Global Arena Form 10-Q/A

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q /A

[x] Quarterly Report Pursuant to Section 13 or 15(d) Securities Exchange Act of 1934 for Quarterly Period Ended September 30, 2014

-OR-

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

Commission File Number 000-49819

Global Arena Holding, Inc.

(Exact name of registrant as specified in its charter)



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

1500 Broadway, Suite 505

New York, NY

10036

(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,

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

EXPLANATORY NOTE

This amendment to the Form 10-Q, as originally filed on November 18, 2014, is being filed solely to correct and clarify a disclosure under Note 13. Commitments and Contingencies, and to give similar disclosure under Part II, Item 1.

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

GLOBAL ARENA HOLDING, INC.

FORM 10-Q

For the three and nine months ended September 30, 2014

INDEX

PART 1 – FINANCIAL INFORMATION



		Page
Item 1. Financial Statements (Unaudited)		5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		36
Item 3. Quantitative and Qualitative Disclosure About Market Risk		44
Item 4. Controls and Procedures		44

PART II – OTHER INFORMATION



Item 1. Legal Proceedings		46
Item 1A. Risk Factors		48
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		49
Item 3. Defaults upon Senior Securities		49
Item 4. Mine Safety Disclosures		49
Item 5. Other Information		49
Item 6. Exhibits		49

SIGNATURES		50

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

See notes to consolidated financial statements.

GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

1. ORGANIZATION

Description of the Business

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

Global Arena Investment Management LLC (“GAIM”), a wholly owned subsidiary, provides investment advisory services to its clients. GAIM is registered with the SEC as an investment advisor and clears all of its business through Fidelity Advisors (“Fidelity”), its correspondent broker. The Company sold 25% of its interest in GAIM to FireRock Capital, Inc. (“FireRock”) in 2012 and on November 25, 2013, repurchased this 25% interest. Global Arena Commodities Corp. (“GACOM”), a wholly owned subsidiary, provided commodities brokerage services and earned commissions. GACOM ceased operating in November 2013 and is currently inactive. The Company is reviewing its options and may liquidate GACOM. Lillybell Entertainment, LLC (“Lillybell”), a 66.67% majority owned subsidiary, provides finance services to the entertainment industry. MGA International Brokerage LLC (“MGA”), a 66.67% majority owned subsidiary and a New York limited liability company, is a full-service insurance broker. MGA offers comprehensive life, property and casualty insurance services, solutions and advice. Global Arena Trading Advisors, LLC (“GATA”), provided futures advisory services. GATA was registered with the National Futures Association (NFA) as a commodities trading advisor. On March 7, 2013, the Company sold GATA to a third party.

Sale of Global Arena Capital Corp.

Global Arena Capital Corp. (“GACC”) was our wholly owned subsidiary through August 5, 2014 that was a full service financial services company. GACC was a broker-dealer registered with the Securities and Exchange Commission (“SEC”). The Company was also a member of the Financial Industry Regulatory Authority (“FINRA”) and the Securities Investor Protection Corp (“SIPC”). GACC was engaged in the securities business, which comprised several classes of securities transactions such as equities, corporate and municipal bonds, mutual funds, insurance and options, all of which the broker dealer executed as risk-less principal and agency transactions. On August 5, 2014, GAHI sold all of its ownership in GACC, subject to FINRA approval.

On August 5, 2014, GAHI entered into an Agreement with PMC Capital, LLC (“PMC Capital”) and Barbara Desiderio pursuant to which GAHI agreed to sell to PMC Capital all of the common stock of GACC, subject to the approval from FINRA. The consideration for the GACC common stock is $2,100,000 and the forgiveness of the amounts payable by GAHI and its other subsidiaries to GACC of approximately $2,281,000.

Pursuant to the terms of the Agreement, GAHI (i) sold 24.9% of the issued and outstanding shares of GACC’s common stock to PMC Capital as of the Agreement date; and (ii) immediately therefore sold the remaining 74.1% of the common stock to PMC Capital subject to the receipt of all necessary and required approvals, including compliance with the applicable FINRA rules. GAHI has agreed to indemnify PMC Capital from losses, third party customer complaints and claims arising from or related to the operations of the GACC on or prior to July 31, 2014. Such indemnification is limited to $250,000, subject to certain limitations and exclusions. GAHI was required to put into escrow $100,000 towards this indemnification.

