RESERVES:
Through the nine months ended September 30, 2011 we have relied on advances
of $127,223 from loans from shareholders, third party non-affiliates and also
proceeds from stock issued for cash. As of September 30, 2011, the Company had
cash of $2,700 and a working capital deficit of $89,331.
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It is the Company's intention to seek additional debt which we plan to use
to use for working capital to implement a marketing program to increase
awareness of our business model and also to expand our operations via the
acquisition companies that are in a similar space and industry as ours.
Depending upon market conditions, the Company may not be successful in
raising sufficient additional capital for it to achieve its business objectives.
In such event, the business, prospects, financial condition, and results of
operations could be materially adversely affected.
The Company's executive offices are based Dubai and our satellite offices
are in London and Marbella (Spain).
Our auditors have not seen the need to include a "Going Concern" note in
our 2010 year end audit report. Instead, a liquidity note was included stating
that the Company's cash balance was minimal and that the Company expects to meet
all of its obligations either by selling its marketable securities or by way of
debt and/or equity financing that could be available to the Company.
We have recently signed contracts with three new clients that are valued at
$767,000 in fees over the next 24 months and a further 10% equity that has an
undetermined value as of today.
We are also in negotiations with two other companies that would like to
retain our services. We hope to sign these new clients before December 31, 2011.
This section of the registration statement includes a number of
forward-looking statements that reflect our current views with respect to future
events and financial performance. Forward-looking statements are often
identified by words like: believe, expect, estimate, anticipate, intend, project
and similar expressions, or words which, by their nature, refer to future
events. You should not place undue certainty on these forward-looking
statements, which apply only as of the date of this prospectus. These
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from historical results or our
predictions.
ITEM 3. PROPERTIES
The Company does not own any property. Our executive offices are located at
23 Frond "K" Palm Jumeirah, Dubai, UAE where we are utilizing approximately 600
square feet of Peter Smith's personal offices in Dubai and pay no rent for such
privilege. We also have a satellite office located at 1 Berkeley Street, London
W1J 8DJ, United Kingdom, which is a service office for which we pay 350 British
Pounds per month on a renewable one year lease. Our Business Development
Director, Adrian Scarrott, uses our London office on a daily basis and we use
the office when our other management members are in London. We have another
satellite office located at Avenida Marques del Duero 67, Edificio Bahia 2A,
29670 San Pedro de Alcantara, Marbella, Spain where we are utilizing
approximately 1,100 square feet of Enzo Taddei's personal offices in Marbella
and pay no rent for such privilege. We have another satellite office at 907
10
South Riverside Drive, Indiatlantic, Florida 32903 where we are utilizing
approximately 200 square feet of Pino Baldassarre's personal offices and pay no
rent. Peter J. Smith, our President and Chief Executive Office, is based in
Dubai, Enzo Taddei, our Chief Financial Officer, is based in Marbella, Adrian
Scarrott, our Business Development Director is based in London and Pino
Baldassarre, our Corporate Secretary, is based in Florida.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth the ownership of our common stock by each
person known by us to be the beneficial owner of more than 5% of our outstanding
common stock, our directors, and our executive officers and directors as a
group. To the best of our knowledge, the persons named have sole voting and
investment power with respect to such shares, except as otherwise noted. There
are not any pending arrangements that may cause a change in control.
The information presented below regarding beneficial ownership of our
voting securities has been presented in accordance with the rules of the U.S.
Securities and Exchange Commission and is not necessarily indicative of
ownership for any other purpose. Under these rules, a person is deemed to be a
"beneficial owner" of a security if that person has or shares the power to vote
or direct the voting of the security or the power to dispose or direct the
disposition of the security. A person is deemed to own beneficially any security
as to which such person has the right to acquire sole or shared voting or
investment power within 60 days through the conversion or exercise of any
convertible security, warrant, option or other right. More than one person may
be deemed to be a beneficial owner of the same securities. The percentage of
beneficial ownership by any person as of a particular date is calculated by
dividing the number of shares beneficially owned by such person, which includes
the number of shares as to which such person has the right to acquire voting or
investment power within 60 days, by the sum of the number of shares outstanding
as of such date plus the number of shares as to which such person has the right
to acquire voting or investment power within 60 days. Consequently, the
denominator used for calculating such percentage may be different for each
beneficial owner. Except as otherwise indicated below, we believe that the
beneficial owners of our common stock listed below have sole voting and
investment power with respect to the shares shown.
Number of Percentage of
Name and Address Shares Ownership
---------------- ------ ---------
Peter J. Smith 18,000,000 62.54%
23 Frond "K" Palm Jumeirah
Dubai, UAE
Enzo Taddei 5,000,000 17.37%
Avenida Marques del Duero 67
Edificio Bahia 2A
29670 San Pedro de Alcantara
Marbella, Spain
Pino G. Baldassarre 0 0%
907 South Riverside Drive
Indiatlantic, FL 32903
All officers and directors
as a group (3 persons) 23,000,000 79.91%
11
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
OFFICERS AND DIRECTORS
Our two directors will serve until their two successors are elected and
qualified. Our officers are elected by the board of directors to a term of one
year and serve until their successor is duly elected and qualified, or until
they are removed from office. Our board of directors has no nominating, auditing
or compensation committees.
The names, addresses, ages and positions of our officers, directors and key
employees are set forth below:
First Year
Name Age as Director Position
---- --- ----------- --------
Peter James Smith 43 2010 President, Chief Executive Officer
and Director
Enzo Taddei 39 2011 Chief Financial Officer and Director
Pino G. Baldassarre 52 -- Corporate Secretary
The persons named above were elected to hold their offices until the next
annual meeting of our stockholders.
PETER JAMES SMITH - PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
Mr. Smith has an excellent pedigree and track record in building companies
before floating them on a recognized stock market. He first qualified as a
stockbroker in London in 1986 with Rensburg and Co where he became both a
registered equity trader and registered representative of the firm who are a UK
registered full service Stockbroker trading Equities, Options, Warrants, Gilts
and bonds. He also spent 12 months within the firm covering the back office
facilities of a brokerage house including sales, purchase, rights, dividends and
new issues. He then moved onto the London Traded Options Market where he passed
his LTOM open outcry examinations to become an Options trader for a subsidiary
of ABN Amro bank called International Clearing Services (ICS). As an Options
trader his remit was to trade options on behalf of all the firms clients and to
hedge the positions of the market makers the firm cleared for into the equity
market. As the sole dual qualified broker for ICS he was constantly trading in
either equities or options either by open outcry or screen dealing on the London
Stock Exchange Floor in Threadneedle Street. In 1993 he moved away from the
stock market to create an International Financial Services company in the Middle
East and Asia. Between 1993 and 2005 he built the business to 23 global offices,
5 country licenses and in 2005 he floated the company for $40m on the American
market having built the organization to $2.2bn under management with a staff of
approximately 300 people.
ENZO TADDEI - CHIEF FINANCIAL OFFICER AND DIRECTOR
Mr. Taddei was appointed as our Chief Financial Officer and a member of our
Board of Directors on September 1, 2011. From November 2010 to the present date,
Mr. Taddei has been a member of the Board of Directors and part-time Chief
12
Financial Officer of Networking Partners, Inc. From May 2009 until the present
date, Mr. Taddei has served as Chief Executive Officer and Chief Financial
Officer of E3B Consulting Network SL (a firm engaged in accounting). From March
2007 until May 2009, Mr. Taddei served as Chief Financial Officer of Dolphin
Digital Media (a company engaged in social networking). From August 2006 until
March 2007, Mr. Taddei served as Chief Financial Officer of Plays on the Net PLC
(an E Commerce firm). From July 1999 until August 2006, Mr. Taddei served as
Chief Executive Officer and Chief Financial Officer of Adesso Res Asesores (an
accounting firm). In addition to being an accountant and tax consultant by
profession, Mr. Taddei is proficient in three languages: English, Spanish and
Italian. He obtained a Degree in Economics from the University of Malaga (Spain)
in 1998 and also a Bachelor in Business Administration (BBA) from the University
of Wales in 1996. He also holds a Masters Degree in Spanish and International
Taxation granted to him by EADE University in Malaga (Spain) in 2000.
PINO G. BALDASSARRE - CORPORATE SECRETARY
Mr. Baldassarre has been our Corporate Secretary since September 1, 2011.
