UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2011
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to ___________
Commission File Number 0-54557
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
(Address of principal executive offices)
Registrant's telephone number, including area code: +971 (7) 204 7593
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Common Stock, $.001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant: (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that he registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Website, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.
232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit or post such files). Yes [ ]
No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S- K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer or a smaller reporting company.
See definitions of "large accelerated filer," "accelerated filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]
The aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the Registrant's most recently completed second fiscal
quarter (June 30, 2011) was approximately $2,885,550.
As of March 30, 2012, there were 28,780,700 shares of our common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None
TABLE OF CONTENTS
ITEMS PAGE
----- ----
PART I
Item 1. Business 4
Item 1A. Risk Factors 13
Item 1B. Unresolved Staff Comments 17
Item 2. Properties 17
Item 3. Legal Proceedings 17
Item 4. Mine Safety Disclosures 17
PART II
Item 5. Market For Common Equity and Related Stockholder Matters and
Issuer Purchases of Equity Securities 17
Item 6. Selected Financial Data 22
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 23
Item 7A. Quantitative and Qualitative Disclosure About Market Risks 25
Item 8. Financial Statements and Supplementary Data 25
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 25
Item 9A. Controls and Procedures 25
Item 9B. Other Information 27
PART III
Item 10. Directors, Executive Officers and Corporate Governance 27
Item 11. Executive Compensation 31
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 35
Item 13 Certain Relationships and Related Transactions, and Director
Independence 37
Item 14. Principal Accounting Fees and Services 37
PART IV
Item 15. Exhibits, Financial Statement Schedules 38
2
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K ("Annual Report"), in particular the
Management's Discussion and Analysis of Financial Condition and Results of
Operations appearing in Item 7 herein ("MD&A") contains certain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking statements
give expectations or forecasts of future events. The reader can indentify these
forward-looking statements by the fact that they do not relate strictly to
historical or current facts. They use words such as "believe(s)," "goal(s),"
"target(s)," "estimate(s)," "anticipate(s)," "forecast(s)," "project(s),"
(plan(s)," "intend(s)," "expect(s)," "might," may" and other words and terms of
similar meaning in connection with a discussion of future operating, financial
performance or financial condition. Forward-looking statements, in particular,
include statements relating to future actions, prospective services or products,
future performance or results of current and anticipated services or products,
sales efforts, expenses, the outcome of contingencies such as legal proceedings,
trends of operations and financial results.
Any or all forward-looking statements may turn out to be wrong, and,
accordingly, readers are cautioned not to place undue reliance on such
statements, which speak only as of the date of this Annual Report. These
statements are based on current expectations and current the current economic
environment. They involve a number of risks and uncertainties that are difficult
to predict. These statements are not guarantees of future performance; actual
results could differ materially from those expressed or implied in the
forward-looking statements. Forward-looking statements can be affected by
inaccurate assumptions or by known or unknown risks and uncertainties. Many such
factors will be important in determining the Company's actual results and
financial condition. The reader should consider the following list of general
factors that could affect the Company's future results and financial condition.
Among the general factors that could cause actual results and financial
condition to differ materially from estimated results and financial condition
are:
* the success or failure of management's efforts to implement their
business strategy;
* the ability of the Company to raise sufficient capital to meet
operating requirements;
* the uncertainty of consumer demand for our products and services;
* the ability of the Company to compete with major established
companies;
* heightened competition, including, with respect to pricing, entry of
new competitors and the development of new products by new and
existing competitors;
* absolute and relative performance of our products and services;
* the effect of changing economic conditions;
* the ability of the Company to attract and retain quality employees and
management;
* the current global recession and financial uncertainty; and
* other risks which may be described in future filings with the U.S.
Securities and Exchange Commission ("SEC").
No assurances can be given that the results contemplated in any
forward-looking statements will be achieved or will be achieved in any
particular timetable. We assume no obligation to publicly correct or update any
forward-looking statements as a result of events or developments subsequent to
the date of this Annual Report. The reader is advised, however, to consult any
further disclosures we make on related subjects in our filings with the SEC.
3
PART I
ITEM 1. BUSINESS.
BUSINESS DEVELOPMENT
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 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 corporate advisory
services 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. These affiliations are informal and are comprised
of personal relationships with groups of people or people with whom our Company
or our management has done, or attempted to do, business in the past. We do not
have any contractual arrangements, written or otherwise, with our affiliations.
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 these clients to private and institutional
investors in our network ("rol-a-dex") of over 179 "financial introducers"
around the world. These financial introducers are simply groups of people or
institutions that are presently introducing new clients to us or who have
introduced new clients to our management in the past. We do not have any
contractual arrangements, written or otherwise, with these financial
introducers.
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
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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
* Website design, development and marketing advice
* Investor and public relations
* Regulatory compliance
* Exchange listings
* 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 businesses 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.
5
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.
EXCHANGE LISTINGS
We also assist our clients with the selection of stock exchanges that may
be suitable to our clients. Various exchanges have listing requirements and
standards that vary from one exchange to another. Typical listing requirements
and standards relate to a number of things, such as pre-tax income, cash flows,
revenue, net tangible assets, market value of a company's listed securities,
minimum trading prices of a company's securities, minimum shareholders' equity,
operating history, number of shareholders, number of market makers, and
corporate governance. We will try to identify appropriate exchanges for our
clients based on the particular client's operating history, pre-tax income, cash
flow, revenue, net tangible assets, shareholder base and other factors described
above.
We will assist our clients with retention of attorneys and accountants
having experience with publicly held companies and stock exchanges in various
countries. We will also assist our clients in locating market makers, investment
bankers and broker-dealers to assist them with accessing capital markets.
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.
6
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, an amount substantially in
excess of the $200,000 in fees payable to us, due to the fact that the shares of
M1 Luxembourg AG were thinly traded and subject to highly volatile price
fluctuations and we had no guarantee they would continue to be listed. Our total
fees received from M1 Luxembourg AG in 2010 represented approximately 52.7% of
our gross revenues for 2010.
On November 15, 2011, M1 Luxembourg AG's shares were delisted from the
Frankfurt Open Market when it fell out of compliance with the capital adequacy
rules of the Frankfurt Open Market. M1 Luxembourg AG's shares are no longer
quoted on the Frankfurt Open Market. M1 Luxembourg is still in business.
However, since its shares are no longer quoted, we will have to write-down the
value of this asset in the fourth quarter of 2011 to $ 0. The resulting
accounting loss on our M1 Luxembourg AG shares was $1,086,160 and will be
accounted for in our audited financial statements for the fiscal year ended
December 31, 2011.
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 2009, GEP received $15,000 in cash compensation from Monkey Rock Group,
Inc. In 2010, GEP received compensation from Monkey Rock in the form of
1,500,000 shares of common stock, valued at $975,000 at the time of issuance, an
amount substantially in excess of the fees payable to us, due to the fact that
the shares of Monkey Rock were thinly traded and subject to highly volatile
price fluctuations and we had no guarantee they would continue to be quoted or
traded.
Our total fees received from Monkey Rock Group, Inc. in 2010 represented
approximately 47.3% of our gross revenues for 2010.
Although we received 52.7% of our gross revenues from M1 Luxembourg AG and
47.3% of our gross revenues from Monkey Rock Group, Inc. during 2010, these
companies represent non-recurring revenues and we were not dependent on revenues
from these two companies in 2011 nor will we be dependent on them in any
subsequent period.
7
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. In addition, we had another contract in 2011 with Voz
Mobile Cloud Ltd., a "voice to mail" technology company. We entered into the
contract with Voz Mobile Cloud Ltd. on December 12, 2011, and we concluded our
work on that contract on December 31, 2011. As compensation, we received
2,000,000 shares of Voz Mobile Cloud Inc. common stock valued at an aggregate of
$100,000 based on services rendered in the fourth quarter of 2011.
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. and a few high profile, potential Dubai based
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
preliminary, non-binding verbal agreements with the Shanghai local government
and Ferrari to set up a Race Fight Club in Shanghai, Peoples Republic of China.
We entered into our contract with RFC K.K. on October 19, 2011. We have
contracted to provide the following services to RFC K.K.:
* Act as a corporate finance advisor in connection with an acquisition
of a target business;
* Advise the client on the structure of the acquisition and assist the
client in the preparation and authorization of documentation;
* Use reasonable efforts through our marketing and public relations
contacts to support and market the acquisition of a target business,
including: (i) where appropriate, arrange meetings and assist in
presentations; (ii) assist the client, its management and advisors in
negotiating definitive documentation; and (iii) otherwise assist the
client with such other actions as may be necessary to accomplish an
acquisition of a target business.
A "target business" would be a company having a business plan that is
compatible with RFC K.K.'s business and has a similar business to RFC K.K. and
have net assets, net profits and projected growth that would be suitable for RFC
K.K. and that, if combined with RFC K.K., could help RFC K.K. meet various
requirements or standards for having RFC K.K.'s shares listed on an exchange or
quoted on a stock quotation medium. At this time, RFC K.K. has not decided on a
particular exchange or identified any particular target business.
