Global Arena Form 10-Q

June 30, 2013

Issuance, December 31, 2012

Expected volatility

Risk free interest rate

Expected life (years)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[x] Quarterly Report Pursuant to Section 13 or 15(d) Securities Exchange Act of 1934 for Quarterly Period Ended June 30, 2013

-OR-

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

Commission File Number 0-49819

Global Arena Holding, Inc.

(Exact name of registrant as specified in its charter)



Delaware		33-0931599
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)


420 Lexington Avenue, New York, NY		10170
(Address of principal executive offices)		(Zip Code)

(212) 508-4700

(Registrant's telephone number, including area code)

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

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

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


Large accelerated filer [ ]		Non-accelerated filer [ ]
Accelerated filer [ ]		Smaller reporting company [x]

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

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

September 5, 2013: Common Stock - 24,250,979

GLOBAL ARENA HOLDING, INC.

FORM 10-Q

For the quarterly period ended June 30, 2013

INDEX

PART 1 – FINANCIAL INFORMATION



		Page
Item 1. Financial Statements (Unaudited)		4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		46
Item 3. Quantitative and Qualitative Disclosure About Market Risk		51
Item 4. Controls and Procedures		52

PART II – OTHER INFORMATION



Item 1. Legal Proceedings		53
Item 1A. Risk Factors		54
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		55
Item 3. Defaults upon Senior Securities		55
Item 4. Mine Safety Disclosures		55
Item 5. Other Information		55
Item 6. Exhibits		55

SIGNATURES		56

PART I – FINANCIAL INFORMATION

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

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

GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock. There were no options exercised during the three and six months ended June 30, 2013.

As of June 30, 2013, approximately $307,300 of total unrecognized compensation costs will be recognized through 2015.

8. CONVERTIBLE PROMISSORY NOTES

On March 31, 2011 and June 1, 2011, the Company sold and issued convertible promissory notes in the principal aggregate amount of $150,000 at a stated interest rate of 12% per annum. In addition the Company granted warrants to purchase 785,714 shares of common stock at an exercise price of $0.35 per share. The warrants have a life of 5 years and were fully vested on the date of the grant. In addition, the warrant agreement has a cashless exercise provision. The convertible promissory notes were to mature on September 30, 2011. The holder of the note is entitled to convert all or a portion of the convertible notes plus any unpaid interest, at the lender’s sole option, into shares of common stock at a conversion price of $0.35 per share.

The gross proceeds from the sale of the notes of $150,000 were recorded net of a discount of $150,000. The debt discount was comprised of $93,000 for the relative fair value of the warrants and $57,000 for the beneficial conversion feature of the notes. The debt discount was accreted as additional interest expense ratably over the term of the convertible notes.

On August 10, 2011 and August 31, 2011 the Company sold and issued convertible promissory notes in the principal aggregate amount of $76,500 at a stated interest rate of 12% per annum. The notes were to mature on September 30, 2011 and the due date was extended. The holder of the notes is entitled to convert all or a portion of the convertible notes plus any unpaid interest, at the lender’s sole option, into shares of common stock at a conversion price of $0.35 per share.

The gross proceeds from the sale of the notes of $76,500 were recorded net of a discount of $11,000. The debt discount is comprised of the beneficial conversion feature of the notes. The debt discount was accreted as additional interest expense ratably over the original term of the convertible notes.

On August 31, 2011 in anticipation of the maturity date of the notes, the Company issued 75,715 of warrants to the note holder to extend the maturity date of the above disclosed notes to January 2012. The warrants are exercisable at $0.35 per share, have a life of 5 years and were fully vested on the date of the grant. In addition, the warrant agreement has a cashless exercise provision. Accordingly, the Company recorded the fair value of the warrants of $23,000 as debt discount and charged it to interest expense ratably over the extended term of the convertible note.

On November 22, 2011, the Company sold and issued promissory notes in the principal amount of $75,000 at a stated interest rate of 12% per annum. In addition the Company granted warrants to purchase 214,286 shares of common stock at an exercise price of $0.35 per share. The warrants have a life of 5 years and were fully vested on the date of the grant. In addition, the warrant agreement has a cashless exercise provision. The

convertible promissory notes were to mature on February 22, 2012. The holder of the notes is entitled to convert all or a portion of the convertible notes plus any unpaid interest, at the lender’s sole option into shares of common stock at a conversion price of $0.35 per share.

The gross proceeds from the sale of the notes of $75,000 were recorded net of a discount of $75,000. The debt discount was comprised of $50,000 for the relative fair value of the warrants and $25,000 for the beneficial conversion feature of the note. The debt discount was accreted as additional interest expense ratably over the term of the convertible notes.

On January 23, 2012, the Company sold and issued a convertible promissory note in the principal amount of $50,000 at a stated interest rate of 12% per annum. In addition, the Company granted warrants to purchase 142,858 shares of common stock at an exercise price of $0.35 per share. The warrants have a life of 5 years and were fully vested on the date of the grant. In addition, the warrant agreement has a cashless exercise provision. The convertible was to mature on March 12, 2012. The holder of the note is entitled to convert all or a portion of the convertible note plus any unpaid interest, at the holder’s sole option, into shares of common stock at a conversion price of $0.35 per share.

The gross proceeds from the sale of the note of $50,000 were recorded net of a discount of $50,000. The debt discount was comprised of $27,000 for the relative fair value of the warrants and $23,000 for the beneficial conversion feature of the note. The debt discount was accreted as additional interest expense ratably over the term of the convertible note.

