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 commissions 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.

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Customer security transactions and the related commission income and expenses are recorded as of the trade date.  The Company generally acted as an agent in executing customer orders to buy or sell listed and over-the-counter securities in which it did not make a market, and charged 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 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.

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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 December 31, 2013, deposits with clearing organizations consisted primarily of cash deposits in accordance with the clearing arrangement related to the operations of GACC.

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 nine months ended September 30, 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

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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 of the BCF and warrants 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 40-15-16 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 nine months ended September 30, 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 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.

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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 September 30, 2014 and December 31, 2013, the Company had deferred tax assets of approximately $4,319,000 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 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 2011.

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Reclassifications

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

3.  RECENTLY ISSUED ACCOUNTING STANDARDS

In August 2014, the FASB issued authoritative guidance that requires an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern and requires additional disclosures if certain criteria are met. This guidance is effective for fiscal periods ending after December 15, 2016, with early adoption permitted. The adoption of this guidance is not expected to impact our consolidated financial statements or related disclosures.

In June 2014, the FASB issued ASU 2014-10, “Development Stage Entities: Elimination of Certain Financial Reporting Requirements”, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.  This ASU amends FASB ASC Topic 915, Development Stage Entities, to remove all incremental financial reporting requirements for development stage entities, thereby improving financial reporting by reducing the cost and complexity associated with providing that information.  The amendments in this ASU also eliminate an exception provided to development stage entities in FASB ASC 810 for determining whether an entity is a variable interest entity (VIE) on the basis of the amount of investment equity that is at risk.  The amendments in this ASU remove the definition of development stage entity from the FASB ASC Master Glossary, thereby removing the financial reporting distinction between development stage entities and other entities from U.S. GAAP.  In addition, the amendments eliminate the requirements for development stage entities to (i) present inception-to-date information on the statements of income, cash flows, and shareholders’ equity, (ii) label the financial statements as those of a development stage entity, (iii) disclose a description of the development stage activities in which the entity is engaged, (iv) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.  The amendments also clarify that the guidance in FASB ASC 275, Risks and Uncertainties, is applicable to entities that have not yet commenced planned principal operations.  The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of FASB ASC 915 should be applied retrospectively, except for the clarification to FASB ASC 275, which should be applied prospectively. For public business entities, those amendments are

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effective for annual reporting periods beginning after December 15, 2014, and interim periods therein.  Earlier implementation is allowed for any period where the reporting entity’s annual or interim financial statements have not yet been made available for issuance.  This accounting standard update is not expected to have a material impact on the Company’s consolidated financial statements.

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 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.

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.  

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Diluted net income per common share for the three and nine months ended September 30, 2014 excluded the diluted effect of common stock equivalents. In accordance with ASR 260, if their inclusion would be antidilutive to the income (loss) from continuing operations, they are to be excluded and the number of shares utilized shall be used in reporting all other diluted per share amounts. As the Company has losses from continuing operations for these periods, no common stock equivalents were utilized in the per share calculations. 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 nine months ended September 30, 2014 and 2013 were as follows:

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 nine months ended September 30, 2013.

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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 and revalued accordingly.

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 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 the 25% of membership interest 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 was 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 nine months ended September 30, 2014, the Company recognized a gain related to this derivative liability upon its liquidation of $35,714 in other income (expense) again.

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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.

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 receivable, 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.

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The following table presents the Company’s assets and liabilities required to be reflected within the fair value hierarchy as of September 30, 2014 and December 31, 2013.

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

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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 $13,580 and $60,554 for the three months ended September 30, 2014 and 2013, and $135,594 and $181,662 for the nine months then ended, respectively.

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 $9,315 for the three months ended September 30, 2014 and 2013, and $20,492 and $27,599 for the nine months then ended, respectively.

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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:

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 September 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 September 30, 2014 and December 31, 2013, the third party non-controlling interests were $(244,648) 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, which is charged at $14,500 per month. Since June 2014, the rent increased to $17,500 per month due to additional space occupied. In November 2014, the Company

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moved to a new location and entered into to a lease agreement with a monthly rental of $10,700, which expires on May 31, 2015. During the three months ended September 30, 2014 and 2013, the Company was charged approximately $48,000 and $43,000, respectively, and $138,000 and $215,000 for the nine months then ended for continuing and discontinued operation’s office space. Considering the discontinued operation still need to pay rent after sale and continuing operation can reduce certain rental payment after the sale of discontinued operation. The Company did not allocate the rent previously charged to the discontinued operation back to the continuing operation in the consolidated statements of operations.