RFC K.K. has agreed to pay us a total of $240,000 over the initial 12
months of our contract. We have received $60,000 under this contract so far and
have nine more monthly payments due to us at $20,000 each. During months 13-24
of the contract, RFC K.K. will pay us $6,000 per month. In addition, we will
receive a 10% equity stake in RFC K.K. in the event that we assist RFC K.K. in
acquiring a "target business."
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.
8
We entered into our contract with Black Swan Data Limited on July 28, 2011.
We have contracted to provide the following services to Black Swan Data Limited:
* Act as a corporate finance advisor in connection with an acquisition
of a target business;
* Advise the client on the structure of the acquisition and assist the
client in the preparation and authorization of documentation;
* Use reasonable efforts through our marketing and public relations
contacts to support and market the acquisition of a target business,
including: (i) where appropriate, arrange meetings and assist in
presentations; (ii) assist the client, its management and advisors in
negotiating definitive documentation; and (iii) otherwise assist the
client with such other actions as may be necessary to accomplish an
acquisition of a target business; and
* Introduce the client to professional advisors, such as accountants,
auditors, lawyers and stock registrars who would assist the client
with having its shares listed on a stock exchange or having its shares
quoted on a stock quotation medium.
A "target business" would be a company having a business plan that is
compatible with Black Swan Data Limited's business and has a similar business to
Black Swan Data Limited, and having net tangible assets, net profits and
projected growth that would be suitable for Black Swan Data Limited and that, if
combined with Black Swan Data Limited, could help Black Swan Data Limited meet
the various requirements or standards for having Black Swan data Limited's
shares listed on an exchange or quoted on a stock quotation medium. At this
time, Black Swan Data Limited has not decided on a particular exchange or target
business.
Black Swan Data Limited has agreed to pay us $180,000, of which $55,000 has
been paid. We will receive the balance of $125,000 over the next six to eight
months. In addition, we will receive a 10% equity stake in Black Swan Data
Limited in the event we assist Black Swan Data Limited in acquiring a target
business. Upon successful quotation of Black Swan Data Limited's shares on a
stock market, GEP will be appointed as a consultant to Black Swan Data Limited
for a 24 month period at $7,500 per month to assist Black Swan Data Limited in
obtaining a listing on NASDAQ in the United States or listing on an alternative,
high profile American stock exchange (i.e., American Stock Exchange or New York
Stock Exchange).
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.
We entered into our contract with Arrow Cars SL on January 14, 2011. We
have contracted to provide the following services to Arrow Cars SL:
* Act as a corporate finance advisor in connection with an acquisition
of a target business;
* Advise the client on the structure of the acquisition and assist the
client in the preparation and authorization of documentation;
9
* Use reasonable efforts through our marketing and public relations
contacts to support and market the acquisition of a target business,
including: (i) where appropriate, arrange meetings and assist in
presentations; (ii) assist the client, its management and advisors in
negotiating definitive documentation; and (iii) otherwise assist the
client with such other actions as may be necessary to accomplish an
acquisition of a target business.
A "target business" would be a company having a business plan that is
compatible with Arrow Cars SL's business and has a business similar to Arrow
Cars SL, and having net tangible assets, net profits and projected growth that
would be suitable for Arrow Cars SL and that, if combined with Arrow Cars SL,
could help Arrow Cars SL meet various requirements or standards for having Arrow
Cars SL's shares listed on an exchange or quoted on a stock quotation medium. At
this time, Arrow Cars SL has not decided on a particular exchange or a target
business.
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 will receive a 10% equity stake in Arrow Cars SL in the event we
assist Arrow Cars SL in acquiring a target business.
OUR BUSINESS IN 2012
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.
FUTURE PLANS
We currently have three clients under contract, Arrow Cars SL, Black Swan
Data Limited and RFC K.K.
We anticipate signing up an additional three clients by the end of 2012. We
expect the contracts with the three new clients will each provide us with an
additional $10,000 to $20,000 per month in revenues. However, we cannot
guarantee that we will sign up any new clients in 2012 or receive any revenues
from new clients in 2012.
In order to achieve our goal of signing up three new clients in 2012, we
are relying on introductions to potential clients by the following firms in Asia
and Europe:
* Merchant House Group (London), a United Kingdom registered investment
house;
10
* TAP 09 Gmbh, an Austrian management consultancy firm based in Wien,
Vienna;
* Mashreq Bank, an Asian retail bank based in Dubai, U.A.E.; and
* ABN Amro Private Bank based in Amsterdam, the Netherlands
We do not have any verbal or written agreements with the four firms
identified above, as our relationship with each of them has been developed over
the past year or so.
The primary expense that we will incur dealing with companies introduced to
us by the four firms listed above will be travel expenses. The second material
expense in signing up these three new clients would be commissions payable to
the four firms list above. Since we do not have a verbal or written agreement
with any of the four firms listed above, any commissions payable to them would
be negotiated at or prior to our entry into definitive contracts with companies
introduced by them. The amount of such commissions cannot be estimated at this
time. However, such expenses would be paid by us from funds received from new
clients they introduce us to.
Our other expenses during the next twelve months would be salaries of our
management team ($33,333 per month), legal, accounting and other fees we will
necessarily incur in connection with the audit of our financial statements for
the fiscal year ended December 31, 2011, quarterly reviews by our auditors of
our interim (unaudited) financial statements to be included in our Form 10-Q
Quarterly Reports and preparation of our Form 10-K, Form 10-Qs, Form 8-Ks and
information statements or proxy statements. We estimate these legal, accounting
and other fees to be approximately $50,000 during the next twelve months.
Our monthly cash burn rate for 2012 will be approximately $15,000 because
we will accrue salaries of our management team, who will only be paid from
consulting fees we receive from our clients. However, we cannot assure investors
that we will have sufficient revenues to fund our operations for the next 12
months.
In the event that we are unable to generate the revenues sufficient to
cover our monthly burn rate, we will have to lower the salaries of our three
employees and possibly curtail our operations until such time as we can generate
sufficient revenues to cover our overhead.
EMPLOYEES; IDENTIFICATION OF A SIGNIFICANT EMPLOYEE
We currently have three employees: Peter J. Smith, Enzo Taddei and Adrian
Scarrott. Peter J. Smith, our President, Enzo Taddei, our Chief Financial
Officer, and Adrian Scarrott, our Business Development Director, each has an
employment agreement with the Company. Peter J. Smith, Enzo Taddei and Adrian
Scarrott are full time employees. 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
11
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, investment advisor or investment company.
EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS
The Company's common stock is registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934 ("1934 Act"). As a result of such registration,
the Company is subject to Regulation 14A of the "1934 Act," which regulates
proxy solicitations. Section 14(a) requires all companies with securities
registered pursuant to Section 12(g) thereof to comply with the rules and
regulations of the Commission regarding proxy solicitations, as outlined in
Regulation 14A. Matters submitted to stockholders of the Company at a special or
annual meeting thereof or pursuant to a written consent will require the Company
to provide its stockholders with the information outlined in Schedules 14A or
14C of Regulation 14; preliminary copies of this information must be submitted
to the Commission at least 10 days prior to the date that definitive copies of
this information are forwarded to stockholders.
The Company is also required to file annual reports on Form 10-K and
quarterly reports on Form 10-Q with the Commission on a regular basis, and will
be required to disclose certain events in a timely manner, (e.g. changes in
corporate control; acquisitions or dispositions of a significant amount of
assets other than in the ordinary course of business; and bankruptcy) in a
Current Report on Form 8-K.
WE ARE SUBJECT TO THE REQUIREMENTS OF SECTION 404 OF THE SARBANES-OXLEY ACT
OF 2002. IF WE ARE UNABLE TO TIMELY COMPLY WITH SECTION 404 OR IF THE COSTS
RELATED TO COMPLIANCE ARE SIGNIFICANT, OUR PROFITABILITY, STOCK PRICE AND
RESULTS OF OPERATIONS AND FINANCIAL CONDITION COULD BE MATERIALLY ADVERSELY
AFFECTED.
The Company is required to comply with the provisions of Section 404 of the
Sarbanes-Oxley Act of 2002, which requires that we document and test our
internal controls and certify that we are responsible for maintaining an
adequate system of internal control procedures for the 2011 fiscal year. We are
currently evaluating our existing controls against the standards adopted by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). During
the course of our ongoing evaluation and integration of the internal controls of
our business, we may identify areas requiring improvement, and we may have to
design enhanced processes and controls to address issues identified through this
review (see Item 9A, below for a discussion of our internal controls and
procedures).
We believe that the out-of-pocket costs, the diversion of management's
attention from running the day-to-day operations and operational changes caused
by the need to comply with the requirement of Section 404 of the Sarbanes-Oxley
Act could be significant. If the time and costs associated with such compliance
12
exceed our current expectations, our results of operations and the future
fillings of our Company could be materially adversely affected.
DEPENDENCE ON KEY EMPLOYEES
The Company is heavily dependent on the ability of our President, Peter
Smith, and our Chief Financial Officer, Enzo Taddei. The loss of the services of
Mr. Smith or Mr. Taddei would seriously undermine our ability to carry out our
business plan.