On January 31, 2012, all notes sold and issued to the lender, in the total principal amount of $351,500, were extended to April 23, 2012 in consideration of a $10,000 payment due. On April 23, 2012, all notes were extended to May 30, 2012 in consideration of an additional $10,000 payment due. As of the effective date of December 31, 2012, the Company and the holder agreed to an additional extension of the notes until May 31, 2013. The extension agreement provides that (1) $118,000 (of which $3,000 is offset as provided in the extension agreement) be paid on or before January 10, 2013, representing the payment for all accrued interest and other fees as of December 31, 2012; (2) $150,000 on or before March 31, 2013; (3) $100,000 on or before April 11, 2013; (4) $98,500 on or before April 30, 2013; and (5) all accrued interest be payable commencing with the first interest payment due on January 31, 2013 and continuing until and including the maturity date. The extension agreement also provides that the holder has the right to purchase shares of common stock of the Company at a per share price of $0.001 for a period of two years from December 31, 2012. In addition, if the holder exercises the options, for the period from December 31, 2012 to January 17, 2014, the Company without any further consideration or action by the holder, shall issue additional shares so that at all times the holder shall own 9.99% of the issued and outstanding shares of the Company. The extension agreement grants the Company a right to repurchase the option from the holder for $3,000 between June 1 and June 3, 2013, which the Company did not excise. The total beneficial ownership by the holder cannot exceed 9.99% of the outstanding

shares of the Company’s common stock. The Company paid the $115,000 by January 2013. However, the Company has not yet made the second and third payments. The Company is negotiating with the lender for a future extension.

On March 24, 2011, the Company sold and issued a convertible promissory note in the principal amount of $50,000 at a stated interest rate of 12% per annum. In addition the Company granted warrants to purchase 100,000 shares of common stock at an exercise price of $0.35 per share. The warrants have a life of 5 years and were fully vested on the date of the grant. The convertible note matured on November 24, 2011, and was extended to September 30, 2012, a second time to December 12, 2012, a third time to June 15, 2013 and a fourth time until December 15, 2013. The holder of the note is entitled to convert all or a portion of the note plus any unpaid interest, at the lender’s sole option, into shares of common stock at a conversion price of $0.35 per share.

The gross proceeds from the sale of the note of $50,000 was recorded net of a discount of $40,700. The debt discount was comprised of $19,000 for the relative fair value of the warrants and $21,700 for the beneficial conversion feature of the note. The debt discount was charged to interest expense ratably over the original term of the convertible note.

The Company repaid $25,000 of the principal in November 2012 and paid $10,000 of interest in July 2012.

On August 30, 2011 and September 14, 2011, the Company sold and issued convertible promissory notes in the principal aggregate amount of $50,000 at a stated interest rate of 12% per annum. The convertible notes were to mature on November 25, 2011 and December 14, 2011, respectively. The holder of the notes is entitled to convert all or a portion of the convertible note plus any unpaid interest, at the lender’s sole option, into shares of common stock at a conversion price of $0.35 per share.

The gross proceeds from the sale of the notes of $50,000 were recorded net of a discount of $7,200. The debt discount was comprised of the beneficial conversion feature of the note. The debt discount was accreted as additional interest expense ratably over the term of the convertible note.

On November 24, 2011 and December 14, 2011, in anticipation of the maturity date of these notes, the Company issued 100,000 of warrants to the note holders to extend the maturity date to September 30, 2012. The warrants are exercisable at $0.35 per share, have a life of 5 years and were fully vested on the date of the grant. Accordingly, the Company recorded the limited fair value of the warrants of $50,000 as debt discount, which was accreted as additional interest expense ratably over the term of the convertible note. The notes were extended a second time to December 14, 2012, a third time to June 15, 2013 and a fourth time until December 15, 2013.

On February 29, 2012, the Company sold and issued a convertible promissory note in the principal amount of $35,000 at a stated interest rate of 12% per annum. In addition the Company granted warrants to purchase 70,000 shares of common stock at an exercise price of $0.45 per share. The warrants have a life of 5 years and were fully vested on the date of the grant. The convertible note originally matured on April 14, 2012, was extended until May 30, 2012, a second time until September 5, 2012, a third time until December 14, 2012 and a fourth time until June 15, 2013. The holder of the note is entitled to convert all or a portion of the convertible note plus any unpaid interest, at the holder’s sole option, into shares of common stock at a conversion price of $0.45 per share.

The gross proceeds from the sale of the note of $35,000 were recorded net of a discount of $32,000. The debt discount was comprised of $16,000 for the relative fair value of the warrants and $16,000 for the beneficial conversion feature of the note. The debt discount was accreted as additional interest expense ratably over the original term of the convertible note.

Effective June 12, 2013, the Company and the holder entered into an agreement to amend the note to set the conversion price of the note to $0.25 per share, and the holder elected to convert the principal and interest into 163,074 shares of common stock. An approximate expense of $18,000 equal to the fair value of shares to be transferred in excess of the fair value of shares issuable pursuant to the original conversion terms was recognized in the consolidated statements of operations for the three and six months ended June 30, 2013. The shares were issued as of June 30, 2013.

On September 29, 2011, the Company sold and issued a convertible promissory note in the principal amount of $25,000 at a stated interest rate of 12% per annum. In addition the Company granted warrants to purchase 71,429 shares of common stock at an exercise price of $0.35 per share. The warrants have a life of 5 years and were fully vested on the date of the grant. The convertible note originally matured on December 29, 2011, was extended to June 30, 2012 and a second time to September 20, 2013. The holder of the note is entitled to convert all or a portion of the convertible note plus any unpaid interest, at the lender’s sole option, into shares of common stock at a conversion price of $0.35 per share.

