Global Equity International, Inc.
X3 Jumeirah Bay, Office 3305
Jumeirah Lake Towers, Dubai, UAE
April 22, 2015
Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549
| Attention: | Ms. Shannon Sobotka |
| Staff Accountant |
| Re: | Global Equity International, Inc. |
| Item 4.02 Form 8-K | |
| Filed on April 10, 2015 | |
| File No. 000-54557 |
Dear Madam,
This letter is our response to your letter to this registrant of April 13, 2015, regarding the above-referenced matter (“Comment Letter”). The purpose of this letter is to resolve Staff comments in the Comment Letter.
Our responses to the Comment Letter are as follows:
Item 4.02 Form 8-K filed April 10, 2015
1. Please amend your filing to address the following:
| a. | Describe the error(s) that caused your accountants to advise you to place non- reliance on your previously issued financial statements, and quantify the impact of such error(s); | |
| Answer: |
| Balance Sheet - March 31, 2014 | ||||||||||||
| As Previously Stated | Restatement Adjustments | As Restated | ||||||||||
| Assets | ||||||||||||
| Current Assets | ||||||||||||
| Prepaids | $ | 8,167 | $ | 5,802 | $ | 13,969 | ||||||
| Other current assets | 466,027 | (13,826 | ) | 452,201 | ||||||||
| Total current assets | $ | 482,742 | $ | (8,024 | ) | $ | 474,718 | |||||
| Current Liabilities | ||||||||||||
| Deferred revenue | $ | 169,750 | $ | 46,250 | $ | 216,000 | ||||||
| Accounts payable and accrued liabilities | 50,064 | (700 | ) | 49,364 | ||||||||
| Loans payable - related parties | 57,194 | 700 | 57,894 | |||||||||
| Accrued interest | 238,651 | 36,078 | 274,729 | |||||||||
| Total current liabilities | $ | 1,793,661 | $ | 82,328 | $ | 1,875,989 | ||||||
| Accumulated deficit | $ | (5,435,292 | ) | $ | (90,352 | ) | $ | (5,525,644 | ) | |||
| Total stockholders’ deficit | $ | (2,643,048 | ) | $ | (90,352 | ) | $ | (2,733,400 | ) | |||
| Profit and Loss - Three Months - March 31, 2014 | ||||||||||||
| As Previously Stated | Restatement Adjustments | As Restated | ||||||||||
| Revenue | $ | 152,250 | $ | (46,250 | ) | $ | 106,000 | |||||
| General and administrative expenses | $ | 45,241 | $ | 8,024 | $ | 53,265 | ||||||
| Total Operating Expenses | $ | 247,414 | $ | 8,024 | $ | 255,438 | ||||||
| Net (loss) from operations | $ | (95,164 | ) | $ | (54,274 | ) | $ | (149,438 | ) | |||
| Other income (expense): | ||||||||||||
| Interest Expense | $ | (122,118 | ) | $ | (36,078 | ) | $ | (158,196 | ) | |||
| Total (income) expense | $ | (127,607 | ) | $ | (36,078 | ) | $ | (163,685 | ) | |||
| Net loss | $ | (222,771 | ) | $ | (90,352 | ) | $ | (313,123 | ) | |||
| Comprehensive Loss: | ||||||||||||
| Net loss | $ | (222,771 | ) | $ | (90,352 | ) | $ | (313,123 | ) | |||
| Comprehensive Loss | $ | (222,771 | ) | $ | (90,352 | ) | $ | (313,123 | ) | |||
| Statements of Cash Flows - For the Three Months ended March 31, 2014. | ||||||||||||
| As Previously Stated | Restatement Adjustements | As Restated | ||||||||||
| Cash flows from operating activities | ||||||||||||
| Net profit (loss) | $ | (222,771 | ) | $ | (90,352 | ) | $ | (313,123 | ) | |||
| Changes in operating assets and liabilities: | ||||||||||||
| Prepaids, cash | 25,632 | (5,802 | ) | 19,830 | ||||||||
