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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.

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

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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 June 30, 2014 and December 31, 2013, deposits with clearing organizations consisted primarily of cash deposits in accordance with the clearing arrangement.

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 and six months ended June 30, 2014 and 2013.

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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.

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 and six months ended June 30, 2014 and 2013.

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Stock-Based Compensation

The fair value of stock options and stock warrants issued to third party consultants and to employees, officers and directors are 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 expected 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.

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 June 30, 2014 and December 31, 2013, the Company had deferred tax assets of approximately $4,682,000 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.

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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 State and City.  The Company is generally no longer subject to Federal, state and local income tax examinations by tax authorities for tax years prior to 2010.

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 May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, which supersedes the revenue recognition requirements in ASC 605, “Revenue Recognition”. The core principle of this updated guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new rule also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Companies are permitted to adopt this new rule following either a full or modified retrospective approach. Early adoption is not permitted. The Company has not yet determined the potential impact of this updated authoritative guidance on its consolidated financial statements.

In April 2014, the FASB issued ASU 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”, which amends the requirements for reporting discontinued operations. Under ASU 2014-08, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the component or group of components meets the criteria to be classified as held for sale or when the component or group of components is disposed of by sale or other than by sale. In addition, this ASU requires additional disclosures about both discontinued operations and the disposal of an individually significant component of an entity that does not qualify for discontinued

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operations presentation in the financial statements. The guidance is effective for annual and interim periods beginning after December 15, 2014, with early adoption permitted. The Company is currently evaluating the potential impact of this updated authoritative guidance on its consolidated financial statements.

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.

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 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 six months ended June 30, 2014 and 2013 were as follows:

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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 six months ended June 30, 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.

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 warrants, originally due on December 31, 2014, were extended to March 31, 2016. The Company determined that the anti-dilution provision feature of the warrants to be an embedded derivative instrument.  This

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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:

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 six months ended June 30, 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:

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.

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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 measurement.  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 due to their short term nature.

Promissory notes payable and convertible promissory notes payable – Promissory notes payable and convertible promissory notes payable are recorded at amortized cost.  The carrying amount approximates their 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 are 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.

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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:

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 issuance 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:

The stock-based compensation related to the Plan, included in stock compensation expense in the consolidated statements of operations, was $55,116 and $60,554 for the three months ended June 30, 2014 and 2013, and $122,014 and $121,108 for the six months then ended, 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 were as follows:

The stock-based compensation related to this option, included in stock compensation expense in the consolidated statements of operations, was $0 and $9,146 for the three months ended June 30, 2014 and 2013, and $20,492 and $18,284 for the six months then ended, 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 which was recognized as goodwill.

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

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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:

11.  NON-CONTROLLING INTEREST

As of June 30, 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 June 30, 2014 and December 31, 2013, the third party non-controlling interests were $(247,668) and $(235,672), respectively.

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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, which is charged at $14,500 per month. Since June 2014, the rent increased to $17,500 per month due to additional space occupied. During the three months ended June 30, 2014 and 2013, the Company was charged approximately $46,000 and $111,000, respectively, and $90,000 and $171,000 for the six months then ended 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 June 30, 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.

On October 10, 2013, GACOM settled a complaint with National Futures Association for a fine of $50,000 for certain noncompliance with Commodity Futures Trading Commission regulations.  The fine 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, management is unable to determine what will be the ultimate outcome of such inquiries, including whether any formal investigation, proceedings or actions 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, proceedings or actions 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,

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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.

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. The Company has responded to this claim by filing an answer that disputes the subject allegations and intends to contest this matter at the arbitration, which was scheduled to be heard by a panel of FINRA arbitrators on January 2015. Management is unable to determine the ultimate outcome, if any, to the Company’s consolidated financial statements at this time. According to management,  all the potential expenses or liability in excess of $25,000 will be covered by insurance.

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On April 10, 2014, the Legal Section of the FINRA formally notified GACC that it had made a preliminary determination to recommend that disciplinary action be brought against GACC for (1) failing to buy and sell corporate bonds at prices that were fair; and (2) failing to have in place a supervisory system that was reasonably designed to achieve compliance with applicable securities laws and regulations and FINRA rules.  GACC has responded and intends to contest this matter.  Management is unable to determine the ultimate outcome, if any, to the Company’s consolidated financial statements at this time.  