From November 2, 2010, until November 14, 2011, Mr. Baldassarre served as the
Chief Executive Officer and a member of the Board of Directors of Networking
Partners, Inc. Since June 30, 2011, Mr. Baldassarre has served as the Chief
Executive Officer of Ecodata Systems Plc (a pharmaceutical recycling company
based in the United Kingdom). Mr. Baldassarre served as Chief Executive Officer
of Anne's Diary, Inc. (a website design company) on a interim basis from March
1, 2010, to July 29, 2010, for the primary purpose of representing Anne's Diary,
Inc. at the United Nations Interregional Crime and Justice Research Institute
("UNICRI"). He has not held any position with Anne's Diary, Inc. since July 29,
2010. Prior to his appointment as interim CEO of Anne's Diary, Inc., Mr.
Baldassarre provided advice and consultation to Anne's Diary, Inc. on issues
related to Internet Safety.
Mr. Baldassarre has held senior management and director positions of new
business start-ups and established multinational organizations and has over 25
years experience in the Security and Communications Industries. With leadership
skills in management of international operations, shareholder exit strategies,
and overall business development, he has utilized a wide range of strategic
programs to maximize organic growth into specific industry segments through OEM,
alliances, and direct multi-level distribution channels.
From 2009 until October 2010, Mr. Baldassarre was responsible for the
International Development of the Aico anti-counterfeiting program for the
prevention of counterfeit prescription drugs. From 2007 until 2009, Mr.
Baldassarre was the Managing Director and Chief Executive Officer of Dolphin
Digital Media, Inc., a publicly held company that specialized in the field of
social networks, Internet security and overall e-commerce. From 2005 until 2007,
he acted as Director Business Development of 1231D, a software development firm
specializing in biometric solutions. He was acting President of BPT Technologies
from 2003 until 2005, we he was responsible for the set up and implementation of
a North America division for a European multinational company. Mr. Baldassarre
was responsible for Business Development of 123ID, a software development
corporation specializing in biometric solutions, and acting President and CEO of
BPT Technologies, responsible for the set up and implementation of a North
American division for a European multinational company. Over the years he has
held many senior positions such as the Managing Director of The Logica Group, a
division of The Mackenzie Group, NY, responsible for total corporate
infrastructure development, from Intellikey Corporation Florida, as Vice
President, and Pacific Entrance Systems in Vancouver, as President and CEO.
Pino is a recognized expert in the field Security(s) and Information
Technologies and he is regularly called on to speak at conferences in both
Canada and the United States on issues surrounding National Security and
13
emerging technologies and is a current member of the UNICRI committee regarding
IT security issues. His career began in 1980 to 1983, when he was an Analyst and
Information Support Specialist in United States - NSA, Level E4 and stationed in
Agnano, Italy.
Pino holds a BA in Mathematics with a minor in economics from York
University, Toronto and an MBA from INSEAD from Fountainbleau, France.
ADRIAN SCARROTT - BUSINESS DEVELOPMENT DIRECTOR
Adrian Scarrott is an experienced new business development and marketing
professional with more than 20-years of experience working with blue chip
companies and global brands. Mr. Scarrott ran a very successful
marketing/communications consultancy for two years prior to joining the
Company's wholly-owned subsidiary, Global Equity Partners PLC, in 2009. From
2006 to 2008, Mr. Scarrott was responsible for developing new business and
creating opportunities for the new media offerings for Stageone, a multimedia
marketing firm in London and Europe. From 2001 to 2006, Mr. Scarrott served as
Sales Director for Seven Soho, another London-based marketing firm. Mr.
Scarrott's blue chip client base at Seven Soho included Sony, Proctor & Gamble,
Apple Mac and United Airlines. Mr. Scarrott began his career in 1991 at
Tapestry, a London-based corporate identity firm, where he served as Sales
Director and was responsible for the full management and development of a
portfolio of accounts covering all areas of advertising and design, press,
outdoor, direct marketing, point of sale marketing, corporate identity,
literature and packaging.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
No officer, director, or persons nominated for such positions, promoter or
significant employee has been involved in the last ten years in any of the
following:
* Any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time
of the bankruptcy or within two years prior to that time;
* Any conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
* Being subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities; and
* Being found by a court of competent jurisdiction (in a civil action),
the Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended, or vacated.
DIRECTOR QUALIFICATIONS
We do not have a formal policy regarding director qualifications. In the
opinion of Peter J. Smith, our President and majority shareholder, both Mr.
Taddei and he have sufficient business experience and integrity to carry out the
Company's plan of operations. Both Mr. Smith and Mr. Taddei recognize that the
Company will have to rely on professional advisors, such as attorneys and
accountants with public company experience to assist with compliance with
Exchange Act reporting and corporate governance matters.
14
ABSENCE OF INDEPENDENT DIRECTORS
We do not have any independent directors and are unlikely to be able to
recruit and retain any independent directors due to our small size and limited
financial resources.
DIRECTORSHIPS
Enzo Taddei is a director of Networking Partners, Inc., a company with a
class of securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934.
AUDIT COMMITTEE FINANCIAL EXPERT
We have not established an Audit Committee. The functions of the Audit
Committee are currently being carried out by our Board of Directors.
CONFLICTS OF INTEREST
One of our officers and directors, Enzo Taddei, devotes approximately 20
hours per week to our Company. The only conflict that exists is that Enzo Taddei
devotes time to other projects or business interests, none of which conflict
with our business activities.
The term of office of each director expires at our annual meeting of
stockholders or until their successors are duly elected and qualified.
FAMILY RELATIONSHIPS.
There are no family relationships between or among or officers and
directors.
CODE OF ETHICS
We adopted a Code of Business Conduct and Ethics on September 2, 2011.
AUDIT COMMITTEE
The Board of Directors acts as the Audit Committee and the Board has no
separate committees. The Company has no qualified financial expert at this time
because it has not been able to hire a qualified candidate. Further, the Company
believes that it has inadequate financial resources at this time to hire such an
expert. The Company intends to continue to search for a qualified individual for
hire.
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid by the
Company and/or its subsidiary, GE Partners PLC, to our executive officers and
directors of the Company for services rendered during the periods indicated
(from inception of GE Partners PLC on September 2, 2009, through December 31,
2010.
15
SUMMARY COMPENSATION TABLE
Name and Stock All Other
Principal Position Year (1) Salary ($) Bonus ($) Awards ($) Compensation ($) Total($)
------------------ -------- ---------- --------- ---------- ---------------- --------
Peter J. Smith 2010 $ 34,658 $ 0 $ 0 $ 0 $ 34,658
President, Chief 2009 $100,000 (1) $ 0 $ 0 $ 0 $100,000 (1)
Executive Officer and
Director
Enzo Taddei 2010 $ 0 $ 0 $ 0 $ 0 $ 0
Chief Financial 2009 $ 0 $ 0 $ 0 $ 0 $ 0
Officer and Director
Pino G. Baldassarre 2010 $ 0 $ 0 $ 0 $ 0 $ 0
Secretary 2009 $ 0 $ 0 $ 0 $ 0 $ 0
----------
(1) In 2009, GEP Partners PLC issued 20,000,000 shares of common stock, having
a fair value of $100,000 (0.005/share) to Mr. Smith, in connection with
pre-incorporation services rendered.
EMPLOYMENT AGREEMENTS SUMMARY
PETER JAMES SMITH:
Mr. Smith's employment agreement with the Company was executed on September
1, 2011, and the basic terms were as follows:
1. DUTIES - ASSIGNMENT: Chief Executive Officer (CEO) and Director on Board
of Directors
2. COMPENSATION: $240,000 per annum, subject to annual review and
adjustment of no less than a 5% percentage increase. The salary will be paid on
a monthly basis.
3. EMPLOYMENT: The contract commenced on the first day of September, 2011.
(a) Employment will continue for 36 MONTHS.
(b) The Company and employee agreed to accrue the monthly from
September 2011 onwards. Payment of the accrued amounts shall
commence no later than January 2nd 2012 and payment of the
ongoing monthly salary shall commence on the last working day of
January 2012.
4. SEVERANCE PAYMENTS
(a) If Employer terminates this Agreement for any reason other than
Disability, Death, Employee shall be entitled to receive, and
Employer shall make, the following severance payments:
(i) continue to pay a sum equivalent to SIX MONTHS' SALARY.
16
(b) If Employer terminates this Agreement by reason of the Disability
of Employee or if this Agreement is automatically terminated upon
the Death of Employee pursuant to Section 3(b), Employee or his
estate shall be entitled to receive, and Employer shall make, the
following severance payments:
(i) continue to pay a sum equivalent to FIVE YEARS ANNUAL SALARY
via the life assurance scheme to be put in place January
2012
ENZO TADDEI:
Mr. Taddei's employment agreement with the Company was executed on
September 1, 2011, and the basic terms were as follows:
1. DUTIES - ASSIGNMENT: Chief Financial Officer (CFO) and Director on Board
of Directors
2. COMPENSATION: $120,000 per annum, subject to annual review and
adjustment of no less than a 5% percentage increase. The salary will be paid on
a monthly basis.