The gross proceeds from the sale of the note of $25,000 were recorded net of a discount of $25,000. The debt discount was comprised of $13,000 for the relative fair value of the warrants and $12,000 for the beneficial conversion feature of the note. The debt discount was charged to interest expense ratably over the term of the note.

The gross proceeds from the sale of the note of $25,000 were recorded net of a discount of $25,000. The debt discount was comprised of $13,000 for the relative fair value of the warrants and $12,000 for the beneficial conversion feature of the note. The debt discount was accreted as additional interest expense ratably over the term of the convertible note.

On May 31, 2012, the Company sold and issued a convertible promissory note in the principal amount of $50,000 at a stated interest rate of 12% per annum. In addition the Company granted warrants to purchase 250,000 shares of common stock at an exercise price of $0.55 per share, which warrants have a life of 3 years and warrants to purchase 111,111 shares of common stock at an exercise price of $0.75 per share, which warrants have a life of 5 years. The warrants were fully vested on the date of the grant. The convertible note matured on July 30, 2012 and was extended until September 20, 2013. The holder of the note is entitled to convert all or a portion of the convertible note plus any unpaid interest, at the holder’s sole option, into shares of common stock at a conversion price of $0.45 per share.

The gross proceeds from the sale of the note of $50,000 were recorded net of a discount of $50,000. The debt discount was comprised of $36,000 for the relative fair value of the warrants and $14,000 for the beneficial conversion feature of the note. The debt discount was accreted as additional interest expense ratably over the original term of the convertible note.

On September 21, 2012, the Company sold and issued a convertible promissory note in the principal amount of $25,000 at a stated interest rate of 12% per annum. In addition the Company granted warrants to purchase 55,556 shares of common stock at an exercise price of $0.75 per share. The warrants have a life of 5 years and were fully vested on the date of the grant. The convertible note matures on September 20, 2013. The holder of the note is entitled to convert all or a portion of the convertible note plus any unpaid interest, at the holder’s sole option, into shares of common stock at a conversion price of $0.45 per share.

The gross proceeds from the sale of the note of $25,000 were recorded net of a discount of $18,900. The debt discount was comprised of $10,000 for the relative fair value of the warrants and $8,900 for the beneficial conversion feature of the note. The debt discount is being accreted as additional interest expense ratably over the term of the convertible note.

On September 16, 2011 and November 10, 2011, the Company sold and issued convertible promissory notes in the principal aggregate amount of $50,000 at a stated interest rate of 12% per annum, which were to mature on December 16, 2011 and February 10, 2012. The notes were extended to September 30, 2012 and a second time to March 16, 2013, respectively. The Company is negotiating a further extension of the notes with the holder. The holder of the note is entitled to convert all or a portion of the convertible note plus any unpaid interest, at the lender’s sole option, into shares of common stock at a conversion price of $0.35 per share.

The gross proceeds from the sale of the note of $50,000 were recorded net of a discount of $38,900. The debt discount was comprised of the beneficial conversion feature of the note. The debt discount was charged to interest expense ratably over the original term of the convertible notes.

On September 30, 2011, the Company sold and issued a promissory note in the principal amount of $75,000 bearing interest at 8% per annum. The note matures and was payable in full on October 31, 2011. On October 12, 2011, the Company entered into an agreement with the note holder to amend the promissory note to include a conversion option. The Company received additional cash proceeds of $175,000 and issued a convertible promissory note of $250,000. The note has a maturity date of October 13, 2013 and has a stated interest rate of 8% per annum. In addition, the Company granted to the note holder warrants to purchase 500,000 shares of common stock at an exercise price of $0.45 per share. The warrants have a life of three years and are fully vested on the date of the grant. The note is convertible into common stock at an amended conversion price of $0.30 per share.

The gross proceeds from the sale of the note of $250,000 were recorded net of a discount of $250,000. The debt discount was comprised of $105,000 for the relative fair value of the warrants and $145,000 for the beneficial conversion feature of the note. The debt discount is being accreted as additional interest expense ratably over the term of the convertible note.

On March 15, 2012, the Company sold and issued a convertible promissory note in the principal amount of $80,000 at a stated interest rate of 8% per annum. In addition, the Company granted warrants to purchase 160,000 shares of common stock at an exercise price of $0.45 per share. The warrants have a life of 5 years and were fully vested on the

date of the grant. The convertible note matured on March 15, 2013. The holder of the note was entitled to convert all or a portion of the convertible note plus any unpaid interest, at the holder’s sole option, into shares of common stock at a conversion price of $0.30 per share.

The gross proceeds from the sale of the note of $80,000 were recorded net of a discount of $80,000. The debt discount was comprised of $36,000 for the relative fair value of the warrants and $44,000 for the beneficial conversion feature of the note. The debt discount was accreted as additional interest expense ratably over the term of the convertible note. The Company repaid all principal and accrued interest in March and April 2013.

On March 20, 2012, the Company sold and issued a convertible promissory note in the principal amount of $70,000 at a stated interest rate of 8% per annum. In addition, the Company granted warrants to purchase 140,000 shares of common stock at an exercise price of $0.45 per share. The warrants have a life of 5 years and were fully vested on the date of the grant. The convertible note matured on March 20, 2013. The holder of the note was entitled to convert all or a portion of the convertible note plus any unpaid interest, at the holder’s sole option, into shares of common stock at a conversion price of $0.30 per share.

