U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 5
to
Form 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of The Securities Exchange Act of 1934
GLOBAL EQUITY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Nevada 27-3986073
(State of Incorporation) (I.R.S. Employer Identification No.)
23 Frond "K" Palm Jumeirah, Dubai, UAE N/A
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: +971 (7) 204 7593
Copies to:
Enzo Taddei
Chief Financial Officer
Avenida Marques del Duero 67
Edificio Bahia 2A
29670 San Pedro de Alcantara
Marbella, Spain
Telephone: 011 34 671 642 835
Copies to:
David E. Wise, Esq.
Law Offices of David E. Wise, P.C.
9901 IH-10 West, Suite 800, San Antonio, Texas 78230
Telephone: (210) 558-2858/Facsimile: (210) 579-1775
Email: wiselaw@verizon.net
Securities to be registered under Section 12(b) of the Act: None
Name of Exchange on which each class is to be registered: Not applicable
Securities to be registered under Section 12(g) of the Exchange Act:
Common Stock, $.001
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
EXPLANATORY NOTE
We are filing this General Form for Registration of Securities on Form 10
to register our common stock, pursuant to Section 12(g) of the Securities
Exchange Act of 1934, as amended ("Exchange Act")
We are subject to the requirements of Regulation 13A under the Exchange
Act, which requires us to file annual reports on Form 10-K, quarterly reports on
Form 10-Q and current reports on Form 8-K, and we will be required to comply
with all other obligations of the Exchange Act applicable to issuers filing
statements pursuant to Section 12(g) of the Exchange Act. We filed our first
Form 10-K on March 30, 2012.
FORWARD LOOKING STATEMENTS
There are statements in this Registration Statement that are not historical
facts. These "forward-looking statements" can be identified by use of
terminology such as "believe," "hope," "may," "anticipate," "should," "intend,"
"plan," "will," "expect," "estimate," "project," "positioned," "strategy" and
similar expressions. You should be aware that these forward-looking statements
are subject to risks and uncertainties that are beyond our control. For a
discussion of these risks, you should carefully read this entire Registration
Statement, especially the risks discussed under "Risk Factors." Although
management believes that the assumptions underlying the forward looking
statements included in this Registration Statement are reasonable, they do not
guarantee our future performance, and actual results could differ from
contemplated by these forward looking statements. The assumptions used for
purposes of the forward-looking statements specified in the following
information represent estimates of future events and are subject to uncertainty
as to possible changes in economic, legislative, industry, and other
circumstances. As a result, the identification and interpretation of data and
other information and their use in developing and selecting assumptions from and
among reasonable alternatives require the exercise of judgment. To the extent
that the assumed events do not occur, the outcome may vary substantially from
anticipated or projected results, and, accordingly, no opinion is expressed on
the achievability of those forward-looking statements. In the light of these
risks and uncertainties, there can be no assurance that the results and events
contemplated by the forward-looking statements contained in this Registration
Statement will in fact transpire. You are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of their dates. We do
not undertake any obligation to update or revise any forward-looking statements.
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TABLE OF CONTENTS
Item Number
and Caption Page
----------- ----
ITEM 1. BUSINESS........................................................... 1
ITEM 1A. RISK FACTORS....................................................... 13
ITEM 2. FINANCIAL INFORMATION.............................................. 18
ITEM 3. PROPERTIES......................................................... 26
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..... 27
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS................................... 29
ITEM 6. EXECUTIVE COMPENSATION............................................. 32
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE....................................................... 36
ITEM 8. LEGAL PROCEEDINGS.................................................. 36
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.................................... 36
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES............................ 37
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED............ 41
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.......................... 44
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................ 45
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE........................................... 45
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.................................. 46
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ITEM 1. BUSINESS
BACKGROUND
Global Equity International, Inc. (sometimes referred to herein as
"Company" or "GEI") 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 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
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.
IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY
As a Company with less than $1 billion in revenue during our last fiscal
year, we qualify as an "emerging growth company" as defined in the Jumpstart Our
Business Startups Act of 2012 (also known as the "JOBS Act"). As an emerging
growth company, we are entitled to take advantage of specified reduced
disclosure and other requirements that are otherwise applicable generally to
public companies. These provisions include:
* Only two years of audited financial statements in addition to any
required unaudited interim financial statements with correspondingly
reduced "Management's Discussion and Analysis of Financial Condition
and Results of Operations" disclosure;
* Reduced disclosure about our executive compensation arrangements;
* Not having to obtain non-binding advisory votes on executive
compensation or golden parachute arrangements; and
* Exemption from the auditor attestation requirement in the assessment
of our internal control over financial reporting.
We may take advantage of these exemptions for up to five years or such
earlier time that we are no longer an emerging growth company. We would cease to
be an emerging growth company if we have more than $1 billion in annual
revenues, if we have more than $700 million in market value of our stock held by
non-affiliates, or if we issue more than $1 billion of non-convertible debt over
a three-year period. We may choose to take advantage of some but not all of
these reduced burdens in the future. We have irrevocably elected to opt out of
the extended transition period for complying with new or revised accounting
standards pursuant Section 107(b) of the JOBS Act.
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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.
GEP looks for promising small to medium size companies ($2,000,000 to
$10,000,000 in assets) and introduce these companies 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
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. GEI does not offer or conduct any consulting or advisory
services, as such services are performed solely by our foreign subsidiary, GEP.
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. We do not presently recommend
and we do not intend in the future to recommend that our clients merge or be
acquired by shell companies.
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.
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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.
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
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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.
NEW BUSINESS TRANSACTED IN 2011
In 2011, we initially had 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 based in Spain. In addition, we
entered into another contract on December 12, 2011 with Voz Mobile Cloud Ltd, a
U.S. corporation, and we concluded our work on that contract on December 31,
2011.
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(1) RFC K.K.
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 because it 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.
grow its business and ultimately 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 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."
(2) BLACK SWAN DATA LIMITED
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 data 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.
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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 because it 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 grow its business and ultimately 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 $40,000 has
been paid. We will receive the balance of $140,000 over the next 12 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).
(3) ARROW CARS SL
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;
* 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.
6
A "target business" would be a company having a business plan that is
compatible with Arrow Cars SL's business because it 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 grow its business and to ultimately 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 agreed to pay us an initial fee of $20,000 and then an
additional aggregate fee of $115,000 over the subsequent twelve months. Arrow
Cars has paid us $83,000 to date. 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.
(4) VOZ MOBILE CLOUD LTD
On December 12, 2011, we entered into a contract with Voz Mobile Cloud Ltd,
a "voice to mail" technology company based in the U.S.. We consulted with Voz
Mobile Cloud Ltd on corporate restructuring, and we concluded our work on that
contract on December 31, 2011. As compensation, we received 2,000,000 shares of
Voz Mobile Cloud Ltd common stock, which we valued at $100,000 in the fourth
quarter of 2011.
During 2011, the Company had revenues totaling $288,041, of which
$188,041 was comprised entirely of cash received from these three 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, valued at $100,000.
Arrow Cars SL $ 73,081 25% (1)
RFC KK $ 60,000 21% (1)
Black Swan Data Limited $ 54,960 19% (1)
Voz Mobile Cloud Ltd $100,000 35% (2)
-------- ----
TOTAL $288,041 100%
======== ====
----------
(1) Represents cash fees received by the Company.
(2) Represents stock received in lieu of services rendered by the Company.
In 2011, our total operating expenses amounted to $337,991.
OPERATING EXPENSES:
GENERAL & ADMINISTRATIVE
Office Expenses $ 10,415
Rent Expense $ 3,540
Travel $ 47,914
Web & Advertising $ 5,133
---------
$ 67,002
LEGAL & ACCOUNTING
Legal $ 16,359
Accountants $ 25,000
---------
$ 41,359
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OTHER PROFESSIONAL SERVICES
Edgar Filer Service $ 1,180
Transfer Agent $ 2,630
Other $ 42,528 (1)
---------
$ 46,338
OTHER EXPENSES - SALARIES
Peter Smith $ 129,959
Enzo Taddei $ 40,000
Adrian Scarrott $ 13,332
---------
$ 183,291 (2)
---------
TOTAL OPERATING EXPENSES $ 337,991
=========
----------
(1) This amount includes due diligence fees paid to third parties on behalf of
some of our clients.
(2) The Company's salaries expense amounted to $183,291, of which $133,332 was
accrued and unpaid at December 31, 2011.
In 2011, we paid a total of $10,000 to Mr. Patrick Dolan, a resident of
London, United Kingdom, as a commission for introducing us to RFC K.K.
COMMISSION EXPENSES:
COMMISSIONS PAID TO INTRODUCERS
Introduction of RFC KK $ 10,000
----------
$ 10,000
==========
In 2011, the Company incurred other "non-recurring expenses" amounting to
$1,632,160:
OTHER EXPENSES - NON-RECURRING
Dubai, U.A.E. Administrative and Consultancy
Service $ 66,000
Bonus paid with Redeemable "Preferred shares"
to Mr. Peter Smith $ 480,000 (3)
Realized Loss on Impairment of Marketable
Securities $1,086,160 (4)
----------
$1,632,160
==========
----------
(3) 5,000,000 shares of the Company's Series A Preferred Stock were issued to
Mr. Peter James Smith, our President, in lieu of the $480,000 salary bonus
our Board of Directors decided to grant to him.
(4) Realized loss due to the impairment of our M1 Luxembourg AG marketable
securities; this impairment was for $1,086,160.
In 2011, 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; hence, the comprehensive loss amounted to ($1,239,178) for 2011.
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The Company recorded interest income amounting to $690, paid $500 of
interest and also recorded an exchange rate loss of $4,197.
OTHER INCOME / EXPENSE
Interest Income $ 690
Interest Expense $ (500)
Exchange Rate Gain / (Loss) $ (4,197)
----------
$ (4,007)
==========
Based on 28,735,897 weighted average shares outstanding for the year ended
December 31 2011, the loss per share was $(0.06).
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 four clients under contract, Arrow Cars SL, Black Swan
Data Limited, RFC K.K. and Direct CCTV and Security Systems Ltd. On March 31,
2012, GE Partners PLC entered into an agreement with CDP Security Group Limited,
doing business as "Direct CCTV" ("Direct CCTV") of Victory Way, Admirals Park,
Crossways Business Park, Dartford, Kent DA2 6QD. Direct CCTV is engaged in the
business of installing closed circuit television and other security equipment.
We have contracted to provide the following services to Direct CCTV:
* 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
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* 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 Direct CCTV's business because it has a similar business to
Direct CCTV, and having net tangible assets, net profits and projected growth
that would be suitable for Direct CCTV and that, if combined with Direct CCTV,
could help Direct CCTV grow its business in order to meet the various
requirements or standards for having Direct CCTV's shares listed on an exchange
or quoted on a stock quotation medium. At this time, Direct CCTV has not decided
on a particular exchange or target business.
Direct CCTV has agreed to pay us $240,000, of which $60,000 was paid on
April 10, 2012. We will receive the balance of $180,000 over the next twelve
months. In addition, we will receive a 10% equity stake in Direct CCTV in the
event we assist Direct CCTV in acquiring a target business.