| Accrued interest | 122,119 | 36,078 | 158,197 | |||||||||
| Accounts payable and accrued liabilities | 11,076 | (700 | ) | 10,376 | ||||||||
| Accounts payable - related parties | 100,232 | 700 | 100,932 | |||||||||
| Deferred revenue | (77,250 | ) | 46,250 | (31,000 | ) | |||||||
| Other current assets | (13,826 | ) | 13,826 | - | ||||||||
| Balance Sheet - June 30, 2014 | ||||||||||||
| As Previously Stated | Restatement Adjustments | As Restated | ||||||||||
| Assets | ||||||||||||
| Current Assets | ||||||||||||
| Prepaids | $ | 28,653 | $ | (10,699 | ) | $ | 17,954 | |||||
| Total current assets | $ | 493,432 | $ | (10,699 | ) | $ | 482,733 | |||||
| Total assets | $ | 505,272 | $ | (10,699 | ) | $ | 494,573 | |||||
| Current Liabilities | ||||||||||||
| Deferred revenue | $ | 31,000 | $ | 185,000 | $ | 216,000 | ||||||
| Accrued interest | 308,198 | 94,203 | 402,401 | |||||||||
| Notes payable - net of unamortized discount | 1,178,742 | (178,984 | ) | 999,758 | ||||||||
| Derivative Liability on notes payable | - | 534,023 | 534,023 | |||||||||
| Total current liabilities | $ | 1,979,123 | $ | 634,242 | $ | 2,613,365 | ||||||
| Subscription Receivable | $ | - | $ | (100,000 | ) | $ | (100,000 | ) | ||||
| Accumulated deficit | (5,719,949 | ) | (544,941 | ) | (6,264,890 | ) | ||||||
| Other Comprehensive gain (loss) | - | - | - | |||||||||
| Total stockholders’ deficit | $ | (2,818,326 | ) | $ | (644,941 | ) | $ | (3,463,267 | ) | |||
| Total liabilities, redeemable preferred stock & stockholders’ deficit | $ | 505,272 | $ | (10,699 | ) | $ | 494,573 |
| ||||
| Profit and Loss - Six Months - June 30, 2014 | ||||||||||||
| As Previously Stated | Restatement Adjustments | As Restated | ||||||||||
| Revenue | $ | 346,000 | $ | (185,000 | ) | $ | 161,000 | |||||
| General and administrative expenses | $ | 96,200 | $ | 10,699 | $ | 106,899 | ||||||
| Total Operating Expenses | $ | 585,328 | $ | 10,699 | $ | 596,027 | ||||||
| Net (loss) from operations | $ | (239,328 | ) | $ | (195,699 | ) | $ | (435,027 | ) | |||
| Other income (expense): | ||||||||||||
| Interest Expense | $ | (258,651 | ) | $ | (83,692 | ) | $ | (342,343 | ) | |||
| Amortization of debt discount | (25,858 | ) | (39,527 | ) | (65,385 | ) | ||||||
| Gain (loss) on Derivative Liability | - | (226,023 | ) | (226,023 | ) | |||||||
| Total income (expense) | $ | (268,102 | ) | $ | (349,242 | ) | $ | (617,344 | ) | |||
| Net loss | $ | (507,430 | ) | $ | (544,941 | ) | $ | (1,052,371 | ) | |||
| Comprehensive Loss: | ||||||||||||
| Net loss | $ | (507,430 | ) | $ | (544,941 | ) | $ | (1,052,371 | ) | |||
| Comprehensive Loss | $ | (507,430 | ) | $ | (544,941 | ) | $ | (1,052,371 | ) | |||
| Profit and Loss - Three Months - June 30, 2014 | ||||||||||||
| As Previously Stated | Restatement Adjustments | As Restated | ||||||||||
| Revenue | $ | 193,750 | $ | (138,750 | ) | $ | 55,000 | |||||
| General and administrative expenses | $ | 50,958 | $ | 2,675 | $ | 53,633 | ||||||
| Total Operating Expenses | $ | 337,912 | $ | 2,675 | $ | 340,587 | ||||||
| Net (loss) from operations | $ | (144,162 | ) | $ | (141,425 | ) | $ | (285,587 | ) | |||
| Other income (expense) | ||||||||||||
| Interest Expense | $ | (136,533 | ) | $ | (47,614 | ) | $ | (184,147 | ) | |||
