10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

FORM 10-Q

_______________

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

HALO COMPANIES, INC.

 (Exact name of registrant as specified in Charter)

Delaware	000-15862	13-3018466
(State or other jurisdiction of incorporation or organization)	(Commission File No.)	(IRS Employee Identification No.)

18451 N. Dallas Parkway, Suite 100

Dallas, Texas 75287

(Address of Principal Executive Offices)

  _______________

214-644-0065

(Issuer Telephone number)

_______________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer 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 (§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-accelerated filer or a smaller reporting company filer.  See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large Accelerated Filer  [_]     Accelerated Filer  [_]      Non-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]

State the number of shares outstanding of each of the issuer’s classes of common equity, November 6, 2015: 48,562,750 shares of Common Stock, $.001 par value per share outstanding.

1

Halo Companies, Inc.

INDEX

PART I.  FINANCIAL INFORMATION

Item 1.	Financial Statements
	Consolidated Balance Sheets at September 30, 2015 (unaudited) and December 31, 2014	3
	Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2015 and 2014	4
	Consolidated Statements of Changes in Shareholders’ Deficit (unaudited) for the nine months ended September 30, 2015 and 2014	5
	Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2015 and 2014	6
	Notes to Consolidated Financial Statements	7-23
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24-29
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29
Item 4T.	Controls and Procedures	29

PART II.  OTHER INFORMATION

Item 1.	Legal Proceedings	30-31
Item 1A.	Risk Factors	31-34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	34
	SIGNATURES	35

2

Part 1 – Financial Information

Item 1. Financial Statements

Halo Companies, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

ASSETS
	September 30, 2015			December 31, 2014
	(Unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	88,044		$	72,982
Trade accounts receivable, net of allowance for doubtful
accounts of $0 and $375,665, respectively		90,953			141,634
Total current assets		178,997			214,616
PROPERTY, EQUIPMENT AND SOFTWARE, net		52,833			70,526
OTHER ASSETS		13,333			23,333
TOTAL ASSETS	$	245,163		$	308,475
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable	$	625,230		$	485,869
Accrued and other liabilities (including $299,321 and
$166,992 to related parties, respectively)		1,941,950			915,900
Deferred revenue		53,500			1,800
Current portion of subordinated debt		20,000			31,250
Current portion of notes payable to related parties		1,222,270			959,365
Total current liabilities		3,862,950			2,394,184
SUBORDINATED DEBT, LESS CURRENT PORTION		70,000			85,000
NOTES PAYABLE TO RELATED PARTIES, LESS CURRENT PORTION		—			179,358
NOTE PAYABLE		2,021,009			1,805,000
DERIVATIVE LIABILITY		2,434			2,434
Total liabilities		5,956,393			4,465,976
SHAREHOLDERS' DEFICIT
Series Z Convertible Preferred Stock, par value $0.01 per share; 82,508 shares
authorized; 0 shares issued and outstanding at September 30, 2015 and December 31, 2014		—			—
Preferred Stock, par value $0.001 per share; 917,492 shares
authorized; 0 shares issued and outstanding at September 30, 2015 and December 31, 2014		—			—
Series X Convertible Preferred Stock, par value $0.01 per share; 53,677 and 143,677 shares authorized;
53,677 and 143,677 shares issued and outstanding,  liquidation preference of $536,770 and		537			1,437
$1,436,770 at September 30, 2015 and December 31, 2014, respectively
Series E Convertible Preferred Stock, par value $0.001 per share; 100,000 shares authorized;
70,000 shares issued and outstanding at September 30, 2015 and December 31, 2014,
liquidation preference of $700,000		70			70
Halo Group, Inc. Preferred Stock, par value $0.001 per share; 2,000,000 shares authorized
Series A Convertible Preferred Stock;
372,999 shares issued and outstanding at September 30, 2015 and December 31, 2014,
liquidation preference of $753,826		373			373
Series B Convertible Preferred Stock;
229,956 shares issued and outstanding at September 30, 2015 and December 31, 2014,
liquidation preference of $621,553		230			230
Series C Convertible Preferred Stock;
124,000 shares issued and outstanding at September 30, 2015 and December 31, 2014,
liquidation preference of $418,745		124			124
Common Stock, par value $0.001 per share; 375,000,000 shares authorized;
48,562,750 and 66,364,083 shares issued and outstanding
at September 30, 2015 and December 31, 2014, respectively		48,563			66,364
Additional paid-in capital		7,407,532			7,638,764
Accumulated deficit		(13,168,659	)		(11,864,863	)
Total shareholders' deficit		(5,711,230	)		(4,157,501	)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	245,163		$	308,475

The accompanying notes are an integral part of these consolidated financial statements.

3

Halo Companies, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
REVENUE (including $104,153, $107,900, $334,538 and
$326,155 from related parties, respectively)	$	1,024,960		$	555,466		$	3,023,625		$	1,975,659
OPERATING EXPENSES
Sales and marketing expenses		366,006			300,992			1,244,843			767,197
General and administrative expenses (including $111,780, $29,751,
$245,339 and $89,244 to related parties, respectively)		200,067			160,084			642,429			535,748
Salaries, wages, and benefits		307,619			386,103			1,952,782			1,311,525
Total operating expenses		873,692			847,179			3,840,054			2,614,470
OPERATING INCOME (LOSS)		151,268			(291,713	)		(816,429	)		(638,811	)
OTHER INCOME (EXPENSE)
Gain on change in fair value of derivative		—			—			—			13,533
Interest expense (including $92,619, $29,075, $215,875 and
$78,085 to related parties, respectively)		(181,689	)		(107,143	)		(474,223	)		(303,609	)
Net income (loss) from operations, before income tax provision		(30,421	)		(398,856	)		(1,290,652	)		(928,887	)
INCOME TAX PROVISION		—			9,870			13,144			31,995
NET INCOME (LOSS)	$	(30,421	)	$	(408,726	)	$	(1,303,796	)	$	(960,882	)
Loss per share:
Basic & Diluted	$	(0.00	)	$	(0.01	)	$	(0.02	)	$	(0.01	)
Weighted Average Shares Outstanding
Basic & Diluted		48,562,750			66,364,083			57,463,417			66,364,083

The accompanying notes are an integral part of these consolidated financial statements.

4

Halo Companies, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT

For the Nine Months Ended September 30, 2015 and 2014

(Unaudited)

	Halo Companies, Inc. Common Stock					Halo Companies, Inc. Series X Convertible Preferred Stock					Halo Companies, Inc. Series E Convertible Preferred Stock			Halo Group, Inc. Series A Convertible Preferred Stock			Halo Group, Inc. Series B Convertible Preferred Stock			Halo Group, Inc. Series C Convertible Preferred Stock			Additional Paid-in Capital			Accumulated Deficit			Total
	Shares		Amount			Shares		Amount			Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2013	66,364,083		$	66,364		143,677		$	1,437		70,000	$	70	372,999	$	373	229,956	$	230	124,000	$	124	$	7,638,764		$	(10,600,783	)	$	(2,893,421	)
Net loss	—			—		—			—		—		—	—		—	—		—	—		—		—			(960,882	)		(960,882	)
Balance at September 30, 2014	66,364,083		$	66,364		143,677		$	1,437		70,000	$	70	372,999	$	373	229,956	$	230	124,000	$	124	$	7,638,764		$	(11,561,665	)	$	(3,854,303	)
Balance at December 31, 2014	66,364,083		$	66,364		143,677		$	1,437		70,000	$	70	372,999	$	373	229,956	$	230	124,000	$	124	$	7,638,764		$	(11,864,863	)	$	(4,157,501	)
Redemption of Series X Convertible Preferred
Stock per settlement agreement (FN 16)	—			—		(90,000	)		(900	)	—		—	—		—	—		—	—		—		(249,100	)		—			(250,000	)
Issuance of Common Shares	6,667			7		—			—		—		—	—		—	—		—	—		—		60			—			67
Cancellation of Common Shares per
settlement agreement (FN 16)	(17,808,000	)		(17,808	)	—			—		—		—	—		—	—		—	—		—		17,808			—			—
Net loss	—			—		—			—		—		—	—		—	—		—	—		—		—			(1,303,796	)		(1,303,796	)
Balance at September 30, 2015	48,562,750		$	48,563		53,677		$	537		70,000	$	70	372,999	$	373	229,956	$	230	124,000	$	124	$	7,407,532		$	(13,168,659	)	$	(5,711,230	)

The accompanying notes are an integral part of these consolidated financial statements.

5

Halo Companies, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2015 and 2014

(Unaudited)

	September 30, 2015			September 30, 2014
CASH FLOWS FROM OPERATIONS
Net (loss) income	$	(1,303,796	)	$	(960,882	)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation		17,693			37,558
Amortization of loan origination costs		10,000			10,000
Capitalization of interest into note payable and notes payable to related parties		224,556			190,228
Bad debt expense		116			111
Gain on change in fair value of derivative		—			(13,533	)
Notes receivable write off		125,000			—
Changes in operating assets and liabilities:
Trade accounts receivable		50,565			21,890
Other assets		—			2,922
Accounts payable		(110,639	)		(63,014	)
Accrued and other liabilities		1,026,050			383,368
Deferred rent		—			(169,349	)
Deferred revenue		51,700			—
Net cash provided by (used in) operating activities		91,245			(560,701	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in affiliate		(125,000	)		—
Purchases of property and equipment		—			(700	)
Net cash used in investing activities		(125,000	)		(700	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable to related parties		100,000			480,000
Principal payments on notes payable to related parties		(25,000	)		(6,117	)
Principal payments on subordinated debt		(26,250	)		(4,167	)
Proceeds received from issuance of common stock		67			—
Net cash provided by financing activities		48,817			469,716
Net increase (decrease) in cash and cash equivalents		15,062			(91,685	)
CASH AND CASH EQUIVALENTS, beginning of period		72,982			127,048
CASH AND CASH EQUIVALENTS, end of period	$	88,044		$	35,363
SUPPLEMENTAL INFORMATION
Cash paid for taxes - Texas Margin Tax	$	13,144		$	31,995
Cash paid for interest	$	92,858		$	51,216
NONCASH SUPPLEMENTAL INFORMATION
Cancellation of stock for settlement payment	$	250,000		$	—

The accompanying notes are an integral part of these consolidated financial statements.

6

Halo Companies, Inc.

Notes To Consolidated Financial Statements

September 30, 2015

NOTE 1. ORGANIZATION AND RECENT DEVELOPMENTS

Halo Companies, Inc. (“Halo”, “HCI” or the “Company”) was incorporated under the laws of the State of Delaware on December 9, 1986. Its principal executive offices are located at 18451 N. Dallas Parkway, Suite 100, Dallas, Texas 75287. On December 15, 2014, the Company moved from its previous office location at 7668 Warren Parkway, Suite 350, Frisco, Texas 75034.

Unless otherwise provided in footnotes, all references from this point forward in this Report to “we,” “us,” “our company,” “our,” or the “Company” refer to the combined Halo Companies, Inc. entity, together with its subsidiaries.

Halo has multiple wholly-owned subsidiaries including Halo Group Inc. (“HGI”), Halo Asset Management, LLC (“HAM”), Halo Portfolio Advisors, LLC (“HPA”), and Halo Benefits, Inc. (“HBI”). HGI is the management and shared services operating company. HAM provides asset management and mortgage servicing services to investors and asset owners including all aspects of buying and managing distressed real estate owned (“REO”) and non-performing loans. HPA exists to market the Company’s operations as a turnkey solution for strategic business to business opportunities with HAM’s investors and asset owners, major debt servicers and field service providers, lenders, and mortgage backed securities holders. HBI was originally established as an association benefit services to customers throughout the United States and although a non-operating entity, remains a subsidiary due to its historical net operating loss carryforward.

During March 2015, the Company entered into a $250,000 compromise and settlement agreement with the court appointed receivership holding 17,808,000 shares of the Company’s common stock. This stock was subject to the unearned “clawback” provisions discussed in Note 16 below. The physical stock certificate has been sent to the Company’s transfer agent to immediately cancel those respective outstanding shares of that Agreement. Further, this settlement agreement calls for a relinquishment and abandonment of any and all claims against Halo on 90,000 shares of the Company’s Series X Preferred stock belonging to the receivership (original liquidation value of $10 per share). Lastly, the Company had $375,665 in accounts receivable owed from the receivership which had previously been fully reserved. With the settlement now in place, the Company wrote off this accounts receivable balance and released the allowance reserve held. The Settlement requires $250,000 to be paid by the Company to the receivership over a twelve month period with the start date April 1, 2015. As the receivership owed the Company $22,500 for success fees previously earned (this receivable was not part of the $375,665 in fully reserved accounts receivable noted above), the first $22,500 of the $250,000 owed was settled via a reduction of the $22,500 accounts receivable balance for the April 1 and part of the May 1, 2015 scheduled payments.

During March 2015, an additional 1,272,000 shares of the Company’s common stock, all subject to the clawback provisions of the Agreement (defined in Note 16), have also been sent to the Company’s transfer agent to immediately cancel those respective common shares of that Agreement but as of the time of this filing those shares have not yet been canceled. The Company expects that to happen shortly. Secondarily, the Company is actively pursuing the procurement of an additional physical certificate from a respective individual still in possession of the common stock certificate. As of the time of this Form 10-Q, 3,392,000 of the 21,200,000 shares issued as part of the Agreement remain outstanding.

On October 8, 2015, Reif Chron, President, tendered his resignation.

7

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

The interim consolidated financial statements are unaudited; however, in the opinion of management, all adjustments considered necessary for fair presentation of the results of the interim periods have been included (consisting of normal recurring accruals). The accompanying consolidated financial statements as of September 30, 2015, and for the three and nine months ended September 30, 2015 and 2014, include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim information. Accordingly, the consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K. The results of operations for the three and nine months ended September 30, 2015, are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

Revenue Recognition, Accounts Receivable and Deferred Revenue

The Company recognizes revenue in the period in which services are earned and realizable. To further understand the Company’s business, HAM earns fees from its clients for its boarding and initial asset management fee, success fees, and its monthly servicing fee. The boarding and initial asset management services are performed in the first 30-60 days of assets being boarded and include; IRR analysis of loans boarded, detailed asset level workout exit strategy analysis, boarding the assets onto HAM’s proprietary software platform and the integrated servicing platform, identification and oversight of custodial files, oversight of mortgage/deed assignment from previous servicer, oversight of title policy administration work, and delinquent property tax research and exposure review. HAM’s monthly success fees are earned for completing its default and asset disposition services including note sales, originating owner finance agreements, and cash sales of REO properties owned by the client. HAM’s servicing fees are earned monthly and are calculated on a monthly unit price for assets under management.

The Company is currently exploring potential opportunities with several client relationships that would allow the Company to implement its internally used asset management software platform as an external service for those customers. This is commonly known as Software as a Service (“SaaS”). The Company entered into a SaaS contract with one client who prepaid for a 12 month service plan during early 2015. Cash receipts from customers in advance of revenue recognized are recorded as deferred revenue and will be earned over the entire SaaS contract period. The Company is still in its research phase of determining if this service line will remain ancillary or become a primary business component of the Company.

HAM and HPA receivables are typically paid the month following services performed. HGI receivables are due when invoiced. As of September 30, 2015 and December 31, 2014, the Company’s accounts receivable are made up of the following percentages; HAM at 32% and 84%, HPA at 68% and 11%, and HGI at 0% and 5%, respectively.

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts: past transaction history with the customer, current economic and industry trends, and changes in customer payment terms. The Company provides for estimated uncollectible amounts through an increase to the allowance for doubtful accounts and a charge to earnings based on actual historical trends and individual account analysis. Balances that remain outstanding after the Company has used reasonable collection efforts are written-off through a charge to the allowance for doubtful accounts. The below table summarizes the Company’s allowance for doubtful accounts as of September 30, 2015 and December 31, 2014:

	Balance at Beginning of Period		Increase in the Provision		Accounts Receivable Write-offs		Balance at End of Period
Nine Months ended September 30, 2015
Allowance for doubtful accounts	$	375,665	$	116	$	375,781	$	0
Year ended December 31, 2014
Allowance for doubtful accounts	$	375,665	$	135	$	135	$	375,665

8

As of December 31, 2014, the Company’s allowance for doubtful accounts was made up of the following percentages; HAM at 96% and HPA at 4%, respectively. The HAM and HPA allowance was related to one client in a court appointed receivership. As discussed in Note 1 above, the March 2015 settlement agreement entered into by the Company and the receivership did not pay the fully reserved accounts receivable. As such, the accounts receivable balance was written off and the allowance for doubtful accounts was fully reduced to zero.

Net Income (Loss) Per Common Share

Basic net income (loss) per share is computed by dividing (i) net income (loss) available to common shareholders (numerator), by (ii) the weighted average number of common shares outstanding during the period (denominator). Diluted net income (loss) per share is computed using the weighted average number of common shares and dilutive potential common shares outstanding during the period. At September 30, 2015 and 2014, there were 4,623,959 and 4,518,626 shares, respectively, underlying potentially dilutive convertible preferred stock and stock options outstanding. These shares were not included in dilutive weighted average shares outstanding for the three and nine months ended September 30, 2015 and 2014 because their effect is anti-dilutive due to the Company’s reported net loss.

Use of Estimates and Assumptions

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include the Company’s revenue recognition method and derivative liabilities.

Principles of Consolidation

The consolidated financial statements of the Company for the three and nine months ended September 30, 2015 and 2014 include the financial results of HCI, HGI, HBI, HPA and HAM. All significant intercompany transactions and balances have been eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all liquid investments with a maturity of 90 days or less to be cash equivalents.

Other Assets

At September 30, 2015, other assets were $13,333 ($40,000 in total origination fees paid offset by $26,667 in accumulated amortization of those fees) for the senior unsecured promissory note discussed in Note 9. The fees are to be amortized over the life of the promissory note. At December 31, 2014, other assets were $23,333 ($40,000 in total origination fees offset by $16,667 in accumulated amortization) for the senior unsecured promissory note.

Property, Equipment and Software

Property, equipment, and software are stated at cost. Depreciation is provided in amounts sufficient to relate the cost of the depreciable assets to operations over their estimated service lives, ranging from three to seven years. Provisions for depreciation are made using the straight-line method.

Major additions and improvements are capitalized, while expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement, the cost of the property and equipment and the related accumulated depreciation are removed from the respective accounts, and any resulting gains or losses are credited or charged to other general and administrative expenses.

9

Fair Value of Financial Instruments

The carrying value of trade accounts receivable, accounts payable, and accrued and other liabilities approximate fair value due to the short maturity of these items. The estimated fair value of the notes payable and subordinated debt approximates the carrying amounts as they bear market interest rates.

The Company considers the warrants related to its subordinated debt to be derivatives, and the Company records the fair value of the derivative liabilities in the consolidated balance sheets. Changes in fair value of the derivative liabilities are included in gain (loss) on change in fair value of derivative in the consolidated statements of operations. The Company’s derivative liability has been classified as a Level III valuation according to Accounting Standards Codification (“ASC”) 820.