The gross proceeds from the sale of the note of $70,000 were recorded net of a discount of $70,000. The debt discount was comprised of $32,000 for the relative fair value of the warrants and $38,000 for the beneficial conversion feature of the note. The debt discount was accreted as additional interest expense ratably over the term of the convertible note.

The Company repaid all principal and accrued interest in March and April, 2013.

On November 9, 2011, the Company sold and issued a convertible promissory note in the principal amount of $30,000 at a stated interest rate of 12% per annum. In addition the Company granted warrants to purchase 110,000 shares of common stock at an exercise price of $0.35 per share. The warrants have a life of 5 years and were fully vested on the date of the grant. The convertible note matured on February 9, 2012, was extended to September 30, 2012, a second time until December 14, 2012, a third time until June 15, 2013 and a fourth time until December 15, 2013. The holder of the note is entitled to convert all or a portion of the convertible note plus any unpaid interest, at the lender’s sole option, into shares of common stock at a conversion price of $0.35 per share.

The gross proceeds from the sale of the note of $30,000 were recorded net of a discount of $30,000. The debt discount was comprised of $22,000 for the relative fair value of the warrants and $8,000 for the beneficial conversion feature of the note. The debt discount was accreted as additional interest expense ratably over the original term of the convertible note.

On February 10, 2012, the Company sold and issued a convertible promissory note in the principal amount of $30,000 at a stated interest rate of 12% per annum. In addition the Company granted warrants to purchase 60,000 shares of common stock at an exercise price of $0.35 per share. The warrants have a life of 5 years and were fully vested on the date of the grant. The convertible note matured on September 30, 2012 and was extended until December 14, 2012, a second time until June 15, 2013 and a third time until December 15, 2013. The holder of the note is entitled to convert all or a portion of the convertible note plus any unpaid interest, at the holder’s sole option, into shares of common stock at a conversion price of $0.35 per share.

The gross proceeds from the sale of the note of $30,000 were recorded net of a discount of $30,000. The debt discount was comprised of $14,000 for the relative fair value of the warrants and $16,000 for the beneficial conversion feature of the note. The debt discount was accreted as additional interest expense ratably over the original term of the convertible note.

On June 29, 2012, the Company sold and issued a convertible promissory note in the principal amount of $25,000 at a stated interest rate of 12% per annum. In addition the Company granted warrants to purchase 50,000 shares of common stock at an exercise price of $0.75 per share. The warrants have a life of 5 years and were fully vested on the date of the grant. The convertible note originally matured on December 31, 2012. The holder of the note is entitled to convert all or a portion of the convertible note plus any unpaid interest, at the holder’s sole option, into shares of common stock at a conversion price of $0.45 per share.

The gross proceeds from the sale of the note of $25,000 were recorded net of a discount of $22,978. The debt discount was comprised of $11,000 for the relative fair value of the warrants and $11,978 for the beneficial conversion feature of the note. The debt discount was accreted as additional interest expense ratably over the original term of the convertible note.

On December 31, 2012, in anticipation of the maturity date of the note, the Company issued 50,000 of warrants to the holders to extend the maturity date to June 15, 2013. The warrants are exercisable at $0.35 per share, have a life of 5 years and were fully vested on the date of the grant. Accordingly, the Company recorded the fair value of the warrants of $10,800 as debt discount, which is being accreted as additional interest expense ratably over the term of the convertible note.

excess of the fair value of shares issuable pursuant to the original conversion terms was recognized in the consolidated statements of operations for the three and six months ended June 30, 2013. The shares were issued as of June 30, 2013.

On September 27, 2012, the Company sold and issued a convertible promissory note in the principal amount of $25,000 at a stated interest rate of 12% per annum. In addition the Company granted warrants to purchase 50,000 shares of common stock at an exercise price of $0.75 per share. The warrants have a life of 5 years and were fully vested on the date of the grant. The convertible note originally matured on December 14, 2012. The holder of the note is entitled to convert all or a portion of the convertible note plus any unpaid interest, at the holder’s sole option, into shares of common stock at a conversion price of $0.45 per share.

The gross proceeds from the sale of the note of $25,000 were recorded net of a discount of $18,900. The debt discount was comprised of $10,000 for the relative fair value of the warrants and $8,900 for the beneficial conversion feature of the note. The debt discount was accreted as additional interest expense ratably over the original term of the convertible note.

On December 14, 2012, in anticipation of the maturity date of the note, the Company issued 50,000 of warrants to the note holders to extend the maturity date to June 15, 2013. The warrants are exercisable at $0.35 per share, have a life of 5 years and were fully vested on the date of the grant. Accordingly, the Company recorded the fair value of the warrants of $10,800 as debt discount, which was accreted as additional interest expense ratably over the extended term of the convertible note.

Effective June 12, 2013, the Company and the holder entered into an agreement to amend the note to set the conversion price of the note to $0.25 per share, and the holder elected to convert the principal and interest into 108,781 shares of common stock. An approximate expense of $12,000 equal to the fair value of shares to be transferred in excess of the fair value of shares issuable pursuant to the original conversion terms was recognized in the consolidated statements of operations for the three and six months ended June 30, 2013. The shares were issued as of June 30, 2013.