The results of operations of GACC and the gain on the sale of GACC has been reported as discontinued operations as: 1) the operations and cash flows of GACC will be eliminated from the ongoing operations of the Company as a result of the sale and 2) the Company will not have any significant continuing involvement in the operations of GACC after the sale transaction. The Company has presented the operations of GACC as discontinued operations, and retrospectively reclassified the operating results for all prior periods presented.

On August 7, 2014, the Company completed the sale the remaining 75.1% ownership of GACC, and recognized a gain from the sale of GACC as "Gain on sale of discontinued operations" in the Consolidated Statements of Operations. The operating results of GACC are reported as "Income from discontinued operations - net" in the Consolidated Statements of Operations for all periods presented. In accordance with accounting guidance, the Company has elected to not separately disclose the cash flows related to the GACC discontinued operations.

Revenue and operating expenses of the discontinued operations for the three and nine months ended September 30, 2014 and 2013 were as follows:


	For the three months ended September 30,		For the nine months ended September 30,
	2014	2013	2014		2013
Revenues
Commissions and other	$ 3,362,048	$2,833,917	$18,455,830	$7,313,462


Total revenues	3,362,048	2,833,917	18,455,830	7,313,462

Operating expenses
Commissions	2,655,848	2,109,300	15,481,994	5,316,824
Salaries and benefits	128,277	190,028	578,543	447,137
Occupancy	10,469	20,906	55,532	75,727
Business development	1,793	8,251	25,387	26,132
Professional fees	22,520	40,150	177,589	164,674
Clearing and operations	118,737	304,845	886,708	760,033
Regulatory fees	26,761	73,109	65,249	139,032
Office and other	15,041	12,805	57,005	56,071


Total operating expenses	2,979,446	2,759,394	17,328,007	6,985,630

Income from operations	382,602	74,523	1,127,823	327,832

Income taxes	141,167	301	158,954	9,065
Income from discontinued operations	$ 241,435	$ 74,222	$ 968,869	$ 318,767

Acquisition of MGA International Brokerage LLC

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

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

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

Sale of Global Arena Trading Advisors, LLC

On March 7, 2013, the Company and Courtney Smith entered into a purchase agreement for the sale of the Company’s 100% interests in GATA to Courtney Smith for $500. The related loss of $2,353 was included in the accompanying statement of operations for the nine months ended September 30, 2013. In accordance with SEC Regulation S-X Rule 3-05, GATA was not a significant subsidiary as of the disposal date. Therefore, no pro forma financial information related to the disposal was required to be presented in accordance with SEC Regulation S-X Rule 11-01. GATA had minimum activities and did not require disclosure as a discontinued operation.

Going Concern

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates the continuation of the Company as a going concern. The Company has generated recurring losses and cash flow deficits from its continuing operations since inception and has had to continually borrow to continue operating. 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. Management believes that it will be successful in obtaining additional financing, from which the proceeds will be primarily used to execute its operating plan. The Company plans to use its available cash to continue the development and execution of its business plan and expand its client base and services. The Company is also investing potential acquisition. 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.

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of GAHI and its wholly-owned subsidiaries and majority owned subsidiaries, GAIM, GACOM, Lillybell, MGA from January 29, 2013, the date of acquisition, and GATA through March 7, 2013, the date of sale. The operations of GACC are included through August 5, 2014, the date of sale and have been reflected as discontinued operations. All significant intercompany accounts and transactions have been eliminated in consolidation.

The unaudited interim consolidated financial statements of the Company as of September 30, 2014 and for the three and nine months ended September 30, 2014 and 2013, have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the SEC which apply to interim financial statements. Accordingly, they do not include all of the information and footnotes normally required by accounting principles generally accepted in the United States of America for annual financial statements. The interim consolidated financial information should be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company’s Form 10-K for the year ended December 31, 2013, previously filed with the SEC. In the opinion of management, the interim information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The results of operations for the three and nine months ended September 30, 2014 are not necessarily indicative of the results to be expected for future quarters or for the year ending December 31, 2014.

Revenue Recognition

The Company’s revenue recognition policies comply with SEC revenue recognition rules and FASB ASC 605-10-S99. The Company earns revenues through various services it provides to its clients. Advisory fees are on a contractual basis with the fee stipulated in the contract and are recognized based on the terms of the contract during the period the service is provided. Insurance 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.

Use of Estimates

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

Fair Value of Financial Instruments

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

Goodwill

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

Cash and Cash Equivalents

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

Deposits with Clearing Organizations

As of 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

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.