3. EMPLOYMENT: The contract commenced on the first day of September, 2011.
(a) Employment will continue for 36 MONTHS.
(b) The Company and employee agreed to accrue the monthly from
September 2011 onwards. Payment of the accrued amounts shall
commence no later than January 2nd 2012 and payment of the
ongoing monthly salary shall commence on the last working day of
January 2012.
4. SEVERANCE PAYMENTS
(a) If Employer terminates this Agreement for any reason other than
Disability, Death, Employee shall be entitled to receive, and
Employer shall make, the following severance payments:
(i) continue to pay a sum equivalent to SIX MONTHS' SALARY.
(b) If Employer terminates this Agreement by reason of the Disability
of Employee or if this Agreement is automatically terminated upon
the Death of Employee pursuant to Section 3(b), Employee or his
estate shall be entitled to receive, and Employer shall make, the
following severance payments:
(i) continue to pay a sum equivalent to FIVE YEARS ANNUAL SALARY via
the life assurance scheme to be put in place January 2012.
ADRIAN SCAROTT:
Mr. Scarott's employment agreement with the Company was executed on
September 1, 2011, and the basic terms were as follows:
1. DUTIES - ASSIGNMENT: New business coordinator.
17
2. COMPENSATION: $40,000 per annum. The salary will be paid on a monthly
basis.
3. EMPLOYMENT: The contract commenced on the first day of September, 2011.
(a) Employment will continue for 12 months.
(b) The Company and employee agreed to accrue the monthly from
September 2011 onwards. Payment of the accrued amounts shall
commence no later than January 2nd 2012 and payment of the
ongoing monthly salary shall commence on the last working day of
January 2012.
4. SEVERANCE PAYMENTS
(a) If Employer terminates this Agreement for any reason other than
Disability, Death, Employee shall be entitled to receive, and
Employer shall make, the following severance payments:
i. continue to pay a sum equivalent to two months' salary.
(b) If Employer terminates this Agreement by reason of the Disability
of Employee or if this Agreement is automatically terminated upon
the Death of Employee pursuant to Section 3(b), Employee or his
estate shall be entitled to receive, and Employer shall make, the
following severance payments:
i. continue to pay a sum equivalent to three years annual
salary via the life assurance scheme to be put in place
January 2012
STOCK OPTION AND OTHER COMPENSATION PLANS
The Company currently does not have a stock option or any other
compensation plan and we do not have any plans to adopt one in the near future.
COMPENSATION OF DIRECTORS
Our two directors do not receive any compensation for serving as a member
of our board of directors as they are compensated pursuant to their employment
agreements as officers of the Company.
No retirement, pension, profit sharing, stock option or insurance programs
or other similar programs have been adopted by the Company for the benefit of
its employees.
There are no understandings or agreements regarding compensation our
management will receive after a business combination that is required to be
included in this table, or otherwise.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
Although we have not adopted formal procedures for the review, approval or
ratification of transactions with related persons, we adhere to a general policy
that such transactions should only be entered into if they are on terms that, on
the whole, are no more favorable, or no less favorable, than those available
18
from unaffiliated third parties and their approval is in accordance with
applicable law. Such transactions require the approval of our board of
directors.
On November 30, 2011, the Company issued 5,000,000 shares of Series A
Preferred Stock to Peter J. Smith, its President, as consideration $480,000 as a
compensatory bonus.
ABSENCE OF INDEPENDENT DIRECTORS
We do not have any independent directors and are unlikely to be able to
recruit and retain any independent directors due to our small size and limited
financial resources.
Except as otherwise indicated herein, there have been no related party
transactions, or any other transactions or relationships required to be
disclosed pursuant to Item 404 of Regulation S-K.
ITEM 8. LEGAL PROCEEDINGS
Presently, there are not any material pending legal proceedings to which
the Company is a party or as to which any of its property is subject and the
Company does not know nor is it aware of any legal proceedings threatened or
contemplated against it.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
(a) Market Information. The Company's Common Stock is not trading on any
stock exchange. The Company is not aware of any market activity in its stock
since its inception and through the date of this filing. There is no assurance
that a trading market will ever develop or, if such a market does develop, that
it will continue.
The Securities and Exchange Commission has adopted Rule 15g-9 which
establishes the definition of a "penny stock," for purposes relevant to us, as
any equity security that has a market price of less than $5.00 per share or with
an exercise price of less than $5.00 per share, subject to certain exceptions.
For any transaction involving a penny stock, unless exempt, the rules require:
(i) that a broker or dealer approve a person's account for transactions in penny
stocks and (ii) the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and quantity of the
penny stock to be purchased. In order to approve a person's account for
transactions in penny stocks, the broker or dealer must (i) obtain financial
information and investment experience and objectives of the person; and (ii)
make a reasonable determination that the transactions in penny stocks are
suitable for that person and that person has sufficient knowledge and experience
in financial matters to be capable of evaluating the risks of transactions in
penny stocks. The broker or dealer must also deliver, prior to any transaction
in a penny stock, a disclosure schedule prepared by the Commission relating to
the penny stock market, which, in highlight form, (i) sets forth the basis on
which the broker or dealer made the suitability determination and (ii) that the
broker or dealer received a signed, written agreement from the investor prior to
the transaction. Disclosure also has to be made about the risks of investing in
penny stocks in both public offerings and in secondary trading, and about
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to
an investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
19
(b) Holders. As of the date of this filing, there were 79 record holders of
the 28,780,700 shares of the Company's issued and outstanding Common Stock. The
issued and outstanding shares of the Company's common stock were issued in
accordance with the exemptions from registration afforded by Section 4(2) and/or
Regulation S of the Securities Act of 1933, as amended.
(c) Dividends. The Company has not paid any cash dividends to date and does
not anticipate or contemplate paying dividends in the foreseeable future. It is
the present intention of management to utilize all available funds for the
development of the Company's business.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
The Company originally issued to one person (a United States citizen) a
total of 2,000,000 shares of common stock on October 28, 2010 at $.001 per share
(par value).
The Company issued 20,000,000 shares of common stock to Peter Smith
(non-citizen, non-resident of the United States) pursuant to a Plan and
Agreement of Reorganization dated November 15, 2010, when the Company acquired
100% of the common stock of Global Equity Partners PLC in a private transaction,
resulting in Global Equity Partners PLC becoming a wholly-owned subsidiary of
the Company. Following the closing of this transaction, Peter Smith became our
President and Chief Executive Officer and a member of our board of directors.
Effective December 31, 2010, the Company issued 668,000 shares of common
stock to seven debt holders (non-citizens, non-residents of the United States)
in satisfaction of $263,533.64 in debt owed by the Company.
Effective November 1, 2010, the Company issued 5,000,000 shares of common
stock to Enzo Taddei (non-citizen, non-resident of the United States) for
services rendered to the Company valued at $5,000. Mr. Taddei became the Chief
Financial Officer and a Director of the Company in September 2011.
Effective December 31, 2010, the Company issued 1,000,000 shares of common
stock to an individual (non-citizen, non-resident of the United States) in
exchange for services rendered to the Company valued at $50,000.
On September 23, 2011, the Company issued 9,600 shares of common stock to
an individual (non-citizen, non-resident of the United States) in exchange for
services rendered to the Company valued at $4,800.
Between May 2, 2011, and June 15, 2011, the Company issued a total of
103,100 shares of common stock in a private offering to a total of 27 persons
(non-citizens, non-residents of the United States) at $.50 per share for an
aggregate consideration of $51,550.
The above shares were issued in reliance of the exemption from registration
requirements of the 33 Act provided by Section 4(2) or Regulation S of the 33
Act, as the issuance of the stock did not involve a public offering of
securities based on the following:
* each investor represented to us that he was acquiring the securities
for his own account for investment and not for the account of any
other person and not with a view to or for distribution, assignment or
resale in connection with any distribution within the meaning of the
33 Act;
20
* we provided each investor with written disclosure prior to sale or
transfer that the securities have not been registered under the 33 Act
and, therefore, cannot be resold unless they are registered under the
33 Act or unless an exemption from registration is available;
* each investor agreed not to sell or otherwise transfer the purchased
securities unless they are registered under the 33 Act and any
applicable state laws, or an exemption or exemptions from such
registration are available;
* each investor had knowledge and experience in financial and other
business matters such that he was capable of evaluating the merits and
risks of an investment in us;
* such investor was given information and access to all of our
documents, records, books, officers and directors, our executive
offices pertaining to the investment and was provided the opportunity
to ask questions and receive answers regarding the terms and
conditions of the offering and to obtain any additional information
that we possesses or were able to acquire without unreasonable effort
and expense;
* each investor had no need for liquidity in their investment in us and
could afford the complete loss of their investment in us;
* we did not employ any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio;
* we did not conduct, hold or participate in any seminar or meeting
whose attendees had been invited by any general solicitation or
general advertising;
* we placed a legend on each certificate or other document that
evidences the securities stating that the securities have not been
registered under the 33 Act and setting forth or referring to the
restrictions on transferability and sale of the securities;
* with respect to the securities issued pursuant to Section 4(2) of the
33 Act, we added the following legend to the certificates:
"The shares represented by this certificate have been issued to the
registered owner in reliance upon written representations that these shares
have been taken for investment. These shares have not been registered under
the Securities Act of 1933, as amended ("Act"), and may not be sold,
transferred or assigned unless an opinion of counsel satisfactory to the
company has been received by the company to the effect that such sale,
transfer or assignment will not be in violation of the Act and the rules
and regulations promulgated thereunder or applicable state securities
laws."