Internally Developed Software

Internally developed legacy application software consisting of database, customer relations management, process management and internal reporting modules are used in each of the Company’s subsidiaries. The Company accounts for computer software used in the business in accordance with ASC 350 “Intangibles-Goodwill and Other”. ASC 350 requires computer software costs associated with internal use software to be charged to operations as incurred until certain capitalization criteria are met. Costs incurred during the preliminary project stage and the post-implementation stages are expensed as incurred. Certain qualifying costs incurred during the application development stage are capitalized as property, equipment and software. These costs generally consist of internal labor during configuration, coding, and testing activities. Capitalization begins when (i) the preliminary project stage is complete, (ii) management with the relevant authority authorizes and commits to the funding of the software project, and (iii) it is probable both that the project will be completed and that the software will be used to perform the function intended. Management has determined that a significant portion of costs incurred for internally developed software came from the preliminary project and post-implementation stages; as such, no costs for internally developed software were capitalized. U

Long-Lived Assets

Long-lived assets are reviewed on an annual basis or whenever events or changes in circumstance indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is generally measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by that asset. If it is determined that the carrying amount of an asset may not be recoverable, an impairment loss is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is the estimated value at which the asset could be bought or sold in a transaction between willing parties. There were no impairment charges for the three and nine months ended September 30, 2015 and 2014.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740 “Income Taxes”. ASC 740 requires the use of the asset and liability method whereby deferred tax assets and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. These differences result in deferred tax assets and liabilities, which are included in the Company’s consolidated balance sheets.

The Company then assesses the likelihood of realizing benefits related to such assets by considering factors such as historical taxable income and the Company’s ability to generate sufficient taxable income of the appropriate character within the relevant jurisdictions in future years. Based on the aforementioned factors, if the realization of these assets is not likely a valuation allowance is established against the deferred tax assets.

10

The Company accounts for its position in tax uncertainties under ASC 740-10. ASC 740-10 establishes standards for accounting for uncertainty in income taxes. ASC 740-10 provides several clarifications related to uncertain tax positions. Most notably, a “more likely-than-not” standard for initial recognition of tax positions, a presumption of audit detection and a measurement of recognized tax benefits based on the largest amount that has a greater than 50 percent likelihood of realization. ASC 740-10 applies a two-step process to determine the amount of tax benefit to be recognized in the financial statements. First, the Company must determine whether any amount of the tax benefit may be recognized. Second, the Company determines how much of the tax benefit should be recognized (this would only apply to tax positions that qualify for recognition.) The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements or the effective tax rate during the three and nine months ended September 30, 2015 or 2014.

The Company incurred no penalties or interest for taxes for the three and nine months ended September 30, 2015 or 2014. The Company is subject to a three year statute of limitations by major tax jurisdictions for the fiscal years ended December 31, 2012, 2013 and 2014. The Company files income tax returns in the U.S. federal jurisdiction.

Recent Accounting Standards

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP.

The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard in 2018.

NOTE 3. CONCENTRATIONS OF CREDIT RISK

The Company maintains aggregate cash balances, at times, with financial institutions, which are in excess of amounts insured by the Federal Deposit Insurance Corporation (“FDIC”). During the three and nine months ended September 30, 2015, the FDIC insured deposit accounts up to $250,000. At September 30, 2015, the Company’s cash accounts were all less than the $250,000 FDIC insured amount and as such were insured in full.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable.

In the normal course of business, the Company extends unsecured credit to its customers. Because of the credit risk involved, management has provided an allowance for doubtful accounts which reflects its estimate of amounts which will eventually become uncollectible. In the event of complete non-performance by the Company’s customers, the maximum exposure to the Company is the outstanding accounts receivable balance at the date of non-performance.

NOTE 4. OPERATING SEGMENTS

The Company has several operating segments as listed below and as defined in Note 1. The results for these operating segments are based on our internal management structure and review process. We define our operating segments by service industry. If the management structure and/or allocation process changes, allocations may change. See the following summary of operating segment reporting;

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Operating Segments	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Revenue:
Halo Asset Management	$	425,429		$	219,125		$	942,148		$	1,101,544
Halo Portfolio Advisors		569,531			336,341			1,947,583			874,115
Other		30,000			—			133,894			—
Net revenue	$	1,024,960		$	555,466		$	3,023,625		$	1,975,659
Operating income (loss):
Halo Asset Management	$	366,583		$	70,014		$	682,695		$	502,426
Halo Portfolio Advisors		212,155			43,833			728,450			129,484
Other		—			—			—			—
Less: Corporate expenses (a)		(609,159	)		(522,573	)		(2,714,941	)		(1,592,792	)
Operating income (loss):	$	(30,421	)	$	(408,726	)	$	(1,303,796	)	$	(960,882	)

a. Corporate expenses include salaries, benefits and other expenses, including rent and general and administrative expenses, related to corporate office overhead and functions that benefit all operating segments. Corporate expenses also include interest expense. Corporate expenses are expenses that the Company does not directly allocate to any segment above. Allocating these indirect expenses to operating segments would require an imprecise allocation methodology. Further, there are no material amounts that are the elimination or reversal of transactions between the above reportable operating segments.

The assets of the Company consist primarily of cash, trade accounts receivable, and property, equipment and software. Cash is managed at the corporate level of the Company and not at the segment level. Each of the remaining primary assets have been discussed in detail, including the applicable operating segment for which the assets and liabilities reside, in the consolidated notes to the financial statements. As such, the duplication is not warranted in this footnote.

All debt of the Company is recorded at the corporate parent companies HCI and HGI. All interest expense is included in corporate expenses above. Interest expense is discussed in further detail in Notes 8, 9, 10 and 11.

For the three and nine months ended September 30, 2015 or 2014, there have been no material transactions between reportable units that would materially affect an operating segment profit or loss. Intercompany transactions are eliminated in the consolidated financial statements.

NOTE 5. GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the Company will need to manage additional asset units under contract and/or additional financing to fully implement its business plan, including continued growth and establishment of a stronger brand name of HAM’s asset management in the distressed asset sector.

The Company is actively seeking growth of its asset units under management, both organically and via new client relationships. Management, in the ordinary course of business, is trying to raise additional capital through sales of common stock as well as seeking financing via equity or debt, or both from third parties. There are no assurances that additional financing will be available on favorable terms, or at all. If additional financing is not available, the Company will need to reduce, defer or cancel development programs, planned initiatives and overhead expenditures. The failure to adequately fund its capital requirements could have a material adverse effect on the Company’s business, financial condition and results of operations. Moreover, the sale of additional equity securities to raise financing will result in additional dilution to the Company’s stockholders, and incurring additional indebtedness could involve an increased debt service cash obligation, the imposition of covenants that restrict the Company operations or the Company’s ability to perform on its current debt service requirements. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

The Company has incurred an accumulated deficit of $13,168,659 as of September 30, 2015. However, of the accumulated deficit, $2,110,748 of expense was incurred as stock-based compensation, $598,457 in depreciation expense, and $279,241 in impairment loss on investment in portfolio assets, all of which are noncash expenses. Further, $906,278 of the accumulated deficit is related to the issuance of stock dividends, also non cash reductions. The $3,894,724 total of these non-cash retained earnings reductions represents 30% of the total deficit balance.

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NOTE 6. PROPERTY, EQUIPMENT AND SOFTWARE

Property, equipment and software consist of the following as of September 30, 2015 and December 31, 2014, respectively:

Computers and purchased software	$	147,800		$	158,899
Furniture and equipment		203,427			203,427
		351,227			362,326
Less: accumulated depreciation		(298,394	)		(291,800	)
	$	52,833		$	70,526

Depreciation totaled $5,728, $17,693, $8,899 and $37,558 for the three and nine months ended September 30, 2015 and 2014, respectively. The Company retired $11,099 of fully depreciated assets during the nine months ended September 30, 2015, and as such there was no financial statement impact from the retired assets.

NOTE 7. ACCRUED AND OTHER LIABILITIES

The Company had $1,941,950 in accrued liabilities at September 30, 2015. Included in this accrual is $539,565 in accrued interest ($240,244 of this balance is related to interest on the secured asset promissory note discussed in more detail in Note 11). The accrual also includes $659,754 in deferred compensation and $729,505 in variable wages payable and $13,126 in other. The Company had $915,900 in accrued liabilities at December 31, 2014. Included in this accrual is $392,756 in accrued interest ($223,987 of this balance is related to interest on the secured asset promissory note discussed in more detail in Note 12) and $523,144 in deferred compensation to several senior management personnel.

NOTE 8. NOTES PAYABLE TO RELATED PARTIES

During March 2011, the Company entered into one unsecured promissory note with a related party (a previous company director) in the amount of $250,000 (the “2011 Related Party Note”). The 2011 Related Party Note had a fixed interest amount of $50,000 and a maturity date of July 31, 2011. On September 20, 2011, the 2011 Related Party Note was amended to include the 2011 Related Party Note plus $52,426 of accrued interest for a total note balance of $302,426. The 2011 Related Party Note has a 6% interest rate and is a monthly installment note with final balloon payment at maturity in September 2014. At the time of the filing of these consolidated financial statements, the Company and the related party had not finalized an extended maturity date, and as such the entire $194,701 2011 Related Party Note balance is included in current portion of notes payable to related parties as of September 30, 2015. As of December 31, 2014, the 2011 Related Party Note was $186,154, all of which is included in current portion of notes payable to related parties.

On September 1, 2011, several previous related party notes totaling $370,639 were amended and consolidated (“the 2011 Consolidated Related Party Note”). This note bears interest of 6% and has a maturity date of September 15, 2016. As of December 31, 2014, the 2011 Consolidated Related Party Note balance was $267,569, of which $88,211 is included in current portion of notes payable to related parties. As of September 30, 2015, the 2011 Consolidated Related Party Note balance was $267,569, all of which is included in current portion of notes payable to related parties.

As of December 31, 2014, a Company director had an outstanding advance to the Company of $500,000 for short term capital. As of September 30, 2015, the outstanding advance balance was $500,000. The maturity date for the advance repayment has been extended through September 30, 2016, and as such the entire balance is included in current portion of notes payable to related parties. Through March 31, 2015, the advance accrued interest at a rate of 15%. Effective in April 2015 and through September 30, 2015, the advance began accruing interest at a flat rate of $25,000 per month ($300,000 annualized fixed rate). As part of the extension for repayment of the advance through September 30, 2016, the annualized fixed interest amount will apply.

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As of December 31, 2014, the Company’s President and Chief Legal Officer had an outstanding advance balance of $70,000 for short term capital. During the nine months ended September 30, 2015, the Company received advances of $100,000 and made $25,000 in principal advance repayments. As of September 30, 2015, the outstanding advance balance was $145,000. At the time of the filing of these consolidated financial statements, the Company and the President had not finalized a maturity date for the advance repayment, and as such the entire balance is included in current portion of notes payable to related parties. The advance accrued interest at a rate of 15%.

As of December 31, 2014, the Company’s CEO and Director of the Board had an outstanding advance balance of $115,000 for short term capital. As of September 30, 2015, the outstanding advance balance was $115,000. At the time of the filing of these consolidated financial statements, the Company and the CEO had not finalized a maturity date for the advance repayment, and as such the entire balance is included in current portion of notes payable to related parties. The advance accrued interest at a rate of 15%.

As of September 30, 2015, the notes payable to related party balance totaled $1,222,270, all of which is included in current portion of notes payable to related parties in the consolidated financial statements. As of December 31, 2014, the notes payable to related party balance totaled $1,138,723, of which $959,365 is included in current portion of notes payable to related parties in the consolidated financial statements.

The Company incurred $92,619, $215,875, $29,075 and $78,085 of interest expense to directors, officers, and other related parties during the three and nine months ended September 30, 2015 and 2014, respectively. Accrued interest due to directors and other related parties totaled $299,321 at September 30, 2015, all of which is included in accrued and other current liabilities. Accrued interest due to directors and other related parties totaled $166,992 at December 31, 2014, all of which is included in accrued and other current liabilities.

NOTE 9. NOTE PAYABLE

In October 2013, the Company entered into a senior unsecured convertible promissory note agreement of $1,500,000. The terms of the note include an interest rate of 15% with a maturity date of October 10, 2016. The Company, although not required, is entitled to capitalize any accrued interest into the outstanding principal balance of the note up until maturity. At the maturity date, all unpaid principal and accrued interest is due. As part of the promissory note, the Company was required to pay origination fees and expenses associated with this note agreement (discussed in Other Assets Note 2), pay the subordinated debt originated in January 2010, pay $375,000 to a related party note held by a director, with the remaining use of proceeds for general corporate purposes including payment of deferred compensation to several management personnel. Additionally, the noteholder has the right, but not the obligation, to convert up to $1,000,000 of the principal balance of the note into common shares of the Company. The $1,000,000 maximum conversion ratio would entitle the noteholder to a maximum total of 10% of the then outstanding common stock of the Company, calculated on a fully diluted basis. Any conversion of the principal amount of this note into common stock would effectively lower the outstanding principal amount of the note. As of September 30, 2015, the note payable balance was $2,021,009, which includes capitalized interest of $521,009. As of December 31, 2014, the note payable balance was $1,805,000, which includes capitalized interest of $305,000.

NOTE 10. SUBORDINATED DEBT

During January 2010, the Company authorized a $750,000 subordinated debt offering (“Subordinated Offering”), which consisted of the issuance of notes paying a 16% coupon with a 1% origination fee at the time of closing. The maturity date of the notes was December 31, 2013. In October 2013, the Company entered into a senior unsecured convertible promissory note (discussed in Note 9) which required the use of those financing proceeds to pay down the subordinated debt. As such, as of December 31, 2013, the remaining balance was $0.

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As part of the Subordinated Offering, the Company granted to investors common stock purchase warrants (the “Warrants”) to purchase an aggregate of 200,000 shares of common stock of the Company at an exercise price of $0.01 per share. The 200,000 shares of common stock contemplated to be issued upon exercise of the Warrants are based on an anticipated cumulative debt raise of $750,000. The investors are granted the Warrants pro rata based on their percentage of investment relative to the $750,000 aggregate principal amount of notes contemplated to be issued in the Subordinated Offering. A total of 112,000 warrants were issued. The Warrants shall have a term of seven years, exercisable from January 31, 2015 to January 31, 2017. During 2015, 6,667 of the 112,000 warrants were purchased for $67 and converted to common stock.

The Company follows the provisions of ASC 815, “Derivatives and Hedging”. ASC 815 requires freestanding contracts that are settled in a company’s own stock to be designated as an equity instrument, assets or liability. Under the provisions of ASC 815, a contract designated as an asset or liability must be initially recorded and carried at fair value until the contract meets the requirements for classification as equity, until the contract is exercised or until the contract expires. Accordingly, the Company determined that the warrants should be accounted for as derivative liabilities and has recorded the initial value as a debt discount which was amortized into interest expense using the effective interest method. As of December 31, 2013, the balance of the debt discount was $0 (fully amortized). Subsequent changes to the marked-to-market value of the derivative liability are recorded in earnings as derivative gains and losses. As of September 30, 2015 and December 31, 2014, there were 105,333 and 112,000 warrants outstanding, respectively, with a derivative liability of $2,434. The Warrants were valued using the Black-Scholes model, which resulted in the fair value of the warrants at $0.02 per share using the following assumptions:

	September 30, 2015
Risk-free rate		0.31	%
Expected volatility		625	%
Expected remaining life (in years)		1.33
Dividend yield		0.00	%

During August 2012, the Company entered into an additional $25,000 subordinated term note with a then current holder of the Company’s subordinated debt. The note pays an 18% coupon rate with a maturity date of August 31, 2015. There are no warrants associated with this subordinated term note. Repayment terms of the note included interest only payments through February 28, 2013. Thereafter, level monthly payments of principal and interest are made as calculated on a 60 month payment amortization schedule with final balloon payment due at maturity. The rights of the holder of this note is subordinated to any and all liens granted by the Company to a commercial bank or other qualified financial institution in connection with lines of credit or other loans extended to the Company in an amount not to exceed $2,000,000, and liens granted by the Company in connection with the purchase of furniture, fixtures or equipment. As of September 30, 2015, the remaining balance of this note totals $0 as the balance was paid in full. As of December 31, 2014, the remaining balance of this note totals $16,250, all of which is included in current portion of subordinated debt.

During October 2014, the Company entered into an additional $100,000 subordinated term note with the current holder of the Company’s subordinated debt. The note pays an 18% coupon rate with a maturity date of September 30, 2017. There are no warrants associated with this subordinated term note. Repayment terms of the note include interest only payments through March 31, 2015. Thereafter, level monthly payments of principal and interest are made as calculated on a 60 month payment amortization schedule with final balloon payment due at maturity. The rights of the holder of this note is subordinated to any and all liens granted by the Company to a commercial bank or other qualified financial institution in connection with lines of credit or other loans extended to the Company in an amount not to exceed $3,500,000, and liens granted by the Company in connection with the purchase of furniture, fixtures or equipment. As of September 30, 2015, the remaining balance of this note totals $90,000, of which $20,000 is included in current portion of subordinated debt. As of December 31, 2014, the remaining balance of this note totals $100,000, of which $15,000 is included in current portion of subordinated debt.

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NOTE 11. SECURED ASSET PROMISSORY NOTE

During December 2010, the Company authorized a debt offering to be secured by real estate assets purchased in connection with Equitas Housing Fund, LLC, (“Equitas Offering”). The Equitas Offering generated $1,200,000 in proceeds. Of the $1,200,000 in proceeds received in December 2010, $300,000 was used to acquire non-performing, residential mortgage notes and the balance was used for mortgage note workout expenses and operational expenses of Halo Asset Management. The Secured Asset Promissory Notes consisted of a 25% coupon. In May 2013, the Secured Asset Promissory Note was paid in full, along with $150,000 of the outstanding accrued interest balance. Halo and the secured asset promissory note holder agreed to include the remaining accrued interest in a promissory note due December 31, 2014. The promissory note will accrue interest at a 10% annual rate, with interest only payments due periodically and final balloon payment due at maturity. At the time of the filing of these consolidated financial statements, the Company and note holder have not finalized an extended maturity date. As such, as of September 30, 2015, the entire accrued interest balance of $240,244 is included in current portion of accrued interest. As of December 31, 2014, the entire accrued interest balance of $223,987 is included in current portion of accrued interest. For the three and nine months ended September 30, 2015 and 2014, the Company incurred $5,419, $16,257, $5,419 and $16,257, respectively, in interest expense on the note.