On April 27, 2012, the Company sold and issued a convertible promissory note in the principal amount of $75,000 at a stated interest rate of 12% per annum. In addition the Company granted warrants to purchase 125,000 shares of common stock at an exercise price of $0.75 per share. The warrants have a life of 5 years and were fully vested on the date of the grant. The convertible note matured on August 1, 2012, was extended until September 5, 2012, and was extended a second time until December 3, 2012, a third time until June 15, 2013. During three months ended June 2013, an oral agreement extends it until December 15, 2013. The holder of the note is entitled to convert all or a portion of the convertible note plus any unpaid interest, at the holder’s sole option, into shares of

common stock at a conversion price of $0.3825 per share.

The gross proceeds from the sale of the note of $75,000 were recorded net of a discount of $67,647. The debt discount was comprised of $30,000 for the relative fair value of the warrants and $37,647 for the beneficial conversion feature of the note. The debt discount was accreted as additional interest expense ratably over the original term of the convertible note.

On June 29, 2012, the Company sold and issued a convertible promissory note in the principal amount of $25,000 at a stated interest rate of 12% per annum. In addition the Company granted warrants to purchase 41,250 shares of common stock at an exercise price of $0.75 per share. The warrants have a life of 5 years and were fully vested on the date of the grant. The convertible note matured on October 1, 2012 and was extended until December 3, 2012, a second time until June 15, 2013 and a third time until December 15, 2013. The holder of the note is entitled to convert all or a portion of the convertible note plus any unpaid interest, at the holder’s sole option, into shares of common stock at a conversion price of $0.3825 per share.

The gross proceeds from the sale of the note of $25,000 were recorded net of a discount of $22,810. The debt discount was comprised of $10,000 for the relative fair value of the warrants and $12,810 for the beneficial conversion feature of the note. The debt discount was accreted as additional interest expense ratably over the term of the convertible note.

On July 12, 2012, the Company sold and issued a convertible promissory note in the principal amount of $50,000 at a stated interest rate of 12% per annum. In addition the Company granted warrants to purchase 111,112 shares of common stock at an exercise price of $0.75 per share. The warrants have a life of 5 years and were fully vested on the date of the grant. The convertible note originally matured on April 15, 2013 and was extended until June 15, 2013. The holder of the note is entitled to convert all or a portion of the convertible note plus any unpaid interest, at the holder’s sole option, into shares of common stock at a conversion price of $0.45 per share.

The gross proceeds from the sale of the note of $50,000 were recorded net of a discount of $39,700. The debt discount was comprised of $21,000 for the relative fair value of the warrants and $18,700 for the beneficial conversion feature of the note. The debt discount was accreted as additional interest expense ratably over the original term of the convertible note.

Effective June 10, 2013, the Company and the holder entered into an agreement to amend the note to set the conversion price of the note to $0.25 per share, and the holder elected to convert the principal and interest into 222,704 shares of common stock. An approximate expense of $35,000 equal to the fair value of shares to be transferred in

On August 6, 2012, the Company sold and issued a convertible promissory note in the principal amount of $25,000 at a stated interest rate of 12% per annum. In addition the Company granted warrants to purchase 50,000 shares of common stock at an exercise price of $0.75 per share. The warrants have a life of 5 years and were fully vested on the date of the grant. The convertible note originally matured on February 6, 2013 and was extended until June 15, 2013. The holder of the note originally was entitled to convert all or a portion of the convertible note plus any unpaid interest, at the holder’s sole option, into shares of common stock at a conversion price of $0.45 per share.

Effective April 30, 2013, the Company and the holder entered into an agreement to amend the note to set the conversion price of the note to $0.25 per share, and the holder elected to convert the principal and interest into 109,151 shares of common stock. An approximate expense of $17,000 equal to the fair value of shares to be transferred in excess of the fair value of shares issuable pursuant to the original conversion terms was recognized in the consolidated statements of operations for the three and six months ended June 30, 2013. The shares were issued as of June 30, 2013.

On August 7, 2012, the Company sold and issued a convertible promissory note in the principal amount of $20,000 at a stated interest rate of 12% per annum. The convertible note originally matured on February 7, 2013 and was extended until June 15, 2013. Pursuant to the note, the holder of the note originally was entitled to convert all or a portion of the convertible note plus any unpaid interest, at the holder’s sole option, into shares of common stock at a conversion price of $0.45 per share.

Effective March 31, 2013, the Company and the holder entered into an agreement to amend the note to set the conversion price of the note to $0.25 per share, and the holder elected to convert the principal and interest into 86,400 shares of common stock. An approximate expense of $12,000 equal to the fair value of shares to be transferred in excess of the fair value of shares issuable pursuant to the original conversion terms was recognized in the consolidated statements of operations for the six months ended June 30, 2013. The shares were issued as of June 30, 2013.

On October 12, 2012, the Company sold and issued a convertible promissory note in the principal amount of $50,000 at a stated interest rate of 12% per annum. In addition the Company granted warrants to purchase 100,000 shares of common stock at an exercise price of $0.50 per share. The warrants have a life of 5 years and were fully vested on the date of the grant. The convertible note matures on October 13, 2014. The holder of the note is entitled to convert all or a portion of the convertible note plus any unpaid interest, at the holder’s sole option, into shares of common stock at a conversion price of $0.35 per share.

The gross proceeds from the sale of the note of $50,000 were recorded net of a discount of $26,857. The debt discount was comprised of $17,000 for the relative fair value of the warrants and $9,857 for the beneficial conversion feature of the note. The debt discount is being accreted as additional interest expense ratably over the term of the convertible note.