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.

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

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.

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:


	2014	2013
Warrants	25,891,594	14,781,675
Convertible debt	5,064,069	4,559,896
Stock options	2,375,000	2,375,000

Common stock equivalents	33, 330,663	21,716,571

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.

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:


	September 30, 2014	December 31, 2013	Issuance, December 31, 2012
Expected volatility	286%	316%	140%
Risk free interest rate	0.58%	0.13%	0.25%
Expected life (years)	1.50	1	2

For the three months ended September 30, 2014 and 2013, the Company recognized a change in the derivative liabilities of $29,400 and $(842,400), respectively, and $1,165,800 and $(937,300) for the nine months then ended, respectively in other income (expense) related to this warrant derivative instrument.

On November 25, 2013, the Company repurchased 714,286 shares of its common stock and 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.

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.

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.


September 30, 2014	Level 1	Level 2	Level 3	Total
Derivative financial instruments	$ -	$ -	$ 402,000	$ 402,000

December 31, 2013	Level 1	Level 2	Level 3	Total
Derivative financial instruments	$ -	$ -	$ 1,603,514	$ 1,603,514

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


Balance, December 31, 2013		$ 1,603,514

Cancellation of derivative liability included in other (income) expenses		(35,714)
Change in fair value included in other (income) expenses		(1,165,800)

Balance, September 30, 2014		$ 402,000

7. STOCK OPTIONS

Stock Options Plan

On June 27, 2011, the Board of Directors adopted a Stock Awards Plan (“Plan”). The purpose of the Plan is to attract, retain and motivate employees, directors and persons affiliated with the Company and to provide such participants with additional incentive and reward opportunities. The awards may be in the form of incentive stock options, options that do not constitute incentive stock options, stock appreciation rights, restricted stock awards, phantom stock awards, or any combination of the foregoing. The total number of shares of stock reserved and available for issuance under the Plan increased to 3,000,000 from 1,750,000, pursuant to a December 2012 proxy vote by holders of a majority of the shares of GAHI. On July 17, 2012, the Board of Directors approved the issuance of non-qualified stock options for the purchase of an aggregate of 1,725,000 shares of common stock under the Plan to certain employees, officers and directors. The

options are exercisable at $0.45 per common share and expire three years after their issuance. The options are to vest over a two-to-three-year period with a fair value of approximately $500,000 at the grant date to be recognized over the vesting period.

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


		July 17, 2012
Expected dividend yield		$ 0
Expected stock price volatility		130%
Risk free interest rate		0.32%
Expected life (years)		3 years

The stock-based compensation related to the Plan, included in stock compensation expense in the consolidated statements of operations, was $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:


		December 27, 2012
Expected dividend yield		$ 0
Expected stock price volatility		140%
Risk free interest rate		0.25%
Expected life (years)		2.5 years

The stock-based compensation related to this option, included in stock compensation expense in the consolidated statements of operations, was $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.

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:


		January 29, 2013
Expected dividend yield		$ 0
Expected stock price volatility		120%
Risk free interest rate		0.15%
Expected life (years)		1 year

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:


ASSETS	September 30, 2014	December 31, 2013
	(Unaudited)

Current assets
Cash	$ 99,448	$ 463,610
Due from clearing organization	512	362,189
Advances to registered representatives and employees	53,340	112,583
Prepaid expenses and other current assets	2,839	23,981
Accounts receivable	21,305	-
Advances - related parties	17,163	17,163

Total current assets	194,607	979,526

Fixed assets, net of accumulated depreciation
of $1,757 and $20,582, respectively	-	3,286

Other assets
Litigation escrow deposit	100,000	-
Goodwill	33,900	33,900
Deposits with clearing organizations	-	50,003

Total other assets	133,900	83,903

TOTAL ASSETS	$ 328,507	$ 1,066,715


LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)	September 30, 2014	December 31, 2013
	(Unaudited)

Current liabilities
Accounts payable and accrued expenses	$ 698,602	$ 595,825
Commission payable	452	554,180
Convertible promissory notes payable, in default	-	604,515
Convertible promissory notes payable,
net of debt discount of $41,270 and $315,262
at September 30, 2014 and December 31, 2013, respectively	734,272	884,738
Promissory notes payable
net of debt discount of $0 at September 30, 2014	229,987	-
Derivative liability	402,000	1,603,514