NOTE 12. RELATED PARTY TRANSACTIONS

For the three and nine months ended September 30, 2015 and 2014, HAM recognized monthly servicing fee revenue totaling $104,153, $334,538, $107,900 and $326,155, respectively, from an entity that is an affiliate of the Company. Further, facilities rent expense discussed in Note 14 was expensed and paid to the same affiliate. Additionally, for the three and nine months ended September 30, 2015, the Company incurred $75,000 and $125,000, respectively, in the write off of notes receivable it invested during the three and nine months ended September 30, 2015 in the same affiliate of the Company. The write offs are included in general and administrative expenses on the consolidated statements of operations and discussed further in section Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations below.

For the three and nine months ended September 30, 2015 and 2014, the Company incurred interest expense to related parties (See Note 8).

For the three and nine months ended September 30, 2015 and 2014, the Company incurred $0, $20,000, $0 and $0, respectively, in commission expense to an entity that is an affiliate of the Company.

For the three and nine months ended September 30, 2015 and 2014, the Company incurred $15,000, $35,000, $0 and $0, respectively, in consulting expense to an entity that is an affiliate of the Company.

NOTE 13. INCOME TAXES

For the three and nine months ended September 30, 2015 and 2014, the effective tax rates of 0%, -2%, -1% and -3%, respectively, vary from the U.S. federal statutory rate primarily due to state income taxes, net losses, certain non-deductible expenses and an increase in the valuation allowance associated with the net operating loss carryforwards. Our deferred tax assets related to net operating loss carryforwards remain fully reserved due to uncertainty of utilization of those assets.

Deferred tax assets and liabilities are computed by applying the effective U.S. federal and state income tax rate to the gross amounts of temporary differences and other tax attributes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. At September 30, 2015, the Company believed it was more likely than not that future tax benefits from net operating loss carry-forwards and other deferred tax assets would not be realizable through generation of future taxable income and are fully reserved.

16

The Company has net operating loss (“NOL”) carry-forwards of approximately $6,700,000 available for federal income tax purposes, which expire from 2024 to 2034. Separately, because of the changes in ownership that occurred on June 30, 2004 and September 30, 2009, prior to GVC merging with HCI, and based on the Section 382 Limitation calculation, the Company will be allowed approximately $6,500 per year of GVC Venture Corp.’s federal NOLs generated prior to June 30, 2004 until they would otherwise expire. The Company would also be allowed approximately $159,000 per year of GVC Venture Corp.’s federal NOLs generated between June 30, 2004 and September 30, 2009 until they would otherwise expire.

NOTE 14. COMMITMENTS AND CONTINGENCIES

The Company leases very limited office equipment, each under a non-cancelable operating lease providing for minimum monthly rental payments. In relation to its office facilities, the Company has not entered into any additional office lease whereby it is contractually committed. The Company currently pays for its office space on a month to month basis, and will continue to do so for the foreseeable future.

Future minimum rental obligations as of September 30, 2015 are as follows:

Years Ending December 31:
2015	$	1,848
2016		3,696
Total minimum lease commitments	$	5,544

For the three and nine months ended September 30, 2015 and 2014, the Company incurred facilities rent expense totaling $21,780, $65,339, $29,751 and $89,244, respectively.

In the ordinary course of conducting its business, the Company may be subject to loss contingencies including possible disputes or lawsuits. The Company notes the following:

17

The Company and certain of its affiliates, officers and directors have been named as defendants in an action filed on December 12, 2011 in the 191^st District Court of Dallas County, Texas. The Plaintiffs allege that the Company has misappropriated funds in connection with offerings of securities during 2010 and 2011. The complaint further alleges that Defendants engaged in fraudulent inducement, negligent misrepresentation, fraud, breach of fiduciary duty, negligence, breach of contract, unjust enrichment, conversion, violation of the Texas Securities Act, and civil conspiracy. The Plaintiffs amended their Petition on April 24, 2012 and dropped the conversion and civil conspiracy claims. The action seeks an injunction and a demand for accounting along with damages in the amount of $4,898,157. The Company has taken the position that the Plaintiff’s claims have no merit, and accordingly is defending the matter vigorously. Defendants have filed a general denial of the claims as well as a Motion to Designate Responsible Third Parties whom Defendants believe are responsible for any damages Plaintiffs may have incurred. Defendants have also filed a Motion for Sanctions against the Plaintiffs and their counsel arguing, among other things, that (i) Plaintiffs’ claims are “judicially stopped” from moving forward by virtue of the fact that the same Plaintiffs previously filed suit against separate entities and parties with dramatically opposed and contradicting views and facts; (ii) Plaintiffs have asserted claims against Defendants without any basis in law or fact; and (iii) Plaintiffs have made accusations against Defendants that Plaintiffs know to be false. Additionally, Defendants have filed a no evidence Motion for Summary Judgment which was scheduled to be heard in October of 2012. The Plaintiffs requested and were granted a six month continuance on the hearing of that motion. The Plaintiffs have also filed a Motion to Stay the case pending the outcome of the Company’s lawsuit with the insurance companies which the Company has opposed. Initially the motion to stay was granted and Defendants moved for reconsideration. The parties were alerted that the court had reversed the Stay on appeal. The no evidence Motion for Summary Judgment was heard on August 9, 2013. Prior to the hearing, the Plaintiff’s filed a 3^rd Amended Petition in which they dropped any claim of fraud including fraudulent inducement, fraud, conversion and civil conspiracy and added a new “control person” claim which was not subject to the no evidence Motion for Summary Judgment heard on August 9, 2013. On September 25, 2013, Defendants no evidence Motion for Summary Judgment was granted in its entirety. Defendants subsequently filed a no evidence Motion for Summary Judgment on the final remaining “control person” claim which was heard before the court on October 21, 2013. On December 18, 2013 a final Order Granting Defendant’s Second No-Evidence Motion of Final Summary Judgment was signed. The Plaintiff’s subsequently filed a motion for new trial. Following a hearing, the Plaintiff’s motion for new trial was denied by operation of law. The Plaintiff’s Filed a Notice of Appeal on March 11, 2014. The Plaintiffs have requested multiple extensions to their time to file their brief on the Appeal. After having multiple extensions granted, the Plaintiff’s requested that the Appeals court stay the Appeal pending the outcome of the Company’s approved settlement agreement with the court appointed Receiver for James G. Temme and Stewardship Fund, LLC, appointed by the Federal Court in the Eastern District of Texas. On September 16, 2014 the Sixth Appellate District Court of Appeals of Texas issued an order abating the Plaintiff’s appeal pending a final determination by the federal courts of an order issued by the federal district court in a separate action directing the Plaintiff’s, among others, not to further pursue this separate litigation. For administrative purposes, this case is abated and will be treated as closed. Any party may seek reinstatement by promptly filing a motion with the Sixth Appellate District Court of Appeals of Texas showing that the injunction or order of the federal court no longer restricts pursuit of this litigation and specifying what further action, if any, is required from the Court. As of the date of this filing, Plaintiffs/Appellants have filed a Motion for Involuntary Dismissal with the Court of Appeals for the Sixth District of Texas at Texarkana, Texas asking that the court dismiss the case on the basis that the United States District Court, Eastern District of Texas, Sherman Division entered an order permanently barring all Stewardship Creditors from continuing and/or asserting or prosecuting any claims or causes of action against Halo. Because Appellants in this action fall within the definition of “Stewardship Creditors” they are barred from continuing to pursue this appeal thereby divesting the Court of Appeals for the Sixth District of Texas, Sherman Division, of jurisdiction over this appeal. On November 6, 2015, the court granted the above mentioned Involuntary Motion to Dismiss.

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As noted above, the Company, in conjunction with its Directors and Officers insurance carrier, is defending the matter vigorously. Based on the facts alleged and the proceedings to date, the Company believes that the Plaintiffs’ allegations will prove to be false, and that accordingly, it is not probable or reasonably possible that a negative outcome for the Company or the remaining Defendants will occur. As with any action of this type the timing and degree of any effect upon the Company are uncertain. If the outcome of the action is adverse to the Company, it could have a material adverse effect on our business prospects, financial position, and results of operation.

The Company and certain of its affiliates, officers and directors named as defendants in an insurance action filed on April 27, 2012 in the United States District Court for the Northern District of Texas. The Plaintiffs allege that it had no duty to indemnify the Company, its affiliates, officers or directors because the claims set forth in the lawsuit mentioned herein above were not covered by the insurance policy issued by Plaintiff in favor of Defendants. The action sought declaratory judgment that the Plaintiff had no duty to indemnify the Defendants pursuant to the insurance policy that Defendants purchased from Plaintiff. The Company took the position that Plaintiff’s claim had no merit, and defended the matter vigorously. Additionally, Defendants filed a counterclaim against the insurer alleging breach of contract, violation of the Texas Insurance Code and violation of the duty of good faith and fair dealing. On March 12, 2013, Plaintiff and Defendants entered into an agreement whereby Plaintiff’s and Defendant’s claims, are to be dismissed without prejudice while the underlying liability suit in the 191^st District Court of Dallas County proceeds. An Agreed Motion to Dismiss Without Prejudice was filed on March 12, 2013, and the parties are awaiting the court’s entry of the Agreed Order of Dismissal Without Prejudice.

As noted above, the Company has defended this matter vigorously. Based on the status of the litigation, it is not probable or reasonably possible that a negative outcome for the Company or the remaining Defendants will occur. As with any action of this type the timing and degree of any effect upon the Company are uncertain. If the outcome of the action is adverse to the Company, it could have a material adverse effect on our financial position.

The Company and certain of its affiliates, officers and directors have been named as defendants in an action filed on July 19, 2012 in the United States District Court for the Northern District of Texas. The Plaintiff alleges that it has no duty to defend or indemnify the Company, its affiliates, officers or directors because the claims set forth in the lawsuit mentioned herein above are not covered by the insurance policy written by Plaintiff in favor or Defendants. The action seeks declaratory judgment that the Plaintiff has no duty to defend or indemnify the Defendants pursuant to the insurance policy that Defendants purchased from Plaintiff. Initially, the Company took the position that Plaintiff’s claims had no merit, and defended the matter vigorously. Additionally, Defendants filed a counterclaim against the insurer alleging breach of contract, violation of the Texas Insurance Code and violation of the duty of good faith and fair dealing. Plaintiff has filed a Motion for Summary Judgment seeking a judgment that it owes no duty to defend or indemnify Defendants. After careful consideration, Defendants decided not to oppose the Motion for Summary Judgment and a response in opposition was not filed. The Motion for Summary Judgment was granted in part and the remaining matter remains pending before the court.

Based on the current status of the litigation, the Company believes it is not probable or reasonably possible that a negative outcome for the Company or the remaining Defendants will occur. As with any action of this type the timing and degree of any effect upon the Company are uncertain. If the outcome of the action is adverse to the Company, it could have a material adverse effect on our financial position.

NOTE 15. STOCK OPTIONS

The Company granted stock options to certain employees under the HGI 2007 Stock Plan, as amended (the “Plan”). The Company was authorized to issue 2,950,000 shares subject to options, or stock purchase rights under the Plan. These options (i) vest over a period no greater than two years, (ii) are contingently exercisable upon the occurrence of a specified event as defined by the option agreements, and (iii) expire three months following termination of employment or five years from the date of grant depending on whether or not the options were granted as incentive options or non-qualified options. At September 30, 2009, pursuant to the terms of the merger, all options granted prior to the merger were assumed by the Company and any options available for issuance under the Plan but unissued, have been forfeited and consequently the Company has no additional shares subject to options or stock purchase rights available for issuance under the Plan. As of September 30, 2015, 438,300 option shares have been exercised. Total stock options outstanding as of September 30, 2015 total 170,000. The weighted average remaining contractual life of the outstanding options at September 30, 2015 is approximately 2 years.

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A summary of stock option activity in the Plan is as follows:

						Weighted
				Exercise		Average
	Number of			Price		Exercise
	Options			Per Option		Price
Outstanding at December 31, 2013		681,700		$	0.01 – 1.59	$	1.00
Granted		—			—		—
Exercised		—			—		—
Canceled		(511,700	)		0.94 – 1.59		1.06
Outstanding at December 31, 2014		170,000		$	0.01	$	0.01
Granted		—			—		—
Exercised		—			—		—
Canceled		—			—		—
Outstanding at September 30, 2015		170,000		$	0.01	$	0.01

All stock options granted under the Plan became exercisable upon the occurrence of the merger that occurred on September 30, 2009. As such, equity-based compensation for the options was recognized in earnings from issuance date of the options over the vesting period of the options effective December 31, 2009.

On July 19, 2010, the board of directors approved the Company’s 2010 Incentive Stock Plan (“2010 Stock Plan”). The 2010 Stock Plan allows for the reservation of 7,000,000 shares of the Company’s common stock for issuance under the plan. The 2010 Stock Plan became effective July 19, 2010 and terminates July 18, 2020. As of September 30, 2015, 20,000 shares had previously been granted (all granted in the year ended December 31, 2012) under the 2010 Stock Plan with an exercise price of $0.34 per option. These are the only shares that have been issued under the 2010 Stock Plan. The shares granted vested immediately and can become exercisable for so long as the Company remains a reporting company under the Securities Exchange Act of 1934. As of September 30, 2015, none of the shares issued under the 2010 Stock Plan have been exercised.

NOTE 16. SHAREHOLDERS’ (DEFICIT) EQUITY

Common Stock

On December 13, 2010 (“the Closing”), the Company was party to an Assignment and Contribution Agreement (the “Agreement”).  Pursuant to the terms of Agreement, the members of Equitas Asset Management, LLC, (“EAM”), a non Halo entity, which owned 100% of the interests of Equitas Housing Fund, LLC (“EHF”), assigned and contributed 100% of the interests of EAM to HAM (a Halo subsidiary) in exchange for shares of 21,200,000 shares of the Company’s Common Stock, $0.001 par value, of the Company. The Agreement did not constitute a business combination.

The Company issued 7,500,000 shares of Halo common stock in exchange for $3,000,000 in debt or equity capital. The aggregate of 7,500,000 shares of Halo common stock was subject to clawback (and cancellation) by Halo in the event that EAM does not generate at least three million dollars ($3,000,000) in new capital to Halo within twelve months following the closing. Halo had the right to claw back 2.5 shares of Halo common stock for every dollar not raised within the twelve months. Any cash generated by EAM would have needed to be designated for use in Halo’s general operations and not that of the EHF business to release the clawback rights.

The Company issued 13,700,000 shares of Halo common stock for the purchase of intangible assets owned by EAM which included trade secrets and business processes used in the EHF business. The aggregate 13,700,000 shares of Halo common stock was subject to clawback (and cancellation) by Halo in the event that EAM fails to generate at least $10,000,000 of net operating cash flows from the EHF business within twenty-four months following the closing. Halo had the right to claw back 1.37 shares of Halo common for every dollar not generated from the net operating cash flows of the EHF business. Once the $10,000,000 in net operating cash flows from the EHF business was generated, the clawback rights would be released.

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In applying the guidance of ASC 505 “Equity” to the above transactions, the clawback provisions create a performance commitment that has not been met. As such, although the transaction did provide for a grant date at which time the equity shares are issued and outstanding, the equity shares have not met the measurement date requirements required by ASC 505. Accordingly, the par value of the shares issued and outstanding have been recorded at the grant date and as the clawback rights are released and the measurement dates established, the fair value of the transactions would have been determined and recorded.

As mentioned above, the Agreement provides for “clawback” provisions, pursuant to which all of the shares of Halo Common Stock issued to the member of EAM are subject to forfeiture in the event certain financial metrics are not timely achieved. The financial metrics call for significant cash generation by EHF within the first 12 months, and within the first 24 months following the closing date. We refer you to Section 2(b)(i) and (ii) of the Agreement, for the specifics of the clawback provisions. As of December 31, 2012, no cash was generated by EHF. The times to meet both the 12 month and 24 month financial metrics have lapsed and the metrics have not been met. Based upon the events that have transpired, and the lack of progress toward the financial metrics, the Company demanded that the recipients of the shares of Halo Common Stock give effect to both clawback provisions and immediately forfeit back all of the Halo shares issued to such recipients – an aggregate of 21,200,000 shares. Additionally, the Company has instructed the Company’s transfer agent to cancel all of the shares of Company Common Stock issued pursuant to the Agreement. As of December 31, 2014, the Company’s transfer agent refused to cancel the shares without either (i) presentation of the physical certificates to the transfer agent, or (ii) a court order requiring the transfer agent to cancel. As of December 31, 2014, the Company had been unsuccessful in its attempts to procure the physical certificates for presentment to the transfer agent, and the Company had yet to secure a court order requiring the transfer agent to cancel the certificates.

During March 2015, the Company entered into a $250,000 compromise and settlement agreement with the court appointed receivership holding 17,808,000 shares of the Company’s 21,200,000 common stock noted above. The physical stock certificate has been sent to the Company’s transfer agent to immediately cancel those respective outstanding shares of that Agreement. An additional 1,272,000 shares of the company’s common stock, all subject to the clawback provisions of the Agreement, have also been sent to the Company’s transfer agent to immediately cancel those respective common shares of that Agreement but as of the time of this filing those shares have not yet been canceled. The Company expects that to happen shortly. Secondarily, subject to the clawback provisions of the Agreement, the Company is actively pursuing the procurement of an additional physical certificate of 2,120,000 shares from a respective individual still in possession of the common stock certificate. As of the time of the filing of these consolidated financials, 3,392,000 of the 21,200,000 shares issued as part of the Agreement remain outstanding.

The Company’s total common shares outstanding totaled 48,562,750 at September 30, 2015.

Preferred Stock

In connection with the 2009 merger, the Company authorized 1,000,000 shares of Series Z Convertible Preferred Stock with a par value of $0.01 per share (the “Series Z Convertible Preferred”). The number of shares of Series Z Preferred Stock may be decreased by resolution of the Board; provided, however, that no decrease shall reduce the number of Series Z Preferred Shares to less than the number of shares then issued and outstanding.  In the event any Series Z Preferred Shares shall be converted, (i) the Series Z Preferred Shares so converted shall be retired and cancelled and shall not be reissued and (ii) the authorized number of Series Z Preferred Shares set forth in this section shall be automatically reduced by the number of Series Z Preferred Shares so converted and the number of shares of the Corporation’s undesignated Preferred Stock shall be deemed increased by such number. The Series Z Convertible Preferred is convertible into common shares at the rate of 45 shares of common per one share of Series Z Convertible Preferred. The Series Z Convertible Preferred has liquidation and other rights in preference to all other equity instruments. Simultaneously upon conversion of the remaining Series A Preferred, Series B Preferred, and Series C Preferred and exercise of any outstanding stock options issued under the HGI 2007 Stock Plan into Series Z Convertible Preferred, they will automatically, without any action on the part of the holders, be converted into common shares of the Company. Since the merger, in connection with the exercise of stock options into common stock and converted Series A Preferred, Series B Preferred and Series C Preferred as noted above, 82,508 shares of Series Z Convertible Preferred were automatically authorized and converted into shares of the Company’s common stock leaving 917,492 shares of authorized undesignated Preferred Stock in the Company in accordance with the Series Z Convertible Preferred certificate of designation. As of September 30, 2015, there were 82,508 shares of Series Z Preferred authorized with zero shares issued and outstanding.