| Amortization of debt discount | (20,369 | ) | (39,527 | ) | (59,896 | ) | ||||||
| Gain (loss) on Derivative Liability | - | (226,023 | ) | (226,023 | ) | |||||||
| Total income (expense) | $ | (140,495 | ) | $ | (313,164 | ) | $ | (453,659 | ) | |||
| Net loss | $ | (284,657 | ) | $ | (454,589 | ) | $ | (739,246 | ) | |||
| Comprehensive Loss: | ||||||||||||
| Net loss | $ | (284,657 | ) | $ | (454,589 | ) | $ | (739,246 | ) | |||
| Comprehensive Loss | $ | (284,657 | ) | $ | (454,589 | ) | $ | (739,246 | ) | |||
| Statements of Cash Flows - For the Six Months ended June 30, 2014 | ||||||||||||
| As Previously Stated | Restatement Adjustments | As Restated | ||||||||||
| Cash flows from operating activities | ||||||||||||
| Net profit (loss) | $ | (507,430 | ) | $ | (544,941 | ) | $ | (1,052,371 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||||||
| Gain (loss) on derivate liability - Notes payable | - | 226,023 | 226,023 | |||||||||
| Amortization of debt discount | 25,858 | 39,527 | 65,385 | |||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Prepaids, cash | 5,146 | 9,799 | 14,945 | |||||||||
| Accrued interest | 191,667 | 84,891 | 276,558 | |||||||||
| Accounts payable and accrued liabilities | 24,466 | (298 | ) | 24,168 | ||||||||
| Deferred revenue | (216,000 | ) | 185,000 | (31,000 | ) | |||||||
Balance Sheet - 09/30/2014 | ||||||||||||
| As Previously Stated | Restatement Adjustments | As Restated | ||||||||||
| Assets | ||||||||||||
| Current Assets | ||||||||||||
| Prepaids | $ | 62,429 | $ | (42,033 | ) | $ | 20,396 | |||||
| Other current assets | 452,201 | - | 452,201 | |||||||||
| Loans receivable | 6,000 | - | 6,000 | |||||||||
| Total current assets | $ | 540,302 | $ | (42,033 | ) | $ | 498,269 | |||||
| Fixed assets, net | $ | 22,404 | $ | 8,496 | $ | 30,900 | ||||||
| Total assets | $ | 567,706 | $ | (33,537 | ) | $ | 534,169 | |||||
| Current Liabilities | ||||||||||||
| Deferred revenue | $ | 250,000 | $ | 210,000 | $ | 460,000 | ||||||
| Accounts payable - related parties | 331,985 | (22,750 | ) | 309,235 | ||||||||
| Accrued interest | 378,979 | 147,945 | 526,924 | |||||||||
| Notes payable - net of unamortized discount | 1,128,951 | (119,756 | ) | 1,009,195 | ||||||||
| Derivative Liability on notes payable | - | 473,020 | 473,020 | |||||||||
| Total current liabilities | $ | 2,220,133 | 688,459 | $ | 2,908,592 | |||||||
| Additional paid in capital | $ | 2,963,638 | $ | 16,667 | $ | 2,980,305 | ||||||
| Subscription Receivable | - | (100,000 | ) | (100,000 | ) | |||||||
| Accumulated deficit | (6,076,550 | ) | (638,574 | ) | (6,715,124 | ) | ||||||
| Other Comprehensive gain (loss) | - | (89 | ) | (89 | ) | |||||||
| Total stockholders’ deficit | $ | (2,996,902 | ) | $ | (721,996 | ) | $ | (3,718,898 | ) | |||
| Total liabilities, redeemable preferred stock & stockholders’ deficit | $ | 567,706 | $ | (33,537 | ) | $ | 534,169 | |||||
| Profit and Loss - Nine Months - September 30, 2014 | ||||||||||||
| As Previously Stated | Restatement Adjustments | As Restated | ||||||||||
| Revenue | $ | 555,000 | $ | (210,000 | ) | $ | 345,000 | |||||
| General and administrative expenses | $ | 226,463 | $ | 10,699 | $ | 237,162 | ||||||
