ARGENTUM 47, INC. - Quarter Report: 2017 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

or

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

FOR THE TRANSITION FROM ______ TO ______.

Commission File Number: 0-54557

GLOBAL EQUITY INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number: +971 42 767 576 / +1 321 200 0142

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [ X ]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [  ] No [  ]

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of August 4, 2017, there were 423,090,573 outstanding shares of the Registrant’s Common Stock, $0.001 par value.

INDEX

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Global Equity International, Inc. and Subsidiaries

Consolidated Financial Statements

June 30, 2017

(Unaudited)

CONTENTS

Global Equity International, Inc. and Subsidiaries

Consolidated Balance Sheets

The accompanying notes are an integral part of these consolidated financial statements.

Global Equity International, Inc. and Subsidiaries

Consolidated Statement of Operations and Comprehensive Income (Loss)

For the three and six months ended June 30, 2017 and June 30, 2016 (Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

Global Equity International Inc. And Subsidiaries

Consolidated Statement of Cash Flows

For the six months ended June 30, 2017 and June 30, 2016 (Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

Note 1 - Organization and Nature of Operations

Global Equity International Inc. (the “Company” or “GEI”), a reporting company since June 21, 2012, was organized under the laws of the state of Nevada on October 1, 2010. Global Equity Partners, Plc. (“GEP”), a private company, was organized under the laws of the Republic of Seychelles on September 2, 2009. On November 15, 2010, GEP executed a reverse recapitalization with GEI. On August 22, 2014, we formed a Dubai subsidiary of GEP called GE Professionals DMCC. On June 10, 2016, GEI incorporated its wholly owned subsidiary, called GEP Equity Holdings Limited (“GEP EH”), under the laws of the Republic of Seychelles. On March 14, 2017, the Company´s board of directors unanimously voted to transfer the ownership of GE Professionals DMCC (Dubai) to GEP EH. On June 5, 2017, the Company sold 100% of the issued and outstanding common stock of its GEP to a citizen of the Republic of Thailand by entering into a Stock Purchase and Debt Assumption Agreement (See Note 5).

Revenue is generated from business consulting services and employment placements.

Note 2 - Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information and disclosures necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation.

The unaudited interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, which contains the audited financial statements and notes thereto, together with the Management’s Discussion and Analysis, for the year ended December 31, 2016. The interim results for the period ended June 30, 2017 are not necessarily indicative of results for the full fiscal year.

Note 3 - Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

As reflected in the accompanying consolidated financial statements, the Company had a net loss of $383,295 and $752,311 for the three and six months ended June 30, 2017 respectively, net cash used by operations of $138,693 for the six months ended June 30, 2017; and a working capital of $103,224 and stockholders´ equity of $1,709,336 as of June 30, 2017. It is management’s opinion that some of these factors may raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issue date of this report.

The ability for the Company to continue its operations is primarily dependent on:

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

Whilst the Company´s current engagements are being consummated and executed, the Company may also have to resort to borrowing additional funds with certain related parties, such as management, and also third party funders on a non-discounted basis (if for shares, on a fixed price basis) to sustain the Company’s existence. In addition, in the event that operating cash flows are slowed, the Company would reduce its overheads wherever possible and any monies owed to the management can also be forgiven, if necessary. Furthermore, it is important to note that the largest debt (Eden loan) stated on our current liabilities is non-collateralized and non-convertible loan.

Note 4 - Summary of Significant Accounting Policies

Principles of Consolidation

Global Equity International Inc. (GEI) is the parent Company of its 100% owned subsidiary called GEP Equity Holdings Limited (GEP EH). GEI also owned 100% shareholding of its subsidiary called Global Equity Partners Plc until the date it was sold pursuant to a stock purchase and debt assumption agreement on June 5, 2017. GEP EH is the parent company of its 100% owned subsidiary, GE Professionals DMCC (Dubai). All significant inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation, or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future non-confirming events. Accordingly, the actual results could differ from those estimates. Significant estimates in the accompanying financial statements include allowance for doubtful accounts and loans, estimates of fair value of securities received for services, estimates of fair value of securities held, depreciation of fixed assets, valuation allowance on deferred tax assets and equity valuations for non-cash equity grants.