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The Company authorized 175,000 shares of Series X Convertible Preferred Stock with a par value of $0.01 per share (the “Series X Preferred”). The number of shares of Series X Preferred may be decreased by resolution of the Board; provided, however, that no decrease shall reduce the number of Series X Preferred to less than the number of shares then issued and outstanding. In the event any Series X Preferred Shares shall be redeemed, (i) the Series X Preferred so redeemed shall be retired and cancelled and shall not be reissued and (ii) the authorized number of Series X Preferred Shares set forth in this section shall be automatically reduced by the number of Series X Preferred Shares so redeemed and the number of shares of the Corporation's undesignated Preferred Stock shall be deemed increased by such number. The Series X Preferred Shares rank senior to the Company’s common stock to the extent of $10.00 per Series X Preferred Shares and on a parity with the Company’s common stock as to amounts in excess thereof. The holders of Series X Preferred shall not have voting rights. Holders of the Series X Preferred shall be entitled to receive, when and as declared by the board of directors, dividends at an annual rate of 9% payable in cash when declared by the board. Holders of Series X Preferred have a liquidation preference per share equal to $10.00. The liquidation preference was $536,770 as of September 30, 2015.

As of December 31, 2014, there were 143,677 shares authorized with 143,677 shares issued and outstanding. During March 2015, as part of the $250,000 compromise and settlement agreement with the court appointed receivership discussed above, the settlement agreement calls for a relinquishment and abandonment of any and all claims against Halo on 90,000 shares of the Company’s Series X Preferred stock belonging to the receivership. As such, as of September 30, 2015, there were 53,677 shares authorized, issued and outstanding. The 53,677 shares were related to the 2010 conversion from notes payable due to related parties.

In April 2012, the Company authorized 100,000 shares of Series E Convertible Preferred Stock (the “Series E Preferred”) with a par value of $0.001 per share, at ten dollars ($10.00) per share with a conversion rate of fifty (50) shares of the Company’s common stock for one share of Series E Preferred. The number of shares of Series E Preferred may be decreased by resolution of the Board; provided, however, that no decrease shall reduce the number of Series E Preferred to less than the number of shares then issued and outstanding. In the event any Series E Preferred Shares shall be converted, (i) the Series E Preferred so converted shall be retired and cancelled and shall not be reissued and (ii) the authorized number of Series E Preferred Shares set forth shall be automatically reduced by the number of Series E Preferred Shares so converted and the number of shares of the Corporation's undesignated Preferred Stock shall be deemed increased by such number. The Series E Preferred Shares rank senior to the Company’s common stock to the extent of $10.00 per Series E Preferred Shares and on a parity with the Company’s common stock as to amounts in excess thereof. The holders of Series E Preferred shall not have voting rights. Holders of the Series E Preferred shall be entitled to receive, when and as declared by the board of directors, dividends at an annual rate of 9% payable in cash or common stock when declared by the board. Holders of Series E Preferred have a liquidation preference per share equal to $10.00. The liquidation preference was $700,000 as of September 30, 2015. Each share of Series E Preferred, if not previously converted by the holder, will automatically be converted into common stock at the then applicable conversion rate after thirty-six months from the date of purchase. As of September 30, 2015, there were 70,000 shares issued and outstanding with total cash consideration of $700,000, convertible into 3,500,000 shares of the Company’s common stock.

The HGI Series A Convertible Preferred Stock (the “Series A Preferred”) has a par value of $0.001 per share and has a liquidation preference of the greater of (a) the consideration paid to the Company for such shares plus all accrued but unpaid dividends, if any or (b) the per share amount the holders of the Series A Preferred would be entitled to upon conversion, as defined in the Series A Preferred certificate of designation. The liquidation preference was $753,826, of which $194,327 is an accrued (but undeclared) dividend as of September 30, 2015. Holders of the Series A Preferred are entitled to receive, if declared by the board of directors, dividends at a rate of 8% payable in cash or common stock of the Company. The Series A Preferred is convertible into the Company’s common stock at a conversion price of $1.25 per share. The Series A Preferred is convertible, either at the option of the holder or the Company, into shares of the Company’s Series Z Convertible Preferred Stock, and immediately, without any action on the part of the holder, converted into common stock of the Company. The Series A Preferred is redeemable at the option of the Company at $1.80 per share prior to conversion. As of September 30, 2015, there have been 127,001 shares of Series A Preferred converted or redeemed. The Series A Preferred does not have voting rights. The Series A Preferred ranks senior to the following capital stock of the Company: (a) Series B Preferred, and (b) Series C Preferred.

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The HGI Series B Convertible Preferred Stock (the “Series B Preferred”) has a par value of $0.001 per share and has a liquidation preference of the greater of (a) the consideration paid to the Company for such shares plus all accrued but unpaid dividends, if any or (b) the per share amount the holders of the Series B Preferred would be entitled to upon conversion. The liquidation preference was $621,553, of which $161,641 is an accrued (but undeclared) dividend as of September 30, 2015. Holders of the Series B Preferred are entitled to receive, if declared by the board of directors, dividends at a rate of 8% payable in cash or common stock of the Company. The Series B Preferred is convertible into the Company’s common stock at a conversion price of $1.74 per share. The Series B Preferred is convertible, either at the option of the holder or the Company, into shares of the Company’s Series Z Convertible Preferred Stock, and immediately, without any action on the part of the holder, converted into common stock of the Company. The Series B Preferred is redeemable at the option of the Company at $2.30 per share prior to conversion. As of September 30, 2015, there have been 270,044 shares of Series B Preferred converted or redeemed. The Series B Preferred does not have voting rights. Series B Preferred ranks senior to the following capital stock of the Company: the Series C Preferred.

The HGI Series C Convertible Preferred Stock (the “Series C Preferred”) has a par value of $0.001 per share and has a liquidation preference of the greater of (a) the consideration paid to the Company for such shares plus all accrued but unpaid dividends, if any or (b) the per share amount the holders of the Series C Preferred would be entitled to upon conversion. The liquidation preference was $418,745, of which $108,745 is an accrued (but undeclared) dividend as of September 30, 2015. Holders of the Series C Preferred are entitled to receive, if declared by the board of directors, dividends at a rate of 8% payable in cash or common stock of the Company. The Series C Preferred is convertible into the Company’s common stock at an initial conversion price of $2.27 per share. The Series C Preferred is convertible, either at the option of the holder or the Company, into shares of the Company’s Series Z Convertible Preferred Stock, and immediately, without any action on the part of the holder, converted into common stock of the Company. The Series C Preferred is redeemable at the option of the Company at $2.75 per share prior to conversion. As of September 30, 2015, there have been 28,000 shares of Series C Preferred converted or redeemed. The Series C Preferred does not have voting rights. Series C Preferred ranks senior to the following capital stock of the Company: None.

The Company had issued and outstanding at September 30, 2015, 372,999 shares of Series A Preferred, 229,956 shares of Series B Preferred, and 124,000 shares of Series C Preferred, all with a par value of $0.001.

NOTE 17. SUBSEQUENT EVENTS

On November 6, 2015, Mr. Robbie Hicks, Chief Accounting Officer, tendered his resignation.

On November 6, 2015, Mr. Robert Boyce, Chief Operating Officer, has agreed to no longer serve as an officer but will continue his employment with the Company in the role of Vice President of Operations.

There were no other subsequent events to disclose.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q that are not statements of historical fact constitute “forward-looking statements”. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements but are not the exclusive means of identifying such statements. Although the Company believes that the current views and expectations reflected in these forward-looking statements are reasonable, those views and expectations, and the related statements, are inherently subject to risks, uncertainties, and other factors, many of which are not under the Company’s control.  Those risks, uncertainties, and other factors could cause the actual results to differ materially from those in the forward-looking statements.  Those risks, uncertainties, and factors (including the risks contained in the section of this report titled “Risk Factors”) that could cause the Company’s actual results, performance or achievements to differ materially from those described or implied in the forward-looking statements and its goals and strategies to not be achieved. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Report. The Company expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any change in its views or expectations. The Company can give no assurances that such forward-looking statements will prove to be correct.

The following discussion of the financial condition and results of operation of the Company should be read in conjunction with the consolidated financial statements and the notes to those statements included in this Report.

Company Overview

The Company, through its subsidiaries, operates a nationwide distressed asset services company, providing technology-driven asset management, portfolio due diligence, acquisition, repositioning and liquidation strategies for the private investment and mortgage servicing industry. Founded in 2004, Halo began operating in the mortgage origination sector, expanding quickly to an award-winning consumer financial services company. Halo’s years of experience, key leadership and industry knowledge, laid the foundation for its emergence as a premier distressed asset services company.

Halo focuses its distressed asset services, portfolio due diligence, and asset liquidation strategies primarily on single family residential real estate across the United States for its business customers (typically distressed debt investors or debt servicers) to market turnkey solutions for improved performance and monetization of their portfolios. In today’s economy, lenders are experiencing an overflow of distressed assets. Many mortgage debt servicers are currently overwhelmed with externally imposed programs that are stretching the limits of their human resources, money and time. Halo’s technology systems are bundled with transparency, accountability, efficiency, and flexibility. This unique strategy directs borrowers into an intelligent, results-driven process that establishes affordable, long-term mortgages while also achieving an improved return for lenders and investors, when compared to foreclosure.

The Company is currently exploring potential opportunities with several client relationships that would allow the Company to implement its internally used asset management software platform as an external service for those customers. This is commonly known as Software as a Service (“SaaS”). The Company entered into a consulting and development agreement with a customer during late 2014, and then entered into a SaaS contract with that client who prepaid for a 12 month service plan during early 2015. Cash receipts from customers in advance of revenue recognized are recorded as deferred revenue and will be earned over the entire SaaS contract period. The Company is still in its research phase of determining if this service line will remain ancillary or become a primary business component of the Company.

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Plan of Operations

Halo has developed a fee for service business model through Halo Asset Management for the monetization of non-performing, residential mortgage notes (“NPNs”) or foreclosed single family homes (“REO”) (collectively, “Assets”). Halo provides investors and asset owners a complete suite of asset management and mortgage services including, but not limited to (i) portfolio due diligence such as valuation engines, tax research, portfolio bid management, cost allocations and decision support; (ii) acquisition services including portfolio reconciliation, title, and tax reporting, an investor portal, initial portfolio inspection and servicing transfer assistance; (iii) repositioning services including portfolio restructuring, valuations, document preparation engine, document e-vaulting and proprietary loan underwriting; (iv) asset management and mortgage servicing including portfolio accounting, servicing and loan management functions, escrow administration, payment processing, loss mitigation and default resolution; and (v) liquidation strategies including predictive liquidity waterfalls, portfolio liquidation analysis, market analysis and disposition support. Halo focuses on the monetization and servicing of distressed real estate assets and finding a win-win solution for the asset owner/investor and the consumer. Halo will board REO properties as well as sub-performing and non-performing first lien mortgages from banks, financial institutions and mortgage servicers which have been purchased by investors. The majority of the assets will be either modified first lien mortgages or sold via owner finance, as opposed to a fire sale through a real estate network. HAM, through its strategic sub-servicing relationship, will “season” the notes (season is defined as collecting consistent cash flow payments from the borrower). Following several months of seller financed payment seasoning, Halo will assist in the disposal of the performing Assets in bulk to various bulk performing asset buyers.

For the NPN’s, Halo will attempt to restructure or modify the note for those borrowers who have a desire to stay in the home and have the capacity to afford the home. For the borrowers who either lack the desire to stay in the home, or who lack the capacity to afford the home, Halo will obtain a deed-in-lieu of foreclosure from the borrower (which ensures the investor ownership of the underlying asset; not just the purchased note), often times through incentives, and take the home back to an REO.

For the REO’s, traditional apartment or home renters become buyers after a qualification and screening process because they are given the opportunity to purchase affordable homes with achievable and manageable down payments and subsequent monthly payments. Halo originates land contracts or mortgage notes for the new home owners. A land contract (sometimes known as an “installment contract” or “contract for deed”) is a contract between a seller and buyer on real property in which the seller provides the buyer financing to buy the property for an agreed-upon purchase price, and the buyer repays the loan in installments. Under a land contract, the seller retains the legal title to the property, while permitting the buyer to take possession of it for most purposes other than legal ownership. The sales price is typically paid in periodic installments. As a general rule, the seller is obligated to convey legal title of the property to the buyer when the full purchase price has been paid including any interest. This process creates entry level housing with built-in, fully amortized financing that equates to payments that are equivalent to what the buyers are currently paying in rent, and often as much as 35% less.

When the loans are “seasoned,” they are attractive investment vehicles to be either refinanced or sold in bulk. Halo will attempt to refinance the rehabilitated borrowers through an FHA loan providing the Client with an exit at 90-95% of par value. The notes of borrowers who did not achieve qualifying levels will be sold in bulk at a discount of par value on the remaining unpaid principle balance of the notes.

Currently, HAM is under contract to manage and service approximately 1,100 assets in various stages of their life-cycle including REO, non-performing loans, re-performing note modifications, and performing owner financed contract-for-deeds. As the Company currently has the management, infrastructure, and physical work area capacity to scale and support additional assets under contract, it is actively seeking new clients as well as helping existing clients increase their respective asset pool. The Company believes that the country is in a long-term deleveraging cycle whereby home financing will continue to be difficult to obtain. For this same reason, we believe that investors will continue to be able to purchase assets in bulk from large institutional sellers at deep discounts and Halo’s goal is to establish itself, with the help of its unique technology platform and key servicing and vendor relationships, as the premier asset manager/servicer in the distressed non-performing loan and REO industry.

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HPA services include portfolio strategy consulting, default management, asset/liability management, asset preservation management, debt restructuring, portfolio acquisition and liquidation support. In addition, HPA also focuses its work with asset managers, investors and servicers to provide a custom, tailored workout program that will improve the performance of the assets or notes through a myriad of creative analytic and retention strategies. HPA utilizes Halo’s proprietary in-house technology to provide a customized analysis of a Client’s position. HPA then custom tailors a solution for the Client which provides the Client analytics on which assets or notes to monetize first and what options are best utilized to monetize each individual asset or note.

The current economic environment finds lenders and servicers drowning in an overflow of defaulted assets and Halo recognizes the cause behind a typical troubled asset is often not one, but several contributing factors. HPA’s workout program allows for management of a diverse portfolio of loans. HPA’s technology systems are bundled with transparency, accountability, efficiency, speed, and flexibility. This unique strategy delivers Clients an intelligent, results-driven process that achieves an improved return for lenders, investors and servicers. Halo’s operational support services allow endless opportunities for strategic relationships with major distressed asset managers and servicers.

Our management team is well-positioned to execute its business plan. At its core, the plan seeks to execute on delivering asset management, valued analytics, and consumer financial rehabilitation to mid-size institutional and private investors.

Significant effort and investment capital has been incurred by the Company over the past eleven years in order to attract and maintain a qualified and capable staff, develop proprietary software platforms, and implement systems, procedures, and infrastructure to execute the business plan on a large scale. Given the short time frame this current market opportunity has existed, we have a significant competitive advantage over others who may try to execute the same business plan.

Results of Operations for the three and nine months ended September 30, 2015 compared to the three and nine months ended September 30, 2014

To completely understand the Company’s results, the below discussion should be read in conjunction with Note 4 Operating Segments of the consolidated financial statements.

Revenues

For the three months ended September 30, 2015, revenue increased $469,494 and 85% to $1,024,960 from $555,466 for the three months ended September 30, 2014. The variance is primarily attributable to revenue increases of $206,304 in HAM, $233,190 in HPA and $30,000 related to the Company’s SaaS contract which is discussed in Company Overview section above.

As discussed in Note 2 of the consolidated financial statements, HAM revenues include boarding and initial asset management fees, success fees, and its monthly servicing fee. HAM revenues increased $206,304 for the three months ended September 30, 2015 compared to the three months ended September 30, 2014. Attributable to the variance, the Company experienced an increase in its asset management fee due to several new multi-unit asset boardings during the current quarter as compared to the three months ended September 30, 2014. The Company also experienced an increase in its success fees during the three months ended September 30, 2015 compared to the three months ended September 30, 2014 directly related to several bulk asset trades, of which the Company earns a success fee. Offsetting the above revenue increases, the Company experienced a slight decrease in its monthly servicing fees during the three months ended September 30, 2015 compared to the three months ended September 30, 2014. This reduction is primarily attributable to less overall volume of assets being managed (see further discussion below) during the three months ended September 30, 2015 compared to the three months ended September 30, 2014.

The HPA revenue increase of $233,190 for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 is primarily attributable to portfolio acquisition support performed during the current quarter, which directly resulted in an increase in title reports, tax certification, and the due diligence fee associated with this portfolio acquisition support.

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For the nine months ended September 30, 2015, revenue increased $1,047,966 and 53% to $3,023,625 from $1,975,659 for the nine months ended September 30, 2014. The increase is primarily attributable to the current quarter variance reasons noted above, as well as the $901,229 increase in revenue from the three months ended March 31, 2015 compared to the three months ended March 31, 2014, offset by the $322,757 decrease for the three months ended June 30, 2015 compared to the three months ended June 30, 2014. The $901,229 increase in early 2015 was primarily a result of several portfolio acquisition support (due diligence projects) completed during the first three months of 2015 that did not occur during the three months ended March 31, 2014. The $322,757 decrease in mid 2015 was primarily a result of a decrease in portfolio acquisition support and bulk sales success fees during the three months ended June 30, 2015 compared to the three months ended June 30, 2014.

Overall, looking forward to the remainder of 2015, in late August 2015, as part of its ordinary course of business, the Company discontinued its asset management agreement with a client that had many assets under current management. As such, the Company is expecting to see a decrease in its success fees and monthly servicing fees, and possibly its asset management fees during the last quarter of 2015 and moving forward. The Company continues to evaluate and refine its sales and marketing strategy as well as manage its expenses, including corporate, personnel, and vendor relationships, in line with its asset units under management. The Company is actively seeking growth of its asset units under management with several of its existing clients.

Operating Expenses

Sales and marketing expenses include direct sales costs and marketing incurred in HPA for property preservation, tax and title reporting, eviction filing, mobile notary services, asset valuation, credit reports, and all other contract service commissions. Sales and marketing expenses increased $65,014 and 22% to $366,006 for the three months ended September 30, 2015 from $300,992 for the three months ended September 30, 2014. The increase is primarily related to the variable expense associated with the above noted increase in revenues in HPA (for portfolio acquisition support) over the same time period. For the nine months ended September 30, 2015, sales and marketing expenses increased $477,646 and 62% to $1,244,843 from $767,197 for the nine months ended September 30, 2014, primarily related to the portfolio acquisition support and due diligence projects completed during the first and third quarters of 2015 as noted above offset by the decrease in revenue for the second quarter ended June 30, 2015.