In the event of future growth in administration, marketing, manufacturing
and customer support functions, the Company may have to increase the depth and
experience of its management team by adding new members. The Company's success
will depend to a large degree upon the active participation of its key officers
and employees, as well as the continued service of its key management personnel
and its ability to identify, hire, and retain additional qualified personnel.
There can be no assurance that the Company will be able to recruit such
qualified personnel to enable it to conduct its proposed business successfully.
REPORTS TO SECURITY HOLDERS
The public may view and obtain copies of the Company's reports, as filed
with the Securities and Exchange Commission, at the SEC's Public Reference Room
at 100 F Street, NE, Room 1580, Washington, D.C. 20549. Information on the
Public Reference Room is available by calling the SEC at 1-800-SEC-0330.
Additionally, copies of the Company's reports are available and can be accessed
and downloaded via the internet on the SEC's internet site at
http://www.sec.gov.
ITEM 1A. RISK FACTORS.
An investment in our Common Stock involves a high degree of risk.
Prospective investors should carefully consider the following risk factors and
the other information in this Annual Report and in our other filings with the
SEC before investing in our Common Stock. Our business and results of operations
could be seriously harmed by any of the following risks. You should carefully
consider the risks described below, the other information in this Annual Report
and the documents incorporated by reference herein when evaluating our Company
and our business. If any of the following risks actually occurs, our business
could be harmed. In such case, the trading price of our Common Stock could
decline and investors could lose all or a part of the money paid for our Common
Stock.
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. For the fiscal
year ended December 31, 2011, we incurred a net loss from operations of
13
$(601,942) and a realized loss on impairment of marketable securities for an
additional loss of $(1,086,160). 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.
WE HAVE NO COMMITMENTS FROM ANY ONE TO PROVIDE US WITH DEBT OR EQUITY
FINANCING. IN THE EVENT OUR REVENUES DO NOT COVER OUR EXPENSES, THEN WE MAY NOT
BE ABLE TO CARRY OUT OUR BUSINESS PLAN.
Our monthly cash burn rate is estimated to be $15,000 during 2012. In
addition to our monthly cash burn rate, we are accruing $33,333 per month in
salaries of our management team, who will not be paid their salaries until we
have revenues sufficient to cover them. We are dependent on our existing
contracts with clients to cover this cash burn rate. If we are unable to cover
our burn rate, then we will have to borrow money or sell our securities to raise
money. We have no commitments from anyone to lend us money or to invest in our
securities. In the event that our revenues do not cover our expenses and we are
unable to borrow money or sell our securities to fund our operations, then we
will have to curtail our operations and our investors could lose part or all of
their investments in our Company.
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
14
severe constraints on the ability of all companies, particularly smaller ones,
to raise capital, borrow money, and operate effectively and profitably and to
plan for the future.
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.
BECAUSE OUR BUSINESS MODEL ANTICIPATES OUR RECEIVING EQUITY STAKES IN OUR
CLIENTS, MOST OF WHOM WILL BE DEVELOPMENT STAGE COMPANIES, WE MAY NOT BE ABLE TO
RESELL SUCH EQUITY AT SUITABLE PRICES, IF AT ALL, WHICH COULD MATERIALLY IMPACT
OUR EARNINGS AND ABILITY TO REMAIN IN BUSINESS.
Our business model anticipates that we will receive, as partial
compensation for our consulting services, equity stakes in our clients, many of
whom will be development stage companies. We will have to value those equity
stakes at the time we receive them. Investments in development stage companies
are risky because many of such companies' securities are illiquid, thinly traded
(if at all) and the value of such securities will be subject to adjustments
should the value of such securities decline, should such securities be delisted
from an exchange or cease being quoted on a stock quotation medium or should
such businesses fail, which could cause us to write-down or write-off the value
of such securities and result in a negative impact to our earnings and possibly
cause us to cease or curtail our operations. On November 15, 2011, the shares of
one of our clients, M1 Luxembourg AG, were delisted from the Frankfurt Open
Market, resulting in a $1,086,160 loss on the value of our shares in M1
Luxembourg AG.
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.
15
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
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 AUTHORIZE 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. On
November 30, 2011, the Company issued all 5,000,000 shares of our authorized
preferred stock to our Chief Executive Officer, Peter Smith.
THIS REGISTRATION STATEMENT CONTAINS FORWARD-LOOKING STATEMENTS AND
INFORMATION RELATING TO US, OUR INDUSTRY AND TO OTHER BUSINESSES.
These forward-looking statements in this Annual Report 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 Annual Report, 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 Annual Report. 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 Annual Report or to reflect the
occurrence of unanticipated events.
16
ITEM 1B. UNRESOLVED STAFF COMMENTS.
On December 1, 2011, we filed a registration statement on Form 10. We have
filed three amendments to our Form 10 in response to Staff comments. As of the
date of this Annual Report, we have not cleared the review of our Form 10.
ITEM 2. PROPERTIES.
The Company does not own any property. Our executive offices are located at
23 Frond "K" Palm Jumeirah, Dubai, U.A.E. 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. Peter J. Smith, our President and Chief
Executive Office, is based in Dubai, Enzo Taddei, our Chief Financial Officer,
is based in Marbella, Spain, and Adrian Scarrott, our Business Development
Director, is based in London, United Kingdom.
ITEM. 3 LEGAL PROCEEDINGS.
We are not subject to any legal proceedings and are not aware of any
threatened legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
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
17
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.
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.
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.
RECENT ISSUANCES OF UNREGISTERED SECURITIES
The Company originally issued to Javan Kasili (a United States citizen) a
total of 2,000,000 shares of common stock on October 28, 2010 at $.001 per share
(par value) for an aggregate consideration of $2,000.00.
SECURITIES ISSUED BETWEEN NOVEMBER 1, 2010, AND SEPTEMBER 30, 2011 (WITHIN
THE ONE-YEAR COMPLIANCE PERIOD APPLICABLE TO NON-REPORTING ISSUERS AS SET FORTH
IN CATEGORY 3 OF RULE 903 OF REGULATION S):
Effective November 1, 2010, the Company issued 5,000,000 shares of common
stock to Enzo Taddei, an individual (non-"U.S. person" as defined in Rule 902 of
Regulation S), for accounting and financial modeling services rendered to Global
Equity Partners PLC valued at $5,000. Mr. Taddei became the Chief Financial
Officer and a Director of the Company in September 2011.
On November 14, ,2010, the Company issued 1,000,000 shares of common stock
to Miss Pilar Tardon, an accountant in Spain, and an individual (non-"U.S.
person" as defined in Rule 902 of Regulation S), in exchange for services
rendered to the Company valued at $50,000 for introducing us to one of our
current clients, Arrow Cars SL.
The Company issued 20,000,000 shares of common stock to Peter Smith (a
non-"U.S. person" as defined in Rule 902 of Regulation S) 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 holder (none of whom was a "U.S. person" as defined in Rule
902 of Regulation S), at various negotiated conversion rates ranging from $.36
18
to $.44 per share, in satisfaction of $263,533.64 in debt owed by the Company,
as follows:
No. of Conversion
Name of Creditor Amount of Debt Shares Issued Price
---------------- -------------- ------------- -----
William & Lorraine Beveridge $ 7,089.00 16,000 $.44 per share
Brain H. Coates $ 14,024.00 40,000 $.35 per share
Daycrest Nominees Ltd. $ 26,952.00 70,000 $.39 per share
Barrie Pearson Craig $ 7,440.00 20,000 $.37 per share
Samueal M. Austin $ 4,435.00 12,000 $.37 per share
David Baker $ 3,593.00 10,000 $.36 per share
Tohibu Ou $200,000.00 500,000 $.40 per share
----------- -------
Totals $263,533,64 668,000
=========== =======
The conversion prices of the above concurrent issuances of common stock
were the product of negotiations by our management with each creditor. None of
the above creditors was a related party or related person to the Company. As a
result of our negotiations with the above creditors, no interest was included in
the aggregate amounts settled.
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
non-related persons (non-"U.S. persons" as defined in Rule 902 of Regulation S)
at $.50 per share for an aggregate consideration of $51,550, as follows:
Name Number of Shares Aggregate Purchase Amount
---- ---------------- -------------------------
Mark Bingham 500 $ 250.00
Margaret Cachart 1,000 $ 500.00
Barry Cotton 500 $ 250.00
Adam Divall 1,000 $ 500.00
Jamie Divall 1,000 $ 500.00
Collin Elliott 500 $ 250.00
Michael Guetjes 500 $ 250.00
Peter Lilley 1,000 $ 500.00
Ian McKenzie 1,000 $ 500.00
Jamie Palacios Vergara 1,000 $ 500.00
Anthony Preece 1,000 $ 500.00
Michael Ricks 500 $ 250.00
Darren Roberts 1,000 $ 500.00
Wayne Roberts 1,000 $ 500.00
Toby Roberts 1,000 $ 500.00
Vicent Samways 2,500 1,250.00
Gary Steel 500 $ 250.00
Jon Stronell 1,000 $ 500.00
Martin Sweeny 500 $ 250.00
Daniel Tovey 2,000 $ 1,000.00
Hayley Wood 1,000 $ 500.00
Caoimhe Lonergan 5,000 $ 2,500.00
Eibhlin Lonergan 5,000 $ 2,500.00
Saoirse Lonergan 5,000 $ 2,500.00
19
John Lonergan 5,000 $ 2,500.00
Brid Lonergan 20,000 $10,000.00
David Lonergan 43,100 $21,550.00
------- ----------
TOTALS 103,100 $51,550.00
======= ==========
On September 23, 2011, the Company issued 9,600 shares of common stock to
Samuel James Cameron, an individual (a non-"U.S. person" as defined in Rule 902
of Regulation S), in exchange for marketing consultancy services rendered to the
Company valued at $4,800.