GACC are involved in a FINRA arbitration commenced by a Claimant alleging that various claims based on excessive and unsuitable trading activity, primarily involving bonds purchased on margin, and seeks $200,000 in compensatory damages in addition to unspecified punitive damages. This matter has been scheduled for a hearing in December 2014. According to management, all the potential expenses or liability in excess of $25,000 will be covered by insurance.

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.

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

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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. During the three months ended June 30, 2014, 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 June 30, 2013, the Company had no brokers 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 six months ended June 30, 2014, 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 six months ended June 30, 2013, the Company had no brokers who accounted for 10% of total revenues, and no revenues from a single customer that accounted for 10% or more of total revenues.

15.  SUBSEQUENT EVENTS  

On August 5, 2014, GAHI entered into an Agreement with PMC Capital, LLC (“PMC Capital”) and Barbara Desiderio pursuant to which GAHI agreed to convey and transfer to PMC Capital all of the common stock of GACC, subject to the approvals from the FINRA.  The consideration for the GACC common stock is $2,100,000 and the forgiveness of the amounts payable by GAHI and its other subsidiaries to GACC.

Pursuant to the terms of the Agreement, GAHI agreed to: (i) sell and transfer 24.9% of the issued and outstanding shares of GACC common stock to PMC Capital as of the Agreement date; and (ii) to sell the remaining 74.1% of the common stock to PMC Capital within five business days following the receipt of all necessary and required approvals, including compliance with the applicable FINRA rules.  GAHI has agree to indemnify  PMC Capital from losses, third party customer complaints and claims arising from or related to the operations of the GACC on or prior to July 31, 2014.  Such indemnification is limited to $250,000, subject to certain limitations and exclusions.

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Unaudited Pro Forma Condensed Consolidated Financial Information

The unaudited pro forma consolidated balance sheet has been derived from the unaudited balance sheet of the Company as of June 30, 2014, and adjusts such information to give the effect as if the foregoing transaction occurred on June 30, 2014.  The unaudited pro forma condensed consolidated statement of operations has been derived from the unaudited statement of operations of the Company for the six months ended June 30, 2014 and adjusts such information to give the effect as if the foregoing transaction occurred on January 1, 2014 for the six months ended June 30, 2014. The unaudited pro forma financial statements do not give effect to the possible indemnification by the Company up to $250,000.

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GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

Unaudited Pro Forma Condensed Consolidated Balance Sheet at June 30, 2014

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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.  

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.

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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.  

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.  

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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.

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.

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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.  As further described in “Liquidity and Capital Resources” and in the “Subsequent Event” footnote of the financial statements for the six months ended June 30, 2014, the Company sold its interest in GACC in August 2014.  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 continue its business.  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.  

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.

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.

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Liquidity and Capital Resources

As of June 30, 2014, the Company has an accumulated deficit of $12,653,576 since inception and a working capital deficiency of $3,171,161.  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 six months ended June 30, 2014, the Company had a net loss of $747,265 and net cash used in its operating activities amounted to $797,058.  Comparatively, during the six months ended June 30, 2013, the Company had a net loss of $2,025,313 and net cash used in its operating activities amounted to $710,201.

During the six months ended June 30, 2014, the Company had no investing activities since our available cash was used to repay certain promissory notes. Comparatively, during the six months ended June 30, 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.  

During the six months ended June 30, 2014, the Company, using proceeds of $904,987 from the issuance of promissory notes and with available cash, was able to pay down convertible debt of $250,000, resulting in net cash provided by financing activities of $654,987 for the six months ended June 30, 2014. The remaining cash proceeds from the issuance of promissory notes was also used principally to pay the $650,000 settlement on litigation in the second quarter of 2014. Comparatively, during the six months ended June 30, 2013, Global Arena received proceeds of $464,287 from the issuance of common stock and warrants, proceeds of $40,000 from convertible promissory notes, repaid $150,000 of convertible promissory notes and received advances of $16,878 from related parties, resulting in net cash provided by financing activities of $371,165 for the six months ended June 30, 2013. 

On August 5, 2014, GAHI entered into a Purchase Agreement with PMC Capital, LLC (“PMC Capital”) and Barbara Desiderio pursuant to which GAHI agreed to convey and transfer to PMC Capital all of the common stock of GACC, subject to the approvals from the FINRA.  The consideration for the GACC common stock is $2,100,000.  The Company used $1,000,000 of the proceeds from the sale of GACC to pay off convertible promissory notes that are in default.