Risks and Uncertainties

The Company’s operations are subject to significant risk and uncertainties including financial, operational, competition and potential risk of business failure. The risk of social and governmental factors is also a concern since the Company is headquartered in Dubai.

Cash & Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At June 30, 2017 and at December 31, 2016 the Company had no cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

The Company recognizes accounts receivable in connection with the services provided. The Company recognizes an allowance for doubtful accounts based on an analysis of current receivables aging and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. There was no allowance for bad debt at June 30, 2017 and December 31, 2016.

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

Foreign currency policy

The Company’s accounting policies related to the consolidation and accounting for foreign operations are as follows: The accompanying consolidated financial statements are presented in U.S. dollars. The functional currency of the Company’s Dubai subsidiary is the Arab Emirates Dirham (AED). All foreign currency balances and transactions are translated into United States dollars “$” and/or “USD” as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of our stockholders’ equity (deficit) as “Accumulated other comprehensive income (loss)”. Since the AED is pegged to the U.S. dollar, translation gains and losses are always De Minimis. Gains and losses resulting from foreign currency transactions are included in the statement of operations.

Investments

Marketable Securities

At the time of the acquisition, a marketable security is designated as held-to-maturity, available-for-sale or trading, which depends on the ability and intent to hold such security to maturity. Securities classified as trading and available-for-sale are reported at fair value, while securities classified as held-to-maturity are reported at amortized cost.

Any unrealized gains and losses are reported as a component of other comprehensive income (loss). Realized gains (losses) are computed on a specific identification basis and are reflected in the statement of operations.

Cost Method Investments

Securities that are not classified as marketable securities are accounted for under the cost method. These securities are recorded at their original cost basis and are subject to impairment testing.

The Company reviews its equity investment portfolio for any unrealized losses that would be deemed other than temporary and require the recognition of an impairment loss in income statement. If the cost of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and the Company’s intent and ability to hold the investments. Management also considers the type of security, related-industry and sector performance, as well as published investment ratings and analyst reports, to evaluate its portfolio. Once a decline in fair value is determined to be other than temporary, an impairment charge is recorded and a new cost basis in the investment is established. If market, industry, and/or investee conditions deteriorate, the Company may incur future impairments. The Company did not record any permanent impairment during the six months ended June 30, 2017.

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

Fixed Assets

Fixed assets are stated at cost of acquisition less accumulated depreciation. Depreciation is provided based on estimated useful lives of the assets. Cost of improvements that substantially extend the useful lives of assets can be capitalized. Repairs and maintenance expenses are to be charged to expense when incurred. In case of sale or disposal of an asset, the cost and related accumulated depreciation are removed from the consolidated financial statements.

Beneficial Conversion Feature

For conventional convertible debt where the rate of conversion is below market value, the Company records any “beneficial conversion feature” (“BCF”) intrinsic value as additional paid in capital and related debt discount.

When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The discount is amortized over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.

Debt Issue Costs

The Company may pay debt issue costs in connection with raising funds through the issuance of debt whether convertible or not or with other consideration. These costs are recorded as debt discounts and are amortized over the life of the debt to the statement of operations as amortization of debt discount.

Original Issue Discount

If debt is issued with an original issue discount, the original issue discount is recorded to debt discount, reducing the face amount of the note and is amortized over the life of the debt to the statement of operations as amortization of debt discount. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.

Valuation of Derivative Instruments

ASC 815 “Derivatives and Hedging” requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula. Upon conversion of a note where the embedded conversion option has been bifurcated and accounted for as a derivative liability, the Company records the shares at fair value, relieves all related notes, derivatives and debt discounts and recognizes a net gain or loss on debt extinguishment.

Revenue Recognition

We recognize revenue from the services we provide in accordance with ASC Topic 605, Revenue Recognition. ASC Topic 605 sets forth guidance as to when revenue is realized or realizable and earned, which is generally, when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been performed; (3) the seller’s price to the buyer is fixed or determinable; and (4) collectability is reasonably assured. Generally, the contract terms for these services are relatively short in duration.