* with respect to the securities issued pursuant to Regulation S, we
added the following legend to the certificates:
"The shares represented by this certificate have not been issued to
the registered owner in reliance upon written representations that these
shares have not been registered under the Securities Act of 1933 ("Act")
and are "restricted securities," as defined under Regulation S, and cannot
be sold, transferred, assigned or traded in the United States for a period
of 12 months from the date of issue and require written release from either
the issuing company or their attorney prior to legend removal."
* we placed stop transfer instructions in our stock transfer records;
21
* no underwriter was involved in the offering; and
* we made independent determinations that such person was a
sophisticated or accredited investor and that he was capable of
analyzing the merits and risks of their investment in us, that he
understood the speculative nature of their investment in us and that
he could lose their entire investment in us.
ITEM 11. DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 70,000,000 shares of Common Stock
and 5,000,000 shares of Preferred Stock.
COMMON STOCK
Our authorized capital stock includes 70,000,000 shares of common stock,
par value $0.001 per share. The holders of our Common Stock:
* have equal ratable rights to dividends from funds legally available if
and when declared by our board of directors;
* are entitled to share ratably in all of our assets available for
distribution to holders of common stock upon liquidation, dissolution
or winding up of our affairs;
* do not have preemptive, subscription or conversion rights and there
are no redemption or sinking fund provisions or rights; and
* are entitled to one non-cumulative vote per share on all matters on
which stockholders may vote.
PREFERRED STOCK
We are authorized to issue 5,000,000 shares of preferred stock.
Our Board of Directors is authorized to provide for the issuance of shares
of preferred stock in series and, by filing a certificate pursuant to the
applicable law of Nevada, to establish from time to time the number of shares to
be included in each such series, and to fix the designation, powers, preferences
and rights of the shares of each such series and the qualifications, limitations
or restrictions thereof without any further vote or action by the shareholders.
Any shares of preferred stock so issued would have priority over the common
stock with respect to dividend or liquidation rights. Any future issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change in control of our Company without further action by the shareholders and
may adversely affect the voting and other rights of the holders of common stock.
At present, we have no plans to neither issue any preferred stock nor adopt any
series, preferences or other classification of preferred stock.
The issuance of shares of preferred stock, or the issuance of rights to
purchase such shares, could be used to discourage an unsolicited acquisition
proposal. For instance, the issuance of a series of preferred stock might impede
a business combination by including class voting rights that would enable the
holder to block such a transaction, or facilitate a business combination by
including voting rights that would provide a required percentage vote of the
stockholders. In addition, under certain circumstances, the issuance of
preferred stock could adversely affect the voting power of the holders of the
common stock. Although the Board of Directors is required to make any
22
determination to issue such stock based on its judgment as to the best interests
of our stockholders, the Board of Directors could act in a manner that would
discourage an acquisition attempt or other transaction that some, or a majority,
of the stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then market price
of such stock. The Board of Directors does not at present intend to seek
stockholder approval prior to any issuance of currently authorized stock, unless
otherwise required by law or stock exchange rules. We have no present plans to
issue any preferred stock.
On November 30, 2011, our Board of Directors approved the creation of
Series A Preferred Stock ("Series A Preferred"), and filed an Amended
Certificate of Designation with the Secretary of State of Nevada on November 30,
2011. By virtue of the Certificate of Designation, the Series A Preferred has
the following rights and preferences:
Number of Shares: 5,000,000
Voting Rights: Each share has two (2) votes
Conversion Rights: Each share will be convertible into two (2) shares
of Common Stock beginning December 1, 2013
Dividend Rights: None
Liquidation Rights: None
On November 30, 2011, we issued 5,000,000 shares of Series A Preferred
Stock ("Series A Preferred") to Peter J. Smith, our President, for an aggregate
consideration of $480,000 as a bonus package equal to 24 months of salary.
This description of certain matters relating to the securities of the
Company is a summary and is qualified in its entirety by the provisions of the
Company's Articles of Incorporation, Certificate of Designation and By-Laws, and
any amendments thereto, copies of which have been filed as exhibits to this Form
10.
DIVIDENDS
Dividends, if any, will be contingent upon the Company's revenues and
earnings, if any, capital requirements and financial conditions. The payment of
dividends, if any, will be within the discretion of the Company's Board of
Directors. The Company presently intends to retain all earnings, if any, for use
in its business operations and accordingly, the Board of Directors does not
anticipate declaring any dividends prior to a business combination.
WARRANTS AND OPTIONS
We have no outstanding warrants or options to acquire our stock,
TRADING OF SECURITIES IN SECONDARY MARKET
The Company presently has 28,780,700 shares of common stock issued and
outstanding, all of which are "restricted securities," as that term is defined
under Rule 144 promulgated under the Securities Act, in that such shares were
issued in private transactions not involving a public offering.
ANTI-TAKEOVER PROVISIONS
There are no Nevada anti-takeover provisions that our Board of Directors
has adopted which may have the affect of delaying or preventing a change in
control.
23
STOCK TRANSFER AGENT
Our stock transfer agent is ClearTrust, LLC, 16450 Pointe Village Drive,
Suite 201, Lutz, Florida 33558.
REGISTRATION RIGHTS
We have not granted registration rights to any person.
REPORTS TO SHAREHOLDERS
We intend to furnish our shareholders with annual reports that will
describe the nature and scope of our business and operations for the prior year
and will contain a copy of our audited financial statements for our most recent
fiscal year.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article VII, Section 7 of the Company's Bylaws provide that the Company
shall indemnify its officers, directors, employees and agents to the fullest
extent permitted by the laws of Nevada.
The Nevada Revised Statutes allow us to indemnify our officers, directors,
employees, and agents from any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative, or investigative, except
under certain circumstances. Indemnification may only occur if a determination
has been made that the officer, director, employee, or agent acted in good faith
and in a manner, which such person believed to be in the best interests of the
corporation. A determination may be made by the shareholders; by a majority of
the directors who were not parties to the action, suit, or proceeding confirmed
by opinion of independent legal counsel; or by opinion of independent legal
counsel in the event a quorum of directors who were not a party to such action,
suit, or proceeding does not exist.
The expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding must be paid by us as they are incurred and
in advance of the final disposition of the action, suit or proceeding, if and
only if the officer or director undertakes to repay said expenses to us if it is
ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by us.
The indemnification and advancement of expenses may not be made to or on
behalf of any officer or director if a final adjudication establishes that the
officer's or director's acts or omission involved intentional misconduct, fraud
or a knowing violation of the law and was material to the cause of action.
The Nevada Revised Statutes allow a company to indemnify our officers,
directors, employees, and agents from any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, except under certain circumstances. Indemnification may only
occur if a determination has been made that the officer, director, employee, or
agent acted in good faith and in a manner, which such person believed to be in
the best interests of the corporation. A determination may be made by the
stockholders; by a majority of the directors who were not parties to the action,
suit, or proceeding confirmed by opinion of independent legal counsel; or by
opinion of independent legal counsel in the event a quorum of directors who were
not a party to such action, suit, or proceeding does not exist.
24
SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the company, we have been advised by our special securities counsel
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy and is, therefore, unenforceable.
AUTHORIZED BUT UNISSUED CAPITAL STOCK
Nevada law does not require shareholder approval for any issuance of
authorized shares. However, the marketplace rules of the NASDAQ, which would
apply only if our common stock were ever listed on the NASDAQ, which is unlikely
for the foreseeable future, require shareholders approval of certain issuances
of common stock equal to or exceeding 20% of the then outstanding voting power
or then outstanding number of shares of common stock, including in connection
with a change of control of the Company, the acquisition of the stock or assets
of another company or the sale or issuance of common stock below the book or
market value price of such stock. These additional shares may be used for a
variety of corporate purposes, including future public offerings to raise
additional capital or to facilitate corporate acquisitions.