The minimum future rentals under this lease as of September 30, 2014 are as follows:

Advances – related parties also represents advances to Broad Sword Holdings, LLC. Those advances are non-interest bearing and payable on demand.  At September 30, 2014 and December 31, 2013, the receivable was approximately $16,000.

13.  COMMITMENTS AND CONTINGENCIES

Litigation claims and settlements

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 the National Futures Association for a fine of $50,000 for certain noncompliance with Commodity Futures Trading Commission regulations.  The fine has not been paid and is included in the accounts payable and accrued expenses at September 30, 2014 and December 31, 2013.

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.

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GACC has responded to multiple requests for documents and FINRA has taken on-the-record testimony. On October 27, 2014 FINRA indicated that it may recommend enforcement proceedings against GACC, the current and prior officers of GACC, but is willing to engage in discussions about its concerns.

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.

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. 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 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 is involved in a FINRA arbitration commenced by a Claimant alleging 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.

On July 2, 2014, an action was commenced by a group of individuals against GACC,  the Company, and chief executive officer of the Company, which assert claims for minimum wage and overtime violations under New York Labor Law, and seek damages in an amount to be determined at trial, plus interest, attorneys’ fees and costs. Pursuant to a stipulation, the time for defendants to answer, move or otherwise respond to the Complaint was extended to and including November 17, 2014.

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Per agreement with the purchaser of GACC (Note 1), GAHI has agree to indemnify  the purchaser 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 for the GACC cases as mentioned above.  Such indemnification is limited to $250,000, subject to certain limitations and exclusions. As of September 30, 2014, the Company has made a litigation escrow deposit of $100,000 within its attorney’s escrow account, which can be used to reduce the indemnity obligations for the payment in settlement of such claims.

The Company and certain of its officers were named in connection with a demand for repayment of $695,000 by PMC LLC, in a letter dated October 16, 2014 relating to the Stock Purchase Agreement by and among GAHI and PMC Capital, LLC and Barbara Desiderio, dated as of August 5, 2014. The demand seeks repayment for expenditures made by GACC prior to the sale and meets certain minimum requirements in the Stock Purchase Agreement. At this time, the Company is unable to determine the ultimate outcome of the demand or whether it will result in a formal proceeding or action against the Company or any of its officers.

14.  SUBSEQUENT EVENTS

On November 11 and 13, 2014, the Company extended the due date of two of its notes that were in payment default until December 31, 2014 and December 15, 2014, respectively. See Note 8c and 8d for the terms of extensions.

In November 2014, the Company entered into a consulting agreement with a consultant for the identification, analysis and due diligence of investment opportunities in either the technology or digital media business. In consideration for the services to be provided, the Company granted the consultant 2,500,000 warrants to acquire 2,500,000 the company’s common stock at 0.25 per share.  

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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 Reports 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 revenue recognition, cash and cash equivalents, derivative financial instruments and accounting for the sale of Global Arena Capital Corp. (“GACC”) as a discontinued operation.

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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 (through August 5, 2014, the date of sale), 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’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 commissions 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 acted as an agent in executing customer orders to buy or sell listed and over-the-counter securities in which it did not make a market, and charged commissions based on the services the Company provides to its customers. The commission income of GACC is included in discontinued operations.

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

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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.

Off-balance Sheet Arrangements

The Company has entered into a purchase agreement with the purchaser of GACC and has agreed to indemnify the purchaser from losses, third party customer complaints and claims arising from or related to the operations of GACC on or prior to July 31, 2014.  Such indemnification is limited to $250,000, subject to certain limitations and exclusions. As of September 30, 2014, the Company has made a litigation escrow deposit of $100,000 within its attorney’s escrow account, which can be used to reduce the indemnity obligations for the payment in settlement of such claims. Please refer to the consolidated financial statements Note 13 “Commitments and Contingencies” for additional information on other financial guarantees or other commitments to guarantee the payment obligations of any third parties.

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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 believed by management will not 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 continuing operations since inception and has had to continually borrow to continue operations. 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, obtain additional financing and/or generate positive cash flows from operations.  As further described in “Liquidity and Capital Resources”, 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, 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 derivative financial instrument and settlement on arbitration.

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The Company has indemnified the purchaser of GACC from losses and third party complaints and claims related to GACC’s operation through July 31, 2014 for up to $250,000. If it becomes necessary to indemnify the purchaser of GACC, this could have a significant effect on the Company’s net income (loss) and its continuing operations.

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. 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.