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

We receive consideration in the form of cash and/or securities. We recognize cash consideration as revenues as the services are performed either on a pro rata basis or on a milestone basis.

Securities received as consideration are often earned at a point in time when the specified event occurs and the securities are issued to us. Therefore, we measure and recognize these securities received at fair value on the date of receipt. If securities are received in advance of completion of our services, the fair value will be recorded as deferred revenue and recognized as revenue as the services are completed.

All revenues are generated from clients whose operations are based outside of the United States.

At June 30, 2017 and December 31, 2016, the Company had the following concentrations of accounts receivables with customers:

For the six months ended June 30, 2017 and 2016, the Company had the following concentrations of revenues with customers:

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

Deferred Revenue

Deferred revenue represents fees that have been received by the Company for requested services that have not been completed. Following table illustrates the movement in deferred revenue during the six months ended June 30, 2017:

Share-based payments

The Company recognizes all forms of share-based payments to employees, including stock option grants, warrants and restricted stock grants at their fair value on the grant date, which is based on the estimated number of awards that are ultimately expected to vest.

Share based payment awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable as of the measurement date. Amounts received prior to the measurement date are adjusted to fair value at each reporting period until a measurement date is achieved. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period.

Share based payments, excluding restricted stock, are valued using a Black-Scholes pricing model.

When computing fair value, the Company considered the following variables:

Earnings per Share

The basic net earnings (loss) per share are computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of shares of common stock and common stock equivalents outstanding during the period.

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

As at June 30, 2017 and December 31, 2016, the Company had common stock equivalents of 33,854,186 and 2,941,176 common shares respectively, in the form of fixed price convertible notes, which, if converted, would be dilutive. See Note 8(F). These common stock equivalents were not included in the computation of diluted net loss per share because the effects would have been anti-dilutive due to the net losses.

Fair Value of Financial Assets and Liabilities

The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability.

The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:

The carrying amounts reported in the balance sheet for prepaid expenses, accounts receivable, accounts payable, accounts payable to related parties and loans payable to related parties, approximate fair value are based on the short-term nature of these instruments.

The Company measures its derivative liabilities at fair market value on a recurring basis and measures its non-marketable securities at fair value on a non-recurring basis. Consequently, the Company may have gains and losses reported in the statement of operations.

The following is the Company’s assets and liabilities measured at fair value on a recurring and nonrecurring basis at June 30, 2017 and December 31, 2016, using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3):

The following section describes the valuation methodologies the Company uses to measure financial instruments at fair value:

Marketable Securities — The Level 1 position consists of the Company’s investment in equity securities of stock held in publically traded companies. The valuation of these securities is based on quoted prices in active markets.

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

Changes in Level 1 marketable securities measured at fair value for the six months ended June 30, 2017 were as follows:

Non-Marketable Securities at Fair Value on a Non-Recurring Basis — Certain assets are measured at fair value on a nonrecurring basis. The level 3 position consist of investments accounted for under the cost method. The Level 3 position consists of investments in equity securities held in private companies.

Management believes that an “other-than-temporary impairment” would be justified, as according to ASC 320-10 an investment is considered impaired when the fair value of an investment is less than its amortized cost basis. The impairment is considered either temporary or other-than-temporary. The accounting literature does not define other-than-temporary. It does, however, state that other-than-temporary does not mean permanent, although, all permanent impairments are considered other-than-temporary. The literature does provide some examples of factors, which may be indicative of an “other-than-temporary impairment”, such as:

Management believes that the fair value of its investment has been correctly measured, as the length of time that the stock has been less than cost is nominal.