Pursuant to the terms of the Purchase Agreement, GAHI agreed to: (i) sell and transfer 24.9% of the issued and outstanding shares of GACC common stock to PMC Capital on the Purchase Agreement date; and (ii) to sell and transfer the remaining 74.1% of the issued and outstanding GACC common stock to PMC Capital within five business days following the receipt of all necessary and required approvals, including compliance with

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the applicable FINRA rules.  GAHI indemnified and held the PMC Indemnitees harmless from losses, third party customer complaints and claims arising from or related to the operations of the GACC on or prior to July 31, 2014.  Such indemnification is limited to $250,000.

Management believes the sale of GACC, a retail Broker Dealer, provides Management with the ability to reduce the Company’s debt burden, and enhance shareholder value. The sale also gives Management the ability to refocus its future broker dealer operations away from retail sales and towards Institutional Sales and Investment Banking. Management of the Company is currently exploring a number of opportunities to acquire an interest in such a broker dealer.

Further, the Management of Global Arena Holdings Inc, will continue its acquisition and growth strategy of the Company’s subsidiary Global Arena Investment Advisors, a Registered Investment Advisory, by attempting to hire additional Registered Investment Advisors, and potentially acquiring existing Registered Investment Advisors.

Management believes that it will be able to continue its operations in the financial services industry and negotiate its acquisition plans. However, management cannot give assurances that such plans will materialize in the near term or on terms advantageous to the Company, or at all. Should the Company not be successful in its new business plans or obtain additional financing, 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.

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Results of Operations

Six Months Ended June 30, 2014 compared to the Six Months Ended June 30, 2013.

Revenues for the six months ended June 30, 2014 consisted of commissions and other of $15,109,924 compared to $4,633,566 for the prior comparative six months ended June 30, 2013, an increase of $10,476,358 due to higher assets under management in GACC.  

Commission expense for the six months ended June 30, 2014 was $12,826,146 compared to $3,207,524 in the prior comparative six months ended June 30, 2013, an increase of $9,618,622 due to the increase in the volume of business.  Commission expense as a percentage of revenues for the six months ended June 30, 2014 was 85% compared to 69% in the comparative prior period, an increase of 16% due to increase in payout rates.  Clearing cost totaled $779,712 for the six months ended June 30, 2014 compared to $518,458 in the prior comparative six months ended June 30, 2013, an increase of $261,254 due to the increase in the volume of transactions handled.  Clearing cost as a percentage of revenues for the six months ended June 30, 2014 was 5% compared to 11% in the prior comparative period, a decrease of 6% due to higher recovery rates and higher transaction volume.

Salaries and benefits and stock-based compensation totaled $1,160,522 for the six months ended June 30, 2014 compared to $1,289,432 for the prior comparative six months ended June 30, 2013, a decrease of $128,910 due to reduced number of employees and headcount principally in the commodities group and certain warrants issued for consulting services were fully amortized in the current period.

Professional fees for the six months ended June 30, 2014 amounted to $579,038 compared to $595,681 for the prior comparative six months ended June 30, 2013, a decrease of $16,643 since the current six months did not involve the same amount of professional time negotiating with promissory note holders to amend existing debts and raising capital.

For the six months ended June 30, 2014, we had occupancy expenses of $90,245, business development expenses of $234,747, regulatory fees of $40,124 and office and other expenses of $125,543, totaling $490,659. Comparatively, for the six months ended June 30, 2013, we had occupancy expenses of $171,487, business development expenses of $174,638, regulatory fees of $75,162, and office and other expenses of $115,211 totaling $536,498.  Occupancy cost decreased by $81,242 due to our move to reduced office space and lower lease cost.

For the six months ended June 30, 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.

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Total operating expenses for the six months ended June 30, 2014 was $16,486,077 compared to $6,147,593 for the comparative six months ended June 30, 2013, an increase of $10,338,484 principally due to commissions and clearing cost as discussed above.

For the six months ended June 30, 2014, other income totaled $628,888 compared to other loss of $511,286 for the prior comparative six months ended June 30, 2013, an increase of $1,140,174 and principally due to the increase in the fair value of a derivative liability as a result of the decrease in our stock price.

Three Months Ended June 30, 2014 compared to the Three Months Ended June 30, 2013.

Revenues for the three months ended June 30, 2014 consisted of commissions and other of $7,520,974 compared to $2,516,187 for the prior comparative three months ended June 30, 2013, an increase of $5,004,787 due to higher assets under management in GACC.  