General and administrative expenses increased $39,983 and 25% to $200,067 for the three months ended September 30, 2015 from $160,084 for the three months ended September 30, 2014. The variance is primarily attributable to a $75,000 note receivable write off that occurred during the three months ended September 30, 2015 compared to the three months ended September 30, 2014. The Company invested in a note receivable of $75,000 in an affiliated company for working capital advances. The proceeds were made as a strategic investment in the affiliate as that affiliate provides revenue sourcing to the Company. As there is not a high probability of recollecting those proceeds advanced, the Company wrote off the note receivable prior to September 30, 2015. The $75,000 increase is offset by several immaterial variances in other general and administrative expenses including employer paid health insurance, depreciation, rent, telecom, travel, and consulting during the three months ended September 30, 2015 compared to the three months ended September 30, 2014. General and administrative expenses increased $106,681 and 20% to $642,429 for the nine months ended September 30, 2015 from $535,748 for the nine months ended September 30, 2014 primarily due to the reasons noted above as well as the $50,000 note receivable investment and subsequent write off of that note receivable during the six months ended June 30, 2015.

Salaries, wages and benefits decreased $78,484 and 20% to $307,619 for the three months ended September 30, 2015 from $386,103 for the three months ended September 30, 2014. The variance is primarily attributable to a reduction in overall employee headcount primarily in HAM. Salaries, wages and benefits increased $641,257 and 49% to $1,952,782 for the nine months ended September 30, 2015 from $1,311,525 for the nine months ended September 30, 2014. The increase is primarily attributable to an increase in variable wages payable. The above increase is offset by a reduction in overall employee headcount primarily in HAM as noted above. Looking forward to the remainder of 2015, the Company will continue to gauge its headcount in the HAM subsidiary in line with its active revenue streams. As salaries, wages and benefits are the most significant cost to the Company, management actively monitors this cost to ensure it is in line with our business plan.

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Interest expense is discussed in full detail in all applicable footnotes of the consolidated financial statements and as such the duplication is not warranted here.

The Company experienced an overall improvement in its net loss of $378,305 and 93% to a net loss of $30,421 for the three months ended September 30, 2015 from a net loss of $408,726 for the three months ended September 30, 2014, primarily attributable to the reasons noted above. The Company experienced an overall increase in its net loss of $342,914 and 36% to a net loss of $1,303,796 for the nine months ended September 30, 2015 from a net loss of $960,882 for the nine months ended September 30, 2014, primarily attributable to the reasons noted above.

Significant Accounting Policies

Certain critical accounting policies affect the more significant judgments and estimates used in the preparation of the Company’s consolidated financial statements. These policies are contained in Note 2 to the consolidated financial statements and included in Note 2 to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2014. There have been no significant changes in our significant accounting policies since the last fiscal year end 2014.

Liquidity and Capital Resources

As of September 30, 2015, the Company had cash and cash equivalents of $88,044. The increase of $15,062 in cash and cash equivalents from $72,982 at December 31, 2014 was due to net cash provided by operating activities of $91,245 and in financing activities of $48,817, offset by net cash used in investing activities of $125,000.

Net cash provided by operating activities was $91,245 for the nine months ended September 30, 2015, compared to $560,701 net cash used in operating activities for the nine months ended September 30, 2014.  The net cash provided by operating activities for the nine months ended September 30, 2015 was due to net loss of $1,303,796, adjusted primarily by the following: an increase of $1,026,050 in accrued and other liabilities, an increase of $51,700 in deferred revenue, a decrease of $110,639 in accounts payable (specifically related to cash flows from operating and discussed further below), non cash capitalization of interest primarily in the note payable of $224,556 (discussed in note 9 of the consolidated financial statements) as well as a $125,000 notes receivable write off discussed below in investing activities, and $50,565 decrease in gross trade accounts receivable primarily attributable to the timing of revenue cash collections. The remaining immaterial variance is related to non cash depreciation and amortization.

The $1,026,050 increase in accrued and other liabilities is primarily related to the increase in deferred compensation and wages payable to a portion of the management team and an increase in accrued interest. The $51,700 increase in deferred revenue is a short term timing difference between cash receipts and the Company’s revenue recognition for its SaaS contract (as discussed in the Company Overview above).

On the balance sheet, accounts payable increased by $139,361 at September 30, 2015 from December 31, 2014. This is the result of the $250,000 increase in accounts payable directly related the receivership settlement discussed in Note 1 to the consolidated financial statements and included on the consolidated statements of cash flows as non cash supplemental information. The $250,000 receivership settlement is offset by a $110,639 decrease in accounts payable (specifically related to cash flows from operating) for the nine months ended September 30, 2015 and is primarily related to the overall cash flow management of the Company.

Net cash used in investing activities was $125,000 for the nine months ended September 30, 2015, compared to $700 net cash used in investing activities during the nine months ended September 30, 2014. The Company invested in notes receivable of $125,000 (investment was done in a $50,000 and $75,000 advance) in an affiliated company for working capital advances. The payments were made as a strategic investment in the affiliate as that affiliate provides revenue sourcing to the Company. As there is not a high probability of recollecting those proceeds advanced, the Company wrote off the notes receivable prior to September 30, 2015.

28

Net cash provided by financing activities was $48,817 for the nine months ended September 30, 2015, compared to net cash provided by financing activities of $469,716 for the nine months ended September 30, 2014. Financing activities for the nine months ended September 30, 2015 consisted primarily of $100,000 in proceeds from notes payable to related parties, offset by the $25,000 and $26,250 in principal payments on notes payable to related parties and subordinated debt, respectively.

As shown below, at September 30, 2015, our contractual cash obligations totaled approximately $3,878,387, all of which consisted of operating lease obligations and debt principal and accrued interest repayment.

	Payments due by December 31,
Contractual Obligations	2015		2016-2017		2018-2019		2020 & Thereafter		Total
Debt Obligations	$	1,525,382	$	2,347,461	$	0	$	0		$	3,872,843
Operating Lease Obligations	$	1,848	$	3,696	$	0	$	0		$	5,544
Total Contractual Cash Obligations	$	1,527,230	$	2,351,157	$	0	$	0		$	3,878,387

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the Company will need to manage additional asset units under contract and/or additional financing to fully implement its business plan, including continued growth and establishment of a stronger brand name of HAM’s asset management in the distressed asset sector. Management, in the ordinary course of business, is trying to raise additional capital through sales of common stock as well as seeking financing via equity or debt, or both from third parties. There are no assurances that additional financing will be available on favorable terms, or at all. If additional financing is not available, the Company will need to reduce, defer or cancel development programs, planned initiatives and overhead expenditures. The failure to adequately fund its capital requirements could have a material adverse effect on the Company’s business, financial condition and results of operations. Moreover, the sale of additional equity securities to raise financing will result in additional dilution to the Company’s stockholders, and incurring additional indebtedness could involve an increased debt service cash obligation, the imposition of covenants that restrict the Company operations or the Company’s ability to perform on its current debt service requirements. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Off Balance Sheet Transactions and Related Matters

Other than operating leases discussed in Note 14 to the consolidated financial statements, there are no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources of the Company.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk.  Our business is highly leveraged and, accordingly, is sensitive to fluctuations in interest rates. Any significant increase in interest rates could have a material adverse effect on our financial condition and ability to continue as a going concern.

Item 4T. Controls and Procedures.

As of the end of the period covered by this report, our principal executive officer and principal financial officer, evaluated the effectiveness of our “disclosure controls and procedures,” as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based on that evaluation, we concluded that, as of the date of the evaluation, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our periodic filings under the Securities Exchange Act of 1934 is accumulated and communicated to management, including the officers, to allow timely decisions regarding required disclosures. It should be noted that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports.

29

During the period covered by this report, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II - Other Information

Item 1. Legal Proceedings

The Company and certain of its affiliates, officers and directors have been named as defendants in an action filed on December 12, 2011 in the 191^st District Court of Dallas County, Texas. The Plaintiffs allege that the Company has misappropriated funds in connection with offerings of securities during 2010 and 2011. The complaint further alleges that Defendants engaged in fraudulent inducement, negligent misrepresentation, fraud, breach of fiduciary duty, negligence, breach of contract, unjust enrichment, conversion, violation of the Texas Securities Act, and civil conspiracy. The Plaintiffs amended their Petition on April 24, 2012 and dropped the conversion and civil conspiracy claims. The action seeks an injunction and a demand for accounting along with damages in the amount of $4,898,157. The Company has taken the position that the Plaintiff’s claims have no merit, and accordingly is defending the matter vigorously. Defendants have filed a general denial of the claims as well as a Motion to Designate Responsible Third Parties whom Defendants believe are responsible for any damages Plaintiffs may have incurred. Defendants have also filed a Motion for Sanctions against the Plaintiffs and their counsel arguing, among other things, that (i) Plaintiffs’ claims are “judicially stopped” from moving forward by virtue of the fact that the same Plaintiffs previously filed suit against separate entities and parties with dramatically opposed and contradicting views and facts; (ii) Plaintiffs have asserted claims against Defendants without any basis in law or fact; and (iii) Plaintiffs have made accusations against Defendants that Plaintiffs know to be false. Additionally, Defendants have filed a no evidence Motion for Summary Judgment which was scheduled to be heard in October of 2012. The Plaintiffs requested and were granted a six month continuance on the hearing of that motion. The Plaintiffs have also filed a Motion to Stay the case pending the outcome of the Company’s lawsuit with the insurance companies which the Company has opposed. Initially the motion to stay was granted and Defendants moved for reconsideration. The parties were alerted that the court had reversed the Stay on appeal. The no evidence Motion for Summary Judgment was heard on August 9, 2013. Prior to the hearing, the Plaintiff’s filed a 3^rd Amended Petition in which they dropped any claim of fraud including fraudulent inducement, fraud, conversion and civil conspiracy and added a new “control person” claim which was not subject to the no evidence Motion for Summary Judgment heard on August 9, 2013. On September 25, 2013, Defendants no evidence Motion for Summary Judgment was granted in its entirety. Defendants subsequently filed a no evidence Motion for Summary Judgment on the final remaining “control person” claim which was heard before the court on October 21, 2013. On December 18, 2013 a final Order Granting Defendant’s Second No-Evidence Motion of Final Summary Judgment was signed. The Plaintiff’s subsequently filed a motion for new trial. Following a hearing, the Plaintiff’s motion for new trial was denied by operation of law. The Plaintiff’s Filed a Notice of Appeal on March 11, 2014. The Plaintiffs have requested multiple extensions to their time to file their brief on the Appeal. After having multiple extensions granted, the Plaintiff’s requested that the Appeals court stay the Appeal pending the outcome of the Company’s approved settlement agreement with the court appointed Receiver for James G. Temme and Stewardship Fund, LLC, appointed by the Federal Court in the Eastern District of Texas. On September 16, 2014 the Sixth Appellate District Court of Appeals of Texas issued an order abating the Plaintiff’s appeal pending a final determination by the federal courts of an order issued by the federal district court in a separate action directing the Plaintiff’s, among others, not to further pursue this separate litigation. For administrative purposes, this case is abated and will be treated as closed. Any party may seek reinstatement by promptly filing a motion with the Sixth Appellate District Court of Appeals of Texas showing that the injunction or order of the federal court no longer restricts pursuit of this litigation and specifying what further action, if any, is required from the Court. As of the date of this filing, Plaintiffs/Appellants have filed a Motion for Involuntary Dismissal with the Court of Appeals for the Sixth District of Texas at Texarkana, Texas asking that the court dismiss the case on the basis that the United States District Court, Eastern District of Texas, Sherman Division entered an order permanently barring all Stewardship Creditors from continuing and/or asserting or prosecuting any claims or causes of action against Halo. Because Appellants in this action fall within the definition of “Stewardship Creditors” they are barred from continuing to pursue this appeal thereby divesting the Court of Appeals for the Sixth District of Texas, Sherman Division, of jurisdiction over this appeal. On November 6, 2015, the court granted the above mentioned Involuntary Motion to Dismiss.

30

The Company and certain of its affiliates, officers and directors named as defendants in an insurance action filed on April 27, 2012 in the United States District Court for the Northern District of Texas. The Plaintiffs allege that it had no duty to indemnify the Company, its affiliates, officers or directors because the claims set forth in the lawsuit mentioned herein above were not covered by the insurance policy issued by Plaintiff in favor of Defendants. The action sought declaratory judgment that the Plaintiff had no duty to indemnify the Defendants pursuant to the insurance policy that Defendants purchased from Plaintiff. The Company took the position that Plaintiff’s claim had no merit, and defended the matter vigorously. Additionally, Defendants filed a counterclaim against the insurer alleging breach of contract, violation of the Texas Insurance Code and violation of the duty of good faith and fair dealing. On March 12, 2013, Plaintiff and Defendants entered into an agreement whereby Plaintiff’s and Defendant’s claims, are to be dismissed without prejudice while the underlying liability suit in the 191^st District Court of Dallas County proceeds. An Agreed Motion to Dismiss Without Prejudice was filed on March 12, 2013, and the parties are awaiting the court’s entry of the Agreed Order of Dismissal Without Prejudice.

The Company and certain of its affiliates, officers and directors have been named as defendants in an action filed on July 19, 2012 in the United States District Court for the Northern District of Texas. The Plaintiff alleges that it has no duty to defend or indemnify the Company, its affiliates, officers or directors because the claims set forth in the lawsuit mentioned herein above are not covered by the insurance policy written by Plaintiff in favor or Defendants. The action seeks declaratory judgment that the Plaintiff has no duty to defend or indemnify the Defendants pursuant to the insurance policy that Defendants purchased from Plaintiff. Initially, the Company took the position that Plaintiff’s claims had no merit, and defended the matter vigorously. Additionally, Defendants filed a counterclaim against the insurer alleging breach of contract, violation of the Texas Insurance Code and violation of the duty of good faith and fair dealing. Plaintiff has filed a Motion for Summary Judgment seeking a judgment that it owes no duty to defend or indemnify Defendants. After careful consideration, Defendants decided not to oppose the Motion for Summary Judgment and a response in opposition was not filed. The Motion for Summary Judgment was granted in part and the remaining matter remains pending before the court.

See Note 14 to the consolidated financial statements for more information

Item 1A. Risk Factors

We will need additional financing to implement our business plan. The Company will need additional financing to fully implement its business plan in a manner that not only continues to expand an already established direct-to-consumer approach, but also allows the Company to establish a stronger brand name in all the areas in which it operates, including mortgage servicing and distressed asset sectors. In particular, the Company will need substantial financing to:

· further develop its product and service lines and expand them into new markets;

· expand its facilities, human resources, and infrastructure;

· increase its marketing efforts and lead generation; and

· expand its business into purchasing and servicing distressed asset portfolios.

There are no assurances that additional financing will be available on favorable terms, or at all. If additional financing is not available, the Company will need to reduce, defer or cancel development programs, planned initiatives and overhead expenditures. The failure to adequately fund its capital requirements could have a material adverse effect on the Company’s business, financial condition and results of operations. Moreover, the sale of additional equity securities to raise financing will result in additional dilution to the Company’s stockholders, and incurring additional indebtedness could involve the imposition of covenants that restrict the Company’s operations.

31

Our products and services are subject to changes in applicable laws and government regulations. In the United States, we are regulated pursuant to laws applicable to businesses in general. And in some areas of our business, we are subject to specific laws regulating the availability of certain material related to, or to the obtaining of, personal information. Adverse developments in the legal or regulatory environment relating to the debt collection, mortgage servicing and mortgage origination industries in the United States could have a material adverse effect on our business, financial condition and operating results. A number of legislative and regulatory proposals from the federal government and various state governments in the areas of debt collection, mortgage servicing, mortgage origination, consumer protection, advertising, and privacy, among others, have been adopted or are now under consideration. We are unable at this time to predict which, if any, of the proposals under consideration may be adopted and, with respect to proposals that have been or will be adopted, whether they will have a beneficial or an adverse effect on our business, financial condition and operating results.

For the mortgage origination and mortgage servicing industries in particular, legislation in the United States has been pervasive and is under constant review for amendment or expansion. Pursuant to such legislation, numerous federal, state and local departments and agencies have issued extensive rules and regulations, some of which carry substantial penalties for failure to comply. These laws and regulations increase the cost of doing business and, consequently, affect profitability. Since new legislation affecting the mortgage origination and mortgage servicing industries is commonplace and existing laws and regulations are frequently amended or reinterpreted, the company is unable to predict the future cost or impact of complying with these laws and regulations. However, the Company considers the cost of regulatory compliance a necessary and manageable part of its business. Further, the Company has been able to plan for and comply with new regulatory initiatives without materially altering its operating strategies.

Specific laws which affect HAM and HPA in particular are the following: The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“S.A.F.E. Act”), the Fair Debt Collection Practices Act (“FDCPA”), and the Real Estate Settlement Procedures Act (“Regulation X” or “RESPA”). Currently, the Company believes it is fully compliant with each of these laws. The Company believes that these laws, as currently enacted, provide barriers to entry for potential competitors, by virtue of their respective bonding and licensing requirements, and the overall cost of compliance. The Company believes that HAM and HPA maintain a competitive advantage in the marketplace because of these barriers to entry.

In addition to the referenced federal laws and regulations, state mortgage origination and mortgage servicing laws and regulations also affect the HAM and HPA businesses, by providing further barriers to entry as well as additional compliance and enforcement procedures for our unlicensed, noncompliant competition. The Company believes it is currently compliant with all relevant state laws and regulations in the states in which the Company does business, however, if the relevant laws and regulations were to change in the states where the Company has its highest concentration of business, such change could have an adverse impact on the Company’s operating strategy and overall revenues.

We rely on key executive officers, and their knowledge of our business and technical expertise would be difficult to replace. We are highly dependent on our executive officers. If one or more of the Company’s senior executives or other key personnel are unable or unwilling to continue in their present positions, the Company may not be able to replace them easily or at all, and the Company’s business may be disrupted. Such failure could have a material adverse effect on the Company’s business, financial condition and results of operations.

We may never pay dividends to our common stockholders. The Company currently intends to retain its future earnings to support operations and to finance expansion and therefore the Company does not anticipate paying any cash dividends in the foreseeable future other than to holders of Halo Group preferred stock.

The declaration, payment and amount of any future dividends on common stock will be at the discretion of the Company’s Board of Directors, and will depend upon, among other things, earnings, financial condition, capital requirement, level of indebtedness and other considerations the Board of Directors considers relevant. There is no assurance that future dividends will be paid on common stock or, if dividends are paid, the amount thereof.

32

Our common stock is quoted through the OTCPink, which may have an unfavorable impact on our stock price and liquidity. The Company’s common stock is quoted on the OTCPink marketplace, which is a significantly more limited market than the New York Stock Exchange or NASDAQ. The trading volume may be limited by the fact that many major institutional investment funds, including mutual funds, follow a policy of not investing in Bulletin Board stocks and certain major brokerage firms restrict their brokers from recommending Over the Counter stock because they are considered speculative and volatile.