MILESTONES THROUGH APRIL 2013
Our specific plan of operations and milestones through April 2013 are as
follows:
DURING THE SECOND QUARTER OF 2012, WE INTEND TO:
DEVELOP THE INTRODUCER NETWORK FURTHER AND IN HOPES OF ATTRACTING NEW INTEREST
FOR OUR SERVICES.
We currently are relying on introductions to potential clients by the
following firms in Asia and Europe:
* Merchant House Group (London), a United Kingdom registered investment
house;
* 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.
We intend to develop relationships with a further five "introducers" to
potential new business for the Company before the end of June 2012. The
estimated additional expense of $10,000 to achieve this is mainly travel
expenses that will be funded by income receivable from clients currently under
contract.
DURING THE THIRD QUARTER OF 2012, WE INTEND TO:
CREATE A MORE EFFICIENT SYSTEM FOR REVIEWING PROSPECTIVE BUSINESSES.
Our new business review system will change in 2012. We will concentrate our
efforts on the quality of the company that is introduced to us. We will start
off by sending the client a standard due diligence list and request that they
complete the list and send us the support for review. We will then follow-up the
due diligence with a "site visit" in order to properly understand our client's
10
business model and more importantly meet the principals in person. We intend to
begin this process in July 2012 and will have an added cost of $5,000 per
company reviewed. We will fund this additional expense from operational income,
mainly income receivable from clients currently under contract.
EXPAND OUR CONSULTANCY TO INCLUDE MORE MERGER AND ACQUISITION ACTIVITY.
We intend to form relationships with merger and acquisition specialists
during 2012 which will hopefully enable us to: 1) find potential merger and
acquisition candidates, 2) introduce our clients to brokers and investment
bankers, and 3) introduce our clients to the appropriate professionals
(attorneys and accountants) to assist them in a public offering or exchange
listing. The only additional cost for this activity will be a very small
administrative burden for telephone calls and communications to be funded out of
operational income, mainly income receivable from clients currently under
contract.
DURING THE FOURTH QUARTER OF 2012, WE INTEND TO:
EXPAND OUR NETWORK OF CONTACTS WITHIN THE INVESTMENT COMMUNITY IN DUBAI
Our network of investment companies in Dubai is currently small; however,
we intend to substantially expand our Dubai network in order to enable us to
make introductions on a more institutional level. From October 2012 onwards, we
intend to develop our network to at least twelve Investment Institutions who may
have interests in minority shareholding in companies from outside of the Middle
East Region. We anticipate a small administrative cost to be no more than
$10,000 for such development to be funded from operational income, mainly income
receivable from clients currently under contract.
BETWEEN JULY 2012 AND APRIL 2013, WE INTEND TO:
SIGN CONTRACTS WITH A MINIMUM OF THREE NEW CLIENTS.
We have a pipeline of at least twelve potentially new clients that we are
currently reviewing and we hope that we will gain at least three new consultancy
contracts in 2012. Hopefully, this pipeline will grow during 2012 and early
2013, making the possibility of attracting at least three new clients more
achievable.
Our estimated monthly cash burn rate for 2012 and through April 2013 will
be approximately $20,000, which does not include the $33,333 we will accrue in
salaries to our management team on a monthly basis. Our management team will not
be paid cash salaries until such time as our monthly revenues are sufficient to
pay our estimated $20,000 monthly burn rate and have money left over to pay a
portion or all of the accrued management team salaries. In any given month in
which we receive revenues in excess of $25,000, we will use the excess revenues
to pay accrued salaries. However, we cannot assure investors that we will have
sufficient revenues to fund our operations for the next 12 months.
11
CASH BURN TABLE:
General & Administrative $ 11,000
Legal & Accounting $ 4,000
Other Expenses - Milestones $ 5,000
----------
TOTAL $ 20,000
==========
During the next twelve months, we estimate that the $4,000 per month (see
table above) in legal and accounting fees will cover the audit of our financial
statements for the fiscal year ended December 31, 2012, 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.
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
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.
12
We are not a broker-dealer. We do not believe we are an investment advisor
or an investment company. We are not a hedge fund or a mutual fund or any
similar type of fund. We are primarily an operating business that offers and
performs corporate consultancy services.
VOLUNTARY FILING
We are voluntarily filing this Registration Statement with the U.S.
Securities and Exchange Commission ("SEC") and we are under no obligation to do
so under the Securities Exchange Act of 1934 ("Exchange Act"). However, our
Board of Directors believes that by registering our class of common stock with
the SEC and filing reports under the Exchange Act, some of which include audited
financial statements, our Company's business activities, financial condition and
results of operations will be transparent and accessible by our current and
potential clients, and may help our business in the future.
REPORTS TO SECURITY HOLDERS
1. We will be subject to the informational requirements of the Exchange
Act. Accordingly, we will file annual, quarterly and periodic reports,
proxy statements, information statements and other information with
the SEC.
2. The public may read and copy any materials the Company files with the
SEC at the SEC's Public Reference Room at 100 F Street, NE, Room 1580,
Washington, D.C. 20549. The public may call the SEC at 1-800-SEC-0330
for further information on the Public Reference Room. Our SEC filings
will also be available to the public at the SEC's web site at
http://www.sec.gov.
ITEM 1A. RISK FACTORS
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. IF ANY OF THE
FOLLOWING RISKS ACTUALLY MATERIALIZES, OUR BUSINESS, FINANCIAL CONDITION AND
RESULTS OF OPERATIONS WOULD SUFFER AND OUR SHAREHOLDERS COULD LOSE ALL OR PART
OF THEIR INVESTMENT IN OUR SHARES.
RISKS ASSOCIATED WITH OUR COMPANY
WHILE WE HAVE TWO YEARS OF OPERATING HISTORY AND HAVE ACCUMULATED PROFITS,
THERE IS NO ASSURANCE THAT OUR FUTURE OPERATIONS WILL RESULT IN PROFITABLE
REVENUES. IF WE CANNOT GENERATE SUFFICIENT REVENUES TO OPERATE PROFITABLY, WE
WILL CEASE OPERATIONS AND YOU WILL LOSE YOUR INVESTMENT.
We were incorporated in Nevada on October 1, 2010, and our wholly-owned
subsidiary, GE Partners Plc, was formed on September 2, 2009. For the twelve
months ended December 31, 2011, we incurred a net loss from operations of
$(601,943) and a realized loss on impairment of marketable securities" (due to a
decline in the value thereof) of $1,086,102. 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.
BECAUSE OUR AUDITORS HAVE ISSUED A GOING CONCERN OPINION, THERE IS
SUBSTANTIAL UNCERTAINTY THAT WE WILL CONTINUE OPERATIONS IN WHICH CASE INVESTORS
COULD LOSE THEIR INVESTMENTS IN OUR COMMON STOCK.
Our auditors have issued a going concern opinion. This means that there is
substantial doubt that we can continue as an ongoing business for the next
twelve months. The financial statements do not include any adjustments that
might result from the uncertainty about our ability to continue in business. As
such, we may have to cease operations and you could lose your investment.
13
WE ARE AN "EMERGING GROWTH COMPANY" AND WE CANNOT BE CERTAIN IF WE WILL BE ABLE
TO MAINTAIN SUCH STATUS OR IF THE REDUCED DISCLOSURE REQUIREMENTS APPLICABLE TO
EMERGING GROWTH COMPANIES WILL MAKE OUR COMMON STOCK LESS ATTRACTIVE TO
INVESTORS.
We are an "emerging growth company," as defined in the Jumpstart Our
Business Startups Act of 2012 or "JOBS Act," and we may adopt certain exemptions
from various reporting requirements that are applicable to other public
companies that are not "emerging growth companies," including, but not limited
to, not being required to comply with the auditor attestation requirements of
Section 404(b) of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy statements,
and exemptions from the requirement of holding a nonbinding advisory vote on
executive and stockholder approval of any golden parachute payments not
previously approved. We may remain an "emerging growth company" for up to five
full fiscal years following our initial public offering. We would cease to be an
emerging growth company, and, therefore, ineligible to rely on the above
exemptions, if we have more than $1 billion in annual revenue in a fiscal year,
if we issue more than $1 billion of non-convertible debt over a three-year
period, or if we have more than $700 million in market value of our common stock
held by non-affiliates as of June 30 in the fiscal year before the end of the
five full fiscal years. Additionally, we cannot predict if investors will find
our common stock less attractive because we may rely on these exemptions. If
some investors find our common stock less attractive as a result of our reduced
disclosures, there may be less active trading in our common stock (assuming a
market ever develops) and our stock price may be more volatile.
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 $20,000 during 2012 and
through April 2013, which does not include the $33,333 we will accrue in
salaries to our management team on a monthly basis. Our management team will not
be paid cash salaries until such time as our monthly revenues are sufficient to
pay our estimated $20,000 monthly burn rate and any variable expenses related to
recruiting or dealing with clients and have money left over to pay a portion or
all of the accrued management team salaries. However, we cannot assure investors
that we will have sufficient revenues to fund our operations for the next 12
months.
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.
14
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
severe constraints on the ability of all companies, particularly smaller ones,
to raise capital, borrow money, operate effectively and profitably and to plan
for the future.
BECAUSE 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.
WE MAY BE SUBJECT TO FURTHER GOVERNMENTAL REGULATION, INCLUDING THE
INVESTMENT COMPANY ACT OF 1940, WHICH COULD ADVERSELY AFFECT OUR OPERATIONS.
As part of our business model, GEP sometimes accepts equity securities in
our clients as partial compensation for our services. Historically, 40% or more
of our income has been derived from the receipt of equity securities and more
than 40% of our assets are comprised of equity securities that we have received
in exchange for some of our services.
15
Although we do not believe we are engaged in the business of investing,
reinvesting or trading in securities, and we do not currently hold ourselves out
to the public as being engaged in those activities, it is possible that we may
be deemed to be an "inadvertent investment company" under section 3(a)(1)(C) of
the Investment Company Act of 1940, as amended ("ICA"), if more than 40% of our
future income and/or more than 40% of our assets are derived from "investment
securities" (as defined in the ICA), and if we are deemed to be, or perceived to
be, primarily engaged in the business of investing, reinvesting or trading in
securities.
If we were deemed or found to be an investment company by the Securities
and Exchange Commission or a court of law, then we would face dire consequences
and a maze of additional regulatory obligations. For example, registered
investment companies are subject to extensive, restrictive and potentially
adverse regulation relating to, among other things, operating methods,
management, capital structure, dividends and transactions with affiliates. If it
were established that we are an unregistered investment company, there would be
a risk, among other material adverse consequences, that we could be become
subject to monetary penalties or injunctive relief, or both, in an action by the
SEC, that we would be unable to enforce contracts with third parties or that
third parties with whom we have contracts could seek to obtain rescission of
transactions with us undertaken during the period it was established that we
were an unregistered investment company.
WE COULD BE SUBJECT TO THE INVESTMENT ADVISERS ACT OF 1940, WHICH WOULD BE
DETRIMENTAL TO OUR BUSINESS.