Total current liabilities	2,065,313	4,242,772

Convertible promissory notes payable,
net of debt discount of $412,100 and $486,900
at September 30, 2014 and December 31, 2013, respectively	87,900	13,100

Total liabilities	2,153,213	4,255,872

Commitment and contingencies	-	-

Stockholders’ (deficiency)
Preferred stock, $0.001 par value; 2,000,000 shares authorized;
none issued and outstanding	-	-
Common stock, $0.001 par value; 100,000,000 shares authorized;	24,851	24,851
24,850,979 shares issued at September 30, 2014 and December 31, 2013;
24,136,693 shares outstanding at September 30, 2014 and December 31, 2013
Additional paid-in capital	10,053,737	9,189,971
Accumulated (deficit)	(11,408,646)	(11,918,307)

	(1,330,058)	(2,703,485)
Less: treasury stock, 714,286 shares at cost	(250,000)	(250,000)


Stockholders’ (deficiency) attributable to common stockholders	(1,580,058)	(2,953,485)

Noncontrolling interests	(244,648)	(235,672)

Total stockholders’ (deficiency)	(1,824,706)	(3,189,157)

TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIENCY)	$ 328,507	$ 1,066,715


	For the three months		For the nine months
	ended September 30,		ended September 30,
	2014	2013	2014	2013
Revenues
Commissions and other	$ 37,845	$ 60,288	$ 53,987	$ 214,309
Total revenues	37,845	60,288	53,987	214,309

Operating expenses
Salaries and benefits	164,733	157,162	390,532	468,568
Occupancy	46,102	22,622	91,284	139,288
Business development	88,873	89,655	300,026	246,412
Professional fees	158,578	115,684	582,547	586,841
Stock-based compensation	13,580	270,488	498,037	991,405
Clearing and operations	1,869	27,361	13,610	90,400
Regulatory fees	523	6,986	2,159	16,225
Settlement of litigation	-	-	650,000	-
Office and other	36,510	25,053	102,302	88,463
Total operating expenses	510,768	715,011	2,630,497	2,627,602

(Loss) from operations	(472,923)	(654,723)	(2,576,510)	(2,413,293)

Other income (expenses)
Interest expense	(363,918)	(114,463)	(907,144)	(532,296)
Loss on sale of GATA	-	-	-	(2,353)
Change in fair value of derivative liability	29,400	(842,400)	1,201,514	(933,500)
Total other income (expenses)	(334,518)	(956,863)	294,370	(1,468,149)

Loss from continuing operations	(807,441)	(1,611,586)	(2,282,140)	(3,881,442)

Discontinued operations
Discontinued operations, net of tax	241,435	74,222	968,869	318,767
Gain on disposition of discontinued operations	1,813,956	-	1,813,956	-
Income from discontinued operations, net of tax	2,055,391	74,222	2,782,825	318,767

Net income (loss)	1,247,950	(1,537,364)	500,685	(3,562,675)

Net income (loss) attributable to noncontrolling interests	3,020	(17,320)	(8,976)	(86,092)

Net income (loss) attributable to common stockholders	$ 1,244,930	$ (1,520,044)	$ 509,661	$ (3,476,583)

Basic and diluted:
(Loss) per share from continuing operations	$ (0.03)	$ (0.07)	$ (0.09)	$ (0.17)
Income per share from discontinued operations	0.09	0.00	0.12	0.02
Net income (loss) per share	$ 0.06	$ (0.07)	$ 0.03	$ (0.15)

Weighted average number of common shares:
Basic and diluted	24,136,693	24,568,371	24,136,693	23,382,529


	2014	2013

Cash flows from operating activities
Net (loss)	$ 500,685	$ (3,562,675)
Adjustment to reconcile net (loss) to net cash (used in) operating activities:
Depreciation and amortization	3,286	3,396
Accretion of debt discount	714,548	397,435
Stock-based compensation to employees and consultants	498,037	991,405
Change in fair value of derivative liability	(1,201,514)	933,500
Loss on sale of GATA	-	2,353
Gain on sale of GACC	(1,813,956)	-
Change in operating assets and liabilities:
Due from clearing organization	361,677	16,339
Accounts receivable	(21,305)	-
Advances to registered representatives and employees	59,243	(43,287)
Deposits with clearing organizations	50,003	-
Litigation escrow deposit	(100,000)	-
Prepaid expenses and other current assets	21,142	53,384
Commissions payable	(553,728)	22,227
Accounts payable and accrued expenses	102,777	366,135
Net assets disposed of GACC	(186,044)	-