Liquidity and Capital Resources

As of September 30, 2014, the Company has an accumulated deficit of $1,824,706  and a working capital deficiency of $1,870,706.  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 nine months ended September 30, 2014, the Company had a net loss from continuing operations of $(2,282,140), net income of $500,685, and net cash used in its operating activities was $1,565,149.  Comparatively, during the nine months ended September 30, 2013, the Company had a net loss from continuing operations of $(3,881,442), net loss of $(3,562,675) and net cash used in its operating activities amounted to $819,788.

During the nine months ended September 30, 2014, the Company had investing activities which was the sale of GACC with proceeds of $2,000,000.  Comparatively, during the nine months ended September 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 nine months ended September 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 $1,704,000, resulting in net cash used by financing activities of $799,013 for the nine months ended September 30, 2014. Comparatively, during the nine months ended September 30, 2013, the Company received proceeds of $564,287 from the issuance of common stock and warrants, proceeds of $105,000 from convertible

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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 $536,165 for the nine months ended September 30, 2013.

Management believed the sale of Global Arena Capital Corp, provided it 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.

The sale also gives GAHI the ability to refocus on its acquisition and growth strategy for the Company’s subsidiary Global Arena Investment Management, a Registered Investment Advisory. Management intends to hire additional Registered Investment Advisors, and Sub Advisors, to assist in the growth of assets under management. Currently, Management is in the process of changing investment managers, and exploring the possibility of closing it’s off shore investment vehicle and opening a fully registered fund for US clients.

Management is currently in discussions regarding the potential asset acquisition of Elections Services Solutions  LLC (“ESS”), a US based company that provides comprehensive technology-enabled election services, primarily for Organized Labor Associations. ESS key employees have been in the elections business since 1981, and have managed over 6000 labor elections.  We are negotiating the principal terms and conditions of any such acquisition which would likely involve issuing restricted shares of our common stock as consideration, paying a cash purchase price and assuming certain liabilities. Our chairman is the son of one of the principal stockholder of ESS.  Accordingly, our chairman has recused himself from our board’s consideration of this potential acquisition.  There can be no assurance that our proposed acquisition will ultimately be consummated.  

Going forward, Management will also focus on other investments with a specific interest in finance, technology and real estate.

Management believes that it will be able to continue its operations and further advance 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” modification in their auditors’ report dated April 15, 2014 included in our form 10k filed with the Securities and Exchange Commission .  A “going concern” modification may make it more difficult for us to raise funds when needed. The outcome of this uncertainty cannot presently be determined.

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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

Nine Months Ended September 30, 2014 compared to the Nine Months Ended September 30, 2013.

Revenues from continuing operations for the nine months ended September 30, 2014 consisted of commissions and other revenue of $53,987 compared to $214,309 for the prior comparative nine months ended September 30, 2013, a decrease of $160,322 due to decreased activity in commodities.  

Salaries and benefits and stock-based compensation from continuing operations totaled $888,569 for the nine months ended September 30, 2014 compared to $1,459,973 for the prior comparative nine months ended September 30, 2013, a decrease of $571,404 due to the reduced number of employees principally in the commodities group and certain warrants issued for consulting services which were fully amortized in the current period.

Professional fees from continuing operations for the nine months ended September 30, 2014 amounted to $582,547 compared to $586,841 for the prior comparative nine months ended September 30, 2013, an decrease of $4,294.

For the nine months ended September 30, 2014, we had occupancy expenses from continuing operations of $91,284, business development expenses of $300,026, regulatory fees of $2,159 and office and other expenses of $102,302, totaling $495,771. Comparatively, for the nine months ended September 30, 2013, we had occupancy expenses of $139,288, business development expenses of $246,412, regulatory fees of $16,225, and office and other expenses of $88,463 totaling $490,388.  Occupancy cost decreased by $48,004 due to our move to reduced office space resulting lower lease cost.

For the nine months ended September 30, 2014, we had a nonrecurring expense of $650,000 due to an arbitration settlement.

Total operating expenses for the nine months ended September 30, 2014 were $2,730,497 compared to $2,627,602 for the comparative nine months ended September 30, 2013, an increase of $102,895 principally due to the settlement of arbitration as discussed above.

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For the nine months ended September 30, 2014, other income totaled $294,370 compared to other loss of $1,468,149 for the prior comparative nine months ended September 30, 2013, an increase of $1,762,569 which was principally due to the increase in the fair value of a derivative liability as a result of the decrease in our stock price.