| Total Operating Expenses | $ | 1,079,115 | $ | 10,699 | $ | 1,089,814 | ||||||
| Net (loss) from operations | $ | (524,115 | ) | $ | (220,699 | ) | $ | (744,814 | ) | |||
| Other income (expense): | ||||||||||||
| Interest Expense | $ | (329,432 | ) | $ | (137,434 | ) | $ | (466,866 | ) | |||
| Amortization of debt discount | (26,567 | ) | (115,422 | ) | (141,989 | ) | ||||||
| Gain (loss) on Derivative Liability | - | (165,020 | ) | (165,020 | ) | |||||||
| Total income (expense) | $ | (339,915 | ) | $ | (417,876 | ) | $ | (757,791 | ) | |||
| Net loss | $ | (864,030 | ) | $ | (638,575 | ) | $ | (1,502,605 | ) | |||
| Weighted average number of common shares outstanding - basic and diluted | 31,866,476 | (339,633 | ) | 31,526,843 | ||||||||
| Net loss per common share - basic and diluted | $ | (0.01 | ) | $ | (0.04 | ) | $ | (0.05 | ) | |||
| Comprehensive Loss: | ||||||||||||
| Net loss | $ | (864,030 | ) | $ | (638,575 | ) | $ | (1,502,605 | ) | |||
| Comprehensive Loss | $ | (864,030 | ) | $ | (638,575 | ) | $ | (1,502,605 | ) | |||
| Profit and Loss - Three Months - September 30, 2014 | ||||||||||||
| As Previously Stated | Restatement Adjustments | As Restated | ||||||||||
| Revenue | $ | 209,000 | $ | (25,000 | ) | $ | 184,000 | |||||
| Net (loss) from operations | $ | (284,788 | ) | $ | (25,000 | ) | $ | (309,788 | ) | |||
| Other income (expense) | ||||||||||||
| Interest Expense | $ | (70,782 | ) | $ | (53,742 | ) | $ | (124,524 | ) | |||
| Amortization of debt discount | (709 | ) | (75,895 | ) | (76,604 | ) | ||||||
| Gain (loss) on Derivative Liability | - | 61,003 | 61,003 | |||||||||
| Total income (expense) | $ | (71,814 | ) | $ | (68,634 | ) | $ | (140,448 | ) | |||
| Net loss | $ | (356,602 | ) | $ | (93,634 | ) | $ | (450,236 | ) | |||
| Comprehensive Loss: | ||||||||||||
| Net loss | $ | (356,602 | ) | $ | (93,634 | ) | $ | (450,236 | ) | |||
| Comprehensive Loss | $ | (356,602 | ) | $ | (93,634 | ) | $ | (450,236 | ) | |||
| Statements of Cash Flows - For the Nine Months ended September 30, 2014. | ||||||||||||
| As Previously Stated | Restatement Adjustments | As Restated | ||||||||||
| Cash flows from operating activities | ||||||||||||
| Net profit (loss) | $ | (864,030 | ) | $ | (638,575 | ) | $ | (1,502,605 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||||||
| Gain (loss) on derivate liability - Notes payable | - | 165,020 | 165,020 | |||||||||
| Amortization of debt discount | 26,567 | 115,422 | 141,989 | |||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Prepaids, cash | (28,630 | ) | 41,132 | 12,502 | ||||||||
| Accrued interest | 262,448 | 138,633 | 401,081 | |||||||||
| Accounts payable and accrued liabilities | 49,895 | (297 | ) | 49,598 | ||||||||
| Accounts payable - related parties | 139,932 | (22,750 | ) | 117,182 | ||||||||
| Deferred revenue | 3,000 | 210,000 | 213,000 | |||||||||
| Net cash used in operating activities: | (173,688 | ) | 8,585 | (165,103 | ) | |||||||
| Cash Flows used in investing activities: | ||||||||||||
| Office furniture and equiment, net | (16,216 | ) | (8,496 | ) | (24,712 | ) | ||||||
| Net cash used in investing activities | (16,216 | ) | (8,496 | ) | (24,712 | ) | ||||||
| Cash flows from financing activities: | ||||||||||||
| Net increase in cash | (31,704 | ) | 89 | (31,615 | ) | |||||||
| Effect of Exchange Rates on Cash | - | (89 | ) | (89 | ) | |||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||||||
| Debt discount recorded on notes payable | $ | 93,446 | $ | 114,554 | $ | 208,000 | ||||||
| b. | State whether your audit committee, or the board of directors in the absence of an audit committee, or authorized officer or officers, discussed with your independent accountant the matters disclosed in the filing. |
Answer:
On April 8, 2015, our independent accountant brought to our attention that there were a series of material adjustments to be made to our financial statements. These adjustments affected mainly the derivative liability, interest expense, prepaid, fixed assets and revenue. After an analysis of our financial records was done, it was determined that significant adjustments were required to be made at each of the quarter ended March 31, June 30 and September 30, 2014.
The CFO of the Company discussed this matter with the Company´s CEO and it was agreed that we had to file an 8k stating that our investors and shareholders could not rely on our interim 2014 financial statements.
| 2. | Please file a copy of the independent accountant letter in an amended Form 8-K no later than two business days after you receive such letter. |
Answer:
Our independent accountant’s letter has been filed along with this response letter.
| 3. | We note that you intend to file restated financial statements. Please tell us how, and when, you will file such amended financial statements. |
Answer:
As we have now filed our 2014 10k and audit report we believe that there now is not a non-reliance issue hence we intend to file the amendment to the March 31, 2014, June 30, 2014 and September 30, 2014 quarterly financials when we file the March 31, 2015, June 30, 2015 and September 30, 2015 quarterly financials.
| 4. | Please tell us how you determined the currently unidentified errors in your previously filed interim reports on Forms 10-Q did not affect, and are in no way reflected in your operating or financial results for the year ended December 31, 2013. Provide to us information supporting the basis for your conclusion. |
Answer:
We analyzed the effect of derivative liability on the two 2013 convertible notes and we determined that the effect of financials for December 31, 2013 were both quantitatively and qualitatively immaterial, hence management deems that the financials for December 31, 2013 are not required to be restated.
In responding to your comments, we acknowledge that:
| ● | the Company is responsible for the adequacy and accuracy of the disclosure in the filing; | |
| ● | staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and | |
| ● | the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. | |
| ● | Please address any further comments to our attorney, David E. Wise, Esq. |
Mr. Wise’s contact information is set forth below:
Law Offices of David E. Wise
Attorney at Law
The Colonnade
9901 IH-10 West, Suite 800
San Antonio, Texas 78230
Telephone: (210) 558-2858
Facsimile: (210) 579-1775
Email: wiselaw@verizon.net
| Sincerely, | |
| /s/ Enzo Taddei | |
| Enzo Taddei | |
| Chief Financial Officer |