One of the effects of the existence of unissued and unreserved common stock
may be to enable our board of directors to issue shares to persons friendly to
current management, which issuance could render more difficult or discourage an
attempt to obtain control of our board by means of a merger, tender offer, proxy
contest or otherwise, and thereby protect the continuity and entrenchment of our
management and possibly deprive the shareholders of opportunities to sell their
shares of our common stock at prices higher then prevailing market prices.
SHAREHOLDER MATTERS
As an issuer of "penny stock," the protection provided by the federal
securities laws relating to forward-looking statements does not apply to us if
our shares are considered to be penny stocks. Although the federal securities
laws provide a safe harbor for forward-looking statements made by a public
company that files reports under the federal securities laws, this safe harbor
is not available to issuers of penny stocks. As a result, we will not have the
benefit of this safe harbor protection in the event of any claim that the
material provided by us, including this prospectus, contained a material
misstatement of fact or was misleading in any material respect because of our
failure to include any statements necessary to make the statements not
misleading.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The audited financial statements of Global Equity International, Inc. for
the years ended December 31, 2010 (consolidated) and 2009 appear beginning at
page F-1, and the unaudited financial statements of Global Equity International,
Inc. for the nine months ended September 30, 2011 (consolidated) and 2010,
appear beginning at F-19.
25
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There are not and have not been any disagreements between the Registrant
and its accountants on any matter of accounting principles, practices or
financial statement disclosure.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(b) Exhibits
The following Exhibits are filed as part of this Registration Statement:
Exhibit No. Document Description
----------- --------------------
2 Plan and Agreement of Reorganization dated November 15, 2010,
among Global Equity International, Inc., Global Equity Partners
PLC and Stockholders of Global Equity Partners LLC
3.1 Articles of Incorporation
3.2 Bylaws
4.1 Specimen Stock Certificate
4.2 Certificate of Amendment to Certificate of Designation of Series A
Convertible Preferred Stock
10.1 Employment Agreement dated September 1, 2011, with Peter J. Smith
10.2 Employment Agreement dated September 1, 2011, with Enzo Taddei
10.3 Employment Agreement dated September 1, 2011, with Adrian Scarrott
10.4 Consulting Agreement between Global Equity Partners PLC and Black
Swan Data Ltd. dated July 29, 2011
10.5 Consulting Agreement between Global Equity Partners PLC and Arrow
Cars SL dated January 14, 2011
10.6 Consulting Agreement between Global Equity Partners PLC and RFC
K.K. dated October 19, 2011
10.7 Consulting Agreement between Global Equity Partners PLC and M1
Luxembourg AG dated December 20, 2010
10.8 Consulting Agreement between Global Equity Partners PLC and Monkey
Rock Group, Inc. dated November 26, 2009
14 Code of Business Conduct and Ethics adopted on September 2, 2011
21 Subsidiaries
26
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 10 registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
Global Equity International, Inc.
Date: December 1, 2011 By: /s/ Peter J. Smith
----------------------------------------
Name: Peter J. Smith
Title: President, Chief Executive Officer
and Director
Global Equity International, Inc.
Date: December 1, 2011 By: /s/ Enzo Taddei
----------------------------------------
Name: Enzo Taddei
Title: Chief Executive Officer and Director
27
Global Equity International, Inc. and Subsidiary
Financial Statements
December 31, 2010 and 2009
F-1
CONTENTS
Page(s)
-------
Report of Independent Registered Public Accounting Firm F-3
Balance Sheets -December 31, 2010 (Consolidated) and 2009 F-4
Statements of Operations and Comprehensive Income (Loss)
Periods Ended December 31, 2010 (Consolidated) and 2009 F-5
Statement of Stockholders' Equity
Periods Ended December 31, 2010 (Consolidated) and 2009 F-6
Statements of Cash Flows
Periods Ended December 31, 2010 (Consolidated) and 2009 F-7
Notes to Financial Statements
Periods Ended December 31, 2010 (Consolidated) and 2009 F-8 through F-18
F-2
[LETTERHEAD OF BERMAN & COMPANY, P.A.]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of:
Global Equity International, Inc.
We have audited the accompanying balance sheets of Global Equity International,
Inc. and Subsidiary, as of December 31, 2010 (consolidated) and 2009, and the
related statements of operations and comprehensive income (loss), stockholders'
equity and cash flows for the periods ended December 31, 2010 (consolidated) and
2009. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included considerations of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Global Equity International,
Inc. and Subsidiary as of December 31, 2010 (consolidated) and 2009, and the
results of its operations and comprehensive income (loss), and its cash flows
for the periods then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Berman & Company, P.A.
-----------------------------------
Boca Raton, Florida
October 13, 2011, except for Note 9 as to which the date is November 30, 2011
F-3
Global Equity International, Inc. and Subsidiary
Balance Sheets
December 31, 2010 December 31, 2009
----------------- -----------------
(Consolidated)
ASSETS
CURRENT ASSETS
Cash $ 3,275 $ 3,380
Prepaids 551 7,225
---------- ----------
TOTAL CURRENT ASSETS 3,826 10,605
Marketable securities 2,227,236 --
---------- ----------
TOTAL ASSETS $2,231,062 $ 10,605
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 23,357 $ 3,757
---------- ----------
TOTAL CURRENT LIABILITIES 23,357 3,757
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock: 5,000,000 shares authorized and 0 shares
authorized and outstanding, $0.001 par value -- --
Common stock: 70,000,000 shares authorized and 28,668,000 and
20,000,000 shares issued and outstanding, $0.001 par value 28,668 20,000
Additional paid in capital 336,866 80,000
Retained earnings (accumulated deficit) 1,676,095 (93,152)
Accumulated other comprehensive income 166,076 --
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 2,207,705 6,848
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $2,231,062 $ 10,605
========== ==========
See accompanying notes to financial statements
F-4
Global Equity International, Inc. and Subsidiary
Statements of Operations and Comprehensive Income (Loss)
Years Ended December 31,
2010 2009
------------ ------------
(Consolidated)
Revenue $ 2,061,160 $ 15,000
General and administrative expenses 291,913 108,152
------------ ------------
NET INCOME (LOSS) $ 1,769,247 $ (93,152)
============ ============
Net income (loss) per share - basic and diluted $ 0.08 $ (0.00)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED 21,092,405 20,000,000
============ ============
COMPREHENSIVE INCOME (LOSS):
Net income (loss) $ 1,769,247 $ (93,152)
Unrealized gain on available for sale marketable securities 166,076 --
------------ ------------
COMPREHENSIVE INCOME (LOSS) $ 1,935,323 $ (93,152)
============ ============
See accompanying notes to financial statements
F-5
Global Equity International, Inc. and Subsidiary
Statement of Stockholders' Equity
Years ended December 31 2010 (Consolidated) and 2009
Retained Accumulated
Common Stock Additional Earnings Other Total
------------------ Paid-in (Accumulated Comprehensive Stockholders'
Shares Amount Capital Deficit) Income Equity
------ ------ ------- -------- ------ ------
Stock issued for services -
related party ($0.005/share) 20,000,000 $20,000 $ 80,000 $ -- $ -- $ 100,000
Net loss - 2009 -- -- -- (93,152) -- (93,152)
---------- ------- -------- ---------- -------- ----------
Balance - December 31, 2009 20,000,000 20,000 80,000 (93,152) -- 6,848
Stock issued in connection with debt
conversion ($0.40/share) 668,000 668 264,866 -- -- 265,534
Recapitalization 8,000,000 8,000 (8,000) -- -- --
Net income - 2010 -- -- -- 1,769,247 -- 1,769,247
Unrealized gain on available for sale
marketable securities -- -- -- -- 166,076 166,076
---------- ------- -------- ---------- -------- ----------
BALANCE - DECEMBER 31, 2010 28,668,000 $28,668 $336,866 $1,676,095 $166,076 $2,207,705
========== ======= ======== ========== ======== ==========
See accompanying notes to financial statements
F-6
Global Equity International, Inc. and Subsidiary
Statements of Cash Flows
Years Ended December 31,
2010 2009
------------ ------------
(Consolidated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Profit (Loss) $ 1,769,247 $ (93,152)
Adjustments to reconcile net income (loss) to
cash used in operating activities:
Stock issued for services - related party -- 100,000
Stock issued for services -- --
Marketable securities received as revenue (2,061,160) --
Changes in operating assets and operating liabilities:
Prepaid expenses 6,674 (7,225)
Accounts Payable 19,600 3,757
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (265,639) 3,380
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible debt 265,534 --
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 265,534 --
------------ ------------
NET INCREASE (DECREASE) IN CASH (105) 3,380
CASH - BEGINNING OF PERIOD 3,380 --
------------ ------------
CASH - END OF PERIOD $ 3,275 $ 3,380
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ -- $ --
============ ============
Income taxes $ -- $ --
============ ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Stock issued in connection with debt conversion $ 265,534 $ --
============ ============
See accompanying notes to financial statements
F-7
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
NOTE 1 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 private company, 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. See Note 3.