Changes in Level 3 assets measured at fair value for the six months ended June 30, 2017 were as follows:

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

Recent Accounting Pronouncements

There are no new accounting pronouncements that have any impact on the Company’s financial statements other than discussed below:

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This update is intended to improve the financial reporting requirements for revenue from contracts with customers by providing a principle-based approach. The core principle of the standard is that revenue should be recognized when the transfer of promised goods or services is made in an amount that the entity expects to be entitled to in exchange for the transfer of goods and services. The update also requires disclosures enabling users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. On July 9, 2015, the FASB voted to defer the effective date of this guidance by one year. On March 17, 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations, which clarifies how an entity determines if it is a principal or an agent for each specified good or service promised to the customer, the nature of each specified good or service, and how an entity that is principal obtains control of a good and service provided by another party involved in providing goods or services to a customer. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing, which clarifies the guidance related to whether goods or services are distinct within the context of contract and therefore a performance obligation and the timing and pattern of revenue recognition for IP licenses. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides clarifying guidance in certain narrow areas and added some practical expedients. In December 2016, the FASB issued ASU 2016-20, Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements, which provides clarifying guidance in certain technical areas. The standard and related amendments will be effective for financial statements issued by public companies for interim and annual reporting periods beginning after December 16, 2018. Early adoption of the standard is permitted, but not before the original date of financial statements issued by public companies for interim and annual reporting periods beginning after December 16, 2017. We currently do not plan to early adopt this guidance and are evaluating the potential impact of this guidance on our consolidated financial statements as well as transition methods.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flow (Topic 230). This update is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The update provides new guidance regarding the classification of debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies including bank-owned life insurance policies, distributions received from equity method investments, beneficial interests in securitized transactions, and separately identifiable cash flows and application of the predominance principle. This standard will be effective for financial statements issued by public companies for the annual and interim periods beginning after December 15, 2017. Early adoption of the standard is permitted. The standard will be applied in a retrospective approach for each period presented. We have completed an initial evaluation of this standard, which requires cash payments for debt prepayment or debt extinguishment costs should be classified as cash outflows for financing activities. We have determined that there were no cash payments involved in debt extinguishment during the six months ended June 30, 2017, hence there will be no potential impact on our financial statements due to this update. We will continue to evaluate the potential impact of this guidance on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842)” (“ASU 2016-02”). The FASB issued ASU 2016-02 to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Under ASU 2016-02, a lessee will recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-to-use asset representing its right to use the underlying asset for the lease term. The amendments of this ASU are effective for reporting periods beginning after December 15, 2018, with early adoption permitted. An entity will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Management currently does not plan to early adopt this guidance and is evaluating the potential impact of this guidance on the consolidated financial statements as well as transition methods.

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall (Topic 825-10): “Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 amends the guidance on the classification and measurement of financial instruments. Some of the amendments in ASU 2016-01 include the following: 1) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; 2) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; 3) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; and 4) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value; among others. For public business entities, the amendments of ASU 2016-01 are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is not permitted. The Company is currently evaluating the effects of ASU 2016-01 on its consolidated financial statements and disclosures.

Note 5 – Sale of Subsidiary

On June 5, 2017, the Company completed a corporate divestiture by entering into a Stock Purchase and Debt Assumption Agreement with a non-affiliate individual, pursuant to which the Company sold 100% of the issued and outstanding common stock of its wholly-owned subsidiary, Global Equity Partners Plc., to a citizen of the Republic of Thailand (acquirer). The consideration for the purchase of GEP by the acquirer was his assumption of all liabilities and indebtedness of GEP in the approximate amount of $626,052. No cash consideration was paid to the Company by the acquirer. Under the terms of the agreement, the acquirer also acquired portfolio of following investments in common shares of various companies owned by GEP:

The Company recorded a gain of $23,052 in connection with this transaction which is included in other income (expenses) in the Consolidated Statement of Operations for the three and six months ended June 30, 2017. The book values of assets sold and liabilities transferred are presented below:

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

Note 6 – Investments

During the six months ended June 30, 2017, one of the Company’s investments commenced trading on OTC Markets hence we reclassified this investment of 3,481,133 common shares amounting to $880,850 to marketable securities. During the six months ended June 30, 2017, the Company sold 42,500 common shares of this particular investment at various fair values recognizing a gain on sale of investment of $3,040. At June 30, 2017, the Company revalued the remaining 3,438,633 common shares at their quoted market price of $0.40 per share, $1,375,453; hence recording an unrealized gain of $505,228 into accumulated other comprehensive income, a component of equity.