SECURITIES ISSUED AFTER THE ONE-YEAR COMPLIANCE PERIOD APPLICABLE TO
NON-REPORTING ISSUERS AS SET FORTH IN CATEGORY 3 OF RULE 903 OF REGULATION S):
On November 30, 2011, the Company issued 5,000,000 shares of Series A
Preferred Stock (100% of the authorized preferred stock) to our Chief Executive
Officer, Peter Smith, for an aggregate consideration of $480,000 as a bonus
package equal to 24 months of salary.
The 2,000,000 shares of common stock issued to Javan Kasili and the
5,000,000 shares of Series A Preferred Stock issued to Peter Smith were issued
in reliance on the exemption from registration requirements of the 33 Act
provided by Section 4(2) 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;
* 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;
20
* 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;
* no broker-dealer or underwriter was involved in the sale of the
shares; and
* 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."
All of the other shares described above (except for the 2,000,000 shares of
common stock issued to Mr. Javan Kasili and the 5,000,000 shares of Series A
Preferred Stock issued to Peter Smith) were issued in reliance on the exemption
from registration requirements of the 33 Act provided by Regulation S of the 33
Act, as the issuance of the shares did not involve the sale to any person who
was a "U.S. person" (as defined in Rule 902 of Regulation S) and based on the
following:
* we did not employ a "distributor" (as defined in Rule 902 of
Regulation S);
* each investor represented and proved to us that he was not a "U.S.
person" (as defined in Rule 902 of Regulation S);
* all of the offers and sales were made within the one-year compliance
period of Category 3 of Rule 903 of Regulation S, applicable to
non-reporting issuers;
* 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;
* 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;
21
* 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;
* we placed stop transfer instructions in our stock transfer records;
* no underwriter was involved in the offering;
* 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; and
* 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."
ISSUER REPURCHASES OF EQUITY SECURITIES
None.
ITEM 6. SELECTED FINANCIAL DATA.
Not applicable.
22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
CAUTIONARY FORWARD - LOOKING STATEMENT
The following discussion should be read in conjunction with our financial
statements and related notes.
Certain matters discussed herein may contain forward-looking statements
that are subject to risks and uncertainties. Such risks and uncertainties
include, but are not limited to, the following:
* the volatile and competitive nature of our industry,
* the uncertainties surrounding the rapidly evolving markets in which we
compete,
* the uncertainties surrounding technological change of the industry,
* our dependence on its intellectual property rights,
* the success of marketing efforts by third parties,
* the changing demands of customers and
* the arrangements with present and future customers and third parties.
Should one or more of these risks or uncertainties materialize or should
any of the underlying assumptions prove incorrect, actual results of current and
future operations may vary materially from those anticipated. SEE ALSO the
disclosures under "Cautionary Statement" following the Table of Contents in this
Annual Report.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PLAN OF OPERATIONS
We have three distinct divisions within our structure:
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.
23
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.
We currently have three clients under contract that are valued at $767,000
in cash fees between 2011 and 2012. In addition, we could earn a 10% equity
stake in each of these three clients if we are successful in help them acquire a
target company. We cannot determine at this time how much, is anything, these
equity stakes would be worth to us or how or at what value we could book such
assets.
We anticipate signing up an additional three clients by the end of 2012. We
expect the contracts with the three new clients will each provide us with an
additional $10,000 to $20,000 per month in revenues. However, we cannot
guarantee that we will sign up any new clients in 2012 or receive any revenues
from new clients in 2012.
In order to achieve our goal of signing up three new clients in 2012, we
are relying on introductions to potential clients by the following firms in Asia
and Europe:
1. Merchant House Group (London), a United Kingdom registered investment
house.
2. TAP 09 Gmbh, an Austrian management consultancy firm based in Wien,
Vienna.
3. Mashreq Bank, an Asian retail bank based in Dubai, U.A.E.
4. ABN Amro Private Bank based in Amsterdam, the Netherlands
We do not have any verbal or written agreements with the four firms
identified above, as our relationship with each of them has been developed over
the past year or so.
RESULTS OF OPERATIONS
RESULTS FOR THE YEAR ENDED DECEMBER 31, 2011
During 2011, the Company had revenues totaling $288,041, of which 188,041
was comprised entirely of cash received from in from clients: Arrow Cars SL,
Black Swan Data Limited and RFC KK; we also received 2,000,000 shares of a
private company called Voz Mobile Cloud Ltd value at $100,000.
Our general and administration costs amounted to $889,984, this amounts
includes $133,332 of accrued salaries to the officers of the Company and a
further $480,000 pay in preferred shares to our CEO, as a bonus. Our legal,
accounting and other professional fees amounted to $79,599. We paid $11,000 for
business licenses and permits. Additionally, we had travel expenditure,
commissions paid to introducers and other miscellaneous operating expenses.
We also accounted for a realized loss due to the impairment of our M1 AG
marketable securities; this impairment was for $1,086,160.
The net loss was $(1,688,102) and the unrealized gain on the available for
sale marketable securities owned by the Company amounted to $448,924 for 2011;
hence the comprehensive loss amounted to $1,239,178 for 2011.
24
The Company recorded interest income amounting to $690 and paid $500 of
interest.
Based on 28,735,897 weighted average shares outstanding for the year ended
December 31 2011, the loss per share was $(0.06).
LIQUIDITY AND CAPITAL RESERVES
Through the year ended December 31, 2011 we have relied on advances of
$91,723 from loans from shareholders, third party non-affiliates and also the
proceeds from stock issued for cash. As of December 31, 2011, the Company had
cash of $2,218, a working capital deficit of $(185,123) and a positive balance
of $1,024,877 of Shareholders Equity.
Although it is the Company's intention to seek additional debt financing,
which we plan to use any additional 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. Any short fall in our projected operating revenues will be
covered by:
1) The revenue that will come from the clients that we currently have
under contract which valued at $767,000 in cash fees between the years
2011 and 2012.
2) Reducing the compensation paid to our directors and officers.
3) Receiving loans from one or more of our officers even though at the
present time, we do not have verbal or written commitments from any of
our officers to lend us money.
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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our financial statements and supplementary data may be found beginning at
page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There are not and have not been any disagreements between the Company and
its accountants on any matter of accounting principles, practices or financial
statement disclosure.
ITEM 9A. CONTROLS AND PROCEDURES.
DISCLOSURE CONTROLS AND PROCEDURES
Commencing with our Annual Report for the 2011 fiscal year, we will be
required to maintain "disclosure controls and procedures." The term "disclosure
controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities and Exchange Act of 1934, as amended ("Exchange Act"), means controls
25
and other procedures of a company that are designed to ensure that information
required to be disclosed by the company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Securities and Exchange Commission's rules and
forms. Disclosure controls and procedures also include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by a company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the company's management,
including its principal executive and principal financial officers, or persons
performing similar functions, as appropriate, to allow timely decisions
regarding required disclosure.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Commencing with our Annual Report for the 2011 fiscal year, our management
will be responsible for establishing and maintaining adequate internal control
over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act. Our internal control over financial reporting is designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Our internal control over
financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of our
assets;
(2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with U.S. GAAP, and that our receipts and expenditures are being made
only in accordance with the authorization of our management and
directors; and
(3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
At December 31, 2011, we carried out an evaluation required by Rule 13a-15
or Rule 15d-15 of the Securities Exchange Act of 1934 (the "Exchange Act") under
the supervision and with the participation of our management, including our
Principal Executive Officer and Principal Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures.
Based upon such evaluation, such person concluded that as of such date, our
disclosure controls and procedures were not effective at the reasonable
assurance level because, due to financial constraints, the Company does not
maintain a sufficient complement of personnel with an appropriate level of
technical accounting knowledge, experience and training in the application of
generally accepted accounting principles commensurate with our financial
accounting and reporting requirements. In the event that we may receive
sufficient funds for internal operational purposes, we plan to retain the
26
services of additional internal management staff to provide assistance to our
current management with the monitoring and maintenance of our internal controls
and procedures.
This Annual Report does not include an attestation report of the Company's
registered public accounting firm due to a transition period established by
rules of the Securities and Exchange Commission for newly public companies.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING.