Revenue is generated from business consulting services, introduction fees, and
equity participation.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
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 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.
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 December 31, 2010 and 2009,
respectively, the Company had no cash equivalents.
F-8
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
MARKETABLE SECURITIES
(A) CLASSIFICATION OF SECURITIES
At the time of acquisition a security is designated as held-to-maturity,
available-for-sale or trading, which depends on 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 other comprehensive income
(loss). Realized gains (losses) are computed on a specific identification basis
and are recorded in net capital gains (losses) on investments in the combined
consolidated statements of operations
All securities held at December 31, 2010 are designated as available for sale.
(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 has not recorded any impairment losses for the
year ended December 31, 2010.
REVENUE RECOGNITION
Revenue is recognized only when the price is fixed or determinable, persuasive
evidence of an arrangement exists, the service is performed, and collectability
of the related fee is reasonably assured. The Company's services do not include
a provision for cancellation, termination, or refunds.
In 2010, the Company received marketable securities as consideration for
services rendered. In 2009, revenues were generated from consulting services for
cash.
F-9
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
During 2010 and 2009, the Company had the following concentrations of revenues
with customers:
Customer 2010 2009
-------- ---- ----
A 53% --%
B 47% 100%
SHARE-BASED PAYMENTS
Generally, all forms of share-based payments, including stock option grants,
warrants, restricted stock grants and stock appreciation rights are measured at
their fair value on the awards' grant date, based on estimated number of awards
that are ultimately expected to vest. Share-based compensation 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.
INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred
income tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, and operating
loss carryforwards. Deferred income tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred income tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. A valuation
allowance is provided to reduce the carrying amount of deferred income tax
assets if it is considered more likely than not that some portion, or all, of
the deferred income tax assets will not be realized.
At December 31, 2009, the Company was not subject to federal and state income
taxes; accordingly, no provision had been made. The financial statements reflect
GEP's transactions without adjustment, if any, required for income tax purposes
for the year ended December 31, 2009 and through November 15, 2010, the date of
the reverse recapitalization.
The Company recognizes the effect of income tax positions only if those
positions are more likely than not of being sustained. Recognized income tax
positions are measured at the largest amount that is greater than 50% likely of
being realized. Changes in recognition or measurement are reflected in the
period in which the change in judgment occurs.
F-10
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
The Company will record interest and penalties related to unrecognized tax
benefits in income tax expense. There were none for the years ended December 31,
2010 and 2009.
The Company may be subject to examination by the Internal Revenue Service
("IRS") and state taxing authorities for all open tax years.
The Company should not be subject to income tax in the Seychelles Islands. A
company is subject to Seychelles income tax if it does business in Seychelles. A
company that is incorporated in Seychelles, but that does not do business in
Seychelles, is not subject to income tax there. The Company did not do business
in Seychelles for the year ended December 31, 2010, and the Company does not
intend to do business in Seychelles in the future. All business activities were
performed in Dubai for the year ended December 31, 2010. Dubai does not have an
income tax.
EARNINGS PER SHARE
Basic earnings (loss) per share is 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.
The Company has no common stock equivalents, which, if exercisable, would be
anti-dilutive. A separate computation of diluted earnings (loss) per share is
not presented.
COMPREHENSIVE INCOME (LOSS)
Consists of the change in unrealized gain (loss) on available-for-sale
marketable securities.
F-11
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
FAIR VALUE FOR 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
arices that are observable for the assets or liabilities; or inputs
that are derived principally from or porroborated 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 cash, marketable
securities and accounts payable approximate fair value based on the short-term
nature of these instruments.
The Company has assets measured at fair market value on a recurring basis.
Consequently, the Company had gains and losses reported in the statement of
comprehensive income (loss), that were attributable to the change in unrealized
gains or losses relating to those assets and liabilities still held at the
reporting date for the year ended December 31, 2010.
F-12
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
The following is the Company's asset measured at fair value on a nonrecurring
basis at December 31, 2010 and 2009, using quoted prices in active markets for
identical assets (Level 1); significant other observable inputs (Level 2); and
significant unobservable inputs (Level 3):
December 31, 2010 December 31, 2009
----------------- -----------------
Level 1 $ -- $ --
Level 2
Marketable Securities 2,227,236 --
Level 3 -- --
---------- ----------
Total $2,227,236 $ --
========== ==========
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220):
Presentation of Comprehensive Income. The guidance in ASU 2011-05 applies to
both annual and interim financial statements and eliminates the option for
reporting entities to present the components of other comprehensive income as
part of the statement of changes in stockholders' equity. This ASU also requires
consecutive presentation of the statement of net income and other comprehensive
income. Finally, this ASU requires an entity to present reclassification
adjustments on the face of the financial statements from other comprehensive
income to net income. The amendments in this ASU should be applied
retrospectively and are effective for fiscal year, and interim periods within
those years, beginning after December 15, 2011. The Company has early adopted
this guidance in these financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic
820): Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs. The guidance in ASU 2011-04 changes the
wording used to describe the requirements in U.S. GAAP for measuring fair value
and for disclosing information about fair value measurements, including
clarification of the FASB's intent about the application of existing fair value
and disclosure requirements and changing a particular principle or requirement
for measuring fair value or for disclosing information about fair value
measurements. The amendments in this ASU should be applied prospectively and are
effective for interim and annual periods beginning after December 15, 2011.
Early adoption by public entities is not permitted. The adoption of this
guidance is not expected to have a material impact on the Company's financial
position or results of operations.
F-13
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
NOTE 3 REVERSE RECAPITALIZATION
On November 15, 2010, the Company merged with GEP, a private corporation, and
GEP became the surviving corporation, in a transaction treated as a reverse
recapitalization. GEI did not have any material operations and majority-voting
control was transferred to GEP.
In the recapitalization, GEI issued 20,000,000 shares of common stock in
exchange for all of GEP's 100,000 issued and outstanding shares of commons
stock. For financial statement reporting purposes, the 100,000 shares have been
recasted to 20,000,000 shares in accordance with an exchange ratio of 200 for 1.
The balance of the common shares issued and outstanding in GEI prior to the
recapitalization were 8,000,000 common shares, and these common shares represent
the common shares issued and outstanding in GEI prior to the recapitalization
that were not contemplated in the share exchange. The transaction resulted in
GEP's shareholders acquiring approximately 72% control.
The transaction also required a recapitalization of GEP. Since GEP acquired a
controlling voting interest, it was deemed the accounting acquirer, while GEI
was deemed the legal acquirer. The historical financial statements of the
Company are those of GEP and of the consolidated entities from the date of
recapitalization and subsequent.
Since the transaction is considered a reverse recapitalization, the presentation
of pro-forma financial information was not required. All share and per share
amounts have been retroactively restated to the earliest periods presented to
reflect the transaction.
NOTE 4 MARKETABLE SECURITIES AND FAIR VALUE
The following table represents the Company's available for sale marketable
securities holdings as of December 31, 2010:
Equity securities - receipt date $ 2,061,160
Unrealized gains - 2010 210,000
Unrealized losses - 2010 (43,924)
-----------
Equity securities at fair value $ 2,227,236
===========
All securities acquired from customer "A" are unrestricted. All securities
acquired from customer "B" became unrestricted in 2011.
F-14
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
NOTE 5 DEBT
During 2010, the Company issued convertible notes for $265,534 to third parties.
In connection with the recapitalization, these notes were converted into 668,000
shares of common stock, representing a conversion price of $0.40/share. There
was no gain or loss on conversion.
NOTE 6 INCOME TAXES
The provision for income taxes results in an effective rate as follows at
December 31, 2010:
Statutory federal income tax 34.0%
Florida income tax 5.5%
----------
Total effective blended rate 37.63%
==========
The Company's provision (benefit) for income taxes was as follows at December
31, 2010:
Current:
Federal $ --
State --
----------
Total --
----------
Deferred:
Federal --
State --
----------
Total --
----------
Continuing operations $ --
==========
The income tax provision differs from the amount of tax determined by applying
the federal statutory rate as follows at December 31, 2010:
Income tax provision at statutory rate $ 582,844
Increase (decrease) in income tax due to:
Non-taxable foreign earnings (601,544)
State taxes (2,000)
Change in valuation allowance 20,700
----------
Total $ --
==========
F-15
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
Net deferred tax assets and liabilities were comprised of the following at
December 31, 2010:
Deferred tax assets (liabilities), non-current:
Net operating loss $ 20,700
Valuation allowance (20,700)
----------
Net deferred tax asset (liability) $ --
==========
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income taxes.