The Company, through its subsidiary GEP Equity Holdings Limited, holds following common equity securities in private and reporting companies as at June 30, 2017 and December 31, 2016:

The Company, through its subsidiary GEP Equity Holdings Limited, holds the following preferred equity securities in private and reporting companies as at June 30, 2017 and December 31, 2016:

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

On June 5, 2017, the Company sold 10,700,000 common securities of different companies having a book value of $603,000 pursuant to the stock purchase and debt assumption agreement. (See Note 5). During the six months ended June 30, 2017, the Company also reclassified one of its investment in common shares as a short term investment valued at fair value. (See Note 6 (A))

At June 30, 2017, there were no identifiable events or changes in circumstances that had a significant adverse effect on the value of the long term investments; hence, no impairment is required as of June 30, 2017.

Note 7 – Fixed Assets

The following table reflects net book value of fixed assets as at June 30, 2017 and December 31, 2016:

Depreciation expense for the six months ended June 30, 2017 and June 30, 2016, was $5,575 and $5,715, respectively.

Note 8 – Debt & Accounts payable

(A)       Accounts Payable and other Accrued Liabilities

The following table represents breakdown of accounts payable and other accrued liabilities as of June 30, 2017 and December 31, 2016, respectively:

(B)       Accrued Contingencies and Penalties

Following is a breakdown of accrued contingencies and penalties as at June 30, 2017 and December 31, 2016, respectively:

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

At December 31, 2016, we accrued an IRS fine of $10,000 plus $492 of interest on account of a late filing of our 2013 IRS Form 5472 Tax Return. After appealing this fine to IRS Appeals Office, this fine of $10,492 was abated in full. We were further subjected to a fine of $10,000 on account of late filing fee of our 2014 IRS form 5472 Tax Return which was also reduced by 50% due to timely submission of subsequent year tax returns. Hence, we accrued $5,000 as a provision for late filing fee for 2014 IRS Form 5472 Tax Return.

(C)       Accounts Payable and Accrued Liabilities – Related Parties

The following table represents the accounts payable and accrued expenses to related parties as of June 30, 2017 and December 31, 2016, respectively:

The Company received short term loans from one of its officers and directors. The loans were non-interest bearing, unsecured and due on demand. The following table represents the loans payable activity as of June 30, 2017:

Following is the summary of all non-convertible notes, net of debt discount, including the accrued interest as at June 30, 2017:

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

Following is the summary of all fixed price convertible notes, net of debt discount, including the accrued interest as at June 30, 2017:

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

Note 9 - Stockholders’ Equity

(A)      Preferred Stock

On November 30, 2011, the Company designated 5,000,000 of its authorized preferred stock as Series “A” convertible preferred shares. On November 13, 2012, the Company’s board of directors approved an amendment to the Certificate of Designation; to amend the voting rights and conversion rights of the Company’s Series “A” preferred shares as follows:

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

On May 19, 2015, the board of directors agreed to the non-redemption of the redeemable Series “A” Preferred Shares and the officers of the company that held these Preferred Shares, returned all 1,983,332 Shares of the Company to Treasury. Since the preferred shares were vested upon issuance in prior years, the cancellation of these shares was considered a contribution back to the company at zero cost with no gain or loss recognized.

On July 15, 2015 the designation of the 5,000,000 Series “A” preferred shares was withdrawn.

On November 10, 2016, the Company designated 45,000,000 of its authorized preferred stock as Series “B” convertible preferred shares. The Certificate of Designation stated the following:

On November 11, 2016, certain Officers and Directors of the Company, offered to retire and exchange an aggregate 450,000,000 shares of Common Stock owned by them for 45,000,000 Series “B” Preferred Stock. The Company permitted Officers and Directors of the Company to exchange 200,000,000, 50,000,000 and 200,000,000 shares of Common Stock, respectively, for 20,000,000, 5,000,000 and 20,000,000 shares of Series “B” Preferred Stock, respectively.

(B)      Common Stock

During the six months ended June 30, 2017, the Company issued 38,614,798 common shares because of conversions of two convertible notes in following manner:

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

Note 10 – Related Party Transactions

At June 30, 2017, there were accounts payable, short-term loans payable and accrued liabilities due to related parties (See Note 8(C & D)).