Commission expense for the three months ended June 30, 2014 was $6,556,096 compared to $1,790,821 in the prior comparative three months ended June 30, 2013, an increase of $4,765,275 due to the increase in the volume of business. Commission expense as a percentage of commission revenues for the three months ended June 30, 2014 was 87% compared to 71% for the prior comparative period, an increase of 16% due to higher payout rates.  Clearing cost totaled $305,416 for the three months ended June 30, 2014 compared to $241,691 in the prior comparative three months ended June 30, 2013, an increase of $63,725 due to the increase in the volume of transactions handled.  Clearing cost as a percentage of commission revenue for the three months ended June 30, 2014 was 4% compared to 10% in the prior comparative period, a decrease of 6% due to higher recovery rates and higher transaction volumes.

Salaries and benefits and stock-based compensation totaled $403,662 for the three months ended June 30, 2014 compared to $842,924 for the prior comparative three months ended June 30, 2013, a decrease of $439,262 due to reduced number of employees and headcount principally in the commodities group and certain warrants issued for consulting services were fully amortized in the current period.

Professional fees for the three months ended June 30, 2014 amounted to $369,313 compared to $225,329 for the prior comparative three months ended June 30, 2013, a increase of $143,984 since the current three months involved more amount of professional time negotiating with promissory note holders to amend existing debts and raising additional promissory notes.

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For the three months ended June 30, 2014, we had occupancy expenses of $46,750, business development expenses of $105,229, regulatory fees of $22,752 and office and other expenses of $53,565, totaling $228,296. Comparatively, for the three months ended June 30, 2013, we had occupancy expenses of $111,259, business development expenses of $100,199, regulatory fees of $43,189, and office and other expenses of $59,404 totaling $314,051.  Occupancy cost decreased by $64,509 due to our move to reduced office space and lower lease cost.

Total operating expenses for the three months ended June 30, 2014 was $7,862,783 compared to $3,414,816 for the comparative three months ended June 30, 2013, an increase of $4,447,967 principally due to commissions and clearing cost as discussed above.

Interest expense for the three months ended June 30, 2014 was $380,613 compared to $226,363 for the comparative prior three months ended June 30, 2013, an increase of $154,250 principally due to higher interest rates on convertible promissory notes and increased debt.  Change in fair value of derivative liability for the three months ended June 30, 2014 was increase $324,800 compared to $94,300 for the comparative three months ended June 30, 2013, an increase of $230,500 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 June 30, 2014.  We do not have sufficient segregation of duties within accounting functions, 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 June 30, 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

44

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 June 30, 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.

On October 10, 2013, GACOM settled a complaint with National Futures Association for a fine of $50,000 for certain noncompliance with Commodity Futures Trading Commission regulations.  The fine 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, management is unable to determine what will be the ultimate outcome of such inquiries, including whether any formal investigation, proceedings or actions 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, proceedings or actions 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 the FINRA Dispute Resolution against GACC.   The 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 claim by filing an answer that disputes the subject allegations and intends to contest this matter at the arbitration, which was scheduled to be heard by a panel of FINRA arbitrators on June 9, 2014 to June 13, 2014 and subsequently postponed to 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. According to management, all the potential expenses or liability in excess of $25,000 will be covered by insurance.

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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. The Company has responded to this claim by filing an answer that disputes the subject allegations and intends to contest this matter at the arbitration, which was scheduled to be heard by a panel of FINRA arbitrators on January 2015. Management is unable to determine the ultimate outcome, if any, to the Company’s consolidated financial statements at this time. According to management,  all the potential expenses or liability in excess of $25,000 will be covered by insurance.

On April 10, 2014, the Legal Section of the FINRA formally notified GACC that it had made a preliminary determination to recommend that disciplinary action be brought against GACC for (1) failing to buy and sell corporate bonds at prices that were fair; and (2) failing to have in place a supervisory system that was reasonably designed to achieve compliance with applicable securities laws and regulations and FINRA rules.  GACC has responded and intends to contest this matter.  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 Company fully paid the settlement amount in June 2014.

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GACC are involved in a FINRA arbitration commenced by a Claimant alleging that various claims based on excessive and unsuitable trading activity, primarily involving bonds purchased on margin, and seeks $200,000 in compensatory damages in addition to unspecified punitive damages. This matter has been scheduled for a hearing in December 2014. According to management, all the potential expenses or liability in excess of $25,000 will be covered by insurance.

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: August 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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