Income from discontinued operations for the nine months ended September 30, 2014 amounted to $968,869 compared to $318,767 for the prior comparative nine months ended September 30, 2013, an increase of $650,102 principally due to the overall increase in the commission revenue of GACC.

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

Revenues from continuing operations for the three months ended September 30, 2014 consisted of commissions and other revenue of $37,845 compared to $60,288 for the prior comparative three months ended September 30, 2013, a decrease of $22,443 due to decreased activity in commodities.  

Salaries and benefits and stock-based compensation from continuing operations totaled $178,313 for the three months ended September 30, 2014 compared to $427,650 for the prior comparative three months ended September 30, 2013, a decrease of $249,337 due to the reduced number of employees principally in the commodities group and certain warrants issued for consulting services which were fully amortized in the current period.

Professional fees from continuing operations for the three months ended September 30, 2014 amounted to $158,578 compared to $115,684 for the prior comparative three months ended September 30, 2013, an increase of $42,894 due to additional professional time negotiating with promissory note holders to amend existing debts and issuing additional promissory notes.

For the three months ended September 30, 2014, we had occupancy expenses from continuing operations of $46,102, business development expenses of $88,873, regulatory fees of $523 and office and other expenses of $36,510, totaling $172,008. Comparatively, for the three months ended September 30, 2013, we had occupancy expenses of $22,622, business development expenses of $89,655, regulatory fees of $6,986, and office and other expenses of $25,053 totaling $144,316.  Occupancy cost increased by $23,480 due to the relocation of the Company.

Total operating expenses for the three months ended September 30, 2014 were $610,768 compared to $715,011 for the comparative three months ended September 30, 2013, an decrease of $104,243 principally due to decrease in salaries and stock-based compensation as discussed above.

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Interest expense for the three months ended September 30, 2014 was $363,918 compared to $114,463 for the comparative prior three months ended September 30, 2013, an increase of $249,455 principally due to higher interest rates on convertible promissory notes and increased debt.  Change in the fair value of derivative liability for the three months ended September 30, 2014 was an increase $29,400 compared to reduction of $842,400 for the comparative three months ended September 30, 2013, an increase of $871,800 as a result of the decrease in our stock price.

Income from discontinued operations for the three months ended September 30, 2014 amounted to $241,435 compared to $74,222 for the prior comparative three months ended September 30, 2013, an increase of $167,213 principally due to the overall increase in commission revenue of GACC.

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 September 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 September 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 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.

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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 September 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 the National Futures Association for a fine of $50,000 for certain noncompliance with Commodity Futures Trading Commission regulations.  The fine has not been paid and is included in the accounts payable and accrued expenses at September 30, 2014 and December 31, 2013.

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.

GACC has responded to multiple requests for documents and FINRA has taken on-the-record testimony. On October 27, 2014 FINRA indicated that it may recommend enforcement proceedings against GACC, the current and prior officers of GACC, but is willing to engage in discussions about its concerns.

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 was subsequently postponed to October

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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.

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 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 Office of Supervisory Jurisdiction (“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 is involved in a FINRA arbitration commenced by a Claimant alleging 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.

On July 2, 2014, an action was commenced by a group of individuals against GACC, the Company, and chief executive officer of the Company, which assert claims for minimum wage and overtime violations under New York Labor Law, and seek damages in an amount to be determined at trial, plus interest, attorneys’ fees and costs. Pursuant to a stipulation, the time for defendants to answer, move or otherwise respond to the Complaint was extended to and including November 17, 2014.

Per agreement with the purchaser of GACC (Note 1), GAHI has agree to indemnify  the purchaser 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 for the GACC cases as mentioned above.  Such indemnification is limited to $250,000, subject to certain limitations and exclusions. As of September 30, 2014, the Company has made a litigation escrow deposit of $100,000 within its attorney’s escrow account, which can be used to reduce the indemnity obligations for the payment in settlement of such claims.

The Company and certain of its officers were named in connection with a demand for repayment of $695,000 by PMC LLC, in a letter dated October 16, 2014 relating to the Stock Purchase Agreement by and among GAHI and PMC Capital, LLC and Barbara Desiderio, dated as of August 5, 2014. The demand seeks repayment for expenditures made by GACC prior to the sale and meets certain minimum requirements in the Stock Purchase Agreement. At this time, the Company is unable to determine the ultimate outcome of the demand or whether it will result in a formal proceeding or action against the Company or any of its officers.

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 c and d, GAHI has outstanding promissory notes which were considered in default.  The Company and the lender have extended the due dates of these outstanding promissory notes.

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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: November 18, 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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