Note 11 – Commitments and contingencies

Contingencies

The plaintiff, the Able Foundation, was requesting a settlement of $411,272, which was the $226,616 owed by the Company at that time, and an additional $184,656 accrued in 2015 as a provision for potential damages (see Note 8(E)).

On June 1, 2015, the Company (the defendant) retained the legal services of a Dubai based law firm called Al Safar & Partners. At March 31, 2017, there was a judgment against the Company (the defendant) for the recovery of $411,272.

During 2015 and 2016, the Company’s Dubai lawyers, Al Safar & Partners, had appealed this judgment various times based on the fact that they believed from a legal stand point that:

All prior appeals were rejected by the Dubai Courts, however a new appeal against the formal execution of this judgement was filed in September 2016.

On June 5, 2017, a citizen of Republic of Thailand assumed the above total amount of $411,272 by way of a stock purchase and debt assumption agreement, hence the Company’s liability and respective litigation in respect of this loan was transferred to the acquiring individual (See Note 5).

Aside from the above matter, we are not subject to any other pending or threatened litigation.

Global Equity International, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

Note 12 – Subsequent events

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Forward - Looking Statement

The following discussion and analysis of the results of operations and financial condition of Global Equity International, Inc. should be read in conjunction with the unaudited financial statements, and the related notes. References to “we,” “our,” or “us” in this section refers to the Company and its subsidiaries. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Certain matters discussed herein may contain forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties include, but are not limited to, the following:

Should one or more of these risks or uncertainties materialize or should any of the underlying assumptions prove incorrect, actual results of current and future operations may vary materially from those anticipated.

Our MD&A is comprised of the following sections:

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), which requires management to make estimates and assumptions that affect reported and disclosed amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period.

We believe that the critical accounting policies set forth in the accompanying consolidated financial statements describe the more significant judgments and estimates used in the preparation of our consolidated financial statements. These critical accounting policies pertain to revenues recognition, valuation of investments, convertible notes and derivatives and; stock based compensation.

If actual events differ significantly from the underlying judgments or estimates used by management in the application of these accounting policies, there could be a material effect on our results of operations and financial condition.

Global Equity International Inc. (the “Company” or “GEI”), a reporting company since June 21, 2012, was organized under the laws of the state of Nevada on October 1, 2010. Global Equity Partners, Plc. (“GEP”), a private company, was organized under the laws of the Republic of Seychelles on September 2, 2009. On November 15, 2010, GEP executed a reverse recapitalization with GEI.

On August 22, 2014, we formed a Dubai subsidiary of GEP called GE Professionals DMCC. On June 10, 2016, GEI incorporated its wholly owned subsidiary, called GEP Equity Holdings Limited (“GEP EH”), under the laws of the Republic of Seychelles. On March 14, 2017, the Company´s board of directors unanimously voted to transfer the ownership of GE Professionals DMCC (Dubai) to GEP EH.

On June 5, 2017, the Company sold 100% of the common shares of GEP to a non-affiliated third party in consideration of the third party’s assumption of all liabilities and indebtedness of GEP in the approximate amount of $626,052. No cash consideration was paid to GEI by such third party.

GEP Equity Holdings Limited and its subsidiary, GE Professionals DMCC, are Dubai based firms that provide consulting services, such as corporate restructuring, management recruitment 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 950,000,000 shares of common stock having a par value of $0.001 per share and 50,000,000 shares of preferred stock having a par value of $0.001.

The Company had revenues amounting to $109,926 and $261,723, for the three months ended June 30, 2017 and 2016, respectively.

During the three months ended June 30, 2017, total revenue was reduced by $151,797 when compared to the same period ended on June 30, 2016. The reason for this reduction was due to the fact that management decided to concentrate on its current clients instead of signing up new clients and over stretch its bandwidth. The other reason for not taking on any new clients was that management has been concentrating on implementing its growth by acquisition model.

The following is the breakdown of total revenue for the three months ended June 30, 2017 amounted to $109,726:

For the three months ended June 30, 2017 and 2016, the Company had the following concentrations of revenues with customers: