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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q/A


[x]     Quarterly Report Pursuant to Section 13 or 15(d) Securities Exchange Act of 1934 for Quarterly Period Ended March 31, 2014

-OR-

[ ]     Transition Report Pursuant to Section 13 or 15(d) of the Securities And Exchange Act of 1934 for the transaction period from _________ to________


Commission File Number  000-49819


Global Arena Holding, Inc.

 (Exact name of registrant as specified in its charter)


 

 

 

Delaware

 

33-0931599

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)


555 Madison Avenue, 12th Floor,

New York, NY

 

10022

(Address of principal executive offices)

 

(Zip Code)


(212) 508-4700

 (Registrant's telephone number, including area code)


Indicate by check mark whether the issuer (1) 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 corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 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 [ ]




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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerate filer, or a small reporting company as defined by Rule 12b-2 of the Exchange Act):


Large accelerated filer        [  ]

 

Non-accelerated filer             [  ]

Accelerated filer                 [  ]

 

Smaller reporting company   [x]


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  [ ]      No [x]


The number of outstanding shares of the registrant's common stock,

May 20, 2014:  Common Stock  -  24,136,693


EXPLANATORY NOTE


This Amendment to Form 10-Q for the period ended March 31, 2014, as originally filed with the SEC on May 20, 2014, is being filed solely to furnish the Interactive Data File exhibits pursuant to Rule 405 of Regulation S-T.


No other changes have been made to the 10-Q, and this Amendment has not been updated to reflect events occurring subsequent to the filing of the 10-Q.



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GLOBAL ARENA HOLDING, INC.

FORM 10-Q

For the quarterly period ended March 31, 2014

INDEX


PART 1 – FINANCIAL INFORMATION

 

 

 

 

 

Page

Item 1.  Financial Statements (Unaudited)

 

5

Item 2.  Management's Discussion and Analysis of

  Financial Condition and Results of Operations

 

33

Item 3.  Quantitative and Qualitative Disclosure

  About Market Risk

 

39

Item 4.  Controls and Procedures

 

39


PART II – OTHER INFORMATION



 

 

 

Item 1.  Legal Proceedings

 

41

Item 1A.  Risk Factors

 

43

Item 2.  Unregistered Sales of Equity Securities and

  Use of Proceeds

 

43

Item 3.  Defaults upon Senior Securities

 

43

Item 4.  Mine Safety Disclosures

 

43

Item 5.  Other Information

 

43

Item 6.  Exhibits

 

43

 

 

 

SIGNATURES

 

44





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PART I – FINANCIAL INFORMATION

 

This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934.  These statements are based on management’s beliefs and assumptions, and on information currently available to management.  Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider,” or similar expressions are used.

 

Forward-looking statements are not guarantees of future performance.  They involve risks, uncertainties, and assumptions.  Our future results and shareholder values may differ materially from those expressed in these forward-looking statements.  Readers are cautioned not to put undue reliance on any forward-looking statements.





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GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


ASSETS

March 31, 2014

December 31, 2013

 

(Unaudited)

 

 

 

 

Current assets

 

 

  Cash

$          576,288

$         463,610

  Due from clearing organization

726,607

362,189

  Advances to registered representatives and employees

116,677

112,583

  Prepaid expenses and other current assets

104,365

23,981

  Account receivable  

22,500

-

  Advances - related parties

17,163

17,163

 

 

 

    Total current assets

1,563,600

979,526

 

 

 

Fixed assets, net of accumulated depreciation

 

 

  of $21,714 and $20,582, respectively

2,154

3,286

 

 

 

Other assets

 

 

  Goodwill

33,900

33,900

  Deposits with clearing organizations

50,003

50,003

 

 

 

    Total other assets

83,903

83,903

 

 

 

TOTAL ASSETS

$      1,649,657

$       1,066,715


Continued on next page



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GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


Continued from previous page

LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)

March 31,

2014

December 31, 2013

 

(Unaudited)

 

 

 

 

Current liabilities

 

 

  Accounts payable and accrued expenses

$   1,220,811

$    595,825

  Commission payable

1,209,076

554,180

  Convertible promissory notes payable, in default

654,515

604,515

  Convertible promissory notes payable,

 

 

    net of debt discount of $226,985 and $315,262

 

 

    at March 31, 2014 and December 31, 2013, respectively

673,015

884,738

  Promissory notes payable

229,987

-

  Derivative liability

756,200

1,603,514

    Total current liabilities

4,743,604

4,242,772

 

 

 

Convertible promissory notes payable,

 

 

  net of debt discount of $462,200 and $486,900

 

 

  at March 31, 2014 and December 31, 2013, respectively

37,800

13,100

    Total liabilities

4,781,404

4,255,872

 

 

 

Commitment and contingencies

 

 

 

 

 

Stockholders’ (deficiency)

 

 

  Preferred stock, $0.001 par value; 2,000,000 shares authorized;

 

 

    none issued and outstanding

-

-

  Common stock, $0.001 par value; 100,000,000 shares authorized;

24,851

24,851

    24,850,979 shares issued at March 31, 2014 and December 31, 2013;

    24,136,693 shares outstanding at March 31, 2014 and December 31, 2013

  Additional paid-in capital

9,597,024

9,189,971

  Accumulated (deficit)

(12,258,014)

(11,918,307)

 

(2,636,139)

(2,703,485)

Less: treasury stock, 714,286 shares at cost

(250,000)

(250,000)

 

 

 

    Stockholders’ (deficiency) attributable to common stockholders

(2,886,139)

(2,953,485)

  Noncontrolling interests

(245,608)

(235,672)

 

 

 

    Total stockholders’ (deficiency)

(3,131,747)

(3,189,157)

TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIENCY)

$    1,649,657

$  1,066,715


See notes to consolidated financial statements.




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GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013

(UNAUDITED)

 

2014

2013

 

 

 

Revenues

 

 

  Commissions and other

$    7,588,950

$    2,117,379

 

 

 

    Total revenues

7,588,950

2,117,379

 

 

 

Operating expenses

 

 

  Commissions

6,270,050

1,416,703

  Salaries and benefits

349,807

285,616

  Occupancy

43,495

60,228

  Business development

129,518

74,439

  Professional fees

209,725

370,352

  Stock-based compensation

407,053

160,892

  Clearing and operations

474,296

276,767

  Regulatory fees

17,372

31,973

  Settlement of litigation

650,000

-

  Office and other

71,978

55,807

 

 

 

    Total operating expenses

8,623,294

2,732,777

 

 

 

(Loss) from operations

(1,034,344)

(615,398)

 

 

 

Other income (expenses)

 

 

  Interest expense

(162,613)

(191,470)

  Loss on sale of GATA

-

(2,353)

  Change in fair value of derivative liability

847,314

(185,400)

 

 

 

    Total other income (expenses)

684,701

(379,223)

 

 

 

Net (loss) before noncontrolling interests

(349,643)

(994,621)

Net (loss) attributable to noncontrolling interests

(9,936)

(52,676)

 

 

 

Net (loss) attributable to common stockholders

$     (339,707)

$    (941,945)

 

 

 

(Loss) per common share, basic and diluted

$         (0.01)

$        (0.04)

 

 

 

Weighted average shares outstanding, basic and diluted

24,136,693

22,009,611


See notes to consolidated financial statements.




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GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013

(UNAUDITED)

 

2014

2013

Cash flows from operating activities

 

 

  Net (loss)

$  (349,643)

$   (994,621)

  Adjustment to reconcile net (loss) to net cash (used in) operating activities:

 

 

    Depreciation and amortization

1,132

1,132

    Accretion of debt discount

112,977

144,328

    Stock-based compensation to employees and consultants

407,053

160,892

    Change in fair value of derivative liability

(847,314)

185,400

    Loss on sale of GATA

-

2,353

 Change in operating assets and liabilities:

 

 

    Due from clearing organization

(364,418)

31,805

    Accounts receivable

(22,500)

-

    Advances to registered representatives and employees

(4,094)

(38,428)

    Prepaid expenses and other current assets

(80,384)

(44,857)

    Commissions payable

654,896

(13,043)

    Accounts payable and accrued expenses

624,986

118,027

      Net cash provided by (used in) operating activities

132,691

(447,012)

 

 

 

Cash flows from investing activities

 

 

  Proceeds from sale of 25% interest in GAIM

-

35,714

  Proceeds from sale of GATA

-

495

      Net cash provided by investing activities

-

36,209

 

 

 

Cash flows from financing activities

 

 

  Proceeds from issuance of common stock and warrants

-

239,286

  Proceeds from convertible promissory notes

-

40,000

  Proceeds from promissory notes

229,987

-

  Repayment of convertible promissory notes

(250,000)

(134,000)

  Advances from related parties

-

16,036

      Net cash (used in) provided by financing activities

(20,013)

161,322

 

 

 

Net change in cash

112,678

(249,481)

Cash, beginning of period

463,610

376,942

 

 

 

Cash, end of period

$      576,288

$      127,461


(Continued on next page)



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GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013

(UNAUDITED)


 

2014

2013

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

  Cash paid for income taxes

$         5,855

$         8,789

 

 

 

  Cash paid for interest

$       50,200

$     142,348

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities

 

 

 

 

 

  Reclassification of derivative liabilities to equity

$                -

$     119,600

 

 

 

  Issuance of options for the purchase of MGA

$                -

$       33,900



See notes to consolidated financial statements.





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GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013

(UNAUDITED)


1.  ORGANIZATION


Description of the Business


Global Arena Holding, Inc. (formerly, “Global Arena Holding Subsidiary Corp.”) (“GAHI”), was formed in February 2009, in the state of Delaware.  GAHI is a financial services firm that services the financial community through its subsidiaries as follows:


Global Arena Capital Corp. (“GACC”) is a wholly owned subsidiary that is a full service financial services company. GACC is a broker-dealer registered with the Securities and Exchange Commission (“SEC”).  The Company is also a member of the Financial Industry Regulatory Authority (“FINRA”) and the Securities Investor Protection Corp (“SIPC”). GACC is engaged in the securities business, which comprises several classes of securities transactions such as equities, corporate and municipal bonds, mutual funds, insurance and options, all of which the broker dealer executes as risk-less principal and agency transactions.  Global Arena Investment Management LLC (“GAIM”), a wholly owned subsidiary, provides investment advisory services to its clients.  GAIM is registered with SEC as an investment advisor and clears all of its business through Fidelity Advisors (“Fidelity”), its correspondent broker.  The Company sold 25% of the interest in GAIM to FireRock Capital, Inc. (“FireRock”) in 2012 and on November 25, 2013, repurchased this 25% interest.  Global Arena Commodities Corp. (“GACOM”), a wholly owned subsidiary, provided commodities brokerage services and earned commissions. GACOM ceased operating in November 2013.  The Company is reviewing its options and may close GACOM.  Lillybell Entertainment, LLC (“Lillybell”), a majority owned subsidiary, provides finance services to the entertainment industry.  MGA International Brokerage LLC (“MGA”), a majority owned subsidiary and a New York limited liability company, is a full-service insurance broker.  MGA offers comprehensive life and property and casualty insurance services, solutions and advice.  Global Arena Trading Advisors, LLC (“GATA”), provided futures advisory services. GATA is registered with the National Futures Association (NFA) as a commodities trading advisor.  On March 7, 2013, the Company sold GATA to a third party.


Reverse Merger Transaction


On January 19, 2011, China Stationery and Office Supply, Inc. (“China Stationery”) entered into an Agreement and Plan of Merger with GAHI.  Upon the terms and subject to the conditions of the Merger Agreement, at the effective date of the Merger, the Company merged with and into China Stationery, with China Stationery continuing as the surviving corporation with the new name of Global Arena Holding, Inc.



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Immediately following the execution of the Merger Agreement, and as a condition and inducement to the willingness of the Company to enter into the Merger Agreement, certain stockholders, who held, as of the date of the Merger Agreement, a majority of the issued and outstanding common shares entitled to vote on the adoption of the Merger Agreement, executed and delivered to the Company a written consent approving the transactions contemplated thereby.


At the effective date of the Merger on May 18, 2011, each share of GAHI’s common stock, was cancelled and converted automatically into 1.5 common shares of China Stationery for an aggregate of 18,000,000 common shares of China Stationery and was recorded as a recapitalization of China Stationery in the form of a reverse merger.


The consolidated financial statements are issued under the name of Global Arena Holding, Inc. (formerly, China Stationery, the legal acquirer), but are a continuation of the consolidated financial statements of Global Arena Holding Subsidiary Corp. and its subsidiaries (the accounting acquirers, collectively, the “Company”).


Acquisition of MGA International Brokerage LLC


On January 29, 2013, the Company entered into an agreement of sale with Marc Goldin and MGA to purchase 66.67% of the aggregate outstanding member interests of MGA, in exchange for an option to purchase 300,000 shares of the Company’s common shares.  Each option is exercisable into one common share of the Company at an exercise price of $0.25 per common share.  The exercise period is one year from the agreement date. The option has been extended for another year.

 

The acquisition was accounted for under the purchase method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805.  Under the purchase method of accounting, the total purchase price is allocated to the net tangible and intangible assets of MGA based on their estimated fair values.  At the acquisition date, MGA has no material net assets.  The goodwill of $33,900 arising from the acquisition consists largely of the synergies and business relationships with insurance customers expected from combining the operations of the Company and MGA.  


In accordance with SEC Regulation S-X Rule 3-05, MGA was not a significant subsidiary as of the acquisition date.  Therefore, no pro forma financial information related to the acquisition is required to be presented in accordance with SEC Regulation S-X Rule 11-01.




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Sale of Global Arena Trading Advisors, LLC


On March 7, 2013, the Company and Courtney Smith entered into a purchase agreement for the sale of the Company’s 100% interests in GATA to Courtney Smith for $500.  The related loss of $2,353 was included in the accompanying statement of operations for the three months ended March 31, 2013.  In accordance with SEC Regulation S-X Rule 3-05, GATA was not a significant subsidiary as of the disposal date.  Therefore, no pro forma financial information related to the disposal is required to be presented in accordance with SEC Regulation S-X Rule 11-01. GATA has minimum activities and did not require disclosure as a discontinued operation.


Going Concern


The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. The Company has generated recurring losses and cash flow deficits from operations since inception and has had to continually borrow to continue operations. In addition, the Company is in default of certain notes outstanding and is subject to the holders’ continued forbearance of not demanding payment.  These matters raise substantial doubt about the Company’s ability to continue as a going concern. The continued operations of the Company are dependent upon its ability to raise additional capital, satisfy the holders of the debts in default, obtain additional financing and/or generate positive cash flows from operations.  Management believes that it will be successful in obtaining additional financing, from which the proceeds will be primarily used to execute its operating plan. The Company plans to use its available cash to continue the development and execution of its business plan and expand its client base and services.  However, the Company can give no assurance that such financing will be available or on terms acceptable to the Company, or at all.  Should the Company not be successful in obtaining the necessary financing to fund its operations, satisfy the holders of the debts in default, and ultimately achieve adequate profitability and cash flows from operations, the Company would need to curtail certain or all of its operating activities.


The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.




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2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Basis of Accounting and Presentation


The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of GAHI and its wholly-owned subsidiaries and majority owned subsidiaries, GACC, GAIM, GACOM, Lillybell, MGA from January 29, 2013, the date of acquisition, and GATA through March 7, 2013, the date of sale.  All significant intercompany accounts and transactions have been eliminated in consolidation.  


The unaudited interim consolidated financial statements of the Company as of March 31, 2014 and for the three months ended March 31, 2014 and 2013, have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the SEC which apply to interim financial statements. Accordingly, they do not include all of the information and footnotes normally required by accounting principles generally accepted in the United States of America for annual financial statements. The interim consolidated financial information should be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company’s Form 10-K for the year ended December 31, 2013, previously filed with the SEC.  In the opinion of management, the interim information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The results of operations for the three months ended March 31, 2014 are not necessarily indicative of the results to be expected for future quarters or for the year ending December 31, 2014.


Revenue Recognition


The Company’s revenue recognition policies comply with SEC revenue recognition rules and FASB ASC 605-10-S99.  The Company earns revenues through various services it provides to its clients.  Advisory fees are on a contractual basis with the fee stipulated in the contract and are recognized based on the terms of the contract during the period the service is provided.  Insurance commission revenues are recognized at the later of the billing or the effective date of the related insurance policies, net of an allowance for estimated policy cancellations.


Customer security transactions and the related commission income and expenses are recorded as of the trade date.  The Company generally acts as an agent in executing customer orders to buy or sell listed and over-the-counter securities in which it does not make a market, and charges commissions based on the services the Company provides to its customers.




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Use of Estimates


The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.  Actual results could differ from those estimates.


Fair Value of Financial Instruments


FASB ASC 820, “Fair Value Measurement” defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market for that asset or liability.  The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity.


Goodwill


In accordance with FASB ASC 805 “Business Combinations” (“ASC 805”), the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree were recognized at the acquisition date and measured at their fair values as of that date.  Goodwill represents the excess of purchase price over the fair value of net assets acquired in business combinations and is not amortized in accordance with FASB ASC 350, “Intangibles – Goodwill and Other” (“ASC 350”). ASC 350 addresses the amortization of intangible assets with defined lives and the impairment testing and recognition for goodwill and indefinite-lived intangible assets. The Company is required to evaluate the carrying value of its goodwill for potential impairment on an annual basis or more frequently if indicators arise. While the Company may use a variety of methods to estimate fair value for impairment testing, its primary methods are discounted cash flows and a market based analysis. When appropriate, the carrying value of these assets is reduced to fair value.  No impairment to the carrying value of goodwill has been identified by the Company.


Cash and Cash Equivalents


The Company considers all demand and time deposits and all highly liquid investments with an original maturity of three months or less to be cash equivalents.  


Deposits with Clearing Organizations


As of March 31, 2014 and December 31, 2013, deposits with clearing organizations consisted primarily of cash deposits in accordance with the clearing arrangement.



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Property and Equipment


Property and equipment is recorded at cost.  Depreciation is calculated using the straight-line method based on the estimated useful lives of the related assets, which range from three to five years.  Maintenance and repairs are charged to expense as incurred; costs of major additions and betterments that extend the useful life of the asset are capitalized. When assets are retired or otherwise disposed of, the costs and related accumulated depreciation or amortization are removed from the accounts and any gain or loss on disposal is recognized.


Impairment of Long-Lived Assets


The Company assesses the recoverability of its long lived assets when there are indications that the assets might be impaired.  When evaluating assets for potential impairment, the Company first compares the carrying amount of the asset to the asset’s estimated future cash flows (undiscounted and without interest charges).  If the estimated future cash flows used in this analysis are less than the carrying amount of the asset, an impairment loss calculation is prepared. The impairment loss calculation compares the carrying amount of the asset to the asset’s estimated future cash flows (discounted and with interest charges).


If the carrying amount exceeds the asset’s estimated future cash flows (discounted and with interest charges), the loss is allocated to the long-lived assets of the group on a pro rata basis using the relative carrying amounts of those assets.  Based on its assessments, the Company did not incur any impairment charges for the three months ended March 31, 2014 and 2013.


Convertible Debt


Convertible debt is accounted for under FASB ASC 470, “Debt – Debt with Conversion and Other Options.”  The Company records a beneficial conversion feature (“BCF”) related to the issuance of convertible debt that has conversion features at fixed or adjustable rates that are in-the-money when issued and records the fair value of any warrants issued with those instruments. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds to the warrants and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic value of the conversion features, both of which are credited to additional paid-in-capital.  The Company calculates the fair value of warrants issued with the convertible instruments using the Black-Scholes valuation method, using the same assumptions used for valuing stock options, except that the contractual life of the warrant is used.  Under these



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guidelines, the Company allocates the value of the proceeds received from a convertible debt transaction between the conversion feature and any other detachable instruments (such as warrants) on a relative fair value basis.  The allocated fair value is recorded as a debt discount and is accreted over the expected term of the convertible debt as interest expense.  


The Company accounts for modifications of its Embedded Conversion Features (ECF’s) in accordance with the FASB ASC 470-50-40-12 and 40-15 through 16 which requires the modification of a convertible debt instrument that changes the fair value of an embedded conversion feature and the subsequent recognition of interest expense or the associated debt instrument when the modification does not result in a debt extinguishment pursuant to FASB ASC 470-50-40/55.


Derivative Financial Instruments


In connection with the issuance of certain warrants that include price protection reset or anti-dilution provisions, the Company determined that these provision features are embedded derivative instruments pursuant to FASB ASC 815 “Derivatives and Hedging.”  These embedded derivatives are adjusted to fair value at each balance sheet date with the change recognized in operations.


Advertising Costs


Advertising costs are expensed as incurred.  Advertising costs, which are included in business development expenses, were deemed to be de minimus for the three months ended March 31, 2014 and 2013.


Stock-Based Compensation


The fair value of stock options and stock warrants issued to third party consultants and to employees, officers and directors is recorded in accordance with the measurement and recognition criteria of FASB ASC 505-50, “Equity-Based Payments to Non-Employees” and FASB ASC 718, “Compensation – Stock Based Compensation,” respectively.


The options and warrants are valued using the Black-Scholes valuation method. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables.  These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected stock option and warrants exercise behaviors.




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Because the Company’s stock options and warrants have characteristics different from those of its traded stock, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of such stock options and warrants.


Noncontrolling Interests


The Company accounts for its less than 100% interest in consolidated subsidiaries in accordance with FASB ASC 810, “Consolidation,” and accordingly the Company presents noncontrolling interests as a component of equity on its consolidated balance sheets and reports the noncontrolling interests’ share of net income or loss under the heading “net income (loss) attributable to noncontrolling interests” in the consolidated statements of operations.


Income Taxes


The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes,” which requires the recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes. Deferred tax assets and liabilities represent the future tax consequences for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled.  Deferred taxes are also recognized for operating losses that are available to offset future taxable income.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.  As of March 31, 2014 and December 31, 2013, the Company had deferred tax assets of approximately $4,550,000 and $4,382,000, respectively, for net operating loss carryforwards, which were fully reserved by a valuation allowance due to the significant uncertainty with respect to their future realization.


The Company follows the provisions of FASB ASC 740-10-25, which prescribes a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or expected to be taken in income tax returns.  FASB ASC 740-10-25 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with tax positions. The Company files income tax returns in the United States (federal) and in New York.  The Company is generally no longer subject to federal, state and local income tax examinations by tax authorities for tax years prior to 2010.




17



Reclassification


Certain amounts in the prior periods’ financial statements have been reclassified for comparative purposes to conform to the presentation in the current period’s financial statements.  These reclassifications had no effect on previously reported earnings.


3.  RECENTLY ISSUED ACCOUNTING STANDARDS


In March 2014, the FASB issued Accounting Standards Update 2014-06, “Technical Corrections and Improvements Related to Glossary Terms”.  This ASU provides technical corrections and improvements to Accounting Standards Codification glossary terms.  The adoption of this pronouncement, effective March 14, 2014, did not have a material effect on the Company’s results of operations or financial position.


In July 2013, the FASB issued Accounting Standards Update 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” Under this guidance, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward.  This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013.  This standard did not have a material impact on the Company’s results of operations or financial position.


In February 2013, FASB issued Accounting Standards Update 2013-04, “Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date” (a consensus of the FASB Emerging Issues Task Force). This guidance requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date. This stipulates that (1) it will include the amount the entity agreed to pay for the arrangement between them and the other entities that are also obligated to the liability and (2) any additional amount the entity expects to pay on behalf of the other entities. The objective of this update is to provide guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements. The amendments in this update are effective for fiscal periods (and interim reporting periods within those years) beginning after December 15, 2013. This standard did not have a material impact on the Company’s results of operations or financial position.


4.  NET INCOME (LOSS) PER SHARE


The Company computes net income (loss) per common share in accordance with FASB ASC 260, “Earnings Per Share” (“ASC 260”) and SEC Staff Accounting Bulletin No. 98 (“SAB 98”).  Under the provisions of ASC 260 and SAB 98, basic net income (loss) per common share is computed by dividing the amount available to common stockholders by



18



the weighted average number of shares of common stock outstanding during the period.  Diluted income per share includes the effect of dilutive common stock equivalents from the assumed exercise of options, warrants, convertible preferred stock and convertible notes. The Company’s common stock equivalents were excluded in the computation of diluted net (loss) per share since their inclusion would be anti-dilutive. These common stock equivalents may dilute future earnings per share.  Total shares issuable upon the exercise of outstanding stock options, warrants and conversion of convertible promissory notes for the three months ended March 31, 2014 and 2013 were as follows:


 

 

2014

 

2013

Warrants

 

13,275,916

 

11,406,533

Convertible debt

 

7,815,133

 

4,919,864

Stock options

 

2,140,625

 

2,375,000

 

 

 

 

 

  Common stock equivalents

 

23,231,674

 

18,701,397


5.  DERIVATIVE FINANCIAL INSTRUMENTS


In October 2010, in connection with a subscription agreement, the Company issued 2,231,250 warrants to an investor at an exercise price of $0.31 per share for 1,115,625 warrants and $0.35 for the remaining 1,115,625 warrants. The warrants had a term of three years. Per the terms of the subscription agreement, in the event the Company, at any time while all or any portion of these warrants are outstanding, sells any shares of common stock per share, or issue common stock equivalents at a conversion price, less than the warrants’ exercise price, the warrant price will be adjusted accordingly. In accordance with the provisions of ASC 815-40, these warrants are subject to derivative accounting treatment under ASC 815-10 and are recorded as a liability which is revalued at fair value each reporting date. Any change in fair value is recorded as non-operating, non-cash income or expense at each balance sheet date.  The Company reassesses the classification at each balance sheet date.  If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. The Company used the Black-Scholes valuation method to value the derivative instruments at inception and on subsequent valuation dates. The derivatives were extinguished on January 1, 2013 upon a mutual agreement reached between the Company and the warrants’ holder. Prior to extinguishment, the fair value of the derivatives measured using the Black-Scholes valuation method was $119,600, resulting in a gain of $3,800 recorded in the statements of consolidated operations for the three months ended March 31, 2013.


On November 15, 2013, the expiration date of the remaining outstanding warrants to purchase 1,179,130 shares of common stock of the Company was extended until December 31, 2013, and subsequently for another year and the warrant exercise price was reduced to $0.25.



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On December 31, 2012, in connection with an extension of the maturity date of certain convertible notes which were due on May 31, 2012, the Company issued the holder a warrant to purchase shares of common stock of the Company not exceeding 9.99% of the issued and outstanding shares and potential issuable shares related to outstanding options, warrants and convertible debt of the Company.  The Company determined that the anti-dilution provision feature of the warrant to be an embedded derivative instrument.  This derivative is adjusted to fair value at each balance sheet with the changes in fair value recognized in operations.  The Company uses the Black-Scholes valuation method to value the derivative instruments at inception and on subsequent valuation dates. Weighted average assumptions used to estimate fair values are as follows:


 

 

March 31, 2014

December 31, 2013

Issuance, December 31, 2012

Expected volatility

 

358%

316%

140%

Risk free interest rate

 

0.44%

0.13%

0.25%

Expected life (years)

 

0.75

1

2


For the three months ended March 31, 2014 and 2013, the Company recognized a change in the derivative liabilities of $811,600 and $(189,200), respectively, in other income (expense) related to this warrant derivative instrument.


On November 25, 2013, the Company repurchased 714,286 shares of its common stock and 25% of membership interests in GAIM, which was previously sold to FireRock in 2012, by issuing a convertible note in the amount of $250,000, which was originally due on December 31, 2013 and extended to and paid on January 6, 2014. The holder of the note is entitled to convert all or a portion of the convertible note plus any unpaid interest into shares of common stock at a lesser of $0.35 per share or 10% discount to the market value the day prior to the date of conversion. The Company determined that the embedded conversion option to be a derivative instrument.  This derivative was adjusted to fair value at each balance sheet with the changes in fair value recognized in operations prior to its extinguishment in January 2014. For the three months ended March 31, 2014, the Company recognized a change in this derivative liability of $35,714 in other income (expense) related to this derivative instrument.


6.  FAIR VALUE MEASUREMENTS


FASB ASC 820 specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs).  In accordance with FASB ASC 820, the following summarizes the fair value hierarchy:



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Level 1 Inputs – Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.


Level 2 Inputs – Inputs other than the quoted prices in active markets that are observable either directly or indirectly.


Level 3 Inputs –Inputs based on prices or valuation techniques that are both unobservable and significant to the overall fair value measurements.


ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurements.  Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The Company’s assessment of the significance of particular inputs to these fair measurements requires judgment and considers factors specific to each asset or liability.


Cash, due from clearing organizations, accounts receivables, advances to registered representatives and employees, accounts payable and accrued expenses, commission payable – The carrying amounts reported in the consolidated balance sheets for these items are a reasonable estimate of fair value.


Promissory notes payable and convertible promissory notes payable – Promissory notes payable and convertible promissory notes payable are recorded at amortized cost.  The carrying amount approximated fair value.


Derivative financial instruments – The fair value of liabilities for warrants with dilutive price reset or anti-dilution provisions and for certain embedded conversion options is determined utilizing the Black-Scholes valuation method.


The following table presents the Company’s assets and liabilities required to be reflected within the fair value hierarchy as of March 31, 2014 and December 31, 2013.


March 31, 2014

 

Level 1

 

Level 2

 

Level 3

 

Total

Derivative financial instruments

 

$                 -

 

$                -

 

$     756,200

 

$      756,200

 

 

 

 

 

 

 

 

 

December 31, 2013

 

Level 1

 

Level 2

 

Level 3

 

Total

Derivative financial instruments

 

$                 -

 

$                -

 

$  1,603,514

 

$  1,603,514




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The following table presents the Level 3 reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs for the derivative warrants:


Balance, December 31, 2013

 

$    1,603,514

 

 

 

Cancellation of derivative liability included in other (income)

  expenses

 

(35,714)

Change in fair value included in other (income) expenses

 

(811,600)

 

 

 

Balance, March 31, 2014

 

$       756,200


7. STOCK OPTIONS


Stock Options Plan


On June 27, 2011, the Board of Directors adopted a Stock Awards Plan (“Plan”).  The purpose of the Plan is to attract, retain and motivate employees, directors and persons affiliated with the Company and to provide such participants with additional incentive and reward opportunities.  The awards may be in the form of incentive stock options, options that do not constitute incentive stock options, stock appreciation rights, restricted stock awards, phantom stock awards, or any combination of the foregoing. The total number of shares of stock reserved and available for distribution under the Plan increased to 3,000,000 from 1,750,000, pursuant to a December 2012 proxy vote by holders of a majority of the shares of GAHI.  On July 17, 2012, the Board of Directors approved the issuance of non-qualified stock options for the purchase of an aggregate of 1,725,000 shares of common stock under the Plan to certain employees, officers and directors. The options are exercisable at $0.45 per common share and expire three years after their issuance.  The options are to vest over a two-to-three-year period with a fair value of approximately $500,000 at the grant date to be recognized over the vesting period.


Weighted average assumptions used to estimate the fair value of stock options on the date of grant are as follows:


 

 

July 17, 2012

    Expected dividend yield

 

$ -

    Expected stock price volatility

 

130%

    Risk free interest rate

 

0.32%

    Expected life (years)

 

3 years


The stock-based compensation related to the Plan, included in stock compensation expense in the consolidated statements of operations, was $66,898 and $60,554 for the three months ended March 31, 2014 and 2013, respectively.



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On December 27, 2012, GAHI granted to an employee, an option to purchase 350,000 shares of common stock. The option is exercisable at $0.45 per common share and expires on July 17, 2015.  The option is to vest 50% in July 2013 and 100% in July 2014 with a fair value of approximately $58,000 at the grant date to be recognized over the vesting period. The options granted to this employee became fully vested in March 2014 upon his departure from the Company in accordance with an arrangement with the Company. Weighted average assumptions used to estimate the fair value of stock options on the date of grant are as follows:


 

 

December 27, 2012

    Expected dividend yield

 

$ -

    Expected stock price volatility

 

140%

    Risk free interest rate

 

0.25%

    Expected life (years)

 

2.5 years


The stock-based compensation related to this option, included in stock compensation expense in the consolidated statements of operations, was $20,492 and $9,138 for the three months ended March 31, 2014 and 2013, respectively.


Other Options


As disclosed in Note 1, on January 29, 2013, in connection with the acquisition of MGA, the Company issued an option to purchase 300,000 shares of common stock exercisable at $0.25 per common share, which expired on January 28, 2014. The Company intends to extend the option for another year, subject to the Board approval. The options vested on the grant date, with a fair value of approximately $34,000 at the grant date recognized as goodwill during the three months ended March 31, 2013.


Weighted average assumptions used to estimate the fair value of stock options on the date of grant are as follows:


 

 

January 29, 2013

    Expected dividend yield

 

$ -

    Expected stock price volatility

 

120%

    Risk free interest rate

 

0.15%

    Expected life (years)

 

1 year




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The Company will issue new shares of common stock upon the exercise of outstanding stock options.  The following is a summary of stock option activity:


 

 





Shares

 


Weighted Average Exercise Price

Weighted- Average Remaining Contractual Life



Aggregate Intrinsic Value

Outstanding at December 31, 2013

 

2,375,000

 

$  0.44

1.43 years

$          -

Granted

 

-

 

-

-

-

Exercised

 

-

 

-

-

-

Cancelled and expired

 

-

 

-

-

-

Forfeited

 

-

 

-

-

-

 

 

 

 

 

 

 

Outstanding at March 31, 2014

 

2,375,000

 

$  0.44

1.26 years

$          -

 

 

 

 

 

 

 

Vested and expected to vest at March 31, 2014

 


2,375,000



$  0.44


1.26 years


$          -

 

 

 

 

 

 

 

Exercisable at March 31, 2014

 

1,553,500

 

$  0.43

1.24 years

$          -


The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock. There were no options exercised during the three months ended March 31, 2014.


As of March 31, 2014, approximately $80,000 of total unrecognized compensation costs will be recognized $74,000 in the remaining 2014 and $6,000 in 2015.




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8.  CONVERTIBLE PROMISSORY NOTES


 

March 31,

December 31,

 

2014

2013

Convertible promissory notes with interest at 12% per annum, convertible into common shares at fixed price of $0.25 per share. Maturity ranges from December 31, 2014 to November 11, 2018, net of unamortized discount of $608,489 and $686,289, respectively. (A)

                    $    391,511

  $       313,711

 

 

 

Convertible promissory notes with interest at 12% per annum, convertible into common shares at fixed price of $0.35 per share. Matured on May 30, 2012 and currently in default. (B)

                  354,515

           354,515

 

 

 

Convertible promissory notes with interest at 12% per annum, convertible into common shares at fixed price of $0.35 per share. Maturity ranges from October 13, 2014 to October 22, 2014, net of unamortized discount of $80,696 and $115,873, respectively.

                  369,304

           334,127

 

 

 

Convertible promissory notes with interest at 8% per annum, convertible into common shares at fixed price of $0.30 per share. Matured on October 13, 2013 and currently in default. (C)

                  250,000

           250,000

 

 

 

Convertible promissory notes with interest at 9% per annum, convertible into common shares at the lesser of $0.35 per share or a 10% discount to the market value the day prior to the date of conversion. Matured and repaid on January 6, 2013.

                             -

           250,000

 

               1,365,330

        1,502,353

Less current portion:

             (1,327,530)

       (1,489,253)


Long-term portion:

$      37,800                     

  $          13,100


(A)

Includes one note in the amount of $50,000 which matured on April 15, 2014 and is currently in default.  The Company is negotiating with the debt holder for a note extension. The Company continues to accrue the interest at12%.



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(B)

Currently, the Company is still negotiating a note extension with the holder for a consideration of $10,000 to extend the maturity date to September 30, 2014. The Company continues to accrue the interest at12%.


(C)

Currently, the Company is still negotiating a note extension with the holder to extend the maturity date to June 30, 2014 for a consideration of (1) the issuance of a warrant to purchase 3,000,000 shares of common stock with an exercise price at $0.25 per share and a life of five years; and (2) an extension of all existing warrants for another five years. The Company continues to accrue the interest at 8%.


The Company recorded $112,977 and $144,328 of interest expense pursuant to the amortization of the note discounts for the three months ended March 31, 2014 and 2013, respectively.


The intrinsic value for the outstanding convertible promissory notes as of March 31, 2014 and December 31, 2013 was approximately $0.


9. PROMISSORY NOTES


On March 28, 2014, the Company issued a promissory note in the principal amount of $200,000 at a stated interest rate of 10% per annum. The note matures on December 31, 2014. The Company has the right to convert all or a portion of the convertible note plus any unpaid interest into shares representing a 20% nonvoting membership interest in GAIM.


On March 31, 2014, the Company issued a promissory note in the principal amount of $30,000 at a stated interest rate of 10% per annum. The note matures on January 13, 2015.  The Company has the right to convert all or a portion of the convertible note plus any unpaid interest into shares representing a 3% nonvoting membership interest in GAIM.


10.  WARRANTS


On January 2, 2013, GAHI granted to a consultant of GAIM, warrants to purchase 1,000,000 shares of common stock. The warrants are exercisable at $0.25 per common share and expire on January 1, 2021.  400,000 warrants vested immediately upon signing the independent contractor agreement, with a fair value of approximately $91,000 at the grant date recognized in the three months ended March 31, 2013. 50,000 warrants vest for every $25,000,000 assets under management (“AUM”) (up to 600,000 warrants for $300,000,000 AUM) brought into the Company.  Each of the 50,000 warrants is measured at its then-current lowest aggregate fair value at each of interim reporting dates.  



26



Changes in the lowest aggregate fair values result in a change in the measure of compensation cost. Weighted average assumptions used to estimate the fair value of warrants on the date of grant are as follows:


 

 

January 2, 2013

    Expected dividend yield

 

$ -

    Expected stock price volatility

 

120%

    Risk free interest rate

 

1.25%

    Expected life (years)

 

8 years


On April 30, 2013, the Company, Daniel D. Rubino, Robert M. Pickus, and George C. Dolatly (collectively, the “GCA Principals”) and GCA Ventures, LLC (“GCA”) entered into a management and investor rights agreement.  Pursuant to the agreement, the Company will receive financial and management consulting services from GCA and the GCA Principals in return for warrants to purchase a total of 2,500,000 common shares, at an exercise price of $0.25 per share, which will be issued in three separate tranches. The first tranche of one million warrants have been issued concurrently with the signing.  The second and third tranche of 750,000 warrants each will be issued six months and one year after the date of the agreement, respectively.  Each tranche of warrants is to expire seven years after issuance. The fair value of approximately $891,500 at the grant date is being recognized over the vesting period. Weighted average assumptions used to estimate the fair value of warrants on the date of grant are as follows:  


 

 

April 30, 2013

    Expected dividend yield

 

$ -

    Expected stock price volatility

 

190%

    Risk free interest rate

 

1.11%

    Expected life (years)

 

7 years


The stock-based compensation related to the warrants, included in stock compensation expense in the consolidated statements of operations, was $66,863 and $0 for the three months ended March 31, 2014 and 2013, respectively.




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On March 13, 2014, the Company issued a three-year warrant to purchase 500,000 shares of common stock at $0.25 per share to a consultant pursuant to a consulting agreement. The warrant was fully vested when issued.  The fair value of approximately $252,800 at the grant date was recognized in the three months ended March 31, 2014. Weighted average assumptions used to estimate the fair value of warrants on the date of grant are as follows:  



 

 

March 13, 2014

    Expected dividend yield

 

$ -

    Expected stock price volatility

 

288%

    Risk free interest rate

 

0.74%

    Expected life (years)

 

3 years


The following tables summarize the warrants activities:


 




Shares

 


Weighted Average Exercise Price



Weighted- Average Exercisable

 



Aggregate

Intrinsic Value

 

 

 

 

 

 

 

Outstanding at December 31, 2013


21,271,487



$  0.43


21,271,487


  

$                  -

 

 

 

 

 

 

 

Granted

367,387

 

0.25

367,387

 

25,562

Exercised

-

 

-

-

 

-

Cancelled and surrendered


-

 


-


-

 


-

 

 

 

 

 

 

 

Outstanding at March 31, 2014


21,638,874



$  0.42


21,638,874


  

$                  -



Exercise

Price


Average Number Outstanding


Average

Contractual Life


Average

Exercise price


Warrants Exercisable

0.001

$0.25 to $0.75

3,793,865


16,211,509

0.75


3.53

$   0.001


   0.37

3,793,865


16,211,509

$0.67

1,633,500

0.13

$     0.67

1,633,500

 

 

 

 

 

 

21,638,874

-

-

21,638,874




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11.  NON-CONTROLLING INTEREST


As of March 31, 2014, the Company had two operating subsidiaries which were not wholly owned.  The Company had a 67% equity interest in Lillybell and a 67% equity interest in MGA. As of March 31, 2014 and December 31, 2013, the third party non-controlling interests were $(245,608) and $(235,672), respectively.


12.  RELATED PARTIES


Prior to July 13, 2012, the Company had a month-to-month agreement with Broad Sword Holdings, LLC, one of the Company’s stockholders, whereby Broad Sword Holdings, LLC provided office space to the Company, which was terminated in April, 2013.  In July 2013, the Company moved to a new location under another month to month agreement. Currently, the Company is being charged at $14,500 per month. During the three months ended March 31, 2014 and 2013, the Company was charged approximately $43,500 and $54,000, respectively, for office space.


Advances – related parties also represents advances to Broad Sword Holdings, LLC. Those advances are non-interest bearing and payable on demand.  At March 31, 2014 and December 31, 2013, the receivable was approximately $16,000 and $16,000, respectively.


13.  COMMITMENTS AND CONTINGENCIES


Litigation


The Company may be involved in legal proceedings in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance.


In early July 2012, GACOM advised the National Futures Association (“NFA”) that Interactive Brokers, LLC, a futures commission merchant that carries GACOM’s introduced futures accounts, had established an account structure that did not comply with the Commodity Futures Trading Commission regulations.  The Company has cooperated fully with NFA’s audit.  In late August 2012, the staff of NFA informed the Company that NFA has made a preliminary determination to recommend an action against the Company in connection therewith.  


On March 1, 2013, as a result of the audit commenced in August 2012 as described in the preceding paragraph, NFA filed a complaint with its Business Conduct Committee against GACOM, and its former president, an NFA associate and a principal and a registered associated person of GACOM.  On October 10, 2013, GACOM settled the complaint for a fine of $50,000, which has not been paid.  



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Named directors, officers, employees and/or registered representatives of GACC have been called before FINRA for on-the-record interviews in connection with certain FINRA inquiries.  At this time, the management is unable to determine what will be the ultimate outcome of such inquiries, including whether any formal investigation, proceeding or action will be instituted against GACC or certain of its named directors, officers, employees and/or registered representatives relating to allegations of FINRA rule violations, and if so, whether any such investigation, proceeding or action will materially impact the Company’s operations or the consolidated financial statements.


In October 2012, GACC received a complaint from a customer’s attorney alleging excessive commissions and one or more sales practice violations, but principally sounding in an alleged failure to execute stop loss orders. The attorney demanded payment of the sum of $642,000, allegedly representing the amount of the customer’s damages. The matter has been submitted to GACC’s insurance company to put it on notice of a potential claim. An arbitration has not been brought. Should one be brought, GACC intends to vigorously contest and defend it. Management is unable to determine the ultimate outcome, if any, to the Company’s consolidated financial statements at this time.


On June 5, 2013, a former customer of GACC filed a statement of claim with FINRA Dispute Resolution against GACC.   The statement of claim alleges churning, unsuitability, breach of fiduciary duty, federal securities law violations, common law fraud, breach of contract, and negligent supervision and requests specified damages of $150,000 and also unspecified punitive damages, attorneys’ fees, interest, and costs.  The parties are in the process of completing their discovery obligations. The Company has responded to this statement of claim by filing an answer that disputes the subject allegations and presently intends to contest this matter at the arbitration, which is scheduled to be heard by a panel of FINRA arbitrators on June 9, 2014 to June 13, 2014.  Management is unable to determine the ultimate outcome, if any, and its effects on the Company’s consolidated financial statements at this time.


GACC and one of its representatives (“Respondents”) are involved in a FINRA arbitration commenced by a Claimant in December 2013, alleging garden-variety sales practice claims, principally sounding in unsuitable trading.  The Claimant alleges losses of approximately $80,000.   Respondents have prepared a responsive pleading that they have submitted as pro se respondents denying the salient allegations of the claim.   The Respondents in that case intend to defend the case vigorously and believe it is without merit.  The case is in the earliest stages of discovery.  Evidentiary hearings have been scheduled for in late September or early October 2014.  Management is unable to determine the ultimate outcome, if any, and its effects on the Company’s consolidated financial statements at this time.




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On January 3, 2014, a former customer of GACC filed a statement of claim with FINRA Dispute Resolution against GACC.   The statement of claim alleges breach of fiduciary duty, breach of covenant of good faith and fair dealing, elder abuse, unfair business practices, federal and state securities law violations, fraud, and negligent misrepresentation, and requests specified damages of $452,000 and also unspecified punitive damages, attorneys’ fees, interest, and costs. GACC does not believe the claim has merit and intends to contest and defend against it vigorously. Management is unable to determine the ultimate outcome, if any, to the Company’s consolidated financial statements at this time.


On May 5, 2014, GAHI and GACC entered into a settlement agreement in the amount of $650,000 for a previous arbitration with a former OSJ (“Claimant”), in which the Claimant alleged that GACC and various of its registered representatives (“Respondents”) engaged in a concerted course of action to wrest from him his book of business by wrongfully terminating an Office of Supervisory Jurisdiction Agreement (“OSJ Agreement”). The settlement agreement provides that GAHI will pay $650,000. The related liability was included in accounts payable and accrued expenses in the accompanying consolidated balance sheets as of March 31, 2014.  Although, as of the filing date, the payment has been made in full, GAHI intends to seek through GACC, an arbitration at FINRA wherein GACC will invoke certain indemnification clauses in its OSJ Agreement with certain Representatives to seek indemnification and financial repayment for the matter.


The Company records legal costs associated with loss contingencies as incurred and accrued for all probable and estimable settlements.


Indemnification


The Company is engaged in providing a broad range of investment services to a diverse group of retail and institutional clientele. Counterparties to the Company’s business activities include broker-dealers and clearing organizations, banks and other financial institutions. The Company uses clearing brokers to process transactions and maintain customer accounts on a fee basis, and the Company permits the clearing firms to extend credit to its clientele secured by cash and securities in the client’s account. The Company’s exposure to credit risk associated with the non-performance by its customers and counterparties in fulfilling their contractual obligations can be directly impacted by volatile or illiquid trading markets, which may impair the ability of customers and counterparties to satisfy their obligations to the Company. The Company has agreed to indemnify the clearing brokers on a limited basis for losses it incurs while extending credit to the Company’s clients.




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It is the Company’s policy to review, as necessary, the credit standing of its customers and each counterparty.  Amounts due from customers that are considered uncollectible by the clearing broker are charged back to the Company when such amounts become determinable. Upon notification of a charge back, such amounts, in total or in part, are then either (i) collected from the customers, (ii) charged to the broker initiating the transaction, and/or (iii) charged as an expense in the accompanying statement of operations, based on the particular facts and circumstances.


The maximum potential amount for future payments that the Company could be required to pay under this indemnification cannot be estimated. However, the Company believes that it is unlikely it will have to make any material payments under these arrangements and has not recorded any contingent liability in the consolidated financial statements for this indemnification.


14.  REVENUE CONCENTRATIONS


The Company considers significant revenue concentrations to be clients or brokers who account for 10% or more of the total revenues generated by the Company during the period.   The Company had one broker who accounted for 10% of total revenues and no revenues from a single customer that accounted for 10% or more of total revenues, during the three months ended March 31, 2014.  During the three months ended March 31, 2013, the Company had two brokers who accounted for 22% of total revenues and no revenues from a single customer that accounted for 10% or more of total revenues.  


15.  SUBSEQUENT EVENTS  


As disclosed in Note 13, the Company entered into a settlement agreement for a previous arbitration and the settlement agreement amount of $650,000 has been paid in full as of the filing date.



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ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following discussion should be read in conjunction with the accompanying unaudited consolidated financial statements and the notes thereto, included in Item 1 in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, and as contained in that report, the information under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” This discussion contains forward-looking information.  Please see “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.


Forward-looking Statements


Statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operation, as well as in certain other parts of this quarterly report on Form 10-Q (as well as information included in oral statements or other written statements made or to be made by Global Arena Holdings, Inc. (“GAHI”, with our subsidiaries “the Company”, “We”) that look forward in time, are forward-looking statements made pursuant to the safe harbor provisions of the U.S. Private Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, expectations, predictions, and assumptions and other statements which are other than statements of historical facts. Although GAHI believes such forward-looking statements are reasonable, it can give no assurance that any forward-looking statements will prove to be correct. Such forward-looking statements are subject to, and are qualified by, known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by those statements. These risks, uncertainties and other factors include, but are not limited to GAHI’s ability to estimate the impact of competition and of industry consolidation and risks, uncertainties and other factors set forth in GAHI’s filings with the Securities and Exchange Commission, including without limitation to Quarterly Report on Form 10-Q.


GAHI undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Form 10-Q.




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Critical Accounting Policies


The Company’s financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by management's applications of accounting policies. Critical accounting policies for the registrant include the revenue recognition, cash and cash equivalents and derivative financial instruments.


Basis of Accounting and Presentation


The accompanying consolidated financial statements include the accounts of GAHI and its wholly-owned and majority owned subsidiaries, GACC, GAIM, GACOM, Lillybell, MGA (from January 29, 2013, the date of acquisition), and GATA (through March 7, 2013, the date of sale). All significant intercompany accounts and transactions have been eliminated in consolidation.


Revenue Recognition


The Company earns revenues through various services it provides to its clients.  Customer security transactions and the related commission income and expense are recorded as of the trade date.  The Company generally acts as an agent in executing customer orders to buy or sell listed and over-the-counter securities in which it does not make a market, and charges commissions based on the services the Company provides to its customers. Advisory fees are on a contractual basis with the fee stipulated in the contract and are recognized based on the terms of the contract during the period service is provided.


Derivative Financial Instruments


In connection with the issuance of certain warrants that include price protection reset or anti-dilution provisions, the Company determined that these provision features are embedded derivative instruments pursuant to FASB ASC 815“Derivatives and Hedging.” These embedded derivatives are adjusted to fair value at each balance sheet date with the change recognized in operations.




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Convertible Debt


Convertible debt is accounted for under FASB ASC 470, “Debt – Debt with Conversion and Other Options.”  The Company records a beneficial conversion feature (“BCF”) related to the issuance of convertible debt that has conversion features at fixed or adjustable rates that are in-the-money when issued and records the fair value of any warrants issued with those instruments. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds to the warrants and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic value of the conversion features, both of which are credited to additional paid-in-capital.  The Company calculates the fair value of warrants issued with the convertible instruments using the Black-Scholes valuation method, using the same assumptions used for valuing stock options, except that the contractual life of the warrant is used.  Under these guidelines, the Company allocates the value of the proceeds received from a convertible debt transaction between the conversion feature and any other detachable instruments (such as warrants) on a relative fair value basis.  The allocated fair value is recorded as a debt discount and is accreted over the expected term of the convertible debt as interest expense.  


The Company accounts for modifications of its Embedded Conversion Features (ECF’s) in accordance with the FASB ASC 470-50-40-12 and 40-15 through 16 which requires the modification of a convertible debt instrument that changes the fair value of an embedded conversion feature and the subsequent recognition of interest expense or the associated debt instrument when the modification does not result in a debt extinguishment pursuant to FASB ASC 470-50-40/55.


Stock-Based Compensation


The fair value of stock options and stock warrants issued to third party consultants and to employees, officers and directors is recorded in accordance with the measurement and recognition criteria of FASB ASC 505-50, “Equity-Based Payments to Non-Employees” and FASB ASC 718, “Compensation – Stock Based Compensation,” respectively.


The options and warrants are valued using the Black-Scholes valuation method. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables.  These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected stock option and warrants exercise behaviors.


Because the Company’s stock options and warrants have characteristics different from those of its traded stock, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of such stock options and warrants.



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Off-balance Sheet Arrangements

The Company has not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties.


The Company does not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.


Recent Accounting Pronouncements

Recent accounting pronouncements issued by the FASB and the SEC did not have, or are not believed by management will have, a material impact on the Company’s present or future consolidated financial statements.


Trends and Uncertainties

The Company is a financial services firm that services the financial community through its subsidiaries. Demand for the Company’s services are dependent on general economic conditions, which are cyclical in nature.  Because a major portion of our activities are the receipt of revenues from financial services, our business operations may be adversely affected by competition, prolonged recessionary periods and other economic and political situations.


The Company has generated recurring losses and cash flow deficits from operations since inception and has had to continually borrow to continue operations. In addition, the Company is in default of certain notes outstanding and is subject to the holders’ continued forbearance of not demanding payment.  These matters raise substantial doubt about the Company’s ability to continue as a going concern. The continued operations of the Company are dependent upon its ability to raise additional capital, satisfy the holders of the debts in default, obtain additional financing and/or generate positive cash flows from operations.  Management believes that it will be successful in obtaining additional financing, from which the proceeds will be primarily used to execute its operating plan. The Company plans to use its available cash to continue the development and execution of its business plan and expand its client base and services.  However, the Company can give no assurance that such financing will be available or on terms acceptable to the Company, or at all.  Should the Company not be successful in obtaining the necessary financing to fund its operations, satisfy the holders of the debts in default, and ultimately achieve adequate profitability and cash flows from operations, the Company would need to curtail certain or all of its operating activities.




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The rapid advances in computing and telecommunications technology over the past several decades have brought with them increasingly sophisticated methods of delivering financial services through electronic channels. Along with these advances, though, have come risks regarding the integrity and privacy of data, and these risks apply to financial institutions, probably more than any other industry, falling into the general classification of cybersecurity. The Company deals with a clearing broker that ensures both the integrity of its data and the protection of the privacy of its customers’ personal financial and identity information. While it is not possible for anyone to give an absolute guarantee that data will not be compromised, the Company believes that its third-party service providers provide a reasonable assurance that the financial and personal data that it holds are secure.


There are no other known trends, events or uncertainties that have, or are reasonably likely to have, a material impact on our short term or long term liquidity. Sources of liquidity will come from the sale of our services, as well as the private sale of our stock and the issuance of debt. There are no material commitments for capital expenditures at this time. There are no trends, events or uncertainties that have had or are reasonably expected to have a material impact on the net sales or revenues or income from continuing operations. There are no significant elements of income or loss that do not arise from our continuing operations except for the fair value change on the derivative financial instrument and settlement on arbitration. There are no other known causes for any material changes from period to period in one or more line items of our financial statements.


Liquidity and Capital Resources

As of March 31, 2014, the Company has an accumulated deficit of $12,258,014 since inception and a working capital deficiency of $3,180,004.  Our ability to continue as a going concern depends upon whether we can ultimately attain profitable operations, generate sufficient cash flow to meet our obligations, and obtain additional financing as needed.


During the three months ended March 31, 2014, the Company had a net loss of $349,643 and net cash provided by its operating activities of $132,691.  Comparatively, during the three months ended March 31, 2013, the Company had a net loss of $994, 621 and net cash used in its operating activities amounted to $447,012.


During the three months ended March 31, 2014, the Company had no investing activities since our available cash was used to repay certain promissory notes. Comparatively, during the three months ended March 31, 2013, Global Arena Holding received proceeds of $35,714 from the sale of a 25% interest in GAIM, and proceeds of $495 from the sale of GATA, resulting in net cash provided by investing activities of $36,209.




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During the three months ended March 31, 2014, the Company with proceeds of $229,987 from the issuance of promissory notes and with available cash, was able to pay down convertible debt of $250,000.   Comparatively, during the three months ended March 31, 2013, the Company received proceeds of $239,286 from the issuance of common stock and warrants, received proceeds of $40,000 from convertible promissory notes, repaid $134,000 of convertible promissory notes and received advances of $16,036 from related parties, resulting in net cash provided by financing activities of $161,322 for the three months ended March 31, 2013.


Management believes that it will be able to obtain additional financing, from which the proceeds will be primarily used to execute its operating plan. Management plans to use its available cash to continue the development and execution of its business plan and expand the Company’s client base and services. However, management cannot give assurances that such financing will be available or on terms advantageous to the Company, or at all. Should the Company not be successful in obtaining the necessary financing to fund its operations, the Company would need to curtail certain or all of its operating activities.


The Company’s continuation as a going concern is dependent upon its ability to ultimately attain profitable operations, generate sufficient cash flow to meet its obligations, and obtain additional financing as may be required. Our auditors have included a “going concern” qualification in their auditors’ report dated April 15, 2014 included in our form 10k filed with the Securities and Exchange Commission .  Such a “going concern” qualification may make it more difficult for us to raise funds when needed. The outcome of this uncertainty cannot presently be determined.


The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. There can be no assurance that management will be successful in implementing its business plan or that the successful implementation of such business plan will actually improve our operating results.


Results of Operations


Three Months Ended March 31, 2014 compared to the Three Months Ended March 31, 2013.


Revenues from commission and other for three months ended March 31, 2014 was $ $7,588,950 compared to $2,117,379 for the prior comparative three months ended March 31, 2013.  The increase in revenue of $5,471,571 is due to the increase in assets under management.




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Operating expenses principally commissions, salaries and stock based compensation, totaled $7,026,910 for the three months ended March 31, 2014 compared to $1,863,211 in the prior comparative three months ended March 31, 2013, an increase of $5,1643,699 due to the increase in the volume of business.  Clearing cost totaled $474,296 for the three months ended March 31, 2014 compared to $276,767 in the prior comparative three months ended March 31, 2013, an increase of $197,529 due to the increase in the volume of transactions handled.


Professional fees for the three months ended March 31, 2014 amounted to $209,725 compared to $370,352 for the prior comparative three months ended March 31, 2013, a decrease of $160,627 since the current quarter did not involve the same amount of professional time negotiating with promissory note holders to amend existing debts and raising capital.


For the three months ended March, 31, 2014, we had occupancy expenses of $43,495, business development expenses of $129,518, regulatory fees of $17,372 and office and other expenses of $71,978, totaling $262,363. Comparatively, for the three months ended March 31, 2013, we had occupancy expenses of $60,228, business development expenses of $74,439, regulatory fees of $31,973, and office and other expenses of $55,807 totaling $222,447.  


For the three months ended March 31, 2014, we had a nonrecurring expense of $650,000 due to an arbitration settlement. Although, as of the filing date, the payment has been made in full, GAHI intends to seek through GACC, an arbitration at FINRA wherein GACC will invoke certain indemnification clauses in its OSJ Agreement with certain Representatives to seek indemnification and financial repayment for the matter.


For the three months ended March 31, 2014, other income totaled $684,701 compared to other loss of $379,223 for the prior comparative three months ended March 31, 2013, an increase of $1,063,924, and principally due increase in the fair value of a derivative liability as a result of the decrease in our stock price.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk


Not applicable for smaller reporting companies.


Item 4.  Controls and Procedures


Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of March 31, 2014.  We do not have sufficient segregation of duties within accounting functions,



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which is a basic internal control.  Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible.  However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals.  Based on this evaluation, our chief executive officer and chief financial officer have concluded such controls and procedures to be not effective as of March 31, 2014 to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms and to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.


Evaluation of Changes in Internal Control over Financial Reporting

Our chief executive officer and chief financial officer have evaluated changes in our internal controls over financial reporting that occurred during the three months ended March 31, 2014.  Based on that evaluation, our chief executive officer and chief financial officer, or those persons performing similar functions, did not identify any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


Important Considerations

The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time.


Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.



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PART II - OTHER INFORMATION


Item 1.   Legal Proceedings  


The Company may be involved in legal proceedings in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance.


In early July 2012, GACOM advised the National Futures Association (“NFA”) that Interactive Brokers, LLC, a futures commission merchant that carries GACOM’s introduced futures accounts, had established an account structure that did not comply with the Commodity Futures Trading Commission regulations.  The Company has cooperated fully with NFA’s audit.  In late August 2012, the staff of NFA informed the Company that NFA has made a preliminary determination to recommend an action against the Company in connection therewith.  


On March 1, 2013, as a result of the audit commenced in August 2012 as described in the preceding paragraph, NFA filed a complaint with its Business Conduct Committee against GACOM, and its former president, an NFA associate and a principal and a registered associated person of GACOM.  On October 10, 2013, GACOM settled the complaint for a fine of $50,000, which has not been paid.  


Named directors, officers, employees and/or registered representatives of GACC have been called before FINRA for on-the-record interviews in connection with certain FINRA inquiries.  At this time, the management is unable to determine what will be the ultimate outcome of such inquiries, including whether any formal investigation, proceeding or action will be instituted against GACC or certain of its named directors, officers, employees and/or registered representatives relating to allegations of FINRA rule violations, and if so, whether any such investigation, proceeding or action will materially impact the Company’s operations or the consolidated financial statements.


In October 2012, GACC received a complaint from a customer’s attorney alleging excessive commissions and one or more sales practice violations, but principally sounding in an alleged failure to execute stop loss orders. The attorney demanded payment of the sum of $642,000, allegedly representing the amount of the customer’s damages. The matter has been submitted to GACC’s insurance company to put it on notice of a potential claim. An arbitration has not been brought. Should one be brought, GACC intends to vigorously contest and defend it. Management is unable to determine the ultimate outcome, if any, to the Company’s consolidated financial statements at this time.




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On June 5, 2013, a former customer of GACC filed a statement of claim with FINRA Dispute Resolution against GACC.   The statement of claim alleges churning, unsuitability, breach of fiduciary duty, federal securities law violations, common law fraud, breach of contract, and negligent supervision and requests specified damages of $150,000 and also unspecified punitive damages, attorneys’ fees, interest, and costs.  The parties are in the process of completing their discovery obligations. The Company has responded to this statement of claim by filing an answer that disputes the subject allegations and presently intends to contest this matter at the arbitration, which is scheduled to be heard by a panel of FINRA arbitrators on June 9, 2014 to June 13, 2014.  Management is unable to determine the ultimate outcome, if any, and its effects on the Company’s consolidated financial statements at this time.


GACC and one of its representatives (“Respondents”) are involved in a FINRA arbitration commenced by a Claimant in December 2013, alleging garden-variety sales practice claims, principally sounding in unsuitable trading.  The Claimant alleges losses of approximately $80,000.   Respondents have prepared a responsive pleading that they have submitted as pro se respondents denying the salient allegations of the claim.   The Respondents in that case intend to defend the case vigorously and believe it is without merit.  The case is in the earliest stages of discovery.  Evidentiary hearings have been scheduled for in late September or early October 2014.  Management is unable to determine the ultimate outcome, if any, and its effects on the Company’s consolidated financial statements at this time.


On January 3, 2014, a former customer of GACC filed a statement of claim with FINRA Dispute Resolution against GACC.   The statement of claim alleges breach of fiduciary duty, breach of covenant of good faith and fair dealing, elder abuse, unfair business practices, federal and state securities law violations, fraud, and negligent misrepresentation, and requests specified damages of $452,000 and also unspecified punitive damages, attorneys’ fees, interest, and costs. GACC does not believe the claim has merit and intends to contest and defend against it vigorously. Management is unable to determine the ultimate outcome, if any, to the Company’s consolidated financial statements at this time.


On May 5, 2014, GAHI and GACC entered into a settlement agreement in the amount of $650,000 for a previous arbitration with a former OSJ (“Claimant”), in which the Claimant alleged that GACC and various of its registered representatives (“Respondents”) engaged in a concerted course of action to wrest from him his book of business by wrongfully terminating an Office of Supervisory Jurisdiction Agreement (“OSJ Agreement”). The settlement agreement provides that GAHI will pay $650,000.  The related liability was included in accounts payable and accrued expenses in the accompanying consolidated balance sheets as of March 31, 2014.   Although, as of the



42



filing date, the payment has been made in full, GAHI intends to seek through GACC, an arbitration at FINRA wherein GACC will invoke certain indemnification clauses in its OSJ Agreement with certain Representatives to seek indemnification and financial repayment for the matter.


The Company records legal costs associated with loss contingencies as incurred and accrued for all probable and estimable settlements.


Item 1A.  Risk Factors

Not applicable for smaller reporting company


Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

None


Item 3.   Defaults Upon Senior Securities  

As discussed in detail under Note 8, section a, GAHI has outstanding promissory notes which are considered in default.  The Company and the lender had previously extended the notes, which are now due, and the Company is negotiating with the lender for another extension.


Item 4.  Mine Safety Disclosures

Not applicable


Item 5.   Other Information  

None


Item 6.   Exhibits

Exhibit 31* - Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of

  2002

Exhibit 32* - Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of

  2002

101.INS**   XBRL Instance Document

101.SCH**   XBRL Taxonomy Extension Schema Document

101.CAL**   XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF**   XBRL Taxonomy Extension Definition Linkbase Document

101.LAB**   XBRL Taxonomy Extension Label Linkbase Document

101.PRE**   XBRL Taxonomy Extension Presentation Linkbase Document


*  Filed herewith

**XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. To be filed by amendment.




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SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.


Dated: May 22, 2014


Global Arena Holding, Inc.



/s/John Matthews

   John Matthews,

   Chief Executive Officer


/s/Joshua Winkler

   Joshua Winkler,

   Chief Financial Officer




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