We did not change our internal control over financial reporting during our
last fiscal quarter that materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
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, Secretary and
Director
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 served as the President, Chief Executive Officer and Director
of Global Equity Partners, PLC, our now wholly-owned subsidiary, since its
formation on September 2, 2009,. Mr. Smith has also served as the President,
Chief Executive Officer and Director of the Company since December 31, 2010.
Between June 1, 2006, and September 2, 2009, when he formed Global Equity
Partners, PLC, Mr. Smith was not employed and spent his time researching the
market for the consulting business in which Global Equity Partners, PLC would be
engaged. 2006. In 1993, he created an international financial services company
27
in the Middle East and Asia, named Belgravia Financial Management, and served as
the Chief Executive Officer of that firm until he resigned in May 2006. Between
1993 and May 2005, he built Belgravia Financial Management to 23 global offices,
5 country licenses, a Company with $2.2 billion under financial management.
Belgravia Financial Management merged with Interwest SL and became Belgravia
Intervest Group Limited. Belgravia Intervest Group Limited subsequently merged
with Tally Ho Ventures, Inc. (TLYH.OB) on May 12, 2005. In 2006, Mr. Smith
resigned from his position as Chief Executive Officer of Tally Ho Ventures, Inc.
Tally Ho Ventures, Inc. subsequently changed it name to Premier Wealth
Management, Inc. on September 26, 2007. Mr. Smith 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 that is a UK
registered, full service stockbroker trading equities, options, warrants, gilts
and bonds. He also spent 12 months within that firm covering the back office
facilities of a brokerage house including sales, purchase, rights, dividends and
new issues. He then moved on to 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 job was to trade options on behalf of all the firm's clients and to
hedge the positions of the market makers the firm cleared for in 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 on Threadneedle Street.
ENZO TADDEI - CHIEF FINANCIAL OFFICER, SECRETARY 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 until December 8,
2011, when he resigned from such offices, Mr. Taddei was a member of the Board
of Directors and part-time Chief Financial Officer of Networking Partners, Inc.,
a social networking company. Mr. Taddei resigned from such offices in order to
devote more time and effort to our Company. 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 and property
management). Mr. Taddei spends only a couple of hours a month on E3B Consulting
business. 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.
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 has been the Business Development
Director of the Company since September 1, 2011. In November 2009, Mr. Scarrott
became the Marketing Director of Winkle Media Ltd., a marketing company engaged
in television and print production, online production and web based marketing
where he worked until joining the Company's as Business Development Director on
September 1, 2011. From 2006 to October 2009, 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
28
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
Except as described below, during the past ten years, no present director,
executive officer or person nominated to become a director or an executive
officer of the Company:
(1) had a petition under the federal bankruptcy laws or any state
insolvency law filed by or against, or a receiver, fiscal agent or
similar officer appointed by a court for the business or property of
such person, or any partnership in which he was a general partner at
or within two years before the time of such filing, or any corporation
or business association of which he was an executive officer at or
within two years before the time of such filing;
(2) was convicted in a criminal proceeding or subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from or
otherwise limiting his involvement in any of the following activities:
(i) acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the
Commodity Futures Trading Commission, or an associated person of
any of the foregoing, or as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and
loan association or insurance company, or engaging in or
continuing any conduct or practice in connection with such
activity;
(ii) engaging in any type of business practice; or
(iii)engaging in any activity in connection with the purchase or sale
of any security or commodity or in connection with any violation
of federal or state securities laws or federal commodities laws;
or
(4) was the subject of any order, judgment or decree, not subsequently
reversed, suspended or vacated, of an federal or state authority
barring, suspending or otherwise limiting for more than 60 days the
right of such person to engage in any activity described in paragraph
(3) (i), above, or to be associated with persons engaged in any such
activity;
(5) was found by a court of competent jurisdiction in a civil action, the
Securities and Exchange Commission to have violated a federal or state
securities law, and the judgment in such civil action or finding by
the Securities and Exchange Commission has not been subsequently
reversed, suspended or vacated;
(6) was found by a court of competent jurisdiction in a civil action or by
the Commodity Futures Trading Commission to have violated any Federal
commodities law, and the judgment in such civil action or finding by
the Commodity Futures Trading Commission has not been subsequently
reversed, suspended or vacated;
29
(7) was the subject of, or a party to, any Federal or State judicial or
administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated, relating to any alleged violation of:
i. Any Federal or State securities or commodities law or regulation;
or
ii. Any law or regulation respecting financial institutions or
insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil
money penalty or temporary or permanent cease-and-desist order,
or removal or prohibition order; or
iii. Any law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity; or
(8) was the subject of, or a party to, any sanction or order, not
subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act (15
U.S.C. 78c(a)(26)), and registered entity (as defined in Section
1(a)(29) of the Commodity Exchange Act (7 U.S.C.1(a)(29)), or any
equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with a
member.
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.
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.
DIRECTORSHIPS
Enzo Taddei was 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, until his resignation from the Board of Directors of that company
on December 8, 2011.
AUDIT COMMITTEE FINANCIAL EXPERT
Although we have not established an Audit Committee, the functions of the
Audit Committee are currently carried out by our Board of Directors.
FAMILY RELATIONSHIPS
There are no family relationships between or among or officers and
directors.
30
CODE OF BUSINESS CONDUCT AND ETHICS
On September 2, 2011, we adopted a Code of Business Conduct and Ethics
applicable to our officers, including our principal executive officer, principal
financial officer, principal accounting officer or controller and any other
persons performing similar functions. Our Code of Business Conduct and Ethics
was designed to deter wrongdoing and promote honest and ethical conduct, full,
fair and accurate disclosure, compliance with laws, prompt internal reporting
and accountability to adherence to our Code of Business Conduct and Ethics. Our
Code of Business Conduct and Ethics is posted on our website at
http://www.globalequityincusa.com/ in the "Governance" section. We also intend
to disclose any future amendments to, and any waivers from (though none are
anticipated), the Code of Business Conduct and Ethics in the "Governance"
section of our website.
ITEM 11. 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 Global Equity Partners PLC on September 2, 2009, through December
31, 2011. Pino Baldassarre resigned from the office of Corporate Secretary on
March 9, 2012.
SUMMARY COMPENSATION TABLE
Name and Stock All Other
Principal Position Year Salary ($) Bonus ($) Awards ($) Compensation ($) Total ($)
------------------ ---- ---------- --------- ---------- ---------------- --------
Peter J. Smith 2011 $129,959 (1) $480,000 (2) $ 0 $ 0 $609,959
President, Chief 2010 $ 34,658 (3) $ 0 $ 0 $ 0 $ 34,658 (3)
Executive Officer 2009 $100,000 (4) $ 0 $ 0 $ 0 $100,000 (4)
and Director
Enzo Taddei 2011 $ 40,000 (5) $ 0 $ 0 $ 0 $ 40,000 (5)
Chief Financial 2010 $ 0 $ 0 $5,000 (6) $ 0 $ 5,000 (6)
Officer, Secretary 2009 $ 0 $ 0 $ 0 $ 0 $ 0
and Director
Pino G. Baldassarre 2011 $ 0 $ 0 $ 0 $ 0 $ 0
Secretary 2010 $ 0 $ 0 $ 0 $ 0 $ 0
2009 $ 0 $ 0 $ 0 $ 0 $ 0
----------
(1) Represents $49,959 paid in cash and $80,000 in accrued, but unpaid salary.
(2) Represents the value of 5,000,000 shares of Series A Preferred Stock (100%
of the authorized preferred stock) issued to Peter Smith as a bonus
package. Our Board of Directors recognized the hard and fruitful work of
Mr. Smith for the past three years and decided to compensate him with a
bonus equivalent to two years of gross salary. Since the Company did not
have the cash resources to pay such bonus, it decided to issue him
preferred stock, which the Board of Directors (after consulting with our
accountants) determined to be worth $480,000. The preferred stock is
redeemable on December 1, 2013.
(3) Represents cash salary.
(4) In 2009, Global Equity 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.
(5) Represents $40,000 of accrued, but unpaid salary.
(6) During 2010, Mr. Taddei provided some accounting and financial modeling to
GE Partners PLC for which he invoiced Global Equity Partners PLC $5,000 and
received 5,000,000 shares of the Company's common stock valued at $.001 per
share.
31
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.
(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.
32
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 SCARROTT:
Mr. Scarrott'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.
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.
33
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),
(i) Employee or his estate shall be entitled to receive, and
Employer shall make, the following severance payments:
c) 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
Aside from the employment agreements with Messrs. Smith, Scarrot and
Taddei, 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.
INDEMNIFICATION
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.
34
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.
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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The following tables set forth the ownership of our common stock and
preferred stock by (a) each person known by us to be the beneficial owner of
more than 5% of our outstanding common stock and preferred stock; and (b) by all
of named officers and our directors and by all of our named 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 and are beneficial
owners of the shares indicated in the tables, except as otherwise noted by
footnote.
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.