During the year ended December 31, 2010, the Company generated a net operating
loss of $55,000 for federal and Florida income tax purposes. This loss can be
carried forward and used to offset taxable income in future years and expires on
December 31, 2030.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. As of December 31, 2010,
based upon the levels of historical taxable income and the limited experience of
the Company, the Company believes that it is more likely than not that it will
not be able to realize the benefits of some of these deductible differences.
Accordingly, a valuation allowance of $20,700 has been provided in the
accompanying financial statements as of December 31, 2010.
The Company's net operating loss available to offset Florida income taxes in
future years is $55,000. For state purposes, net operating losses can only be
carried forward. The Company has recorded a full valuation allowance against the
net operating loss since the loss may never be utilized.
From November 15, 2010 to December 31, 2010, GEP incurred a loss of $19,698;
therefore, it had negative earnings and profits and does not have any foreign
earnings and profits to be distributed. Since the GEP does not have any
undistributed earnings, the Company has not recorded a deferred tax liability
associated with the foreign earnings.
GEP is not subject to any foreign income taxes for the year ended December 31,
2010.
F-16
NOTE 7 STOCKHOLDERS' EQUITY
In 2009, the Company issued 20,000,000 shares of common stock, having a fair
value of $100,000 ($0.005/share), to the Company's Chief Executive Officer, in
connection with pre-incorporation services rendered. Fair value was based on the
value of services provided, as this reflected the best evidence of fair value
for an entity that is not publicly traded.
NOTE 8 LIQUIDITY
At December 31, 2010, and through the date of the accompanying report, the
Company's cash balance is minimal, however, the Company expects that it can meet
all of its current obligations if necessary by selling its marketable securities
to generate cash flows. The Company also believes that related party debt and/or
equity financing could be available if needed under favorable terms.
NOTE 9 SUBSEQUENT EVENTS
The Company has evaluated for subsequent events between the balance sheet date
of December 31, 2010 and October 13, 2011, the date the financial statements
were available to be issued, and concluded that events or transactions occurring
during that period requiring recognition or disclosure are as follows:
(A) STOCK ISSUANCES
COMMON STOCK
In May and June 2011, the Company issued 103,100 shares of common stock for
$51,550 ($0.50/share).
On September 23, 2011, the Company issued 9,600 shares of common stock for
services rendered, having a fair value of $4,800 ($0.50/share), based upon
recent third party cash offerings.
PREFERRED STOCK
On November 30 2011, the Company designated Series A Preferred Stock, with the
following rights:
* Voting rights - each share has two votes.
* Conversion - each share is convertible into two shares of common stock
beginning on December 1, 2012
* Number of shares - 5,000,000
The Company issued 5,000,000 Series A convertible preferred shares of stock, as
a bonus to its Chief Executive Officer for services rendered, having a fair
value of $480,000 ($0.096/share), based upon the fair value of the services
rendered, which represents the best evidence of fair value.
(B) DEBT
On July 5, 2011, the Company received an advance of $35,500 from a third party.
The advance was non-interest bearing, unsecured and due on demand. The loan was
repaid in September 2011.
F-17
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
(C) EMPLOYMENT AGREEMENTS
Effective September 1, 2011, the Company executed an employment agreement with
its Chief Executive Officer and Chief Financial Officer, under the following
terms:
* Salary - $120,000 - 240,000 per year,
* Stock options - amount yet to be determined; and
* Term - 3 years
F-18
Global Equity International, Inc. and Subsidiary
Financial Statements
September 30, 2011
(Unaudited)
F-19
CONTENTS
Page(s)
-------
Consolidated Balance Sheets - September 30, 2011 (unaudited)
and December 31, 2010 (Consolidated) F-21
Statements of Operations and Comprehensive Income (Loss) F-22
Nine Months Ended September 30, 2011 (consolidated)
and September 30, 2010 (unaudited)
Statement of Stockholders' Equity F-23
Nine Months Ended September 30, 2011 (consolidated) (unaudited)
Statements of Cash Flows F-24
Nine Months Ended September 30, 2011 (consolidated)
and September 30, 2010 (Unaudited)
Notes to Financial Statements (unaudited) F-25 through F-32
F-20
Global Equity International, Inc. and Subsidiary
Consolidated Balance Sheets
September 30, 2011 December 31, 2010
------------------ -----------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 2,700 $ 3,275
Prepaids 551 551
----------- -----------
TOTAL CURRENT ASSETS 3,251 3,826
MARKETABLE SECURITIES 752,701 2,227,236
----------- -----------
TOTAL ASSETS $ 755,952 $ 2,231,062
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 52,409 $ 23,357
Loans payable - shareholders 40,173 --
----------- -----------
TOTAL CURRENT LIABILITIES 92,582 23,357
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred Stock: 5,000,000 shares authorized and no shares
issued and outstanding, $0.001 par value -- --
Common Stock: 70,000,000 shares authorized and 28,780,700
and 28,668,000 shares issued and outstanding 28,781 28,668
Additional Paid In Capital 393,103 336,866
Retained Earnings 1,549,945 1,676,095
Accumulated Other Comprehensive Income (Loss) (1,308,459) 166,076
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 663,370 2,207,705
----------- -----------
Total Liabilities & Stockholders' Equity $ 755,952 $ 2,231,062
=========== ===========
See accompanying notes to financial statements
F-21
Global Equity International, Inc. and Subsidiary
Statements of Operations and Comprehensive Income (Loss)
Nine Months Ended September 30,
2011 2010
------------ ------------
(Consolidated)
(Unaudited) (Unaudited)
Revenue $ 96,542 $ 2,061,160
General and administrative expenses 222,692 81,818
------------ ------------
NET INCOME (LOSS) $ (126,150) $ 1,979,342
============ ============
NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED $ (0.00) $ 0.10
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -
BASIC AND DILUTED 28,720,833 20,000,000
============ ============
COMPREHENSIVE INCOME (LOSS):
Net income (loss) $ (126,150) $ 1,979,342
Unrealized loss on available for sale
marketable securities (1,308,459) (1,277,600)
------------ ------------
COMPREHENSIVE INCOME (LOSS) $ (1,434,609) $ 701,742
============ ============
See accompanying notes to financial statements
F-22
Global Equity International, Inc. and Subsidiary
Consolidated Statement of Stockholders' Equity
For the period ended September 30, 2011
(Unaudited)
Retained Accumulated
Common Stock Additional Earnings Other Total
------------------ Paid-in (Accumulated Comprehensive Stockholders'
Shares Amount Capital Deficit) Income Equity
------ ------ ------- -------- ------ ------
Balance - December 31, 2009 20,000,000 $20,000 $ 80,000 $ (93,152) $ -- $ 6,848
Stock issued in connection with debt
conversion ($0.40/share) 668,000 668 264,866 -- -- 265,534
Recapitalization 8,000,000 8,000 (8,000) -- -- --
Net income - 2010 -- -- -- 1,769,247 -- 1,769,247
Unrealized gain on available for sale
marketable securities -- -- -- -- 166,076 166,076
---------- ------- -------- ---------- ----------- -----------
BALANCE - DECEMBER 31, 2010 28,668,000 28,668 336,866 1,676,095 166,076 2,207,705
Stock issued for services
($0.50/share) 103,100 103 51,447 -- -- 51,550
Stock issued for services
($0.50/share) 9,600 10 4,790 -- -- 4,800
Net loss - 2011 -- -- -- (126,150) -- (126,150)
Unrealized loss on available for sale
marketable securities -- -- -- -- (1,474,535) (1,474,535)
---------- ------- -------- ---------- ----------- -----------
BALANCE - SEPTEMBER 30, 2011 28,780,700 $28,781 $393,103 $1,549,945 $(1,308,459) $ 663,370
========== ======= ======== ========== =========== ===========
See accompanying notes to financial statements
F-23
Global Equity International, Inc. and Subsidiary
Statements of Cash Flows
Nine Months Ended September 30,
2011 2010
------------ ------------
(Consolidated)
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (126,150) $ 1,979,342
Adjustments to reconcile net loss to net
cash used in by operating activities:
Stock issued for services 4,800 --
Marketable securities received as revenue -- (2,061,160)
Changes in operating assets and operating liabilities:
Prepaid expenses -- 6,674
Accounts payable 29,052 22,445
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (92,298) (52,699)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans payable - shareholders 40,173 3,757
Proceeds from loans payable 35,500 --
Repayments from loans payable (35,500) --
Proceeds from convertible debt -- 236,581
Proceeds from stock issued for cash 51,550 --
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 91,723 240,338
------------ ------------
NET INCREASE (DECREASE) IN CASH $ (575) $ 187,639
============ ============
CASH - BEGINNING OF PERIOD 3,275 3,380
------------ ------------
CASH - END OF PERIOD $ 2,700 $ 191,019
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ -- $ --
============ ============
Income taxes $ -- $ --
============ ============
See accompanying notes to financial statements
F-24
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
September 30, 2011
(Unaudited)
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited interim 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 S-1, which contains the
audited financial statements and notes thereto, together with the Management's
Discussion and Analysis, for the periods ended December 31, 2010 and 2009. The
interim results for the period ended September 30, 2011 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 private company, 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. See Note 3.