The trading volume of the Company’s common stock has been and may continue to be limited and sporadic. As a result, the quoted price for the Company’s common stock on the OTC Bulletin Board may not necessarily be a reliable indicator of its fair market value.

Additionally, the securities of small capitalization companies may trade less frequently and in more limited volume than those of more established companies. The market for small capitalization companies is generally volatile, with wide price fluctuations not necessarily related to the operating performance of such companies.

Our common stock is subject to price volatility unrelated to our operations. The market price of the Company’s common stock could fluctuate substantially due to a variety of factors, including market perception of the Company’s ability to achieve its planned growth, operating results of it and other companies in the same industry, trading volume of the Company’s common stock, changes in general conditions in the economy and the financial markets or other developments affecting the Company or its competitors.

Our common stock is classified as a “penny stock.” Rule 3a51-1 of the Securities Exchange Act of 1934 establishes the definition of a “penny stock,” for purposes relevant to us, as any equity security that has a minimum bid price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to a limited number of exceptions which are not available to us. It is likely that the Company’s common stock will be considered a penny stock for the immediately foreseeable future.

For any transactions involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person’s account for transactions in penny stocks and the broker or dealer receive from the investor a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also provide disclosures to its customers, prior to executing trades, about the risks of investing in penny stocks in both public offerings and in secondary trading in commissions payable to both the broker-dealer and the registered representative, and the rights and remedies available to an investor in cases of fraud in penny stock transactions.

Because of these regulations, broker-dealers may not wish to furnish the necessary paperwork and disclosures and/or may encounter difficulties in their attempt to buy or sell shares of the Company’s common stock, which may in turn affect the ability of Company stockholders to sell their shares.

Accordingly, this classification severely and adversely affects any market liquidity for the Company’s common stock, and subjects the shares to certain risks associated with trading in penny stocks. These risks include difficulty for investors in purchasing or disposing of shares, difficulty in obtaining accurate bid and ask quotations, difficulty in establishing the market value of the shares, and a lack of securities analyst coverage.

33

We may continue to encounter substantial competition in our business. The Company believes that existing and new competitors will continue to improve their products and services, as well as introduce new products and services with competitive price and performance characteristics. The Company expects that it must continue to innovate, and to invest in product development and productivity improvements, to compete effectively in the several markets in which the Company participates. Halo’s competitors could develop a more efficient product or service or undertake more aggressive and costly marketing campaigns than those implemented by the Company, which could adversely affect the Company’s marketing strategies and could have a material adverse effect on the Company’s business, financial condition and results of operations.

Important factors affecting the Company’s current ability to compete successfully include:

· lead generation and marketing costs;

· service delivery protocols;

· branded name advertising; and

· product and service pricing.

In periods of reduced demand for the Company’s products and services, the Company can either choose to maintain market share by reducing product service pricing to meet the competition or maintain its product and service pricing, which would likely sacrifice market share. Sales and overall profitability would be reduced in either case. In addition, there can be no assurance that additional competitors will not enter the Company’s existing markets, or that the Company will be able to continue to compete successfully against its competition.

We may not successfully manage our growth. Our success will depend upon the expansion of our operations and the effective management of our growth, which will place significant strain on our management and our administrative, operational and financial resources. To manage this growth, we may need to expand our facilities, augment our operational, financial and management systems and hire and train additional qualified personnel. If we are unable to manage our growth effectively, our business would be harmed.

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

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

Mr. Robbie Hicks, Chief Accounting Officer and Principal Financial Officer, tendered his resignation effective November 6, 2015.

On November 6, 2015, Mr. Robert Boyce, Chief Operating Officer, resigned his position as an officer but will continue his employment with the Company in the role of Vice President of Operations.

Item 6. Exhibits

31.1 Rule 13a-14(a) Certification of the Principal Executive Officer.

31.2 Rule 13a-14(a) Certification of the Principal Financial Officer.

32 Section 1350 Certifications.

34

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 6, 2015	By:	/s/ Brandon Cade Thompson
	Brandon Cade Thompson
	Chief Executive Officer
	(Principal Executive Officer)
Date: November 6, 2015	By:	/s/ Robbie Hicks
	Robbie Hicks
	Chief Accounting Officer
	(Principal Financial Officer)

35

EX-31.1

Exhibit 31.1

Rule 13a-14(a) Certification of the Principal Executive Officer

I, Brandon Cade Thompson, Chief Executive Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Halo Companies, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 6, 2015	By:	/s/ Brandon Cade Thompson
	Brandon Cade Thompson
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Rule 13a-14(a) Certification of the Principal Financial Officer

I, Robbie Hicks, Chief Accounting Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Halo Companies, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   November 6, 2015	By:	/s/ Robbie Hicks
	Robbie Hicks
	Chief Accounting Officer
	(Principal Financial Officer)

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, the Chief Executive Officer and the Chief Accounting Officer of Halo Companies, Inc. (the “Company”), each certify that, to his knowledge on the date of this certification:

1. The quarterly report of the Company for the period ended September 30, 2015 as filed with the Securities and Exchange Commission on this date (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date:   November 6, 2015	By:	/s/ Brandon Cade Thompson
	Brandon Cade Thompson
	Chief Executive Officer
	(Principal Executive Officer)
Date:   November 6, 2015	By:	/s/ Robbie Hicks
	Robbie Hicks
	Chief Accounting Officer
	(Principal Financial Officer)

XML

Property, Equipment and Software (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Property Equipment And Software Details Narrative
Depreciation expense during the period	$ 5,728	$ 8,899	$ 17,693	$ 37,558
Assets retired during period			$ 11,099

XML

Commitments and Contingencies - Future Minimum Rental Obligations (Details)	Sep. 30, 2015 USD ($)
Commitments And Contingencies - Future Minimum Rental Obligations Details
2015	$ 1,848
Thereafter 2016	3,696
Total minimum lease commitments	$ 5,544

XML

Related Party Transactions (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Revenue from related party	$ 104,153	$ 107,900	$ 334,538	$ 326,155
Note receivable write off	75,000		125,000
Commission expense incurred to affiliate	0	0	20,000	0
Consulting expense incurred to affiliate	$ 15,000	$ 0	$ 35,000	$ 0

XML

Significant Accounting Policies - Allowance for Doubtful Accounts (Details) - USD ($)	9 Months Ended		12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Significant Accounting Policies - Allowance For Doubtful Accounts Details
Allowance for doubtful accounts, beginning balance	$ 375,665	$ 375,665	$ 375,665
Increase in the provision	116	$ 111	135
Accounts receivable write-offs	$ 375,781		135
Allowance for doubtful accounts, ending balance			$ 375,665

XML

Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2015

Significant Accounting Policies Policies

Revenue Recognition, Accounts Receivable and Deferred Revenue

Revenue Recognition, Accounts Receivable and Deferred Revenue

The Company recognizes revenue in the period in which services are earned and realizable. To further understand the Company’s business, HAM earns fees from its clients for its boarding and initial asset management fee, success fees, and its monthly servicing fee. The boarding and initial asset management services are performed in the first 30-60 days of assets being boarded and include; IRR analysis of loans boarded, detailed asset level workout exit strategy analysis, boarding the assets onto HAM’s proprietary software platform and the integrated servicing platform, identification and oversight of custodial files, oversight of mortgage/deed assignment from previous servicer, oversight of title policy administration work, and delinquent property tax research and exposure review. HAM’s monthly success fees are earned for completing its default and asset disposition services including note sales, originating owner finance agreements, and cash sales of REO properties owned by the client. HAM’s servicing fees are earned monthly and are calculated on a monthly unit price for assets under management.

The Company is currently exploring potential opportunities with several client relationships that would allow the Company to implement its internally used asset management software platform as an external service for those customers. This is commonly known as Software as a Service (“SaaS”). The Company entered into a SaaS contract with one client who prepaid for a 12 month service plan during early 2015. Cash receipts from customers in advance of revenue recognized are recorded as deferred revenue and will be earned over the entire SaaS contract period. The Company is still in its research phase of determining if this service line will remain ancillary or become a primary business component of the Company.

HAM and HPA receivables are typically paid the month following services performed. HGI receivables are due when invoiced. As of September 30, 2015 and December 31, 2014, the Company’s accounts receivable are made up of the following percentages; HAM at 32% and 84%, HPA at 68% and 11%, and HGI at 0% and 5%, respectively.

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts: past transaction history with the customer, current economic and industry trends, and changes in customer payment terms. The Company provides for estimated uncollectible amounts through an increase to the allowance for doubtful accounts and a charge to earnings based on actual historical trends and individual account analysis. Balances that remain outstanding after the Company has used reasonable collection efforts are written-off through a charge to the allowance for doubtful accounts. The below table summarizes the Company’s allowance for doubtful accounts as of September 30, 2015 and December 31, 2014:

	Balance at Beginning of Period		Increase in the Provision		Accounts Receivable Write-offs		Balance at End of Period
Nine Months ended September 30, 2015
Allowance for doubtful accounts	$	375,665	$	116	$	375,781	$	0
Year ended December 31, 2014
Allowance for doubtful accounts	$	375,665	$	135	$	135	$	375,665

As of December 31, 2014, the Company’s allowance for doubtful accounts was made up of the following percentages; HAM at 96% and HPA at 4%, respectively. The HAM and HPA allowance was related to one client in a court appointed receivership. As discussed in Note 1 above, the March 2015 settlement agreement entered into by the Company and the receivership did not pay the fully reserved accounts receivable. As such, the accounts receivable balance was written off and the allowance for doubtful accounts was fully reduced to zero.

Net Income (Loss) Per Common Share

Net Income (Loss) Per Common Share

Basic net income (loss) per share is computed by dividing (i) net income (loss) available to common shareholders (numerator), by (ii) the weighted average number of common shares outstanding during the period (denominator). Diluted net income (loss) per share is computed using the weighted average number of common shares and dilutive potential common shares outstanding during the period. At September 30, 2015 and 2014, there were 4,623,959 and 4,518,626 shares, respectively, underlying potentially dilutive convertible preferred stock and stock options outstanding. These shares were not included in dilutive weighted average shares outstanding for the three and nine months ended September 30, 2015 and 2014 because their effect is anti-dilutive due to the Company’s reported net loss.

Use of Estimates and Assumptions

Use of Estimates and Assumptions

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include the Company’s revenue recognition method and derivative liabilities.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements of the Company for the three and nine months ended September 30, 2015 and 2014 include the financial results of HCI, HGI, HBI, HPA and HAM. All significant intercompany transactions and balances have been eliminated in consolidation.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all liquid investments with a maturity of 90 days or less to be cash equivalents.

Other Assets

Other Assets

At September 30, 2015, other assets were $13,333 ($40,000 in total origination fees paid offset by $26,667 in accumulated amortization of those fees) for the senior unsecured promissory note discussed in Note 9. The fees are to be amortized over the life of the promissory note. At December 31, 2014, other assets were $23,333 ($40,000 in total origination fees offset by $16,667 in accumulated amortization) for the senior unsecured promissory note.

Property, Equipment and Software

Property, Equipment and Software

Property, equipment, and software are stated at cost. Depreciation is provided in amounts sufficient to relate the cost of the depreciable assets to operations over their estimated service lives, ranging from three to seven years. Provisions for depreciation are made using the straight-line method.

Major additions and improvements are capitalized, while expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement, the cost of the property and equipment and the related accumulated depreciation are removed from the respective accounts, and any resulting gains or losses are credited or charged to other general and administrative expenses.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying value of trade accounts receivable, accounts payable, and accrued and other liabilities approximate fair value due to the short maturity of these items. The estimated fair value of the notes payable and subordinated debt approximates the carrying amounts as they bear market interest rates.

The Company considers the warrants related to its subordinated debt to be derivatives, and the Company records the fair value of the derivative liabilities in the consolidated balance sheets. Changes in fair value of the derivative liabilities are included in gain (loss) on change in fair value of derivative in the consolidated statements of operations. The Company’s derivative liability has been classified as a Level III valuation according to Accounting Standards Codification (“ASC”) 820.

Internally Developed Software

Internally Developed Software

Internally developed legacy application software consisting of database, customer relations management, process management and internal reporting modules are used in each of the Company’s subsidiaries. The Company accounts for computer software used in the business in accordance with ASC 350 “Intangibles-Goodwill and Other”. ASC 350 requires computer software costs associated with internal use software to be charged to operations as incurred until certain capitalization criteria are met. Costs incurred during the preliminary project stage and the post-implementation stages are expensed as incurred. Certain qualifying costs incurred during the application development stage are capitalized as property, equipment and software. These costs generally consist of internal labor during configuration, coding, and testing activities. Capitalization begins when (i) the preliminary project stage is complete, (ii) management with the relevant authority authorizes and commits to the funding of the software project, and (iii) it is probable both that the project will be completed and that the software will be used to perform the function intended. Management has determined that a significant portion of costs incurred for internally developed software came from the preliminary project and post-implementation stages; as such, no costs for internally developed software were capitalized. U

Long-Lived Assets

Long-Lived Assets

Long-lived assets are reviewed on an annual basis or whenever events or changes in circumstance indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is generally measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by that asset. If it is determined that the carrying amount of an asset may not be recoverable, an impairment loss is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is the estimated value at which the asset could be bought or sold in a transaction between willing parties. There were no impairment charges for the three and nine months ended September 30, 2015 and 2014.

Income Taxes

Income Taxes

The Company accounts for income taxes in accordance with ASC 740 “Income Taxes”. ASC 740 requires the use of the asset and liability method whereby deferred tax assets and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. These differences result in deferred tax assets and liabilities, which are included in the Company’s consolidated balance sheets.

The Company then assesses the likelihood of realizing benefits related to such assets by considering factors such as historical taxable income and the Company’s ability to generate sufficient taxable income of the appropriate character within the relevant jurisdictions in future years. Based on the aforementioned factors, if the realization of these assets is not likely a valuation allowance is established against the deferred tax assets.

The Company accounts for its position in tax uncertainties under ASC 740-10. ASC 740-10 establishes standards for accounting for uncertainty in income taxes. ASC 740-10 provides several clarifications related to uncertain tax positions. Most notably, a “more likely-than-not” standard for initial recognition of tax positions, a presumption of audit detection and a measurement of recognized tax benefits based on the largest amount that has a greater than 50 percent likelihood of realization. ASC 740-10 applies a two-step process to determine the amount of tax benefit to be recognized in the financial statements. First, the Company must determine whether any amount of the tax benefit may be recognized. Second, the Company determines how much of the tax benefit should be recognized (this would only apply to tax positions that qualify for recognition.) The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements or the effective tax rate during the three and nine months ended September 30, 2015 or 2014.

The Company incurred no penalties or interest for taxes for the three and nine months ended September 30, 2015 or 2014. The Company is subject to a three year statute of limitations by major tax jurisdictions for the fiscal years ended December 31, 2012, 2013 and 2014. The Company files income tax returns in the U.S. federal jurisdiction.

Recent Accounting Standards

Recent Accounting Standards

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP.

The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard in 2018.

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Stock Options - Stock Option Activity Summary (Details) - HGI 2007 Stock Plan - $ / shares	9 Months Ended	12 Months Ended		70 Months Ended
	Sep. 30, 2015	Dec. 31, 2014	Dec. 31, 2013	Sep. 30, 2015
Outstanding, beginning balance (in shares)	170,000	681,700
Granted (in shares)
Exercised (in shares)				438,300
Canceled (in shares)		(511,700)
Outstanding, ending balance (in shares)	170,000	170,000	681,700	170,000
Outstanding, beginning balance (weighted average exercise price)	$ .01	$ 1.00
Canceled (weighted average exercise price)		1.06
Outstanding, ending balance (weighted average exercise price)	.01	.01	$ 1.00	$ .01
Exercise price lower range (per share)	$ .01	.01	.01
Exercise price upper range (per share)			$ 1.59
Canceled (exercise price per option) lower range		.94
Canceled (exercise price per option) upper range		$ 1.59

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Notes Payable (Details Narrative) - USD ($)	1 Months Ended	9 Months Ended
	Oct. 31, 2013	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Note payments during period		$ 25,000	$ 6,117
2013 Unsecured Convertible Promissory Note
Interest rate	15.00%
Maturity date	Oct. 10, 2016
Note payable	$ 1,500,000	2,021,009		$ 1,805,000
Note payments during period	375,000
Principal balance convertible into common stock	$ 1,000,000
Maximum percentage of shares potentially acquired upon conversion	10.00%
Capitalized interest		$ 521,009		$ 305,000

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Going Concern (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Accumulated deficit at end of period	$ (13,168,659)	$ (11,864,863)
Deficit Related to Stock-Based Compensation
Accumulated deficit at end of period	(2,110,748)
Deficit Related to Depreciation Expense
Accumulated deficit at end of period	(598,457)
Deficit Related to Impairment Loss
Accumulated deficit at end of period	(279,241)
Deficit Related to Issuance of Stock Dividends
Accumulated deficit at end of period	(906,278)
Total Non-Cash Retained Earnings
Accumulated deficit at end of period	$ (3,894,724)
Total non-cash retained earnings reductions to total deficit balance	30.00%

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Shareholders' Equity (Deficit) (Details Narrative) - USD ($)

1 Months Ended

9 Months Ended

55 Months Ended

60 Months Ended

Mar. 31, 2015

Dec. 31, 2010

Sep. 30, 2015

Sep. 30, 2015

Sep. 30, 2015

Nov. 06, 2015

Dec. 31, 2014

Par value

$ 0.001

$ 0.001

$ 0.001

$ 0.001

Common shares outstanding

48,562,750

48,562,750

48,562,750

66,364,083

Court Appointed Receivership

Common shares outstanding

17,808,000

17,808,000

17,808,000

Preferred shares outstanding

90,000

90,000

90,000

Compromise and settlement agreement

$ 250,000

Pursuing Procurement from Respective Individual

Common shares outstanding

2,120,000

2,120,000

2,120,000

Pending Cancellation

Common shares outstanding

1,272,000

1,272,000

1,272,000

Halo Companies, Inc. Common Stock

Par value

$ 0.001

$ 0.001

$ 0.001

Common shares issued per assignment agreement (in shares)

21,200,000

Common stock issued for debt or equity capital (in shares)

7,500,000

Value of debt or equity capital received

$ 3,000,000

Shares issued for debt or equity capital subject to claw back provision (in shares)

7,500,000

Minimum new capital required to be generated by claw back provision

$ 3,000,000

Shares available for claw back provision for every dollar not raised (in shares)

2.5

Common stock issued for intangible asset (in shares)

13,700,000

Shares issued for intangible asset subject to claw back provision (in shares)

13,700,000

Minimum net operating cash flows required to be generated by claw back provision

$ 10,000,000

Shares available for claw back provision for every dollar not generated from net operating cash flows (in shares)

1.37

New capital generated claw back provision description

The Company issued 7,500,000 shares of Halo common stock in exchange for $3,000,000 in debt or equity capital.  The aggregate of 7,500,000 shares of Halo common stock was subject to clawback (and cancellation) by Halo in the event that EAM does not generate at least three million dollars ($3,000,000) in new capital to Halo within twelve months following the closing.  Halo had the right to claw back 2.5 shares of Halo common stock for every dollar not raised within the twelve months.  Any cash generated by EAM would have needed to be designated for use in Halo’s general operations and not that of the EHF business to release the clawback rights.