35
(a) Security ownership of certain beneficial owners:
Name and Address of Amount and Nature of ARTICLE 1
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
-------------- ---------------- -------------------- ----------------
Common Stock Peter J. Smith 18,000,000 (1) 62.54%
23 Frond "K" Palm Jumeirah
Dubai, UAE
Common Stock Enzo Taddei 5,000,000 (2) 17.37%
Avenida Marques del Duero 67
Edificio Bahia 2A
29670 San Pedro de Alcantara
Marbella, Spain
----------
(1) Mr. Smith is the direct beneficial owner of, and has sole dispositive and
voting power over, these shares.
(2) Mr. Taddei is the direct beneficial owner of, and has sole dispositive and
voting power over, these shares.
Name and Address of Amount and Nature of ARTICLE 2
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
-------------- ---------------- -------------------- ----------------
Preferred Stock Peter J. Smith 5,000,000 (1) 100.00%
23 Frond "K" Palm Jumeirah
Dubai, UAE
----------
(1) Mr. Smith is the direct beneficial owner of, and has sole dispositive and
voting power over, these shares.
(b) Security ownership of management:
Name of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
-------------- ---------------- -------------------- ----------------
Common Stock Peter J. Smith 18,000,000 (1) 62.54%
Common Stock Enzo Taddei 5,000,000 (2) 17.37%
Common Stock All officers and directors 23,000,000 79.91%
as a group (3 persons)
----------
(1) Mr. Smith is the direct beneficial owner of, and has sole dispositive and
voting power over, these shares.
(2) Mr. Taddei is the direct beneficial owner of, and has sole dispositive and
voting power over, these shares.
36
Name of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
-------------- ---------------- -------------------- ----------------
Preferred Stock Peter J. Smith 5,000,000 (1) 100.00%
Preferred Stock Enzo Taddei 0 0%
Preferred Stock All officers and directors
as a group (2 persons) 5,000,000 (1) 100.00%
----------
(1) Mr. Smith is the direct beneficial owner of, and has sole dispositive and
voting power over, these shares.
(c) Changes in control:
We are not aware of any arrangements, including any pledge by any person of
our securities, the operation of which may at a subsequent date result in a
change in control of the Company.
ITEM 13. 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
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 for $480,000
as a compensatory bonus.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has renewed the engagement of Berman & Company, P.A. to serve
as the independent accounting firm responsible for auditing our financial
statements for the fiscal year ended December 31, 2011.
(1) Audit Fees. During the fiscal year ended December 31, 2011, the
aggregate fees billed by the Company's auditors, for services rendered for the
audit of our annual financial statements and the review of the financial
statements included in our quarterly reports on Form 10-Q and for services
provided in connection with the statutory and regulatory filings or engagements
for 2011, was $20,000. During the fiscal year ended December 31, 2010, the
aggregate fees billed by the Company's auditors, for services rendered for the
audit of our annual financial statements and the review of the financial
statements included in our quarterly reports on Form 10-Q and for services
provided in connection with the statutory and regulatory filings or engagements
for 2010, was $20,000.
37
(2) Audit-Related Fees. During fiscal years ended December 31, 2011 and
2010, our auditors did not receive any fees for any audit-related services other
than as set forth in paragraph (1) above.
(3) Tax Fees. Our auditors did not provide tax compliance, tax advice, or
tax planning advice during the fiscal years ended December 31, 2011 and 2010.
(4) All Other Fees. None.
(5) Audit Committee's Pre-Approval Policies and Procedures.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules
that require that before Principal Accountants are engaged by us to render any
auditing or permitted non-audit related service, the engagement be:
* approved by our audit committee (which consists of our entire board of
directors); or
* entered into pursuant to pre-approval policies and procedures
established by the board of directors, provided the policies and
procedures are detailed as to the particular service, the board of
directors is informed of each service, and such policies and
procedures do not include delegation of the board of directors'
responsibilities to management.
The board of directors pre-approves all services provided by our
independent auditors. All of the above services and fees were reviewed and
approved by the board of directors either before or after the respective
services were rendered.
The board of directors has considered the nature and amount of fees billed
by our principal accountants and believes that the provision of services for
activities unrelated to the audit is compatible with maintaining our principal
accountants' independence.
During the 2011 and 2010 fiscal years, the Company used the following
pre-approval procedures related to the selection of our independent auditors and
the services they provide: unanimous consent of all directors via a board
resolution.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) (1) Financial Statements
Financial statements for Global Equity International, Inc. listed in
the Index to Financial Statements on page F-1 are filed as part of
this Annual Report.
(a) (2) Financial Statement Schedule
Financial Statement Schedule for Global Equity International, Inc.
listed in the Index to Financial Statements on page F-1 are filed as
part of this Annual Report.
(a) (3) See the "Index to Exhibits" set forth below.
(b) See Exhibit Index below for exhibits required by Item 601 of
Regulation S-K.
38
EXHIBIT INDEX
List of Exhibits attached or incorporated by reference pursuant to Item 601
of Regulation S-B
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
10.9* Consulting Agreement between Global Equity Partners PLC and Voz
Mobile Cloud Ltd. dated December 12, 2011
14* Code of Business Conduct and Ethics adopted on September 2, 2011
21** Subsidiaries
31.1** Certification of Principal Executive Officer Pursuant to 18
U.S.C. Section 1350
31.2** Certification of Principal Financial Officer Pursuant to 18
U.S.C. Section 1350
32.1** 906 Certification of Principal Executive Officer
32.2** 906 Certification of Principal Financial Officer
----------
* Incorporated by reference to the Company's Form 10 Registration Statement
filed with the Commission on December 1, 2011, and as subsequently amended.
** Filed herewith.
39
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Global Equity International, Inc.
Dated: March 30, 2012 /s/ Peter J. Smith
------------------------------------------
By: Peter J. Smith
Its: President and Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
Dated: March 30, 2012 /s/ Peter J. Smith
------------------------------------------
By: Peter J. Smith
Its: President and Chief Executive Officer and
Director (Principal Executive Officer)
Dated: March 30, 2012 /s/ Enzo Taddei
------------------------------------------
By: Enzo Taddei
Its: Chief Financial Officer, Secretary and
Director (Principal Financial Officer and
Principal Accounting Officer)
40
Global Equity International, Inc. and Subsidiary
Consolidated Financial Statements
December 31, 2011 and 2010
F-1
CONTENTS
Page(s)
-------
Report of Independent Registered Public Accounting Firm F-3
Consolidated Balance Sheets -December 31, 2011 and 2010 F-4
Consolidated Statements of Operations and Comprehensive Income (Loss)
Years Ended December 31, 2011 and 2010 F-5
Consolidated Statement of Stockholders' Equity
Years Ended December 31, 2011 and 2010 F-6
Consolidated Statements of Cash Flows
Years Ended December 31, 2011 and 2010 F-7
Notes to Consolidated Financial Statements F-8
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of:
Global Equity International, Inc.
We have audited the accompanying consolidated balance sheets of Global Equity
International, Inc. and Subsidiary, as of December 31, 2011 and 2010, and the
related consolidated statements of operations and comprehensive income (loss),
stockholders' equity and cash flows for the years ended December 31, 2011 and
2010. 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 consolidated 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, 2011 and 2010, and the
results of its operations and comprehensive income (loss), and its cash flows
for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 8 to the
financial statements, the Company has a net loss of $1,688,102 and net cash used
in operations of $92,780 for the year ended December 31, 2011. The Company also
has a working capital deficit of $185,123 at December 31, 2011. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plan in regards to these matters is also described in Note
8. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ Berman & Company, P.A.
-------------------------------
Boca Raton, Florida
March 29, 2012
F-3
Global Equity International, Inc. and Subsidiary
Consolidated Balance Sheets
December 31, 2011 December 31, 2010
----------------- -----------------
ASSETS
CURRENT ASSETS
Cash $ 2,218 $ 3,275
Accounts receivable 35,000 --
Prepaids 551 551
----------- -----------
TOTAL CURRENT ASSETS 37,769 3,826
MARKETABLE SECURITIES 1,690,000 2,227,236
----------- -----------
TOTAL ASSETS $ 1,727,769 $ 2,231,062
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 37,191 $ 23,357
Accrued liabilities - related parties 145,528 --
Loans payable - related party 40,173 --
----------- -----------
TOTAL CURRENT LIABILITIES 222,892 23,357
----------- -----------
Redeemable Series A, Convertible Preferred Stock:
5,000,000 shares authorized and 5,000,000 and no shares
issued and outstanding, respectively, $0.001 par value
(redemption amount $480,000) (liquidation preference of $0) 480,000 --
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock: 70,000,000 shares authorized and 28,780,700
and 28,668,000 shares issued and outstanding, respectively,
$0.001 par value 28,781 28,668
Additional Paid In Capital 393,103 336,866
Retained Earnings (12,007) 1,676,095
Accumulated other comprehensive income 615,000 166,076
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,024,877 2,207,705
----------- -----------
Total Liabilities, Redeemable Preferred Stock & Stockholders' Equity $ 1,727,769 $ 2,231,062
=========== ===========
See accompanying notes to financial statements.