On October 22, 2012, the Company sold and issued a convertible promissory note in the principal amount of $400,000 at a stated interest rate of 12% per annum. Pursuant to this note, the Company received $360,000 in 2012 and $40,000 in 2013. In addition the Company granted warrants to purchase 1,052,632 shares of common stock at an exercise price of $0.38 per share. The warrants have a life of 5 years and were fully vested on the date of the grant. The convertible note matures on October 22, 2014. The holder of the note is entitled to convert all or a portion of the convertible note plus any unpaid interest, at the holder’s sole option, into shares of common stock at a conversion price of $0.35 per share.

The gross proceeds from the sale of the note of $360,000 received during 2012 were recorded net of a discount of $260,571. The debt discount was comprised of $156,000 for the relative fair value of the warrants and $104,571 for the beneficial conversion feature of the note. The debt discount is being accreted as additional interest expense ratably over the term of the convertible note.

On March 26, 2013, the Company received the remaining $40,000 pursuant to the promissory note.

The intrinsic value for the outstanding convertible promissory notes as of June 30, 2013 and December 31, 2012 was approximately $0 and $0, respectively.

9. STOCKHOLDERS’ EQUITY

In 2009, the Company entered into a private placement offering for $2,000,000 (40 units). Each unit consisted of 90,000 shares of common stock and warrants to purchase 45,000 shares of common stock. The warrants were exercisable in whole or in part during the three-year period following issuance at an exercise price of $1.00 per share. The shares of common stock into which the warrants are exercisable will have the same registration rights as all other shares of common stock sold in the offering.

Under the terms of the agreement, the Company could sell up to an additional 20 units to cover investor over-subscriptions, if any. The purchase price for each unit was $50,000, although subscriptions for lesser amounts could be accepted at the discretion of the Company’s management.

For the year ended December 31, 2010, under the private placement offering as described above, the Company sold 5.2 net units consisting of 927,000 shares of common stock with 463,500 warrants for net proceeds of $515,000.

The Company also entered into a separate subscription agreement during the year ended December 31, 2010 to sell 2,625,000 shares of common stock and warrants to purchase 2,231,250 shares of common stock for net proceeds of $700,000; 1,115,625 warrants are exercisable in whole or in part during the three-year period following issuance at an exercise price of $0.31 per share and the remaining 1,115,625 warrants are exercisable at $0.35 per share. The warrants had a dilutive provision whereby in the event the Company sells shares of common stock for consideration less than the stated exercise price then the warrant price will be adjusted accordingly to the terms of the agreement.

The Company determined that the reset provision is a derivative liability and under FASB ASC 815. The Company was required to classify the warrants as a derivative liability and mark to market through earnings at the end of each reporting period. On January 1, 2013, the reset provision was removed (see Note 5).

During the year ended December 31, 2010, the Company repurchased from investors 459,000 shares of the Company’s common stock and 229,500 warrants for $255,000. Accordingly, the Company cancelled the 459,000 shares of common stock and 229,500 warrants associated with these shares.

As described in Note 1, on May 18, 2011, each share of the Company’s common stock was cancelled and converted automatically into the right to receive 1.5 common shares of China Stationery. The above shares reflect the effect of the 1:1.5 stock split.

During 2011, the Company issued 908,027 shares of common stock for the exercise of warrants for $290,000. Upon the exercise of warrants, the Company reclassified $170,700 of the derivative liability to equity.

On May 18, 2011 the Company modified 1,633,500 of warrants previously granted pursuant to the 2009 private placement memorandum. The Company reset the term of the warrants to three years as of the date of the reverse merger. The Company recorded a charge of $110,400 for the modification of the award which has been charged as interest expense.

On July 1, 2011, the Company entered into a stock option agreement with a vendor to purchase 100,000 shares of common stock at a price of $0.50 per share. The option agreement had a life of 30 days and was fully vested on the date of the grant. On July 7, 2011 the options were exercised for services provided by the vendor. Due to the nature of the transaction, the Company recorded a charge of $50,000 as a share issuance for the fair value of the services provided.

On July 10, 2011 a holder exercised 785,714 warrants using the cashless exercise provision. Accordingly, the Company issued 673,007 shares of common stock for the exercise of the warrants, which represented the net shares with respect to the cashless exercise provision.

On July 28, 2011 the Company issued 144,093 shares of common stock for the exercise of warrants for $50,000. Upon the exercise of warrants the Company reclassified $22,200 of the derivative liability to equity.

On November 28, 2011, the Company entered into a subscription agreement to sell 714,286 shares of common stock and warrants to purchase 187,500 shares of common stock for net proceeds of $250,000. The warrants are exercisable in whole or in part during the five-year period following issuance at an exercise price of $0.45 per share.

On December 14, 2011, the Company entered into another subscription agreement to sell 285,715 shares of common stock for net proceeds of $100,000.

On October 22, 2012, the Company issued a warrant to purchase 150,000 shares of common stock at $0.45 per share for a period of five years to a consultant pursuant to a consulting agreement. The Company recorded a charge of $38,700.

On December 18, 2012, the Company issued a warrant to purchase 400,000 shares of common stock at $0.50 per share for a period of five years to a consultant pursuant to a consulting agreement. The Company recorded a charge of $83,900.

On December 31, 2012, GAHI and GAIM entered into a securities purchase agreement (the “Purchase Agreement”) with FireRock Capital, Inc. (“FireRock”), pursuant to which FireRock purchased 714,286 shares of the Company’s common stock and membership

interests representing 25% of GAIM for gross proceeds of $250,000. As of December 31, 2012, the unpaid proceeds of $125,000 was included in other receivable on the consolidated balance sheets. The receivable was collected on January 2, 2013.