Although we do not believe we are engaged in the investment advisory
business and we do not hold ourselves out to be investment advisers, it is
possible that the SEC could deem or find us to be an unregistered investment
adviser due to the types of consulting services offered by us. If we were deemed
or found to be an investment adviser by the Securities and Exchange Commission
or a court of law, then we would face dire consequences and a maze of additional
regulatory obligations. For example, registered investment advisers are subject
to extensive, restrictive and potentially adverse regulation relating to, among
other things, operating methods, fees, management, capital structure, dividends
and transactions with affiliates. If it were established that we are an
unregistered investment adviser, there would be a risk, among other material
adverse consequences, that we could be become subject to monetary penalties or
injunctive relief, or both, in an action by the SEC, that we would be unable to
enforce contracts with third parties or that third parties with whom we have
contracts could seek to obtain rescission of transactions with us undertaken
during the period it was established that we were an unregistered investment
adviser.
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 41,079,300 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.
16
BECAUSE THERE IS NO PUBLIC TRADING MARKET FOR OUR COMMON STOCK, YOU MAY NOT
BE ABLE TO RESELL YOUR STOCK.
Our Common Stock is not presently quoted on the Over-the-Counter Bulletin
Board or traded in any market. Therefore, you may not be able to resell your
stock.
Because the SEC imposes additional sales practice requirements on brokers
who deal in our shares that are penny stocks, some brokers may be unwilling to
trade them. This means that you may have difficulty reselling your shares and
this may cause the price of our shares to decline.
Our shares would be classified as penny stocks and are covered by Section
15(g) of the Securities Exchange Act of 1934 and the rules promulgated
thereunder, which impose additional sales practice requirements on
brokers/dealers who sell our securities in this offering or in the aftermarket.
For sales of our securities, the broker/dealer must make a special suitability
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, which is classified
outside shareholders' equity since it is considered redeemable.
THIS REGISTRATION STATEMENT CONTAINS FORWARD-LOOKING STATEMENTS AND
INFORMATION RELATING TO US, OUR INDUSTRY AND TO OTHER BUSINESSES.
These forward-looking statements in this registration statement are based
on the beliefs of our management, as well as assumptions made by and information
currently available to our management. When used in this registration statement,
the words "estimate," "project," "believe," "anticipate," "intend," "expect" and
similar expressions are intended to identify forward-looking statements. These
statements reflect our current views with respect to future events and are
subject to risks and uncertainties that may cause our actual results to differ
materially from those contemplated in our forward-looking statements. We caution
you not to place undue reliance on these forward-looking statements, which speak
only as of the date of this registration statement. We do not undertake any
obligation to publicly release any revisions to these forward-looking statements
to reflect events or circumstances after the date of this registration statement
or to reflect the occurrence of unanticipated events.
17
ITEM 2. FINANCIAL INFORMATION
The following discussion is intended to provide an analysis of our
financial condition and should be read in conjunction with our financial
statements and the notes thereto.
RECENT ACCOUNTING PRONOUNCEMENTS
In May 2011, the FASB issued ASU 2011-04, "Amendments to Achieve Common
Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS
(International Financial Reporting Standard)." ASU 2011-04 attempts to improve
the comparability of fair value measurements disclosed in financial statements
prepared in accordance with U.S. GAAP and IFRS. Amendments in ASU 2011-04
clarify the intent of the application of existing fair value measurement and
disclosure requirements, as well as change certain measurement requirements and
disclosures. ASU 2011-04 is effective for the Company beginning January 1, 2012
and will be applied on a prospective basis. We do not believe that the adoption
of ASU 2011-04 will have material effect on our consolidated financial
statements.
BUSINESS DEVELOPMENT
2010 TRANSACTIONS
GEP completed two transactions in 2010. The first transaction involved M1
Luxembourg AG, a Swiss company, that we helped get listed on the Frankfurt Open
Market, a German stock exchange.
M1 Luxembourg AG, through its subsidiaries, offers financial advisory
services. The firm's subsidiaries include Cannon Regus, Sumner Holdings, ISIS
financial Associates Ltd, Britannia Overseas Property, and M1 Lux (Cyprus) Ltd.
It provides mortgage, private banking, company formation, real estate management
and trust formation advisory services. Additionally, the firm offers property
documentation, education fees planning, retirement planning, healthcare
insurance policies and private wealth management advisory services. M1
Luxembourg AG is headquartered in Hunenberg, Switzerland.
Our contract with M1 Luxembourg AG originally called for us to receive a
cash fee of $200,000. However, we renegotiated our fee to take 2,000,000 shares
of the client's common stock, valued at $1,086,160. 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 was 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.
Our total fees received from Monkey Rock Group, Inc. in 2010 represented
approximately 47.3% of our gross revenues for 2010.
18
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.
RESULTS FOR THE YEAR ENDED DECEMBER 31, 2010:
During 2010, the Company had revenues totaling $2,061,160, comprised
entirely of equity received in two companies: M1 Luxembourg AG and Monkey Rock
Group, Inc.
Our general and administration costs amounted to $40,328, including $15,178
in travel expenses. $34,658 was paid to our Chief Executive Officer as salary.
We paid $88,852 in cash commissions and fees to persons who introduced us
to two of our clients, Black Swan Data Limited and Monkey Rock Group Inc., of
which amount a commission of $17,577 was paid to Bridge Consulting Limited, a
United Kingdom company, for introducing us to Black Swan Data Limited, $71,275
(50,000 Euros) was paid to Mr. Oscar Alario, a Spanish lawyer, who introduced us
to Monkey Rock Group, Inc. We issued 1,000,000 shares of common stock to Pilar
Tardon, an accountant in Spain valued at $50,000 ($25,000 as a commission for
introducing us to Arrow Cars SL plus $25,000 for her accounting services).
Neither Bridge Consulting Limited, Oscar Alario nor Pilar Tardon was a related
person or party to the Company. We did not have written agreements with Bridge
Consulting Limited, Oscar Alario or Pilar Tardon. The commissions paid to Bridge
Consulting Limited and Oscar Alario were not based on any percentage of value
for the introductions and were instead simply the result of negotiations with
them. The $25,000 commission paid to Ms. Tardon was not based on any percentage
of value for the introduction to Arrow Cars SL. The $25,000 in accounting fees
paid to Ms. Tardon were paid pursuant to her invoice and were not related to the
value of the Arrow Cars SL contract.
We also incurred $64,584 in legal, accounting and other professional fees.
We paid an additional $60,050 for business licenses and permits. We recognized
exchange rate losses of $3,441.
Thus, our total operating expenses for 2010 were $291,913.
The net profit was $1,769,247 and the unrealized gain on the available for
sale marketable securities owned by the Company amounted to $166,076, hence the
comprehensive income amounted to $1,935,323.
The Company did not pay any interest as interest was not due within the
2010 fiscal year.
Based on 21,092,405 weighted average shares outstanding for the year ended
December 31 2010, the profit per share was $0.08.
RESULTS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2011:
In 2011, we had contracts with four companies: (1) RFC K.K., a Japan based
company; (2) Black Swan Data Limited, a United Kingdom based company; (3) Arrow
Cars SL, a company based in Spain; and (4) Voz Mobile Cloud Ltd, a company based
in the U.S. We entered into our 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 Ltd common stock
valued at an aggregate of $100,000 in the fourth quarter of 2011.
During 2011, the Company had revenues totaling $288,041, of which $188,041
was comprised entirely of cash received from three clients: Arrow Cars SL, Black
Swan Data Limited and RFC K.K. We also received 2,000,000 shares of a private
company called Voz Mobile Cloud Ltd valued at $100,000.
19
Arrow Cars SL $ 73,081 25% (1)
RFC KK $ 60,000 21% (1)
Black Swan Data Limited $ 54,960 19% (1)
Voz Mobile Cloud Ltd $100,000 35% (2)
-------- ----
TOTAL $288,041 100%
======== ====
----------
(1) Represents cash fees received by the Company.
(2) Represents stock received in lieu of services rendered by the Company.
In 2011, our total operating expenses amounted to $337,991.
OPERATING EXPENSES:
GENERAL & ADMINISTRATIVE
Office Expenses $ 10,415
Rent Expense $ 3,540
Travel $ 47,914
Web & Advertising $ 5,133
---------
$ 67,002
LEGAL & ACCOUNTING
Legal $ 16,359
Accountants $ 25,000
---------
$ 41,359
OTHER PROFESSIONAL SERVICES
Edgar Filer Service $ 1,180
Transfer Agent $ 2,630
Other $ 42,528 (1)
---------
$ 46,338
OTHER EXPENSES - SALARIES
Peter Smith $ 129,959
Enzo Taddei $ 40,000
Adrian Scarrott $ 13,332
---------
$ 183,291 (2)
---------
TOTAL OPERATING EXPENSES $ 337,991
=========
----------
(1) This amount includes due diligence fees paid to third parties on behalf of
some of our clients.
(2) The Company's salaries expense amounted to $183,291, of which $133,332 was
accrued and unpaid at December 31, 2011.
20
In 2011, we paid a total of $10,000 to Mr. Patrick Dolan, a resident of
London, United Kingdom, as a commission for introducing us to RFC K.K.
COMMISSION EXPENSES:
COMMISSIONS PAID TO INTRODUCERS
Introduction of RFC KK $ 10,000
----------
$ 10,000
==========
In 2011, the Company incurred other "non-recurring expenses" amounting to
$1,632,160:
OTHER EXPENSES - NON-RECURRING
Dubai, U.A.E. Administrative and Consultancy
Service $ 66,000
Bonus paid with "Preferred shares" to
Mr. Peter Smith $ 480,000 (3)
Realized Loss on Impairment of Marketable
Securities $1,086,160 (4)
----------
$1,632,160
==========
----------
(3) 5,000,000 shares of the Company's Series A Preferred Stock were issued to
Mr. Peter James Smith, our President, in lieu of the $480,000 salary bonus
our Board of Directors decided to grant to him.
(4) Realized loss due to the impairment of our M1 Luxembourg AG marketable
securities; this impairment was for $1,086,160.
In 2011, 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; hence, the comprehensive loss amounted to ($1,239,178) for 2011.
The Company recorded interest income amounting to $690, paid $500 of
interest and also recorded an exchange rate loss of $4,198.
OTHER INCOME / EXPENSE
Interest Income $ 690
Interest Expense $ (500)
Exchange Rate Gain / (Loss) $ (4,197)
----------
$ (4,007)
==========
Based on 28,735,897 weighted average shares outstanding for the year ended
December 31, 2011, the loss per share was $(0.06).
21
LIQUIDITY AND CAPITAL RESERVES
Our audited financial statements contained herein 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.
As of March 31, 2012, the Company had $6,675 in cash and net cash used in
operations of $32,214. For the quarter ended March 31, 2012, the Company had a
net loss of $(137,448) and a working capital deficit of $(327,603). The Company
had a positive balance of $477,397 of Shareholders' Equity for the period ended
March 31, 2012. 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.
On February 28, 2012, Global Equity Partners PLC entered into a Bridge Loan
Agreement with David Lonergan, a resident of Ireland, pursuant to which Mr.