F-4
Global Equity International, Inc. and Subsidiary
Consolidated Statements of Operations and Comprehensive Income (Loss)
Years Ended December 31,
2011 2010
------------ ------------
REVENUE $ 288,041 $ 2,061,160
GENERAL AND ADMINISTRATIVE EXPENSES 889,984 291,913
REALIZED LOSS ON IMPAIRMENT OF MARKETABLE SECURITIES 1,086,160 --
------------ ------------
NET INCOME (LOSS) $ (1,688,102) $ 1,769,247
============ ============
NET INCOME (LOSS) PER COMMON SHARE -
BASIC AND DILUTED $ (0.06) $ 0.08
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING -
BASIC AND DILUTED 28,735,897 21,092,405
============ ============
COMPREHENSIVE INCOME (LOSS):
Net income (loss) $ (1,688,102) $ 1,769,247
Unrealized gain on available for sale marketable securities 448,924 166,076
------------ ------------
COMPREHENSIVE INCOME (LOSS) $ (1,239,178) $ 1,935,323
============ ============
See accompanying notes to financial statements.
F-5
Global Equity International, Inc. and Subsidiary
Consolidated Statement of Stockholders' Equity
Year ended December 31, 2011
Retained Accumulated
Common Stock Additional Earnings Other Total
------------------ Paid-in (Accumulated Comprehensive Stockholders'
Shares Amount Capital Deficit) Income (Loss) 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 cash ($0.50/share) 103,100 103 51,447 -- -- 51,550
Common stock issued for services
($0.50/share) 9,600 10 4,790 -- -- 4,800
Net loss - 2011 -- -- -- (1,688,102) -- (1,688,102)
Unrealized gain on available for sale
marketable securities -- -- -- -- 448,924 448,924
---------- ------- -------- ---------- ----------- -----------
BALANCE - DECEMBER 31, 2011 28,780,700 $28,781 $393,103 $ (12,007) $ 615,000 $ 1,024,877
========== ======= ======== ========== =========== ===========
See accompanying notes to financial statements.
F-6
Global Equity International, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31,
2011 2010
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,688,102) $ 1,769,247
Adjustments to reconcile net income (loss) to net cash
used in by operating activities:
Redeemable preferred stock issued for services - related party 480,000 --
Common stock issued for services 4,800 --
Marketable securities received as revenue (100,000) (2,061,160)
Realized loss on impairment of marketable securities 1,086,160 --
Changes in operating assets and operating liabilities:
Accounts receivable (35,000) --
Prepaid expenses -- 6,674
Accounts payable 13,834 19,600
Accrued liabilities - related parties 145,528 --
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (92,780) (265,639)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans payable - shareholders 40,173 --
Proceeds from loans payable 35,500 --
Repayments of loan (35,500) --
Proceeds from convertible debt -- 265,534
Proceeds from issuance of common stock 51,550 --
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 91,723 265,534
------------ ------------
NET DECREASE IN CASH (1,057) (105)
CASH - BEGINNING OF YEAR 3,275 3,380
------------ ------------
CASH - END OF YEAR $ 2,218 $ 3,275
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 500 $ --
============ ============
Cash paid for 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 Consolidated Financial Statements
December 31, 2011 and 2010
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. GEI is a holding
company that conducts operations through its wholly owned subsidiary, GEP.
Revenue is generated from business consulting services, financing 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, 2011 and 2010,
respectively, the Company had no cash equivalents.
F-8
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2011 and 2010
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company recognizes accounts receivable in connection with the services
provided. The Company has not recorded any allowance for bad debt, as all
amounts are expected to be collected.
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.
All securities held at December 31, 2011 are designated as available for sale.
Any unrealized gains and losses are reported as other comprehensive income
(loss). Realized gains (losses) will be computed on a specific identification
basis and are recorded in net capital gains (losses) on investments in the
statements of operations.
COST METHOD INVESTMENT
At December 31, 2011, the Company has one investment, having a fair value of
$100,000, that is treated as a cost method investment. The value of the cost
method investment pertains to the receipt of 10% of the common stock in a
private company in which the best evidence of fair value was the services
rendered.
In accordance with ASC NO.325-20, "COST METHOD INVESTMENTS", the Company
recognizes an investment in the stock of an investee as an asset, as a component
of marketable securities.
Under the cost method of accounting for investments in common stock, dividends
will be the basis for recognition by the Company of earnings from the
investment. The net accumulated earnings of an investee subsequent to the date
of investment are recognized by the Company only to the extent distributed by
the investee as dividends. Dividends received in excess of earnings subsequent
to the date of investment are considered a return of investment and are recorded
as reductions of cost of the investment. At December 31, 2011, the Company had
not received any dividends.
Since the Company has less than $100,000,000 in assets, estimating fair value
and related impairment is exempt under ASC No. 325-35-26.
F-9
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2011 and 2010
(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 recorded a realized loss on impairment of
marketable securities for the years ended December 31, 2011 and 2010 totaling
$1,086,160 and $0, respectively (See Note 4).
BENEFICIAL CONVERSION FEATURE
For conventional convertible debt where the rate of conversion is below market
value, the Company records a "beneficial conversion feature" ("BCF") and related
debt discount.
When the Company records a BCF, the relative fair value of the BCF would be
recorded as a debt discount against the face amount of the respective debt
instrument. The discount would be amortized to interest expense over the life of
the debt.
DERIVATIVE LIABILITIES
Fair value accounting requires bifurcation of embedded derivative instruments
such as conversion features in convertible debt or equity instruments, and
measurement of their fair value for accounting purposes. In determining the
appropriate fair value, the Company uses the Black-Scholes option-pricing model.
In assessing the convertible debt instruments, management determines if the
convertible debt host instrument is conventional convertible debt and further if
there is a beneficial conversion feature requiring measurement. If the
instrument is not considered conventional convertible debt, the Company will
continue its evaluation process of these instruments as derivative financial
instruments.
Once the derivative liabilities are determined, they are adjusted to reflect
fair value at each reporting period end, with any increase or decrease in the
fair value being recorded in results of operations as an adjustment to fair
value of derivatives. In addition, the fair value of freestanding derivative
instruments such as warrants, are also valued using the Black-Scholes
option-pricing model.
F-10
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2011 and 2010
DEBT ISSUE COSTS AND DEBT DISCOUNT
The Company may pay debt issue costs, and record debt discounts in connection
with raising funds through the issuance of convertible debt. These costs are
amortized over the life of the debt to interest expense. If a conversion of the
underlying debt occurs, a proportionate share of the unamortized amounts is
immediately expensed.
ORIGINAL ISSUE DISCOUNT
For certain convertible debt issued, the Company provides the debt holder with
an original issue discount. The original issue discount is recorded to debt
discount, reducing the face amount of the note and is amortized to interest
expense over the life of the debt.
REVENUE RECOGNITION
Revenue is recognized 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 2011, the Company received marketable securities and cash as consideration
for services rendered. In 2010, the Company received marketable securities as
consideration for all revenue recognized.
During 2011 and 2010, the Company had the following concentrations of accounts
receivables with customers:
Customer 2011 2010
-------- ---- ----
D 43% --%
E 57% --%
F-11
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2011 and 2010
During 2011 and 2010, the Company had the following concentrations of revenues
with customers:
Customer 2011 2010
-------- ---- ----
A --% 53%
B --% 47%
C 25% --%
D 19% --%
E 21% --%
F* 35% --%
No securities were acquired from customers "C", "D", or "E" as all of this
revenue was received in cash (See Note 4).
* Non-marketable securities, accounted for under the cost method.
SHARE-BASED PAYMENTS
The Company recognizes all forms of share-based payments, including stock option
grants, warrants, restricted stock grants and stock appreciation rights, at
their fair value on the grant date, which are based on the estimated number of
awards that are ultimately expected to vest.
Share based payments, excluding restricted stock, are valued using a
Black-Scholes option pricing model. Share based payment awards issued to
non-employees for services rendered are recorded at either the fair value of the
services rendered or the fair value of the share-based payment, whichever is
more readily determinable. The grants are amortized on a straight-line basis
over the requisite service periods, which is generally the vesting period. If an
award is granted, but vesting does not occur, any previously recognized
compensation cost is reversed in the period related to the termination of
service.
When computing fair value, the Company considered the following variables:
* The risk-free interest rate assumption is based on the U.S. Treasury
yield for a period consistent with the expected term of the warrant in
effect at the time of the grant.
* The expected term was developed by management estimate.
* The Company has not paid any dividends on common stock since inception
and does not anticipate paying dividends on its common stock in the
near future.
* The expected volatility is based on management estimates regarding
private company stock, where future trading of stock in a public
market is expected to be highly volatile.
* The forfeiture rate is based on historical experience.
F-12
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2011 and 2010
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.
On November 15, 2010, the date of the reverse recapitalization, the Company
became subject to federal and state income taxes.
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 percent
likely of being realized. Changes in recognition or measurement are reflected in
the period in which the change in judgment occurs.
The Company will record interest and penalties related to unrecognized tax
benefits in income tax expense. There were no penalties or interest for the
years ended December 31, 2011 and 2010.