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

On January 29, 2013, in connection with the acquisition of MGA (see Note 1), the Company issued an option to purchase 300,000 shares of common stock, valued at $33,900 at the acquisition date, to purchase the Company’s common shares.

On March 31, 2013, the Company and a convertible debt holder entered into an agreement to amend the note to set the conversion price of the note to $0.25 per share, and the holder elected to convert the principal and interest into 86,400 shares of common stock. The shares have been issued as of June 30, 2013 (see Note 8).

On April 30, 2013, the Company and a convertible debt holder entered into an agreement to amend the note to set the conversion price of the note to $0.25 per share, and the holder elected to convert the principal and interest into 109,151 shares of common stock. The shares have been issued as of June 30, 2013 (see Note 8).

On June 10, 2013, the Company and a convertible debt holder entered into an agreement to amend the note to set the conversion price of the note to $0.25 per share, and the holder elected to convert the principal and interest into 222,704 shares of common stock. The shares have not been issued as of June 30, 2013 (see Note 8).

On June 12, 2013, the Company and a convertible debt holder entered into an agreement to amend two notes to set the conversion price of the notes to $0.25 per share, and the holder elected to convert the principal and interest into 220,714 shares of common stock. The shares have been issued as of June 30, 2013 (see Note 8).

On June 12, 2013, the Company and a convertible debt holder entered into an agreement to amend the note to set the conversion price of the note to $0.25 per share, and the holder elected to convert the principal and interest into 163,074 shares of common stock. The shares have been issued as of June 30, 2013 (see Note 8).

In March 2013, the Company entered into a private placement offering for $1,500,000 (30 units). Each unit consists of 200,000 shares of common stock and warrants to purchase 100,000 shares of common stock. The warrants are exercisable in whole or in part during the three-year period following issuance at an exercise price of $0.50 per share. The shares of common stock into which the warrants are exercisable will have the same registration rights as all other shares of common stock sold in the offering. The purchase price for each unit is $50,000, although subscriptions for lesser amounts could be accepted at the discretion of the Company’s management.

During the three months and six months ended June 30, 2013, under the private placement offering as described above, the Company sold 4.5 net units consisting of 900,000 shares of common stock with 450,000 warrants for net proceeds of $225,000, and 7.5 net units consisting of 1,500,000 shares of common stock with 750,000 warrants for net proceeds of $375,000, respectively.

10. WARRANTS

The following tables summarize the warrants activities:


ASSETS	June 30, 2013	December 31, 2012
	(Unaudited)

Current assets
Cash	$ 74,115	$ 376,942
Due from clearing organization	424,206	475,861
Advances to registered representatives and employees	158,591	100,454
Prepaid expenses and other current assets	105,655	112,099
Other receivable	-	125,000
Advances - related parties	17,163	34,041

Total current assets	779,730	1,224,397

Fixed assets, net of accumulated depreciation
of $18,318 and $16,054, respectively	5,550	7,814

Other assets
Goodwill	33,900	-
Deposits with clearing organizations	50,003	50,003

Total other assets	83,903	50,003

TOTAL ASSETS	$869,183	$1,282,214


LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)	June 30, 2013	December 31, 2012
	(Unaudited)
Current liabilities
Accounts payable and accrued expenses	$ 749,174	$ 516,752
Commission payable	338,557	413,244
Convertible promissory notes payable,
net of debt discount of $37,122 and $182,600
at June 30, 2013 and December 31, 2012, respectively	977,393	1,161,915
Derivative liability	877,200	905,700
Total current liabilities	2,942,324	2,997,611

Convertible promissory notes payable,
net of debt discount of $187,644 and $259,500
at June 30, 2013 and December 31, 2012, respectively	262,356	150,500
Total liabilities	3,204,680	3,148,111

Stockholders’ (deficiency)
Common stock, $0.001 par value; 100,000,000 shares	24,251	21,949
authorized; 24,250,979 and 21,948,937 shares issued and outstanding at
June 30, 2013 and December 31, 2012, respectively
Additional paid-in capital	7,801,147	6,247,736
Accumulated (deficit)	(9,933,088)	(7,976,547)
Stockholders’ (deficiency) attributable to controlling interests	(2,107,690)	(1,706,862)

Noncontrolling interests	(227,807)	(159,035)
Total stockholders’ (deficiency)	(2,335,497)	(1,865,897)
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIENCY)	$ 869,183	$ 1,282,214


	For the three months ended June 30,		For the six months ended June 30,
	2013	2012	2013	2012
Revenues
Investment advisory fees	$ -	$ 20,720	$ -	$ 207,759
Commissions and other	2,516,187	1,957,105	4,633,566	4,108,173

Total revenues	2,516,187	1,977,825	4,633,566	4,315,932

Operating expenses
Commissions	1,790,821	1,301,062	3,207,524	3,131,426
Salaries and benefits	282,899	302,855	568,515	559,792
Occupancy	111,259	76,860	171,487	153,721
Business development	100,199	94,539	174,638	175,943
Professional fees	225,329	72,702	595,681	211,825
Stock-based compensation	560,025	-	720,917	-
Clearing and operations	209,752	264,132	461,070	448,009
Communication and data	31,939	28,671	57,388	57,517
Regulatory fees	43,189	42,586	75,162	91,699
Office and other	59,404	61,486	115,211	124,067
Total operating expenses	3,414,816	2,244,893	6,147,593	4,953,999

(Loss) from operations	(898,629)	(267,068)	(1,514,027)	(638,067)