Lonergan loaned Global Equity Partners PLC $20,000. The loan is unsecured and is
due on June 11, 2012, which is 90 days after the funds were received. Interest
on the loan is 3% or $600 for the 90 day loan term plus 40,000 shares of the
Company's common stock. In addition, the Company granted Mr. Lonergan warrants
to purchase 20,000 shares of common stock. The warrants are exercisable at $1.00
per share and expire on September 13, 2013 (18 months after the funds were
received).
On March 13, 2012, the Company entered into a Bridge Loan and Option
Agreement with Mr. Robert Hasnain, a resident of the United Kingdom, pursuant to
which Mr. Hasnain loaned the Company $50,000. The loan is unsecured and matures
on July 9, 2012, ninety days after the Company received the final tranche of
loan funds. We agreed to issue Mr. Hasnain 100,000 shares of common stock as
interest for the loan. I n the event we default on the loan, then additional
interest will accrue at the rate of 2% per month until the loan is paid in full.
The Company will record debt discounts of $70,000 on the above two loans.
The remaining valuation of the warrants granted to Mr. Lonergan will be record
as $7,000 of interest expense. The Company will credit additional paid in
capital for $77,000 on the two loans.
The Company applied fair value accounting for all share based payment
awards, The fair value of each warrants granted is estimated on the date of
grant using the Black-Scholes pricing model. The Black-Scholes assumptions used
are as follows:
Exercise price $1.00
Expected dividends 0%
Expected volatility 200%
Risk free interest rate 0.35%
Expected life of warrants 1.5 years
Expected forfeitures 0%
If the Company is unable to repay these two loans at maturity, then the
Company may need to cease operations.
It is the Company's intention to seek additional debt financing, which we
plan to use as additional working capital to implement our marketing program to
increase awareness of our business model and also to expand our operations via
the acquisition of companies that are in a similar space and industry as ours,
although we have not identified any companies that we would consider acquiring.
However, we do not not have any verbal or written agreements with anyone to
provide us with debt financing. Any short fall in our projected operating
revenues will be covered by:
22
1) The cash fees that we expect to receive during the next 12 months from
the four clients we currently have under contract.
2) Reducing our expenditures; and
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.
The contracted fees with the four clients listed in the table below, the
fees we have received from the four clients to date, and the outstanding fees we
expect to receive from these clients are set forth in the following table.
Contracted Received to date Future Contract
Consulting Fees (April 2012) Revenue
--------------- ------------ --------
Arrow Cars $135,000 $ 83,000 $ 52,000
RFC KK $312,000 $ 60,000 $252,000
Black Swan Data $270,000 $ 40,000 $230,000
Direct CCTV $240,000 $ 60,000 $180,000
-------- -------- --------
Totals $957,000 $243,000 $714,000
======== ======== ========
Of the $714,000 in future contract revenue in the above table, we expect to
receive the $597,000 in future contract revenue described in the table below in
the next 12 months (May 2012 and April 2013).
Future Contract
Arrow Cars RFC Black Swan Direct CCTV Revenue
---------- -------- ---------- ----------- ----------
2012 May $ 10,000 $ 20,000 $ -- $ -- $ 30,000
June $ 10,000 $ -- $ 15,000 $ -- $ 25,000
July $ 10,000 $ -- $ -- $ 60,000 $ 70,000
August $ 10,000 $ -- $ -- $ -- $ 10,000
September $ 12,000 $ 20,000 $ -- $ -- $ 32,000
October $ -- $ 20,000 $ 80,000 $ -- $100,000
November $ -- $ 20,000 $ -- $ -- $ 20,000
December $ -- $ 20,000 $ 60,000 $ -- $ 80,000
2013 January $ -- $ 20,000 $ 7,500 $120,000 $147,500
February $ -- $ 20,000 $ 7,500 $ -- $ 27,500
March $ -- $ 20,000 $ 7,500 $ -- $ 27,500
April $ -- $ 20,000 $ 7,500 $ -- $ 27,500
-------- -------- -------- -------- --------
Totals $ 52,000 $180,000 $185,000 $180,000 $597,000
======== ======== ======== ======== ========
EXPENSES RELATED TO CONTRACTS WITH OUR FOUR CLIENTS
In 2010, 2011 and 2012, we paid the following commissions and fees in
connection with signing up our four current clients, Arrow Cars SL, RFC K.K.,
Black Swan Data Limited and Direct CCTV:
In 2010, we issued 1,000,000 shares of our common stock to Pilar Tardon, an
accountant in Spain. We valued this stock at $50,000 and issued the stock to
cover a (i) $25,000 commission for introducing us to Arrow Cars SL, and (ii) as
payment of Ms. Tardon's $25,000 invoice for accounting services related to Arrow
Cars SL.
23
In 2010, we paid a $17,577 commission to Bridge Consulting Limited, a
United Kingdom company, for introducing us to Black Swan Data Limited.
In 2011, we paid a $10,000 commission to Patrick Dolan, a resident of the
United Kingdom, for introducing us to RFC K.K.
No commissions or fees were paid in connection with our contract with
Direct CCTV.
No further commissions or fees will be paid to any person or entity related
to these four clients.
FUTURE PLANS
We currently have four clients under contract, Arrow Cars SL, Black Swan
Data Limited, RFC K.K. and CDP Security Group Limited ("Direct CCTV").
We anticipate signing up an additional three clients by the end of 2012.
However, we cannot guarantee that we will sign up any new clients in 2012 or
receive any revenues from new clients in 2012.
Our specific plan of operations and milestones for May 2012 through April
2013 are as follows:
DURING THE SECOND QUARTER OF 2012, WE INTEND TO:
DEVELOP THE INTRODUCER NETWORK FURTHER AND IN HOPES OF ATTRACTING NEW INTEREST
FOR OUR SERVICE.
We currently 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;
* 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.
We intend to develop relationships with a further five "introducers" to
potential new business for the Company before the end of June 2012. The
estimated additional expense of $10,000 to achieve this is mainly travel
expenses that will be funded by income receivable from clients currently under
contract.
DURING THE THIRD QUARTER OF 2012, WE INTEND TO:
CREATE A MORE EFFICIENT SYSTEM FOR REVIEWING PROSPECTIVE BUSINESS.
Our new business review system will change in 2012. We will concentrate our
efforts on the quality of the company that is introduced to us. We will start
off by sending the client a standard due diligence list and request that they
complete the list and send us the support for review. We will then follow-up the
due diligence with a "site visit" in order to properly understand our client's
business model and more importantly meet the principals in person. We intend to
begin this process in July 2012 and will have an added cost of $5,000 per
company reviewed. We will fund this additional expense from operational income,
mainly income receivable from clients currently under contract.
24
EXPAND OUR CONSULTANCY TO INCLUDE MORE MERGER AND ACQUISITION ACTIVITY.
We intend to form relationships with merger and acquisition specialists in
both during 2012, which, hopefully, will enable us to: 1) find potential merger
and acquisition candidates, 2) introduce our clients to brokers and investment
bankers, and 3) introduce the our clients to the appropriate professionals
(attorneys and accountants) to assist them in a public offering or exchange
listing. The only additional cost for this activity will be a very small
administrative burden for telephone calls and communications to be funded out of
operational income, mainly income receivable from clients currently under
contract.
DURING THE FOURTH QUARTER OF 2012, WE INTEND TO:
EXPAND OUR NETWORK OF CONTACTS WITHIN THE INVESTMENT COMMUNITY IN DUBAI
Our network of investment companies in Dubai is currently small; however,
we intend to substantially expand our Dubai network in order to enable us to
make introductions on a more institutional level. From October 2012 onwards, we
intend to develop our network to at least twelve Investment Institutions who may
have interests in minority shareholding in companies from outside of the Middle
East Region. We anticipate a small administrative cost to be no more than
$10,000 for such development to be funded from operational income, mainly income
receivable from clients currently under contract.
BETWEEN JULY 2012 AND DECEMBER 2012, WE INTEND TO:
SIGN CONTRACTS WITH A MINIMUM OF THREE NEW CLIENTS.
We have a pipeline of at least twelve potentially new clients that we are
currently reviewing and we hope that we will gain at least three new consultancy
contracts in 2012. Hopefully, this pipeline will grow during 2012 and early
2013, making the possibility of attracting at least three new clients more
achievable.
Our estimated monthly cash burn rate for 2012 and thorugh April 2013 will
be approximately $20,000, which does not include the $33,333 we will accrue in
salaries to our management team on a monthly basis. Our management team will not
be paid cash salaries until such time as our monthly revenues are sufficient to
pay our estimated $20,000 monthly burn rate and have money left over to pay a
portion or all of the accrued management team salaries. In any given month in
which we receive revenues in excess of $25,000, we will use the excess revenues
to pay accrued salaries. However, we cannot assure investors that we will have
sufficient revenues to fund our operations for the next 12 months.
25
CASH BURN TABLE:
General & Administrative $ 11,000
Legal & Accounting $ 4,000
Other Expenses - Milestones $ 5,000
----------
TOTAL $ 20,000
==========
During the next twelve months, we estimate that the $4,000 per month (see
table above) in legal and accounting fees will cover the audit of our financial
statements for the fiscal year ended December 31, 2012, quarterly reviews by of
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.
In the event that we are unable to generate 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.
This section of the registration statement includes a number of
forward-looking statements that reflect our current views with respect to future
events and financial performance. Forward-looking statements are often
identified by words like: believe, expect, estimate, anticipate, intend, project
and similar expressions, or words which, by their nature, refer to future
events. You should not place undue certainty on these forward-looking
statements, which apply only as of the date of this registration statement.
These forward-looking statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from historical results or
our predictions.
ITEM 3. PROPERTIES
The Company does not own any property. Our executive offices are located at
23 Frond "K" Palm Jumeirah, Dubai, UAE where we are utilizing approximately 600
square feet of Peter Smith's personal offices in Dubai and pay no rent for such
privilege. We also have a satellite office located at 1 Berkeley Street, London
W1J 8DJ, United Kingdom, which is a service office for which we pay 350 British
Pounds per month on a renewable one year lease. Our Business Development
Director, Adrian Scarrott, uses our London office on a daily basis and we use
the office when our other management members are in London. We have another
satellite office located at Avenida Marques del Duero 67, Edificio Bahia 2A,
29670 San Pedro de Alcantara, Marbella, Spain where we are utilizing
approximately 1,100 square feet of Enzo Taddei's personal offices in Marbella
and pay no rent for such privilege. 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. We do not maintain an office in
the United States.
26
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
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.
(a) Security ownership of certain beneficial owners:
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
-------------- ---------------- -------------------- ----------------
Common Stock Peter J. Smith 18,000,000 (1) 62.23%
23 Frond "K" Palm Jumeirah
Dubai, UAE
Common Stock Enzo Taddei 5,000,000 (2) 17.29%
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.
27
Name and Address 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%
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) 62.23%
Common Stock Enzo Taddei 5,000,000 (2) 17.29%
Common Stock All officers and directors 23,000,000 79.52%
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.
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.
28
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
OFFICERS AND DIRECTORS
Our two directors will serve until their two successors are elected and
qualified. Our officers are elected by the board of directors to a term of one
year and serve until their successor is duly elected and qualified, or until
they are removed from office. Our board of directors has no nominating, auditing
or compensation committees.