The Company may be subject to examination by the Internal Revenue Service
("IRS") and state taxing authorities for 2011 and 2010 tax years.
The Company's subsidiary, GEP, is incorporated under the laws of the Republic of
Seychelles ("Seychelles"). 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. GEP
did not do business in Seychelles for the years ended December 31, 2011 and
December 31, 2010, and GEP does not intend to do business in Seychelles in the
future. Accordingly, the Company is not subject to income tax in Seychelles for
the years ended December 31, 2011 and December 31, 2010. All business activities
were performed by GEP in Dubai for the years ended December 31, 2011 and
December 31, 2010. Dubai does not have an income tax.
F-13
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2011 and 2010
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.
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
prices that are observable for the assets or liabilities; or inputs
that are derived principally from or corroborated by observable market
data by correlation or other means.
* Level 3: Unobservable inputs reflecting the Company's assumptions
incorporated in valuation techniques used to determine fair value.
These assumptions are required to be consistent with market
participant assumptions that are reasonably available.
F-14
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2011 and 2010
The carrying amounts reported in the balance sheet for cash, prepaids, accounts
receivable, accounts payable, accrued liabilities - related parties and loans
payable - related party, 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, 2011.
The following is the Company's assets measured at fair value on a nonrecurring
basis at December 31, 2011 and 2010, 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, 2011 December 31, 2010
----------------- -----------------
Level 1 - None $ -- $ --
Level 2 - Marketable Securities 1,590,000 2,227,236
Level 3 - Non-Marketable Securities 100,000 --
---------- ----------
TOTAL $1,690,000 $2,227,236
========== ==========
Changes in Level 3 assets measured at fair value for the year ended December 31,
2011 were as follows:
December 31, 2011
-----------------
Beginning balance, December 31, 2010 $ --
Realized and unrealized gains (losses) --
Purchases, sales and settlements 100,000
Impairment loss --
----------
Ending balance, December 31, 2011 $ 100,000
==========
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 adopted this
guidance in these financial statements.
F-15
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2011 and 2010
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.
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 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.
F-16
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2011 and 2010
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 and 2011:
Equity securities acquired in 2010 $ 2,061,160
Unrealized gains - 2010 210,000
Unrealized losses - 2010 (*) (43,924)
-----------
Equity securities at fair value - 2010 2,227,236
Equity securities acquired in 2011 100,000
Unrealized gains - 2011 405,000
Impairment loss - 2011 (*) (1,042,236)
-----------
EQUITY SECURITIES AT FAIR VALUE - 2011 $ 1,690,000
===========
(*) The securities acquired in 2010 from customer "B" were permanently impaired
to zero since the customer was delisted from the Frankfurt Open Market when it
fell out of compliance with the capital adequacy rules. During 2011, in
connection with recording a realized loss on impairment of marketable securities
for customer "B", previously recorded unrealized losses of $43,924 were recorded
as a component of total impairment loss of $1,086,160.
NOTE 5 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
In July 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 Consolidated Financial Statements
December 31, 2011 and 2010
NOTE 6 INCOME TAXES
The Company's provision (benefit) for income taxes is approximately as follows:
2011 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 approximately as follows:
2011 2010
--------- ---------
Income tax provision at statutory rate $(586,000) $ 583,000
Increase (decrease) in income tax due to:
Non-taxable foreign earnings 574,000 (602,000)
State taxes (1,000) (2,000)
Change in valuation allowance 13,000 21,000
--------- ---------
Total $ -- $ --
========= =========
F-18
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2011 and 2010
Net deferred tax assets and liabilities are comprised approximately of the
following:
2011 2010
-------- --------
Deferred tax assets (liabilities), current $ -- $ --
-------- --------
Deferred tax assets (liabilities), non-current:
Net operating loss 34,000 21,000
Valuation allowance (34,000) (21,000)
-------- --------
-- --
-------- --------
Net deferred tax assets (liabilities) $ -- $ --
======== ========
Current assets (liabilities) $ -- $ --
Non-current assets (liabilities) -- --
-------- --------
$ -- $ --
======== ========
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 years ended December 31, 2011 and 2010, the Company generated net
operating losses of approximately $34,000 and $55,000, respectively, for federal
and Florida income tax purposes. These losses can be carried forward and used to
offset taxable income in future years and expire on December 31, 2031 and 2030,
respectively.
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, 2011
and 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 or all of these
deductible differences. Accordingly, a valuation allowance of approximately
$34,000 and $21,000 has been provided in the accompanying financial statements
as of December 31, 2011 and 2010, respectively.
F-19
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2011 and 2010
For the year ended December 31, 2011 and from November 15, 2010 to December 31,
2010, GEP incurred a loss of approximately $567,000 and $20,000, respectively.
Therefore, GEP had negative earnings and profits and does not have any foreign
earnings and profits to be distributed. Since GEP does not have any
undistributed earnings, the Company has not recorded a deferred tax liability
associated with the foreign earnings as of December 31, 2011 and 2010.
The Company is not subject to any foreign income taxes for the years ended
December 31, 2011 and 2010.
The Company may be subject to examination by the Internal Revenue Service
("IRS") and state taxing authorities for 2011 and 2010 tax years.
NOTE 7 STOCKHOLDERS' EQUITY
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 automatically convertible into 10,000,000
shares of common stock on December 1, 2013. (See Redeemable Preferred
Stock below).
* No dividend rights.
* No liquidation rights.
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.
The Company has determined that no beneficial conversion feature or derivative
financial instruments exist in connection with the Series A, convertible
preferred stock, as the conversion rate was fixed at an amount equal to the
market price of our common stock. Additionally, there is a stated number of
fixed shares.
F-20
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2011 and 2010
REDEEMABLE PREFERRED STOCK
Under Regulation S-X, Rule 5-02-28, preferred stock must be classified outside
shareholders' equity when the stock is:
* Redeemable at a fixed or determinable price on a fixed or determinable
date,
* Redeemable at the option of the holder, or
* Redeemable based on conditions outside the control of the issuer.
Since the Series A, convertible preferred stock is redeemable on December 1,
2013 it is presented on the balance sheets as "Redeemable Preferred Stock" in a
manner consistent with temporary equity.
There are no other features associated with this class of redeemable preferred
stock, which require disclosure. The carrying amount and redemption amount are
$480,000. There are no redemption requirements.
COMMON STOCK
YEAR END 2010
On December 31, 2010, the Company agreed to issue 668,000 restricted common
shares to various creditors as part of a debt conversion agreement for $263,534.
YEAR END 2011
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 GOING CONCERN
As reflected in the accompanying financial statements, the Company had a net
loss of $1,688,102 and net cash used in operations of $92,780 for the year ended
December 31, 2011; and a working capital deficit of $185,123 and at December 31,
2011. These factors raise substantial doubt about the Company's ability to
continue as a going concern.
F-21
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2011 and 2010
The ability of the Company to continue its operations is dependent on
Management's plans, which include the raising of capital through debt and/or
equity markets, until such time that funds provided by operations are sufficient
to fund working capital requirements. The Company may need to incur liabilities
with certain related parties to sustain the Company's existence.
The Company expects to use its working capital to implement a marketing program
to increase awareness of its business model, which includes, but is not limited
to, acquisition of private companies, with the intention of taking those
companies public in the United States and possibly dual listing those entities
abroad. In the event that operating cash flows are slowed or nonexistent, the
Company plans to reduce its overhead wherever possible.
Depending upon market conditions, the Company may not be successful in raising
sufficient additional capital for it to achieve its business objectives. In such
event, the business, prospects, financial condition, and results of operations
could be materially adversely affected hence there is certain doubt about the
Company's ability to continue as a going concern.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. These financial statements do not
include any adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the Company be
unable to continue as a going concern.
NOTE 9 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
At December 31, 2011, the Company has accrued salaries of $145,528 for these
officers.
NOTE 10 SUBSEQUENT EVENTS
DEBT
In March 2012, the Company entered into 90 day bridge loan agreements to raise a
total of $70,000. The loans will have interest ranging from 0% - 3%. The loans
are unsecured. As of March 29, 2012, the Company has received $50,000.
F-22
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2011 and 2010
In connection with this loan, the Company issued 140,000 shares of common stock,
having a fair value of $70,000 ($0.50/share), based upon recent third party
services rendered, and 20,000 warrants to the lender having an exercise price of
$1, expiring September 2013. The fair value of the warrants was approximately
$7,000.
The amounts paid to acquire the debt financing have been treated as a debt
discount. The Company will record debt discounts of $70,000. The remaining
valuation of the warrants of $7,000 will be recorded as interest expense. The
Company will credit additional paid in capital for $77,000.
The Company applied fair value accounting for all share based payment awards.
The fair value of each warrant granted is estimated on the date of grant using
the Black-Scholes option-pricing model. The Black-Scholes assumptions used are
as follows:
Exercise price $ 1
Expected dividends 0%
Expected volatility 200%
Risk fee interest rate 0.35%
Expected life of option 1.5 years
Expected forfeitures 0%
F-23