Net operating cash claw back provision description

The Company issued 13,700,000 shares of Halo common stock for the purchase of intangible assets owned by EAM which included trade secrets and business processes used in the EHF business.  The aggregate 13,700,000 shares of Halo common stock was subject to clawback (and cancellation) by Halo in the event that EAM fails to generate at least $10,000,000 of net operating cash flows from the EHF business within twenty-four months following the closing.  Halo had the right to claw back 1.37 shares of Halo common for every dollar not generated from the net operating cash flows of the EHF business.  Once the $10,000,000 in net operating cash flows from the EHF business was generated, the clawback rights would be released.

Shares sought for forfeiture under claw back provision

21,200,000

Shares issued and outstanding under claw back provision

3,392,000

3,392,000

3,392,000

3,392,000

21,200,000

Common shares outstanding

48,562,750

48,562,750

48,562,750

Halo Companies, Inc. Series Z Convertible Preferred Stock

Preferred shares initially authorized, prior to conversions

1,000,000

1,000,000

1,000,000

Preferred shares automatically authorized and converted

82,508

82,508

82,508

Preferred shares authorized

82,508

82,508

82,508

Par value

$ 0.01

$ 0.01

$ 0.01

Preferred stock convertible into common shares (in shares)

45

45

45

Preferred shares issued

0

0

0

Preferred shares outstanding

0

0

0

Halo Companies, Inc. Preferred Stock

Preferred shares authorized

917,492

917,492

917,492

Par value

$ 0.001

$ 0.001

$ 0.001

Preferred shares issued

0

0

0

Preferred shares outstanding

0

0

0

Halo Companies, Inc. Series X Convertible Preferred Stock

Preferred shares initially authorized, prior to conversions

175,000

175,000

175,000

Preferred shares authorized

53,677

53,677

53,677

143,677

Par value

$ 0.01

$ 0.01

$ 0.01

Annual dividend rate

9.00%

Liquidation preference (per share)

$ 10

$ 10

$ 10

Aggregate liquidation preference

$ 536,770

$ 536,770

$ 536,770

$ 1,436,770

Shares redeemed during period (in shares)

(90,000)

Preferred shares issued

53,677

53,677

53,677

143,677

Preferred shares outstanding

53,677

53,677

53,677

143,677

Shares issued in exchange for debt (in shares)

53,677

Shares issued for cash (in shares)

90,000

Issue price (per share)

$ 10

$ 10

$ 10

Halo Companies, Inc. Series E Convertible Preferred Stock

Preferred shares authorized

100,000

100,000

100,000

Par value

$ 0.001

$ 0.001

$ 0.001

Preferred stock convertible into common shares (in shares)

50

50

50

Annual dividend rate

9.00%

Liquidation preference (per share)

$ 10

$ 10

$ 10

Aggregate liquidation preference

$ 700,000

$ 700,000

$ 700,000

Preferred shares issued

70,000

70,000

70,000

Preferred shares outstanding

70,000

70,000

70,000

Shares issued for cash (in shares)

70,000

Issue price (per share)

$ 10

$ 10

$ 10

Automatic conversion period

36 months

Proceeds received from issuance of preferred stock

$ 700,000

Preferred stock convertible into common shares (in shares)

3,500,000

3,500,000

3,500,000

Halo Group, Inc. Series A Convertible Preferred Stock

Preferred shares authorized

500,000

500,000

500,000

Par value

$ 0.001

$ 0.001

$ 0.001

Annual dividend rate

8.00%

Aggregate liquidation preference

$ 753,826

$ 753,826

$ 753,826

Preferred shares issued

372,999

372,999

372,999

Preferred shares outstanding

372,999

372,999

372,999

Dividends payable

$ 194,327

$ 194,327

$ 194,327

Conversion price (per share)

$ 1.25

$ 1.25

$ 1.25

Redemption price (per share)

$ 1.80

$ 1.80

$ 1.80

Shares converted during period (in shares)

127,001

Halo Group, Inc. Series B Convertible Preferred Stock

Preferred shares authorized

500,000

500,000

500,000

Par value

$ 0.001

$ 0.001

$ 0.001

Annual dividend rate

8.00%

Aggregate liquidation preference

$ 621,553

$ 621,553

$ 621,553

Preferred shares issued

229,956

229,956

229,956

Preferred shares outstanding

229,956

229,956

229,956

Dividends payable

$ 161,641

$ 161,641

$ 161,641

Conversion price (per share)

$ 1.74

$ 1.74

$ 1.74

Redemption price (per share)

$ 2.30

$ 2.30

$ 2.30

Shares converted during period (in shares)

270,044

Halo Group, Inc. Series C Convertible Preferred Stock

Preferred shares authorized

500,000

500,000

500,000

Par value

$ 0.001

$ 0.001

$ 0.001

Annual dividend rate

8.00%

Aggregate liquidation preference

$ 418,745

$ 418,745

$ 418,745

Preferred shares issued

124,000

124,000

124,000

Preferred shares outstanding

124,000

124,000

124,000

Dividends payable

$ 108,745

$ 108,745

$ 108,745

Conversion price (per share)

$ 2.27

$ 2.27

$ 2.27

Redemption price (per share)

$ 2.75

$ 2.75

$ 2.75

Shares converted during period (in shares)

28,000

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Income Taxes (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Net operating loss carry-forwards	$ 6,700,000		$ 6,700,000
Net operating loss carry-forwards expiration			Dec. 31, 2034
Effective tax rate	0.00%	(1.00%)	(2.00%)	(3.00%)
NOLs prior to June 2004
GVC NOLs annual benefit	$ 6,500		$ 6,500
NOLs between June 2004 and September 2009
GVC NOLs annual benefit	$ 159,000		$ 159,000

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Significant Accounting Policies

9 Months Ended

Sep. 30, 2015

Significant Accounting Policies

Significant Accounting Policies

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

The interim consolidated financial statements are unaudited; however, in the opinion of management, all adjustments considered necessary for fair presentation of the results of the interim periods have been included (consisting of normal recurring accruals). The accompanying consolidated financial statements as of September 30, 2015, and for the three and nine months ended September 30, 2015 and 2014, include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim information. Accordingly, the consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K. The results of operations for the three and nine months ended September 30, 2015, are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

Revenue Recognition, Accounts Receivable and Deferred Revenue

The Company recognizes revenue in the period in which services are earned and realizable. To further understand the Company’s business, HAM earns fees from its clients for its boarding and initial asset management fee, success fees, and its monthly servicing fee. The boarding and initial asset management services are performed in the first 30-60 days of assets being boarded and include; IRR analysis of loans boarded, detailed asset level workout exit strategy analysis, boarding the assets onto HAM’s proprietary software platform and the integrated servicing platform, identification and oversight of custodial files, oversight of mortgage/deed assignment from previous servicer, oversight of title policy administration work, and delinquent property tax research and exposure review. HAM’s monthly success fees are earned for completing its default and asset disposition services including note sales, originating owner finance agreements, and cash sales of REO properties owned by the client. HAM’s servicing fees are earned monthly and are calculated on a monthly unit price for assets under management.

The Company is currently exploring potential opportunities with several client relationships that would allow the Company to implement its internally used asset management software platform as an external service for those customers. This is commonly known as Software as a Service (“SaaS”). The Company entered into a SaaS contract with one client who prepaid for a 12 month service plan during early 2015. Cash receipts from customers in advance of revenue recognized are recorded as deferred revenue and will be earned over the entire SaaS contract period. The Company is still in its research phase of determining if this service line will remain ancillary or become a primary business component of the Company.

HAM and HPA receivables are typically paid the month following services performed. HGI receivables are due when invoiced. As of September 30, 2015 and December 31, 2014, the Company’s accounts receivable are made up of the following percentages; HAM at 32% and 84%, HPA at 68% and 11%, and HGI at 0% and 5%, respectively.

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts: past transaction history with the customer, current economic and industry trends, and changes in customer payment terms. The Company provides for estimated uncollectible amounts through an increase to the allowance for doubtful accounts and a charge to earnings based on actual historical trends and individual account analysis. Balances that remain outstanding after the Company has used reasonable collection efforts are written-off through a charge to the allowance for doubtful accounts. The below table summarizes the Company’s allowance for doubtful accounts as of September 30, 2015 and December 31, 2014:

	Balance at Beginning of Period		Increase in the Provision		Accounts Receivable Write-offs		Balance at End of Period
Nine Months ended September 30, 2015
Allowance for doubtful accounts	$	375,665	$	116	$	375,781	$	0
Year ended December 31, 2014
Allowance for doubtful accounts	$	375,665	$	135	$	135	$	375,665

As of December 31, 2014, the Company’s allowance for doubtful accounts was made up of the following percentages; HAM at 96% and HPA at 4%, respectively. The HAM and HPA allowance was related to one client in a court appointed receivership. As discussed in Note 1 above, the March 2015 settlement agreement entered into by the Company and the receivership did not pay the fully reserved accounts receivable. As such, the accounts receivable balance was written off and the allowance for doubtful accounts was fully reduced to zero.

Net Income (Loss) Per Common Share

Basic net income (loss) per share is computed by dividing (i) net income (loss) available to common shareholders (numerator), by (ii) the weighted average number of common shares outstanding during the period (denominator). Diluted net income (loss) per share is computed using the weighted average number of common shares and dilutive potential common shares outstanding during the period. At September 30, 2015 and 2014, there were 4,623,959 and 4,518,626 shares, respectively, underlying potentially dilutive convertible preferred stock and stock options outstanding. These shares were not included in dilutive weighted average shares outstanding for the three and nine months ended September 30, 2015 and 2014 because their effect is anti-dilutive due to the Company’s reported net loss.

Use of Estimates and Assumptions

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include the Company’s revenue recognition method and derivative liabilities.

Principles of Consolidation

The consolidated financial statements of the Company for the three and nine months ended September 30, 2015 and 2014 include the financial results of HCI, HGI, HBI, HPA and HAM. All significant intercompany transactions and balances have been eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all liquid investments with a maturity of 90 days or less to be cash equivalents.

Other Assets

At September 30, 2015, other assets were $13,333 ($40,000 in total origination fees paid offset by $26,667 in accumulated amortization of those fees) for the senior unsecured promissory note discussed in Note 9. The fees are to be amortized over the life of the promissory note. At December 31, 2014, other assets were $23,333 ($40,000 in total origination fees offset by $16,667 in accumulated amortization) for the senior unsecured promissory note.

Property, Equipment and Software

Property, equipment, and software are stated at cost. Depreciation is provided in amounts sufficient to relate the cost of the depreciable assets to operations over their estimated service lives, ranging from three to seven years. Provisions for depreciation are made using the straight-line method.

Major additions and improvements are capitalized, while expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement, the cost of the property and equipment and the related accumulated depreciation are removed from the respective accounts, and any resulting gains or losses are credited or charged to other general and administrative expenses.

Fair Value of Financial Instruments

The carrying value of trade accounts receivable, accounts payable, and accrued and other liabilities approximate fair value due to the short maturity of these items. The estimated fair value of the notes payable and subordinated debt approximates the carrying amounts as they bear market interest rates.

The Company considers the warrants related to its subordinated debt to be derivatives, and the Company records the fair value of the derivative liabilities in the consolidated balance sheets. Changes in fair value of the derivative liabilities are included in gain (loss) on change in fair value of derivative in the consolidated statements of operations. The Company’s derivative liability has been classified as a Level III valuation according to Accounting Standards Codification (“ASC”) 820.

Internally Developed Software

Internally developed legacy application software consisting of database, customer relations management, process management and internal reporting modules are used in each of the Company’s subsidiaries. The Company accounts for computer software used in the business in accordance with ASC 350 “Intangibles-Goodwill and Other”. ASC 350 requires computer software costs associated with internal use software to be charged to operations as incurred until certain capitalization criteria are met. Costs incurred during the preliminary project stage and the post-implementation stages are expensed as incurred. Certain qualifying costs incurred during the application development stage are capitalized as property, equipment and software. These costs generally consist of internal labor during configuration, coding, and testing activities. Capitalization begins when (i) the preliminary project stage is complete, (ii) management with the relevant authority authorizes and commits to the funding of the software project, and (iii) it is probable both that the project will be completed and that the software will be used to perform the function intended. Management has determined that a significant portion of costs incurred for internally developed software came from the preliminary project and post-implementation stages; as such, no costs for internally developed software were capitalized. U

Long-Lived Assets

Long-lived assets are reviewed on an annual basis or whenever events or changes in circumstance indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is generally measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by that asset. If it is determined that the carrying amount of an asset may not be recoverable, an impairment loss is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is the estimated value at which the asset could be bought or sold in a transaction between willing parties. There were no impairment charges for the three and nine months ended September 30, 2015 and 2014.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740 “Income Taxes”. ASC 740 requires the use of the asset and liability method whereby deferred tax assets and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. These differences result in deferred tax assets and liabilities, which are included in the Company’s consolidated balance sheets.

The Company then assesses the likelihood of realizing benefits related to such assets by considering factors such as historical taxable income and the Company’s ability to generate sufficient taxable income of the appropriate character within the relevant jurisdictions in future years. Based on the aforementioned factors, if the realization of these assets is not likely a valuation allowance is established against the deferred tax assets.

The Company accounts for its position in tax uncertainties under ASC 740-10. ASC 740-10 establishes standards for accounting for uncertainty in income taxes. ASC 740-10 provides several clarifications related to uncertain tax positions. Most notably, a “more likely-than-not” standard for initial recognition of tax positions, a presumption of audit detection and a measurement of recognized tax benefits based on the largest amount that has a greater than 50 percent likelihood of realization. ASC 740-10 applies a two-step process to determine the amount of tax benefit to be recognized in the financial statements. First, the Company must determine whether any amount of the tax benefit may be recognized. Second, the Company determines how much of the tax benefit should be recognized (this would only apply to tax positions that qualify for recognition.) The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements or the effective tax rate during the three and nine months ended September 30, 2015 or 2014.

The Company incurred no penalties or interest for taxes for the three and nine months ended September 30, 2015 or 2014. The Company is subject to a three year statute of limitations by major tax jurisdictions for the fiscal years ended December 31, 2012, 2013 and 2014. The Company files income tax returns in the U.S. federal jurisdiction.

Recent Accounting Standards

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP.

The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard in 2018.

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Subordinated Debt (Details Narrative) - USD ($)

1 Months Ended

9 Months Ended

12 Months Ended

Oct. 31, 2014

Aug. 31, 2012

Jan. 31, 2010

Sep. 30, 2015

Sep. 30, 2014

Dec. 31, 2014

Dec. 31, 2013

Subordinated debt balance, current portion

$ 20,000

$ 31,250

Derivative liability

2,434

$ 2,434

Change in fair value of derivatives

$ 13,533

Proceeds from purchase of warrants

67

2010 Subordinated Debt

Subordinated term note

$ 750,000

Subordinated debt coupon rate

16.00%

Subordinated debt origination fee

1.00%

Subordinated debt maturity date

Dec. 31, 2013

Subordinated debt balance

0

$ 0

Common stock potentially purchased by warrants offered as part of subordinated debt (in shares)

200,000

Warrants exercise price (per share)

$ 0.01

Subordinated debt warrant description

The 200,000 shares of common stock contemplated to be issued upon exercise of the Warrants are based on an anticipated cumulative debt raise of $750,000. The investors are granted the Warrants pro rata based on their percentage of investment relative to the $750,000 aggregate principal amount of notes contemplated to be issued in the Subordinated Offering. The Warrants shall have a term of seven years, exercisable from January 31, 2015 to January 31, 2017.

Warrant exercise date range, start

Jan. 31, 2015

Warrant exercise date range, end

Jan. 31, 2017

Debt discount balance

$ 0

$ 0

Warrants outstanding

105,333

112,000

Derivative liability

$ 2,434

$ 2,434

Fair value of warrants

$ .02

$ .02

Warrants purchased and converted to common shares during period

6,667

Proceeds from purchase of warrants

$ 67

2012 Additional Subordinated Debt

Subordinated term note

$ 25,000

Subordinated debt coupon rate

18.00%

Subordinated debt maturity date

Aug. 31, 2015

Payment amortization term

60 months

Subordinated debt rights and restrictions description

The rights of the holder of this note is subordinated to any and all liens granted by the Company to a commercial bank or other qualified financial institution in connection with lines of credit or other loans extended to the Company in an amount not to exceed $2,000,000, and liens granted by the Company in connection with the purchase of furniture, fixtures or equipment

Subordinated debt balance, current portion

0

$ 16,250

Subordinated debt balance

0

16,250

2014 Subordinated Note

Subordinated term note

$ 100,000

Subordinated debt coupon rate

18.00%

Subordinated debt maturity date

Sep. 30, 2017

Payment amortization term

60 months

Subordinated debt rights and restrictions description

The rights of the holder of this note is subordinated to any and all liens granted by the Company to a commercial bank or other qualified financial institution in connection with lines of credit or other loans extended to the Company in an amount not to exceed $3,500,000, and liens granted by the Company in connection with the purchase of furniture, fixtures or equipment.

Subordinated debt balance, current portion

20,000

15,000

Subordinated debt balance

$ 90,000

$ 100,000

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Subordinated Debt (Tables)

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

Fair Value Assumptions

	September 30, 2015
Risk-free rate		0.31	%
Expected volatility		625	%
Expected remaining life (in years)		1.33
Dividend yield		0.00	%

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Property, Equipment and Software (Tables)

9 Months Ended

Sep. 30, 2015

Property Equipment And Software Tables

Property, Equipment and Software

Computers and purchased software	$	147,800		$	158,899
Furniture and equipment		203,427			203,427
		351,227			362,326
Less: accumulated depreciation		(298,394	)		(291,800	)
	$	52,833		$	70,526

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Subordinated Debt - Fair Value Assumptions (Details)	9 Months Ended
	Sep. 30, 2015
Subordinated Debt - Fair Value Assumptions Details
Risk-free rate	0.31%
Expected volatility	625.00%
Expected remaining life	1 year 4 months
Dividend yield	0.00%

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2015

Commitments And Contingencies Tables

Future Minimum Rental Obligations

Years Ending December 31:
2015	$	1,848
2016		3,696
Total minimum lease commitments	$	5,544

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Stock Options (Tables)

9 Months Ended

Sep. 30, 2015

Stock Options Tables

Stock Option Activity Summary

						Weighted
				Exercise		Average
	Number of			Price		Exercise
	Options			Per Option		Price
Outstanding at December 31, 2013		681,700		$	0.01 – 1.59	$	1.00
Granted		—			—		—
Exercised		—			—		—
Canceled		(511,700	)		0.94 – 1.59		1.06
Outstanding at December 31, 2014		170,000		$	0.01	$	0.01
Granted		—			—		—
Exercised		—			—		—
Canceled		—			—		—
Outstanding at September 30, 2015		170,000		$	0.01	$	0.01

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Organization and Recent Developments

9 Months Ended

Sep. 30, 2015

Organization And Recent Developments

Organization and Recent Developments

NOTE 1. ORGANIZATION AND RECENT DEVELOPMENTS

Halo Companies, Inc. (“Halo”, “HCI” or the “Company”) was incorporated under the laws of the State of Delaware on December 9, 1986. Its principal executive offices are located at 18451 N. Dallas Parkway, Suite 100, Dallas, Texas 75287. On December 15, 2014, the Company moved from its previous office location at 7668 Warren Parkway, Suite 350, Frisco, Texas 75034.