Net cash (used in) operating activities	(1,565,149)	(819,788)

Cash flows from investing activities
Proceeds from sale of 25% interest in GAIM	-	35,714
Proceeds from sale of GACC	2,000,000	-
Proceeds from sale of GATA	-	495

Net cash provided by investing activities	2,000,000	36,209

Cash flows from financing activities
Proceeds from issuance of common stock and warrants	-	564,287
Proceeds from issuance of convertible promissory notes	-	105,000
Proceeds from issuance of promissory notes	904,987	-
Repayment of convertible promissory notes/promissory notes	(1,704,000)	(150,000)
Advances from related parties	-	16,878

Net cash (used) provided by financing activities	(799,013)	536,165

Net change in cash	(364,162)	(247,414)
Cash, beginning of period	463,610	376,942

Cash, end of period	$ 99,448	$ 129,528


	2014	2013

Supplemental disclosure of cash flow information

Cash paid for income taxes	$ 5,855	$ 9,090

Cash paid for interest	$ 256,849	$ 200,403


Supplemental disclosure of non-cash investing and financing activities

Issuance of warrants in connection with debt	$ 365,729	$ 21,428

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

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

Intercompany payables to GACC forgiven on sale	$ 2,280,877	$ -


	Shares	Weighted Average Exercise Price	Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at December 31, 2013	2,375,000	$ 0.44	1.43 years	$ -
Granted	-	-	-	-
Exercised	-	-	-	-
Cancelled and expired	-	-	-	-
Forfeited	-	-	-	-

Outstanding at September 30, 2014	2,375,000	$ 0.44	0.76 years	$ -

Vested and expected to vest at September 30, 2014	2,375,000	$ 0.44	0.76 years	$ -

Exercisable at September 30, 2014	2,375,000	$ 0.44	0.76 years	$ -


	September 30,	December 31,
	2014	2013
Convertible promissory notes with interest at 12% per annum, convertible into common shares at the fixed price of $0.25 per share. Maturity dates range from December 31, 2014 to November 11, 2018, net of unamortized discount of $445,484 and $686,289, respectively. (A)	$ 329,516	$ 313,711

Convertible promissory notes with interest at 12% per annum, convertible into common shares at fixed price of $0.35 per share. Matured on May 30, 2013 (B)	-	354,515

Convertible promissory notes with interest at 12% per annum, convertible into common shares at a fixed price of $0.35 per share. Maturity dates range from October 13, 2014 to October 22, 2014, net of unamortized discount of $7,886 and $115,873, respectively.(D)	242,656	334,127

Convertible promissory notes with interest at 8% per annum, convertible into common shares at a fixed price of $0.30 per share. Matured on October 13, 2013. (C)	250,000	250,000

Convertible promissory notes with interest at 9% per annum, convertible into common shares at the lesser of $0.35 per share or a 10% discount to the market value the day prior to the date of conversion. Matured and repaid on January 6, 2014.	-	250,000
	822,172	1,502,353
Less current portion:	(734,272)	(1,489,253)
Long-term portion:	$ 87,900	$ 13,100


		January 2, 2013
Expected dividend yield		$ 0
Expected stock price volatility		120%
Risk free interest rate		1.25%
Expected life (years)		8 years


		April 30, 2013
Expected dividend yield		$ 0
Expected stock price volatility		190%
Risk free interest rate		1.11%
Expected life (years)		7 years


		March 13, 2014
Expected dividend yield		$ 0
Expected stock price volatility		288%
Risk free interest rate		0.74%
Expected life (years)		3 years


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

Outstanding at December 31, 2013		21,271,487	$ 0.43	21,271,487	$ -

Granted		6,291,309	0.25	6,291,309	-
Expired		1,633,500	0.67	1,633,500	-
Cancelled and surrendered		-	-	-	-

Outstanding at September 30, 2014		25,929,296	$ 0.35	25,929,296	$ -


Exercise Price	Average Number Outstanding	Average Contractual Life	Average Exercise price	Warrants Exercisable
0.001 $0.25 to $0.75	4,038,062 21,891,234	1.50 3.14	$ 0.001 $ 0.35	4,038,062 21,891,234

	25,929,296	-	-	25,929,296


Period Ending December 31,		Amount
2014	$	31,200
2015		53,500
	$	84,700