The names, addresses, ages and positions of our officers, directors and key
employees are set forth below:
First Year
Name Age as Director Position
---- --- ----------- --------
Peter James Smith 43 2010 President, Chief Executive Officer
and Director
Enzo Taddei 39 2011 Chief Financial Officer, 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
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.
29
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 few 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
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);
30
(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;
(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.
31
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.
ABSENCE OF INDEPENDENT DIRECTORS
We do not have any independent directors and are unlikely to be able to
recruit and retain any independent directors due to our small size and limited
financial resources.
DIRECTORSHIPS
Enzo Taddei 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
We have not established an Audit Committee. The functions of the Audit
Committee are currently being carried out by our Board of Directors.
FAMILY RELATIONSHIPS
There are no family relationships between or among or officers and
directors.
CODE OF ETHICS
We adopted a Code of Business Conduct and Ethics on September 2, 2011.
AUDIT COMMITTEE
The Board of Directors acts as the Audit Committee and the Board has no
separate committees. The Company has no qualified financial expert at this time
because it has not been able to hire a qualified candidate. Further, the Company
believes that it has inadequate financial resources at this time to hire such an
expert. The Company intends to continue to search for a qualified individual for
hire.
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid by the
Company and/or its subsidiary, GE Partners PLC, to our executive officers and
directors of the Company for services rendered during the periods indicated
(from inception of 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.
32
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.
(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.
In 2011, we issued 5,000,000 shares of Series A Preferred Stock (100% of
the authorized shares of preferred stock) to our President, Peter James Smith.
Our Board of Directors recognized the hard and fruitful work of Mr. Smith for
the past three years, as well as the extensive contact list in the United
Kingdom and Dubai that Mr. Smith has developed over the years, and which is an
invaluable asset to our current business model. Our Board of Directors decided
to compensate Mr. Smith 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) valued at $480,000.
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:
33
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.
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.
34
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.
(b) If Employer terminates this Agreement by reason of the Disability
of Employee or if this Agreement is automatically terminated upon
the Death of Employee pursuant to Section 3(b), Employee or his
estate shall be entitled to receive, and Employer shall make, the
following severance payments:
i. continue to pay a sum equivalent to three years annual
salary via the life assurance scheme to be put in place
January 2012
35
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.
In March 2012, the Company granted 20,000 stock purchase warrants to David
Lonergan in connection with a Bridge Loan and Option Agreement with Mr.
Lonergan. The warrants are exercisable at $1.00 per share and expire on
September 13, 2013. There have been no options granted.
COMPENSATION OF DIRECTORS
Our two directors do not receive any compensation for serving as a member
of our board of directors, as they are compensated pursuant to their employment
agreements as officers of the Company.
No retirement, pension, profit sharing, stock option or insurance programs
or other similar programs have been adopted by the Company for the benefit of
its employees.
There are no understandings or agreements regarding compensation our
management will receive after a business combination that is required to be
included in this table, or otherwise.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
Although we have not adopted formal procedures for the review, approval or
ratification of transactions with related persons, we adhere to a general policy
that such transactions should only be entered into if they are on terms that, on
the whole, are no more favorable, or no less favorable, than those available
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.
ABSENCE OF INDEPENDENT DIRECTORS
We do not have any independent directors and are unlikely to be able to
recruit and retain any independent directors due to our small size and limited
financial resources.
Except as otherwise indicated herein, there have been no related party
transactions, or any other transactions or relationships required to be
disclosed pursuant to Item 404 of Regulation S-K.
ITEM 8. LEGAL PROCEEDINGS
Presently, there are not any material pending legal proceedings to which
the Company is a party or as to which any of its property is subject and the
Company does not know nor is it aware of any legal proceedings threatened or
contemplated against it.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information. The Company's Common Stock is not trading on any
stock exchange. The Company is not aware of any market activity in its stock
since its inception and through the date of this filing. There is no assurance
that a trading market will ever develop or, if such a market does develop, that
it will continue.
36
The Securities and Exchange Commission has adopted Rule 15g-9 which
establishes the definition of a "penny stock," for purposes relevant to us, as
any equity security that has a market price of less than $5.00 per share or with
an exercise price of less than $5.00 per share, subject to certain exceptions.
For any transaction involving a penny stock, unless exempt, the rules require:
(i) that a broker or dealer approve a person's account for transactions in penny
stocks and (ii) the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and quantity of the
penny stock to be purchased. In order to approve a person's account for
transactions in penny stocks, the broker or dealer must (i) obtain financial
information and investment experience and objectives of the person; and (ii)
make a reasonable determination that the transactions in penny stocks are
suitable for that person and that person has sufficient knowledge and experience
in financial matters to be capable of evaluating the risks of transactions in
penny stocks. The broker or dealer must also deliver, prior to any transaction
in a penny stock, a disclosure schedule prepared by the Commission relating to
the penny stock market, which, in highlight form, (i) sets forth the basis on
which the broker or dealer made the suitability determination and (ii) that the
broker or dealer received a signed, written agreement from the investor prior to
the transaction. Disclosure also has to be made about the risks of investing in
penny stocks in both public offerings and in secondary trading, and about
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to
an investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
(b) Holders. As of the date of this filing, there were 81 record holders of
the 28,920,700 shares of the Company's issued and outstanding Common Stock. The
issued and outstanding shares of the Company's common stock were issued in
accordance with the exemptions from registration afforded by Section 4(2) and/or
Regulation S of the Securities Act of 1933, as amended.
(c) Dividends. The Company has not paid any cash dividends to date and does
not anticipate or contemplate paying dividends in the foreseeable future. It is
the present intention of management to utilize all available funds for the
development of the Company's business.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
The Company originally issued to 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, who is an individual (non-"U.S.
person" as defined in Rule 902 of Regulation S), in exchange for professional
services rendered to the Company and also for an introduction commission. The
professional services rendered related to the financial restructuring of one of
our current clients, Arrow Cars SL; these services were valued at $25,000. Miss
Tardon also submitted to the Company an invoice for a further $25,000 for her
introduction of Arrow Cars SL. Therefore, the total value of Ms. Tardon's
services were valued at $50,000 and paid by our issuance to her of the 1,000,000
shares of common stock.
37
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 holders (none of whom was a "U.S. person" as defined in Rule
902 of Regulation S), at various negotiated conversion rates ranging from $.36
to $.44 per share, in satisfaction of $263,533 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 16,000 $.44 per share
Brain H. Coates $ 14,024 40,000 $.35 per share
Daycrest Nominees Ltd. $ 26,952 70,000 $.39 per share
Barrie Pearson Craig $ 7,440 20,000 $.37 per share
Samueal M. Austin $ 4,435 12,000 $.37 per share
David Baker $ 3,593 10,000 $.36 per share
Tohibu Ou $200,000 500,000 $.40 per share
-------- -------
Totals $263,533 668,000
======== =======
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
38
Caoimhe Lonergan 5,000 $ 2,500.00
Eibhlin Lonergan 5,000 $ 2,500.00
Saoirse Lonergan 5,000 $ 2,500.00
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 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.
On March 31, 2012, the Company issued 100,000 shares of common stock to Mr.
Robert Hasnain, a resident of the United Kingdom, as interest on a $50,000 loan
he made to the Company. $30,000 was loaned to Global Equity Partners Plc on
March 20, 2012 and the $20,000 balance of the loan was paid to Global Equity
Partners, PLC on April 10, 2012. The Company valued these 100,000 shares at
$50,000 in the aggregate.
On March 31, 2012, the Company issued 40,000 shares of common stock to Mr.
David Lonergan, a resident of Ireland, as a portion of the interest due under a
loan of $20,000 loan made to Global Equity Partners PLC on March 13, 2012. The
Company valued these shares at $20,000 in the aggregate.
The 2,000,000 shares of common stock issued to Javan Kasili, the 5,000,000
shares of Series A Preferred Stock issued to Peter Smith, the 100,000 shares of
common stock issued to Mr. Hasnain and the 40,000 shares issued to Mr. Lonergan,
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;
39
* 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;
* 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 Javan Kasili, the 5,000,000 shares of Series A Preferred
Stock issued to Peter Smith, the 100,000 shares issued to Mr. Hasnain and the
40,000 shares issued to Mr. Lonergan) 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;
40
* each investor had knowledge and experience in financial and other
business matters such that he was capable of evaluating the merits and
risks of an investment in us;
* such investor was given information and access to all of our
documents, records, books, officers and directors, our executive
offices pertaining to the investment and was provided the opportunity
to ask questions and receive answers regarding the terms and
conditions of the offering and to obtain any additional information
that we possesses or were able to acquire without unreasonable effort
and expense;
* each investor had no need for liquidity in their investment in us and
could afford the complete loss of their investment in us;
* we did not employ any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio;
* we did not conduct, hold or participate in any seminar or meeting
whose attendees had been invited by any general solicitation or
general advertising;
* we placed a legend on each certificate or other document that
evidences the securities stating that the securities have not been
registered under the 33 Act and setting forth or referring to the
restrictions on transferability and sale of the securities;
* 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."
ITEM 11. DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 70,000,000 shares of Common Stock
and 5,000,000 shares of Preferred Stock.
COMMON STOCK
Our authorized capital stock includes 70,000,000 shares of common stock,
par value $0.001 per share. The holders of our Common Stock:
41
* have equal ratable rights to dividends from funds legally available if
and when declared by our board of directors;
* are entitled to share ratably in all of our assets available for
distribution to holders of common stock upon liquidation, dissolution
or winding up of our affairs;
* do not have preemptive, subscription or conversion rights and there
are no redemption or sinking fund provisions or rights; and
* are entitled to one non-cumulative vote per share on all matters on
which stockholders may vote.
PREFERRED STOCK
We are authorized to issue 5,000,000 shares of preferred stock, all of
which is currently issued and outstanding and held by our Chief Executive
Officer, Peter Smith.
Our Board of Directors is authorized to provide for the issuance of shares
of preferred stock in series and, by filing a certificate pursuant to the
applicable law of Nevada, to establish from time to time the number of shares to
be included in each such series, and to fix the designation, powers, preferences
and rights of the shares of each such series and the qualifications, limitations
or restrictions thereof without any further vote or action by the shareholders.
Any shares of preferred stock so issued would have priority over the common
stock with respect to dividend or liquidation rights. Any future issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change in control of our Company without further action by the shareholders and
may adversely affect the voting and other rights of the holders of common stock.
At present, we have no plans to neither issue any preferred stock nor adopt any
series, preferences or other classification of preferred stock.
The issuance of shares of preferred stock, or the issuance of rights to
purchase such shares, could be used to discourage an unsolicited acquisition
proposal. For instance, the issuance of a series of preferred stock might impede
a business combination by including class voting rights that would enable the
holder to block such a transaction, or facilitate a business combination by
including voting rights that would provide a required percentage vote of the
stockholders. In addition, under certain circumstances, the issuance of
preferred stock could adversely affect the voting power of the holders of the
common stock. Although the Board of Directors is required to make any
determination to issue such stock based on its judgment as to the best interests
of our stockholders, the Board of Directors could act in a manner that would
discourage an acquisition attempt or other transaction that some, or a majority,
of the stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then market price
of such stock. The Board of Directors does not at present intend to seek
stockholder approval prior to any issuance of currently authorized stock, unless
otherwise required by law or stock exchange rules.
On November 30, 2011, our Board of Directors approved the creation of
Series A Preferred Stock ("Series A Preferred"), and filed an Amended
Certificate of Designation with the Secretary of State of Nevada on November 30,
2011. By virtue of the Certificate of Designation, the Series A Preferred has
the following rights and preferences:
42
Number of Shares: 5,000,000
Voting Rights: Each share has two (2) votes
Conversion Rights: Each share will be convertible into two (2) shares
of Common Stock beginning December 1, 2013
Dividend Rights: None
Liquidation Rights: None
On November 30, 2011, we issued 5,000,000 shares of Series A Preferred
Stock ("Series A Preferred") to Peter J. Smith, our President, for an aggregate
consideration of $480,000 as a bonus package equal to 24 months of gross salary.
This description of certain matters relating to the securities of the
Company is a summary and is qualified in its entirety by the provisions of the
Company's Articles of Incorporation, Certificate of Designation and By-Laws, and
any amendments thereto, copies of which have been filed as exhibits to this Form
10.
DIVIDENDS
Dividends, if any, will be contingent upon the Company's revenues and
earnings, if any, capital requirements and financial conditions. The payment of
dividends, if any, will be within the discretion of the Company's Board of
Directors. The Company presently intends to retain all earnings, if any, for use
in its business operations and accordingly, the Board of Directors does not
anticipate declaring any dividends prior to a business combination.
WARRANTS AND OPTIONS
We have no outstanding options to acquire our stock. However, in March
2012, the Company granted 20,000 stock purchase warrants to David Lonergan in
connection with a Bridge Loan and Option Agreement with Mr. Lonergan. The
warrants are exercisable at $1.00 per share and expire on September 13, 2013.
TRADING OF SECURITIES IN SECONDARY MARKET
The Company presently has 28,920,700 shares of common stock issued and
outstanding, all of which are "restricted securities," as that term is defined
under Rule 144 promulgated under the Securities Act, in that such shares were
issued in private transactions not involving a public offering.
ANTI-TAKEOVER PROVISIONS
There are no Nevada anti-takeover provisions that our Board of Directors
has adopted which may have the affect of delaying or preventing a change in
control.
STOCK TRANSFER AGENT
Our stock transfer agent is ClearTrust, LLC, 16450 Pointe Village Drive,
Suite 201, Lutz, Florida 33558.
REGISTRATION RIGHTS
We have not granted registration rights to any person.
43
REPORTS TO SHAREHOLDERS
We intend to furnish our shareholders with annual reports that will
describe the nature and scope of our business and operations for the prior year
and will contain a copy of our audited financial statements for our most recent
fiscal year.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article VII, Section 7 of the Company's Bylaws provide that the Company
shall indemnify its officers, directors, employees and agents to the fullest
extent permitted by the laws of Nevada.
The Nevada Revised Statutes allow us to indemnify our officers, directors,
employees, and agents from any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative, or investigative, except
under certain circumstances. Indemnification may only occur if a determination
has been made that the officer, director, employee, or agent acted in good faith
and in a manner, which such person believed to be in the best interests of the
corporation. A determination may be made by the shareholders; by a majority of
the directors who were not parties to the action, suit, or proceeding confirmed
by opinion of independent legal counsel; or by opinion of independent legal
counsel in the event a quorum of directors who were not a party to such action,
suit, or proceeding does not exist.
The expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding must be paid by us as they are incurred and
in advance of the final disposition of the action, suit or proceeding, if and
only if the officer or director undertakes to repay said expenses to us if it is
ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by us.
The indemnification and advancement of expenses may not be made to or on
behalf of any officer or director if a final adjudication establishes that the
officer's or director's acts or omission involved intentional misconduct, fraud
or a knowing violation of the law and was material to the cause of action.
The Nevada Revised Statutes allow a company to indemnify our officers,
directors, employees, and agents from any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, except under certain circumstances. Indemnification may only
occur if a determination has been made that the officer, director, employee, or
agent acted in good faith and in a manner, which such person believed to be in
the best interests of the corporation. A determination may be made by the
stockholders; by a majority of the directors who were not parties to the action,
suit, or proceeding confirmed by opinion of independent legal counsel; or by
opinion of independent legal counsel in the event a quorum of directors who were
not a party to such action, suit, or proceeding does not exist.
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.
44
AUTHORIZED BUT UNISSUED CAPITAL STOCK
Nevada law does not require shareholder approval for any issuance of
authorized shares. However, the marketplace rules of the NASDAQ, which would
apply only if our common stock were ever listed on the NASDAQ, which is unlikely
for the foreseeable future, require shareholders' approval of certain issuances
of common stock equal to or exceeding 20% of the then outstanding voting power
or then outstanding number of shares of common stock, including in connection
with a change of control of the Company, the acquisition of the stock or assets
of another company or the sale or issuance of common stock below the book or
market value price of such stock. These additional shares may be used for a
variety of corporate purposes, including future public offerings to raise
additional capital or to facilitate corporate acquisitions.
One of the effects of the existence of unissued and unreserved common stock
may be to enable our board of directors to issue shares to persons friendly to
current management, which issuance could render more difficult or discourage an
attempt to obtain control of our board by means of a merger, tender offer, proxy
contest or otherwise, and thereby protect the continuity and entrenchment of our
management and possibly deprive the shareholders of opportunities to sell their
shares of our common stock at prices higher then prevailing market prices.
SHAREHOLDER MATTERS
As an issuer of "penny stock," the protection provided by the federal
securities laws relating to forward-looking statements does not apply to us if
our shares are considered to be penny stocks. Although the federal securities
laws provide a safe harbor for forward-looking statements made by a public
company that files reports under the federal securities laws, this safe harbor
is not available to issuers of penny stocks. As a result, we will not have the
benefit of this safe harbor protection in the event of any claim that the
material provided by us, including this prospectus, contained a material
misstatement of fact or was misleading in any material respect because of our
failure to include any statements necessary to make the statements not
misleading.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The audited financial statements of Global Equity International, Inc. for
the years ended December 31, 2010 (consolidated) and 2009 appear beginning at
page F-1, and the audited financial statements of Global Equity International,
Inc. for the year ended December 31 , 2011 (consolidated) and 2010, appear
beginning at F-19.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There are not and have not been any disagreements between the Registrant
and its accountants on any matter of accounting principles, practices or
financial statement disclosure.
45
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(b) Exhibits
The following Exhibits are filed as part of this Registration Statement:
Exhibit No. Document Description
----------- --------------------
2* Plan and Agreement of Reorganization dated November 15, 2010, among
Global Equity International, Inc., Global Equity Partners PLC and
Stockholders of Global Equity Partners LLC
3.1* Articles of Incorporation
3.2* Bylaws
4.1* Specimen Stock Certificate
4.2* Certificate of Amendment to Certificate of Designation of Series A
Convertible Preferred Stock
10.1* Employment Agreement dated September 1, 2011, with Peter J. Smith
10.2* Employment Agreement dated September 1, 2011, with Enzo Taddei
10.3* Employment Agreement dated September 1, 2011, with Adrian Scarrott
10.4* Consulting Agreement between Global Equity Partners PLC and Black
Swan Data Ltd. dated July 29, 2011
10.5* Consulting Agreement between Global Equity Partners PLC and Arrow
Cars SL dated January 14, 2011
10.6* Consulting Agreement between Global Equity Partners PLC and RFC K.K.
dated October 19, 2011
10.7* Consulting Agreement between Global Equity Partners PLC and M1
Luxembourg AG dated December 20, 2010
10.8* Consulting Agreement between Global Equity Partners PLC and Monkey
Rock Group, Inc. dated November 26, 2009
10.9* Consulting Agreement between Global Equity Partners PLC and Voz
Mobile Cloud Ltd dated December 12, 2011
10.10** Consulting Agreement between Global Equity Partners PLC and CDP
Security Group Limited dated March 31, 2012.
10.11** Bridge Loan and Option Agreement made as of February 28, 2012,
between Mr. David Lonergan, Global Equity Partners, PLC and Global
Equity International, Inc.
10.12** Bridge Loan and Option Agreement made as of March 13, 2012, between
Mr. Robert Hasnain and Global Equity International, Inc.
14* Code of Business Conduct and Ethics adopted on September 2, 2011
21* Subsidiaries
----------
* Previously filed.
** Filed herewith.
46
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment No. 4 to Form 10 registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
Global Equity International, Inc.
Date: May 29, 2012 By: /s/ Peter J. Smith
----------------------------------------
Name: Peter J. Smith
Title: President, Chief Executive Officer
and Director
Global Equity International, Inc.
Date: May 29, 2012 By: /s/ Enzo Taddei
----------------------------------------
Name: Enzo Taddei
Title: Chief Financial Officer and Director
47
Global Equity International, Inc. and Subsidiary
Financial Statements
December 31, 2010 and 2009
F-1
CONTENTS
Page(s)
-------
Report of Independent Registered Public Accounting Firm F-3
Balance Sheets - December 31, 2010 (Consolidated) and 2009 F-4
Statements of Operations and Comprehensive Income (Loss)
Periods Ended December 31, 2010 (Consolidated) and 2009 F-5
Statement of Stockholders' Equity
Periods Ended December 31, 2010 (Consolidated) and 2009 F-6
Statements of Cash Flows
Periods Ended December 31, 2010 (Consolidated) and 2009 F-7
Notes to Financial Statements
Periods Ended December 31, 2010 (Consolidated) and 2009 F-8 through F-18
F-2
[LETTERHEAD OF BERMAN & COMPANY, P.A.]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of:
Global Equity International, Inc.
We have audited the accompanying balance sheets of Global Equity International,
Inc. and Subsidiary, as of December 31, 2010 (consolidated) and 2009, and the
related statements of operations and comprehensive income (loss), stockholders'
equity and cash flows for the periods ended December 31, 2010 (consolidated) and
2009. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included considerations of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Global Equity International,
Inc. and Subsidiary as of December 31, 2010 (consolidated) and 2009, and the
results of its operations and comprehensive income (loss), and its cash flows
for the periods then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Berman & Company, P.A.
-----------------------------------
Boca Raton, Florida
October 13, 2011, except for Note 9 as to which the date is November 30, 2011
F-3
Global Equity International, Inc. and Subsidiary
Balance Sheets
December 31, 2010 December 31, 2009
----------------- -----------------
(Consolidated)
ASSETS
CURRENT ASSETS
Cash $ 3,275 $ 3,380
Prepaids 551 7,225
---------- ----------
TOTAL CURRENT ASSETS 3,826 10,605
Marketable securities 2,227,236 --
---------- ----------
TOTAL ASSETS $2,231,062 $ 10,605
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 23,357 $ 3,757
---------- ----------
TOTAL CURRENT LIABILITIES 23,357 3,757
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock: 70,000,000 shares authorized and 28,668,000 and
20,000,000 shares issued and outstanding, $0.001 par value 28,668 20,000
Additional paid in capital 336,866 80,000
Retained earnings (accumulated deficit) 1,676,095 (93,152)
Accumulated other comprehensive income 166,076 --
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 2,207,705 6,848
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $2,231,062 $ 10,605
========== ==========
See accompanying notes to financial statements
F-4
Global Equity International, Inc. and Subsidiary
Statements of Operations and Comprehensive Income (Loss)
Years Ended December 31,
2010 2009
------------ ------------
(Consolidated)
Revenue $ 2,061,160 $ 15,000
General and administrative expenses 291,913 108,152
------------ ------------
NET INCOME (LOSS) $ 1,769,247 $ (93,152)
============ ============
Net income (loss) per share - basic and diluted $ 0.08 $ (0.00)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED 21,092,405 20,000,000
============ ============
COMPREHENSIVE INCOME (LOSS):
Net income (loss) $ 1,769,247 $ (93,152)
Unrealized gain on available for sale marketable securities 166,076 --
------------ ------------
COMPREHENSIVE INCOME (LOSS) $ 1,935,323 $ (93,152)
============ ============
See accompanying notes to financial statements
F-5
Global Equity International, Inc. and Subsidiary
Statement of Stockholders' Equity
Years ended December 31 2010 (Consolidated) and 2009
Retained Accumulated
Common Stock Additional Earnings Other Total
------------------ Paid-in (Accumulated Comprehensive Stockholders'
Shares Amount Capital Deficit) Income Equity
------ ------ ------- -------- ------ ------
Stock issued for services -
related party ($0.005/share) 20,000,000 $20,000 $ 80,000 $ -- $ -- $ 100,000
Net loss - 2009 -- -- -- (93,152) -- (93,152)
---------- ------- -------- ---------- -------- ----------
Balance - December 31, 2009 20,000,000 20,000 80,000 (93,152) -- 6,848
Stock issued in connection with debt
conversion ($0.40/share) 668,000 668 264,866 -- -- 265,534
Recapitalization 8,000,000 8,000 (8,000) -- -- --
Net income - 2010 -- -- -- 1,769,247 -- 1,769,247
Unrealized gain on available for sale
marketable securities -- -- -- -- 166,076 166,076
---------- ------- -------- ---------- -------- ----------
BALANCE - DECEMBER 31, 2010 28,668,000 $28,668 $336,866 $1,676,095 $166,076 $2,207,705
========== ======= ======== ========== ======== ==========
See accompanying notes to financial statements
F-6
Global Equity International, Inc. and Subsidiary
Statements of Cash Flows
Years Ended December 31,
2010 2009
------------ ------------
(Consolidated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Profit (Loss) $ 1,769,247 $ (93,152)
Adjustments to reconcile net income (loss) to
cash used in operating activities:
Stock issued for services - related party -- 100,000
Stock issued for services -- --
Marketable securities received as revenue (2,061,160) --
Changes in operating assets and operating liabilities:
Prepaid expenses 6,674 (7,225)
Accounts Payable 19,600 3,757
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (265,639) 3,380
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible debt 265,534 --
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 265,534 --
------------ ------------
NET INCREASE (DECREASE) IN CASH (105) 3,380
CASH - BEGINNING OF PERIOD 3,380 --
------------ ------------
CASH - END OF PERIOD $ 3,275 $ 3,380
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ -- $ --
============ ============
Income taxes $ -- $ --
============ ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Stock issued in connection with debt conversion $ 265,534 $ --
============ ============
See accompanying notes to financial statements
F-7
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
NOTE 1 NATURE OF OPERATIONS
Global Equity Partners, PLC ("GEP"), a private company, was organized under the
laws of the Republic of Seychelles on September 2, 2009. Global Equity
International Inc. (the "Company" or "GEI"), a private company, was organized
under the laws of the state of Nevada on October 1, 2010. On November 15, 2010,
GEP executed a reverse recapitalization with GEI. See Note 3.
Revenue is generated from business consulting services, introduction fees, and
equity participation.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
All significant inter-company accounts and transactions have been eliminated in
consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenue and expenses during the reporting
period.
Making estimates requires management to exercise significant judgment. It is at
least reasonably possible that the estimate of the effect of a condition,
situation or set of circumstances that existed at the date of the financial
statements, which management considered in formulating its estimate could change
in the near term due to one or more future non confirming events. Accordingly,
the actual results could differ from those estimates.
RISKS AND UNCERTAINTIES
The Company's operations are subject to significant risk and uncertainties
including financial, operational, competition and potential risk of business
failure. The risk of social and governmental factors is also a concern since the
Company is headquartered in Dubai.
CASH
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. At December 31, 2010 and 2009,
respectively, the Company had no cash equivalents.
F-8
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
MARKETABLE SECURITIES
(A) CLASSIFICATION OF SECURITIES
At the time of acquisition a security is designated as held-to-maturity,
available-for-sale or trading, which depends on ability and intent to hold such
security to maturity. Securities classified as trading and available-for-sale
are reported at fair value, while securities classified as held-to-maturity are
reported at amortized cost.
Any unrealized gains and losses are reported as other comprehensive income
(loss). Realized gains (losses) are computed on a specific identification basis
and are recorded in net capital gains (losses) on investments in the combined
consolidated statements of operations
All securities held at December 31, 2010 are designated as available for sale.
(B) OTHER THAN TEMPORARY IMPAIRMENT
The Company reviews its equity investment portfolio for any unrealized losses
that would be deemed other-than-temporary and require the recognition of an
impairment loss in income. If the cost of an investment exceeds its fair value,
the Company evaluates, among other factors, general market conditions, the
duration and extent to which the fair value is less than cost, and the Company's
intent and ability to hold the investments. Management also considers the type
of security, related-industry and sector performance, as well as published
investment ratings and analyst reports, to evaluate its portfolio. Once a
decline in fair value is determined to be other than temporary, an impairment
charge is recorded and a new cost basis in the investment is established. If
market, industry, and/or investee conditions deteriorate, the Company may incur
future impairments. The Company has not recorded any impairment losses for the
year ended December 31, 2010.
REVENUE RECOGNITION
Revenue is recognized only when the price is fixed or determinable, persuasive
evidence of an arrangement exists, the service is performed, and collectability
of the related fee is reasonably assured. The Company's services do not include
a provision for cancellation, termination, or refunds.
In 2010, the Company received marketable securities as consideration for
services rendered. In 2009, revenues were generated from consulting services for
cash.
F-9
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
During 2010 and 2009, the Company had the following concentrations of revenues
with customers:
Customer 2010 2009
-------- ---- ----
A 53% --%
B 47% 100%
SHARE-BASED PAYMENTS
Generally, all forms of share-based payments, including stock option grants,
warrants, restricted stock grants and stock appreciation rights are measured at
their fair value on the awards' grant date, based on estimated number of awards
that are ultimately expected to vest. Share-based compensation awards issued to
non-employees for services rendered are recorded at either the fair value of the
services rendered or the fair value of the share-based payment, whichever is
more readily determinable.
INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred
income tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, and operating
loss carryforwards. Deferred income tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred income tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. A valuation
allowance is provided to reduce the carrying amount of deferred income tax
assets if it is considered more likely than not that some portion, or all, of
the deferred income tax assets will not be realized.
At December 31, 2009, the Company was not subject to federal and state income
taxes; accordingly, no provision had been made. The financial statements reflect
GEP's transactions without adjustment, if any, required for income tax purposes
for the year ended December 31, 2009 and through November 15, 2010, the date of
the reverse recapitalization.
The Company recognizes the effect of income tax positions only if those
positions are more likely than not of being sustained. Recognized income tax
positions are measured at the largest amount that is greater than 50% likely of
being realized. Changes in recognition or measurement are reflected in the
period in which the change in judgment occurs.
F-10
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
The Company will record interest and penalties related to unrecognized tax
benefits in income tax expense. There were none for the years ended December 31,
2010 and 2009.
The Company may be subject to examination by the Internal Revenue Service
("IRS") and state taxing authorities for all open tax years.
The Company should not be subject to income tax in the Seychelles Islands. A
company is subject to Seychelles income tax if it does business in Seychelles. A
company that is incorporated in Seychelles, but that does not do business in
Seychelles, is not subject to income tax there. The Company did not do business
in Seychelles for the year ended December 31, 2010, and the Company does not
intend to do business in Seychelles in the future. All business activities were
performed in Dubai for the year ended December 31, 2010. Dubai does not have an
income tax.
EARNINGS PER SHARE
Basic earnings (loss) per share is computed by dividing net income (loss) by
weighted average number of shares of common stock outstanding during each
period. Diluted earnings (loss) per share is computed by dividing net income
(loss) by the weighted average number of shares of common stock, common stock
equivalents and potentially dilutive securities outstanding during the period.
The Company has no common stock equivalents, which, if exercisable, would be
anti-dilutive. A separate computation of diluted earnings (loss) per share is
not presented.
COMPREHENSIVE INCOME (LOSS)
Consists of the change in unrealized gain (loss) on available-for-sale
marketable securities.
F-11
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
FAIR VALUE FOR FINANCIAL ASSETS AND LIABILITIES
The Company measures assets and liabilities at fair value based on an expected
exit price as defined by the authoritative guidance on fair value measurements,
which represents the amount that would be received on the sale of an asset or
paid to transfer a liability, as the case may be, in an orderly transaction
between market participants. As such, fair value may be based on assumptions
that market participants would use in pricing an asset or liability. The
authoritative guidance on fair value measurements establishes a consistent
framework for measuring fair value on either a recurring or nonrecurring basis
whereby inputs, used in valuation techniques, are assigned a hierarchical level.
The following are the hierarchical levels of inputs to measure fair value:
* Level 1: Observable inputs that reflect quoted prices (unadjusted) for
identical assets or liabilities in active markets.
* Level 2: Inputs reflect: quoted prices for identical assets or
liabilities in markets that are not active; quoted prices for similar
assets or liabilities in active markets; inputs other than quoted
arices that are observable for the assets or liabilities; or inputs
that are derived principally from or porroborated by observable market
data by correlation or other means.
* Level 3: Unobservable inputs reflecting the Company's assumptions
incorporated in valuation techniques used to determine fair value.
These assumptions are required to be consistent with market
participant assumptions that are reasonably available.
The carrying amounts reported in the balance sheet for cash, marketable
securities and accounts payable approximate fair value based on the short-term
nature of these instruments.
The Company has assets measured at fair market value on a recurring basis.
Consequently, the Company had gains and losses reported in the statement of
comprehensive income (loss), that were attributable to the change in unrealized
gains or losses relating to those assets and liabilities still held at the
reporting date for the year ended December 31, 2010.
F-12
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
The following is the Company's asset measured at fair value on a nonrecurring
basis at December 31, 2010 and 2009, using quoted prices in active markets for
identical assets (Level 1); significant other observable inputs (Level 2); and
significant unobservable inputs (Level 3):
December 31, 2010 December 31, 2009
----------------- -----------------
Level 1 $ -- $ --
Level 2
Marketable Securities 2,227,236 --
Level 3 -- --
---------- ----------
Total $2,227,236 $ --
========== ==========
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220):
Presentation of Comprehensive Income. The guidance in ASU 2011-05 applies to
both annual and interim financial statements and eliminates the option for
reporting entities to present the components of other comprehensive income as
part of the statement of changes in stockholders' equity. This ASU also requires
consecutive presentation of the statement of net income and other comprehensive
income. Finally, this ASU requires an entity to present reclassification
adjustments on the face of the financial statements from other comprehensive
income to net income. The amendments in this ASU should be applied
retrospectively and are effective for fiscal year, and interim periods within
those years, beginning after December 15, 2011. The Company has early adopted
this guidance in these financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic
820): Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs. The guidance in ASU 2011-04 changes the
wording used to describe the requirements in U.S. GAAP for measuring fair value
and for disclosing information about fair value measurements, including
clarification of the FASB's intent about the application of existing fair value
and disclosure requirements and changing a particular principle or requirement
for measuring fair value or for disclosing information about fair value
measurements. The amendments in this ASU should be applied prospectively and are
effective for interim and annual periods beginning after December 15, 2011.
Early adoption by public entities is not permitted. The adoption of this
guidance is not expected to have a material impact on the Company's financial
position or results of operations.
F-13
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
NOTE 3 REVERSE RECAPITALIZATION
On November 15, 2010, the Company merged with GEP, a private corporation, and
GEP became the surviving corporation, in a transaction treated as a reverse
recapitalization. GEI did not have any material operations and majority-voting
control was transferred to GEP.
In the recapitalization, GEI issued 20,000,000 shares of common stock in
exchange for all of GEP's 100,000 issued and outstanding shares of commons
stock. For financial statement reporting purposes, the 100,000 shares have been
recasted to 20,000,000 shares in accordance with an exchange ratio of 200 for 1.
The balance of the common shares issued and outstanding in GEI prior to the
recapitalization were 8,000,000 common shares, and these common shares represent
the common shares issued and outstanding in GEI prior to the recapitalization
that were not contemplated in the share exchange. The transaction resulted in
GEP's shareholders acquiring approximately 72% control.
The transaction also required a recapitalization of GEP. Since GEP acquired a
controlling voting interest, it was deemed the accounting acquirer, while GEI
was deemed the legal acquirer. The historical financial statements of the
Company are those of GEP and of the consolidated entities from the date of
recapitalization and subsequent.
Since the transaction is considered a reverse recapitalization, the presentation
of pro-forma financial information was not required. All share and per share
amounts have been retroactively restated to the earliest periods presented to
reflect the transaction.
NOTE 4 MARKETABLE SECURITIES AND FAIR VALUE
The following table represents the Company's available for sale marketable
securities holdings as of December 31, 2010:
Equity securities - receipt date $ 2,061,160
Unrealized gains - 2010 210,000
Unrealized losses - 2010 (43,924)
-----------
Equity securities at fair value $ 2,227,236
===========
All securities acquired from customer "A" are unrestricted. All securities
acquired from customer "B" became unrestricted in 2011.
F-14
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
NOTE 5 DEBT
During 2010, the Company issued convertible notes for $265,534 to third parties.
In connection with the recapitalization, these notes were converted into 668,000
shares of common stock, representing a conversion price of $0.40/share. There
was no gain or loss on conversion.
NOTE 6 INCOME TAXES
The provision for income taxes results in an effective rate as follows at
December 31, 2010:
Statutory federal income tax 34.0%
Florida income tax 5.5%
----------
Total effective blended rate 37.63%
==========
The Company's provision (benefit) for income taxes was as follows at December
31, 2010:
Current:
Federal $ --
State --
----------
Total --
----------
Deferred:
Federal --
State --
----------
Total --
----------
Continuing operations $ --
==========
The income tax provision differs from the amount of tax determined by applying
the federal statutory rate as follows at December 31, 2010:
Income tax provision at statutory rate $ 582,844
Increase (decrease) in income tax due to:
Non-taxable foreign earnings (601,544)
State taxes (2,000)
Change in valuation allowance 20,700
----------
Total $ --
==========
F-15
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
Net deferred tax assets and liabilities were comprised of the following at
December 31, 2010:
Deferred tax assets (liabilities), non-current:
Net operating loss $ 20,700
Valuation allowance (20,700)
----------
Net deferred tax asset (liability) $ --
==========
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income taxes.
During the year ended December 31, 2010, the Company generated a net operating
loss of $55,000 for federal and Florida income tax purposes. This loss can be
carried forward and used to offset taxable income in future years and expires on
December 31, 2030.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. As of December 31, 2010,
based upon the levels of historical taxable income and the limited experience of
the Company, the Company believes that it is more likely than not that it will
not be able to realize the benefits of some of these deductible differences.
Accordingly, a valuation allowance of $20,700 has been provided in the
accompanying financial statements as of December 31, 2010.
The Company's net operating loss available to offset Florida income taxes in
future years is $55,000. For state purposes, net operating losses can only be
carried forward. The Company has recorded a full valuation allowance against the
net operating loss since the loss may never be utilized.
From November 15, 2010 to December 31, 2010, GEP incurred a loss of $19,698;
therefore, it had negative earnings and profits and does not have any foreign
earnings and profits to be distributed. Since the GEP does not have any
undistributed earnings, the Company has not recorded a deferred tax liability
associated with the foreign earnings.
GEP is not subject to any foreign income taxes for the year ended December 31,
2010.
F-16
NOTE 7 STOCKHOLDERS' EQUITY
In 2009, the Company issued 20,000,000 shares of common stock, having a fair
value of $100,000 ($0.005/share), to the Company's Chief Executive Officer, in
connection with pre-incorporation services rendered. Fair value was based on the
value of services provided, as this reflected the best evidence of fair value
for an entity that is not publicly traded.
NOTE 8 LIQUIDITY
At December 31, 2010, and through the date of the accompanying report, the
Company's cash balance is minimal, however, the Company expects that it can meet
all of its current obligations if necessary by selling its marketable securities
to generate cash flows. The Company also believes that related party debt and/or
equity financing could be available if needed under favorable terms.
NOTE 9 SUBSEQUENT EVENTS
The Company has evaluated for subsequent events between the balance sheet date
of December 31, 2010 and October 13, 2011, the date the financial statements
were available to be issued, and concluded that events or transactions occurring
during that period requiring recognition or disclosure are as follows:
(A) STOCK ISSUANCES
COMMON STOCK
In May and June 2011, the Company issued 103,100 shares of common stock for
$51,550 ($0.50/share).
On September 23, 2011, the Company issued 9,600 shares of common stock for
services rendered, having a fair value of $4,800 ($0.50/share), based upon
recent third party cash offerings.
PREFERRED STOCK
On November 30 2011, the Company designated Series A Preferred Stock, with the
following rights:
* Voting rights - each share has two votes.
* Conversion - each share is convertible into two shares of common stock
beginning on December 1, 2012
* Number of shares - 5,000,000
The Company issued 5,000,000 Series A convertible preferred shares of stock, as
a bonus to its Chief Executive Officer for services rendered, having a fair
value of $480,000 ($0.096/share), based upon the fair value of the services
rendered, which represents the best evidence of fair value.
(B) DEBT
On July 5, 2011, the Company received an advance of $35,500 from a third party.
The advance was non-interest bearing, unsecured and due on demand. The loan was
repaid in September 2011.
F-17
Global Equity International Inc. and Subsidiary
Notes to Financial Statements
December 31, 2010 (Consolidated) and 2009
(C) EMPLOYMENT AGREEMENTS
Effective September 1, 2011, the Company executed an employment agreement with
its Chief Executive Officer and Chief Financial Officer, under the following
terms:
* Salary - $120,000 - 240,000 per year,
* Stock options - amount yet to be determined; and
* Term - 3 years
F-18
Global Equity International, Inc. and Subsidiary
Consolidated Financial Statements
December 31, 2011 and 2010
F-19
CONTENTS
Page(s)
-------
Report of Independent Registered Public Accounting Firm F-21
Consolidated Balance Sheets - December 31, 2011 and 2010 F-22
Consolidated Statements of Operations and Comprehensive
Income (Loss) Years Ended December 31, 2011 and 2010 F-23
Consolidated Statement of Stockholders' Equity
Years Ended December 31, 2011 and 2010 F-24
Consolidated Statements of Cash Flows
Years Ended December 31, 2011 and 2010 F-25
Notes to Consolidated Financial Statements F-26
F-20
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-21
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-22
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-23
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-24
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-25
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-26
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.
It is not practicable to estimate the fair value of the investment since the
cost of obtaining an independent valuation appears excessive considering the
materiality of the investment to the Company. Additionally, there are no
identifiable events or changes in circumstances that had a significant adverse
effect on the fair value of this investment.
F-27
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 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
pricing model.
F-28
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-29
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 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-30
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-31
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.
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.
F-32
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2011 and 2010
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 recurring and
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
========== ==========
The following section describes the valuation methodologies the Company uses to
measure financial instruments at fair value:
Marketable Securities -- The Level 2 position consists of the Company's
investments in equity securities of various stock held in publicly traded
companies. The valuation of these securities is based on significant inputs that
are observable or can be derived from or corroborated by observable market data.
These valuations are typically based on quoted prices in inactive markets. Our
basis for valuing the stock was the market approach valuation methodology stated
in ASC 820.
Management believes that an "other-than-temporary impairment" would not be
justified, as according to ASC 320-10 an investment is considered impaired when
the fair value of an investment is less than its amortized cost basis. The
impairment is considered either temporary or other-than-temporary. The
accounting literature does not define other-than-temporary. It does, however,
state that other-than-temporary does not mean permanent; although, all permanent
impairments are considered other-than-temporary. The literature does provide
some examples of factors which may be indicative of an "other-than-temporary
impairment", such as:
* the length of time and extent to which market value has been less than
cost;
* the financial condition and near-term prospects of the issuer; and
* the intent and ability of the holder to retain its investment in the
issuer for a period of time sufficient to allow for any anticipated
recovery in market value.
Management believes that the fair value of its investment has been correctly
measured, as the length of time that the stock has been less than cost is
nominal. The financial condition and near-term prospects of the Company's
investment is expected to realize improved value due to a public reverse merger.
Non-Marketable Securities at Fair Value on a Nonrecurring Basis -- Certain
assets are measured at fair value on a nonrecurring basis. These assets consist
of investments accounted for under the cost method. The Level 3 position
consists of investment in an equity security held in a private company.
F-33
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2011 and 2010
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.
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.
F-34
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2011 and 2010
The transaction also required a recapitalization of GEP. Since GEP acquired a
controlling voting interest, it was deemed the accounting acquirer, while GEI
was deemed the legal acquirer. The historical financial statements of the
Company are those of GEP and of the consolidated entities from the date of
recapitalization and subsequent.
Since the transaction is considered a reverse recapitalization, the presentation
of pro-forma financial information was not required. All share and per share
amounts have been retroactively restated to the earliest periods presented to
reflect the transaction.
NOTE 4 MARKETABLE SECURITIES AND FAIR VALUE
The following table represents the Company's available for sale marketable
securities holdings as of December 31, 2010 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.
F-35
Global Equity International Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2011 and 2010
(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.
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-36
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-37
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-38
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-39
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-40
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 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 warrants 1.5 years
Expected forfeitures 0%
F-41