Other income (expenses)
Loss on sale of GATA	-	-	(2,353)	-
Interest expense	(226,363)	(219,417)	(417,833)	(455,476)
Change in fair value of derivative liability	94,300	8,000	(91,100)	343,500
Total other (expenses)	(132,063)	(211,417)	(511,286)	(111,976)

Net (loss) before noncontrolling interests	(1,030,692)	(478,485)	(2,025,313)	(750,043)
Net (loss) attributable to noncontrolling interests	(16,096)	(7,818)	(68,772)	(15,732)

Net (loss) attributable to common stockholders	$ (1,014,596)	$ (470,667)	$ (1,956,541)	$(734,311)

(Loss) per common share, basic and diluted	$ (0.04)	$ (0.02)	$ (0.09)	$ (0.03)

Weighted average shares outstanding, basic and diluted	23,542,155	21,234,651	22,779,781	21,234,651


	2013	2012
Cash flows from operating activities
Net (loss) before noncontrolling interests	$ (2,025,313)	$ (750,043)
Adjustment to reconcile net (loss) to net cash (used in) operating activities:
Depreciation and amortization	2,264	2,557
Accretion of debt discount	323,119	382,069
Stock-based compensation	720,917	-
Change in fair value of derivative liability	91,100	(343,500)
Loss on sale of GATA	2,353	-
Change in operating assets and liabilities:
Due from clearing organization	48,807	(188,039)
Deposits with clearing organizations	-	1,587
Advances to registered representatives and employees	(58,137)	44,089
Prepaid expenses and other current assets	6,444	71,014
Commissions payable	(74,687)	164,058
Accounts payable and accrued expenses	252,932	189,170
Customer deposit	-	(12,147)

Net cash (used in) operating activities	(710,201)	(439,185)

Cash flows from investing activities
Proceeds from sale of 25% interest in GAIM	35,714	-
Proceeds from sale of GATA	495	-
Return of escrow deposit – restricted cash	-	613

Net cash provided by investing activities	36,209	613

Cash flows from financing activities
Proceeds from issuance of common stock and warrants	464,287	-
Proceeds from convertible promissory notes	40,000	440,000
Repayment of convertible promissory notes	(150,000)	-
Advances from related parties	16,878	54,048

Net cash provided by financing activities	371,165	494,048

Net change in cash	(302,827)	55,476
Cash, beginning of period	376,942	28,176

Cash, end of period	$ 74,115	$ 83,652


	2013	2012

Supplemental disclosure of cash flow information

Cash paid for income taxes	$ 8,789	$ 24,435

Cash paid for interest	$ 167,352	$ -


Supplemental disclosure of non-cash investing and financing activities

Issuance of warrants in connection with debt	$ -	$ 425,435

Reclassification of derivative liabilities to equity	$ 119,600	$ -

Issuance of options for the purchase of MGA	$ 33,900	$ -

Increase of ownership interest in GAIM	$ -	$ 46,697


		For the three months		For the six months
		Ended June 30,2012

Total revenue	$	1,761,659	$	3,897,137
Net income (loss)	$	(31,978)	$	(94,914)


	2013	2012
Warrants	14,781,675	5,393,210
Convertible debts	4,559,896	3,596,068
Stock options	2,375,000	-

Common stock equivalents	21,716,571	8,989,278


June 30, 2013	Level 1	Level 2	Level 3	Total
Derivative financial instruments - warrants	$ -	$ -	$ 877,200	$ 877,200

December 31, 2012	Level 1	Level 2	Level 3	Total
Derivative financial instruments - warrants	$ -	$ -	$ 905,700	$ 905,700



Balance, January 1, 2013		$ 905,700
Fair value of warrants exercised		-
Cancellation of derivative liability		(119,600)
Change in fair value included in other (income) loss		91,100

Balance, June 30, 2013		$ 877,200


		July 17, 2012
Expected dividend yield		-
Expected stock price volatility		130%
Risk free interest rate		0.32%
Expected life (years)		3 years


		December 27, 2012
Expected dividend yield		-
Expected stock price volatility		140%
Risk free interest rate		0.25%
Expected life (years)		2.5 years


		January 29, 2013
Expected dividend yield		-
Expected stock price volatility		120%
Risk free interest rate		0.15%
Expected life (years)		1 year


	Shares	Weighted Average Exercise Price	Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value

Outstanding at December 31, 2012	2,075,000	$ 0.45	2.5 years	$ -
Granted	300,000	0.25	0.58 years	6,821
Exercised	-	-	-	-
Cancelled and expired	-	-	-	-
Forfeited	-	-	-	-

Outstanding at June 30, 2013	2,375,000	$ 0.44	1.94 years	$ -

Vested and expected to vest at June 30, 2013	300,000	$ 0.25	0.58 years	$ -

Exercisable at June 30, 2013	300,000	$ 0.25	0.58 years	$ -


	Shares		Weighted Average Exercise Price	Weighted- Average Exercisable	Aggregate Intrinsic Value


Outstanding at December 31, 2012		10,604,173	$ 0.50	10,604,173	$ -

Granted		4,177,502	0.26	4,177,502	38,834
Exercised		-	-	-	-
Cancelled and surrendered		-	-	-	-


Outstanding at June 30, 2013		14,781,675	$ 0.46	14,781,675	$ -


Exercise Price	Average Number Outstanding	Average Contractual Life	Average Exercise price	Warrants Exercisable
0.001 $0.25 to $0.75	3,669,166 9,479,009	1.55 3.5	$ 0.001 0.41	3,669,166 9,479,009
$0.67	1,633,500	0.88	$ 0.67	1,633,500

	14,781,675	-	-	14,781,675