Revenue is generated from business consulting services, introduction fees, and
equity participation.
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
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 financial
statements and the reported amounts of revenue and expenses during the reporting
period.
F-25
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
September 30, 2011
(Unaudited)
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.
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.
MARKETABLE SECURITIES
(A) CLASSIFICATION OF SECURITIES
At the time of acquisition, a security is designated as held-to-maturity,
available-for-sale or trading, which depends on 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 other comprehensive income
(loss). Realized gains (losses) are computed on a specific identification basis
and are recorded in net capital gains (losses) on investments in the combined
consolidated statements of operations
All securities held at September 30, 2011 are designated as available for sale.
(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 has not recorded any impairment losses for the
periods ended September 30, 2011 and 2010.
F-26
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
September 30, 2011
(Unaudited)
REVENUE RECOGNITION
Revenue is recognized only when the price is fixed or determinable, persuasive
evidence of an arrangement exists, the service is performed, and collectability
of the related fee is reasonably assured. The Company's services do not include
a provision for cancellation, termination, or refunds.
In 2010, the Company received marketable securities as consideration for
services rendered. In 2011, revenues were generated from consulting services for
cash.
During the nine months ended September 30, 2011 and 2010, the Company had the
following concentrations of revenues with customers:
Customer 2011 2010
-------- ---- ----
A --% 53%
B --% 47%
C 59% --%
D 41% --%
SHARE-BASED PAYMENTS
Generally, all forms of share-based payments, including stock option grants,
warrants, restricted stock grants and stock appreciation rights are measured at
their fair value on the awards' grant date, based on estimated number of awards
that are ultimately expected to vest. Share-based compensation 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.
EARNINGS PER SHARE
Basic earnings (loss) per share is 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.
The Company has no common stock equivalents, which, if exercisable, would be
anti-dilutive. A separate computation of diluted earnings (loss) per share is
not presented.
COMPREHENSIVE INCOME (LOSS)
The comprehensive income or loss consists of the change in unrealized gain
(loss) on available-for-sale marketable securities.
F-27
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
September 30, 2011
(Unaudited)
FAIR VALUE FOR 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
arices that are observable for the assets or liabilities; or inputs
that are derived principally from or porroborated 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 cash, prepaids,
marketable securities, accounts payable and loans payable - shareholders,
approximate fair value based on the short-term nature of these instruments.
The Company has assets measured at fair market value on a recurring basis.
Consequently, the Company had gains and losses reported in the statement of
comprehensive income (loss), that were attributable to the change in unrealized
gains or losses relating to those assets and liabilities still held at the
reporting date for the periods ended September 30, 2011 and December 31, 2010.
F-28
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
September 30, 2011
(Unaudited)
The following is the Company's asset measured at fair value on a nonrecurring
basis at September 30, 2011 and December 31, 2010, 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, 2011 December 31, 2010
------------------ -----------------
Level 1 $ -- $ --
Level 2
Marketable Securities 752,701 2,227,236
Level 3 -- --
---------- ----------
Total $ 752,701 $2,227,236
========== ==========
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220):
Presentation of Comprehensive Income. The guidance in ASU 2011-05 applies to
both annual and interim financial statements and eliminates the option for
reporting entities to present the components of other comprehensive income as
part of the statement of changes in stockholders' equity. This ASU also requires
consecutive presentation of the statement of net income and other comprehensive
income. Finally, this ASU requires an entity to present reclassification
adjustments on the face of the financial statements from other comprehensive
income to net income. The amendments in this ASU should be applied
retrospectively and are effective for fiscal year, and interim periods within
those years, beginning after December 15, 2011. The Company has early adopted
this guidance in these financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic
820): Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs. The guidance in ASU 2011-04 changes the
wording used to describe the requirements in U.S. GAAP for measuring fair value
and for disclosing information about fair value measurements, including
clarification of the FASB's intent about the application of existing fair value
and disclosure requirements and changing a particular principle or requirement
for measuring fair value or for disclosing information about fair value
measurements. The amendments in this ASU should be applied prospectively and are
effective for interim and annual periods beginning after December 15, 2011.
Early adoption by public entities is not permitted. The adoption of this
guidance is not expected to have a material impact on the Company's financial
position or results of operations.
F-29
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
September 30, 2011
(Unaudited)
NOTE 4 REVERSE RECAPITALIZATION
On November 15, 2010, the Company merged with GEP, a private corporation, and
GEP became the surviving corporation, in a transaction treated as a reverse
recapitalization. GEI did not have any material operations and majority-voting
control was transferred to GEP.
In the recapitalization, GEI issued 20,000,000 shares of common stock in
exchange for all of GEP's 100,000 issued and outstanding shares of commons
stock. For financial statement reporting purposes, the 100,000 shares have been
recasted to 20,000,000 shares in accordance with an exchange ratio of 200 for 1.
The balance of the common shares issued and outstanding in GEI prior to the
recapitalization were 8,000,000 common shares, and these common shares represent
the common shares issued and outstanding in GEI prior to the recapitalization
that were not contemplated in the share exchange. The transaction resulted in
GEP acquiring approximately 72% control.
The transaction also required a recapitalization of GEP. Since GEP acquired a
controlling voting interest, it was deemed the accounting acquirer, while GEI
was deemed the legal acquirer. The historical financial statements of the
Company are those of GEP and of the consolidated entities from the date of
recapitalization and subsequent.
Since the transaction is considered a reverse recapitalization, the presentation
of pro-forma financial information was not required. All share and per share
amounts have been retroactively restated to the earliest periods presented to
reflect the transaction.
NOTE 5 MARKETABLE SECURITIES AND FAIR VALUE
The following table represents the Company's available for sale marketable
securities holdings as of September 30, 2011:
Balance - December 31, 2010 $ 2,227,236
Unrealized losses - 2011 (1,308,459)
-----------
Equity securities at fair value - September 30, 2011 $ 752,701
===========
F-30
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
September 30, 2011
(Unaudited)
NOTE 6 DEBT
(A) RELATED PARTY
The Company received advances of $40,173 from related parties. The advances are
non-interest bearing, unsecured and due on demand.
(B) OTHER
On July 5, 2011, the Company received an advance of $35,500 from a third party.
The advance was non-interest bearing, unsecured and due on demand. The loan was
repaid in September 2011.
NOTE 7 STOCKHOLDERS' EQUITY
In May and June 2011, the Company issued 103,100 shares of common stock for
$51,550 ($0.50/share).
On September 23, 2011, the Company issued 9,600 shares of common stock for
services rendered, having a fair value of $4,800 ($0.50/share), based upon
recent third party cash offerings.
NOTE 8 COMMITMENTS
Effective September 1, 2011, the Company executed an employment agreement with
its Chief Executive Officer and Chief Financial Officer, under the following
terms:
* Salary - $120,000 - 240,000 per year,
* Stock options - amount yet to be determined; and
* Term - 3 years
NOTE 9 LIQUIDITY
At September 30, 2011, and through the date these financial statements were
available to be issued, the Company's cash balance is minimal. The Company
expects that it can meet all of its current obligations if necessary by selling
its marketable securities to generate cash flows. The Company also believes that
related party debt and/or equity financing is available if needed under
favorable terms.
F-31
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
September 30, 2011
(Unaudited)
NOTE 10 SUBSEQUENT EVENTS
The Company has evaluated for subsequent events between the balance sheet date
of September 30, 2011 and November 30, 2011, the date the financial statements
were available to be issued, and concluded that the following events or
transactions occurred during that period requiring recognition or disclosure.
On November 30 2011, the Company designated Series A Preferred Stock, with the
following rights:
* Voting rights - each share has two votes.
* Conversion - each share is convertible into two shares of common stock
beginning on December 1, 2012
* Number of shares - 5,000,000
The Company issued 5,000,000 Series A convertible preferred shares of stock, as
a bonus to its Chief Executive Officer for services rendered, having a fair
value of $480,000 ($0.096/share), based upon the fair value of the services
rendered, which represents the best evidence of fair value.
F-32