Unless otherwise provided in footnotes, all references from this point forward in this Report to “we,” “us,” “our company,” “our,” or the “Company” refer to the combined Halo Companies, Inc. entity, together with its subsidiaries.

Halo has multiple wholly-owned subsidiaries including Halo Group Inc. (“HGI”), Halo Asset Management, LLC (“HAM”), Halo Portfolio Advisors, LLC (“HPA”), and Halo Benefits, Inc. (“HBI”). HGI is the management and shared services operating company. HAM provides asset management and mortgage servicing services to investors and asset owners including all aspects of buying and managing distressed real estate owned (“REO”) and non-performing loans. HPA exists to market the Company’s operations as a turnkey solution for strategic business to business opportunities with HAM’s investors and asset owners, major debt servicers and field service providers, lenders, and mortgage backed securities holders. HBI was originally established as an association benefit services to customers throughout the United States and although a non-operating entity, remains a subsidiary due to its historical net operating loss carryforward.

During March 2015, the Company entered into a $250,000 compromise and settlement agreement with the court appointed receivership holding 17,808,000 shares of the Company’s common stock. This stock was subject to the unearned “clawback” provisions discussed in Note 16 below. The physical stock certificate has been sent to the Company’s transfer agent to immediately cancel those respective outstanding shares of that Agreement. Further, this settlement agreement calls for a relinquishment and abandonment of any and all claims against Halo on 90,000 shares of the Company’s Series X Preferred stock belonging to the receivership (original liquidation value of $10 per share). Lastly, the Company had $375,665 in accounts receivable owed from the receivership which had previously been fully reserved. With the settlement now in place, the Company wrote off this accounts receivable balance and released the allowance reserve held. The Settlement requires $250,000 to be paid by the Company to the receivership over a twelve month period with the start date April 1, 2015. As the receivership owed the Company $22,500 for success fees previously earned (this receivable was not part of the $375,665 in fully reserved accounts receivable noted above), the first $22,500 of the $250,000 owed was settled via a reduction of the $22,500 accounts receivable balance for the April 1 and part of the May 1, 2015 scheduled payments.

During March 2015, an additional 1,272,000 shares of the Company’s common stock, all subject to the clawback provisions of the Agreement (defined in Note 16), have also been sent to the Company’s transfer agent to immediately cancel those respective common shares of that Agreement but as of the time of this filing those shares have not yet been canceled. The Company expects that to happen shortly. Secondarily, the Company is actively pursuing the procurement of an additional physical certificate from a respective individual still in possession of the common stock certificate. As of the time of this Form 10-Q, 3,392,000 of the 21,200,000 shares issued as part of the Agreement remain outstanding.

On October 8, 2015, Reif Chron, President, tendered his resignation.

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Organization and Recent Developments (Details Narrative) - USD ($)	1 Months Ended
	Mar. 31, 2015	Nov. 06, 2015	Sep. 30, 2015	Dec. 31, 2014
Common shares held			48,562,750	66,364,083
Accounts receivable			$ 90,953	$ 141,634
Allowance for doubtful accounts			$ 0	$ 375,665
Halo Companies, Inc. Common Stock
Shares issued and outstanding under claw back provision		3,392,000	3,392,000	21,200,000
Common shares held			48,562,750
Court Appointed Receivership
Compromise and settlement agreement	$ 250,000
Common shares held			17,808,000
Series X Preferred stock held			90,000
Accounts receivable			$ 375,665
Allowance for doubtful accounts			375,665
Settlement obligation payment period	12 months
Success fees due from receivership			$ 22,500
Pending Cancellation
Common shares held			1,272,000

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Accrued and Other Liabilities (Details Narrative) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Accrued liabilities	$ 1,941,950	$ 915,900
Accrued variable wages payable	729,505
Accrued deferred compensation	659,754	523,144
Accrued interest	539,565	392,756
Other accrued liabilities	13,126
Secured Asset Promissory Note
Accrued interest	$ 240,244	$ 223,987

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Consolidated Balance Sheets - USD ($)	Sep. 30, 2015	Dec. 31, 2014
CURRENT ASSETS
Cash and cash equivalents	$ 88,044	$ 72,982
Trade accounts receivable, net of allowance for doubtful accounts of $0 and $375,665, respectively	90,953	141,634
Total current assets	178,997	214,616
PROPERTY, EQUIPMENT AND SOFTWARE, net	52,833	70,526
OTHER ASSETS	13,333	23,333
TOTAL ASSETS	245,163	308,475
CURRENT LIABILITIES
Accounts payable	625,230	485,869
Accrued and other liabilities (including $299,321 and $166,992 to related parties, respectively)	1,941,950	915,900
Deferred revenue	53,500	1,800
Current portion of subordinated debt	20,000	31,250
Current portion of notes payable to related parties	1,222,270	959,365
Total current liabilities	3,862,950	2,394,184
SUBORDINATED DEBT, LESS CURRENT PORTION	70,000	85,000
NOTES PAYABLE TO RELATED PARTIES, LESS CURRENT PORTION	0	179,358
NOTE PAYABLE	2,021,009	1,805,000
DERIVATIVE LIABILITY	2,434	2,434
Total liabilities	5,956,393	4,465,976
SHAREHOLDERS' DEFICIT
Common Stock, par value $0.001 per share; 375,000,000 shares authorized; 48,562,750 and 66,364,083 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively	48,563	66,364
Additional paid-in capital	7,407,532	7,638,764
Accumulated deficit	(13,168,659)	(11,864,863)
Total shareholders' deficit	(5,711,230)	(4,157,501)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	245,163	308,475
Halo Companies, Inc. Series Z Convertible Preferred Stock
SHAREHOLDERS' DEFICIT
Preferred Stock	0	0
Halo Companies, Inc. Preferred Stock
SHAREHOLDERS' DEFICIT
Preferred Stock	0	0
Halo Companies, Inc. Series X Convertible Preferred Stock
SHAREHOLDERS' DEFICIT
Preferred Stock	537	1,437
Halo Companies, Inc. Series E Convertible Preferred Stock
SHAREHOLDERS' DEFICIT
Preferred Stock	70	70
Halo Group, Inc. Series A Convertible Preferred Stock
SHAREHOLDERS' DEFICIT
Preferred Stock	373	373
Halo Group, Inc. Series B Convertible Preferred Stock
SHAREHOLDERS' DEFICIT
Preferred Stock	230	230
Halo Group, Inc. Series C Convertible Preferred Stock
SHAREHOLDERS' DEFICIT
Preferred Stock	$ 124	$ 124

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Secured Asset Promissory Note (Details Narrative) - USD ($)	1 Months Ended		3 Months Ended		9 Months Ended
	May. 31, 2013	Dec. 31, 2010	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Interest expense			$ 181,689	$ 107,143	$ 474,223	$ 303,609
Accrued interest, current portion			539,565		539,565		$ 392,756
Accrued interest paid					92,858	51,216
Secured Asset Promissory Note
Proceeds from (repayments of) debt offering		$ 1,200,000
Amount of proceeds used to acquire mortgage notes		$ 300,000
Interest rate	10.00%	25.00%
Note maturity date	Dec. 31, 2014
Secured note balance	$ 0
Interest expense			5,419	$ 5,419	16,257	$ 16,257
Accrued interest			240,244		240,244		223,987
Accrued interest, current portion			$ 240,244		$ 240,244		$ 223,987
Accrued interest paid	$ 150,000

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Consolidated Statements of Changes in Shareholders' Deficit - USD ($)	Halo Companies, Inc. Common Stock	Halo Companies, Inc. Series X Convertible Preferred Stock	Halo Companies, Inc. Series E Convertible Preferred Stock	Halo Group, Inc. Series A Convertible Preferred Stock	Halo Group, Inc. Series B Convertible Preferred Stock	Halo Group, Inc. Series C Convertible Preferred Stock	Additional Paid-in Capital	Accumulated Deficit	Total
Balance at Dec. 31, 2013	$ 66,364	$ 1,437	$ 70	$ 373	$ 230	$ 124	$ 7,638,764	$ (10,600,783)	$ (2,893,421)
Balance (in shares) at Dec. 31, 2013	66,364,083	143,677	70,000	372,999	229,956	124,000
Net loss								(960,882)	(960,882)
Balance at Sep. 30, 2014	$ 66,364	$ 1,437	$ 70	$ 373	$ 230	$ 124	7,638,764	(11,561,665)	(3,854,303)
Balance (in shares) at Sep. 30, 2014	66,364,083	143,677	70,000	372,999	229,956	124,000
Balance at Dec. 31, 2014	$ 66,364	$ 1,437	$ 70	$ 373	$ 230	$ 124	7,638,764	(11,864,863)	(4,157,501)
Balance (in shares) at Dec. 31, 2014	66,364,083	143,677	70,000	372,999	229,956	124,000
Redemption of Series X Convertible Preferred Stock		$ (900)					(249,100)		(250,000)
Redemption of Series X Convertible Preferred Stock (in shares)		(90,000)
Issuance of Common Shares	$ 7						60		67
Issuance of Common Shares (in shares)	6,667
Cancellation of Common Shares	$ (17,808)						17,808
Cancellation of Common Shares (in shares)	(17,808,000)
Net loss								(1,303,796)	(1,303,796)
Balance at Sep. 30, 2015	$ 48,563	$ 537	$ 70	$ 373	$ 230	$ 124	$ 7,407,532	$ (13,168,659)	$ (5,711,230)
Balance (in shares) at Sep. 30, 2015	48,562,750	53,677	70,000	372,999	229,956	124,000

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Concentrations of Credit Risk (Details Narrative)

9 Months Ended

Sep. 30, 2015

USD ($)

Concentrations Of Credit Risk Details Narrative

FDIC insurance amount on deposits

$ 250,000

Bank accounts and FDIC insurance

At September 30, 2015, the Company's cash accounts were all less than the $250,000 FDIC insured amount and as such were insured in full.

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Stock Options

9 Months Ended

Sep. 30, 2015

Stock Options

Stock Options

NOTE 15. STOCK OPTIONS

The Company granted stock options to certain employees under the HGI 2007 Stock Plan, as amended (the “Plan”). The Company was authorized to issue 2,950,000 shares subject to options, or stock purchase rights under the Plan. These options (i) vest over a period no greater than two years, (ii) are contingently exercisable upon the occurrence of a specified event as defined by the option agreements, and (iii) expire three months following termination of employment or five years from the date of grant depending on whether or not the options were granted as incentive options or non-qualified options. At September 30, 2009, pursuant to the terms of the merger, all options granted prior to the merger were assumed by the Company and any options available for issuance under the Plan but unissued, have been forfeited and consequently the Company has no additional shares subject to options or stock purchase rights available for issuance under the Plan. As of September 30, 2015, 438,300 option shares have been exercised. Total stock options outstanding as of September 30, 2015 total 170,000. The weighted average remaining contractual life of the outstanding options at September 30, 2015 is approximately 2 years.

A summary of stock option activity in the Plan is as follows:

						Weighted
				Exercise		Average
	Number of			Price		Exercise
	Options			Per Option		Price
Outstanding at December 31, 2013		681,700		$	0.01 – 1.59	$	1.00
Granted		—			—		—
Exercised		—			—		—
Canceled		(511,700	)		0.94 – 1.59		1.06
Outstanding at December 31, 2014		170,000		$	0.01	$	0.01
Granted		—			—		—
Exercised		—			—		—
Canceled		—			—		—
Outstanding at September 30, 2015		170,000		$	0.01	$	0.01

All stock options granted under the Plan became exercisable upon the occurrence of the merger that occurred on September 30, 2009. As such, equity-based compensation for the options was recognized in earnings from issuance date of the options over the vesting period of the options effective December 31, 2009.

On July 19, 2010, the board of directors approved the Company’s 2010 Incentive Stock Plan (“2010 Stock Plan”). The 2010 Stock Plan allows for the reservation of 7,000,000 shares of the Company’s common stock for issuance under the plan. The 2010 Stock Plan became effective July 19, 2010 and terminates July 18, 2020. As of September 30, 2015, 20,000 shares had previously been granted (all granted in the year ended December 31, 2012) under the 2010 Stock Plan with an exercise price of $0.34 per option. These are the only shares that have been issued under the 2010 Stock Plan. The shares granted vested immediately and can become exercisable for so long as the Company remains a reporting company under the Securities Exchange Act of 1934. As of September 30, 2015, none of the shares issued under the 2010 Stock Plan have been exercised.

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Operating Segments - Operating Segments Reporting (Details) - USD ($)		3 Months Ended		9 Months Ended
		Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Revenue		$ 1,024,960	$ 555,466	$ 3,023,625	$ 1,975,659
Operating income (loss)		(30,421)	(408,726)	(1,303,796)	(960,882)
Halo Asset Management
Revenue		425,429	219,125	942,148	1,101,544
Operating income (loss)		366,583	70,014	682,695	502,426
Halo Portfolio Advisors
Revenue		569,531	336,341	1,947,583	874,115
Operating income (loss)		212,155	43,833	728,450	129,484
Other
Revenue		30,000		133,894
Corporate Expenses
Operating income (loss)	[1]	$ (609,159)	$ (522,573)	$ (2,714,941)	$ (1,592,792)

[1] Corporate expenses include salaries, benefits and other expenses, including rent and general and administrative expenses, related to corporate office overhead and functions that benefit all operating segments. Corporate expenses also include interest expense. Corporate expenses are expenses that the Company does not directly allocate to any segment above. Allocating these indirect expenses to operating segments would require an imprecise allocation methodology. Further, there are no material amounts that are the elimination or reversal of transactions between the above reportable operating segments.

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Subsequent Events

9 Months Ended

Sep. 30, 2015

Subsequent Events [Abstract]

Subsequent Events

NOTE 17. SUBSEQUENT EVENTS

On November 6, 2015, Mr. Robbie Hicks, Chief Accounting Officer, tendered his resignation.

On November 6, 2015, Mr. Robert Boyce, Chief Operating Officer, has agreed to no longer serve as an officer but will continue his employment with the Company in the role of Vice President of Operations.

There were no other subsequent events to disclose.

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Consolidated Statements of Cash Flows - USD ($)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
CASH FLOWS FROM OPERATIONS
Net (loss) income	$ (1,303,796)	$ (960,882)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation	17,693	37,558
Amortization of loan origination costs	10,000	10,000
Capitalization of interest into note payable and notes payable to related parties	224,556	190,228
Bad debt expense	116	111
Gain on change in fair value of derivative		(13,533)
Notes receivable write off	125,000
Changes in operating assets and liabilities:
Trade accounts receivable	50,565	21,890
Other assets		2,922
Accounts payable	(110,639)	(63,014)
Accrued and other liabilities	1,026,050	383,368
Deferred rent		(169,349)
Deferred revenue	51,700
Net cash provided by (used in) operating activities	91,245	(560,701)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in affiliate	(125,000)
Purchases of property and equipment		(700)
Net cash used in investing activities	(125,000)	(700)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable to related parties	100,000	480,000
Principal payments on notes payable to related parties	(25,000)	(6,117)
Principal payments on subordinated debt	(26,250)	(4,167)
Proceeds received from issuance of common stock	67
Net cash provided by financing activities	48,817	469,716
Net increase (decrease) in cash and cash equivalents	15,062	(91,685)
CASH AND CASH EQUIVALENTS, beginning of period	72,982	127,048
CASH AND CASH EQUIVALENTS, end of period	88,044	35,363
SUPPLEMENTAL INFORMATION
Cash paid for taxes - Texas Margin Tax	13,144	31,995
Cash paid for interest	92,858	$ 51,216
NONCASH SUPPLEMENTAL INFORMATION
Cancellation of stock for settlement payment	$ 250,000

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Consolidated Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Allowance for doubtful accounts	$ 0	$ 375,665
Accrued and other liabilities to related parties	$ 299,321	$ 166,992
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	375,000,000	375,000,000
Common stock, shares issued	48,562,750	66,364,083
Common stock, shares outstanding	48,562,750	66,364,083
Halo Companies, Inc. Series Z Convertible Preferred Stock
Preferred stock, par value	$ .01	$ .01
Preferred stock, shares authorized	82,508	82,508
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Halo Companies, Inc. Preferred Stock
Preferred stock, par value	$ .001	$ .001
Preferred stock, shares authorized	917,492	917,492
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Halo Companies, Inc. Series X Convertible Preferred Stock
Preferred stock, par value	$ .01	$ 0.01
Preferred stock, shares authorized	53,677	143,677
Preferred stock, shares issued	53,677	143,677
Preferred stock, shares outstanding	53,677	143,677
Preferred stock, liquidation preference	$ 536,770	$ 1,436,770
Halo Companies, Inc. Series E Convertible Preferred Stock
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	100,000	100,000
Preferred stock, shares issued	70,000	70,000
Preferred stock, shares outstanding	70,000	70,000
Preferred stock, liquidation preference	$ 700,000
Halo Group, Inc. Series A Convertible Preferred Stock
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	500,000	500,000
Preferred stock, shares issued	372,999	372,999
Preferred stock, shares outstanding	372,999	372,999
Preferred stock, liquidation preference	$ 753,826
Halo Group, Inc. Series B Convertible Preferred Stock
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	500,000	500,000
Preferred stock, shares issued	229,956	229,956
Preferred stock, shares outstanding	229,956	229,956
Preferred stock, liquidation preference	$ 621,553
Halo Group, Inc. Series C Convertible Preferred Stock
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	500,000	500,000
Preferred stock, shares issued	124,000	124,000
Preferred stock, shares outstanding	124,000	124,000
Preferred stock, liquidation preference	$ 418,745

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Subordinated Debt

9 Months Ended

Sep. 30, 2015

SubordinatedDebtAbstract

Subordinated Debt

NOTE 10. SUBORDINATED DEBT

During January 2010, the Company authorized a $750,000 subordinated debt offering (“Subordinated Offering”), which consisted of the issuance of notes paying a 16% coupon with a 1% origination fee at the time of closing. The maturity date of the notes was December 31, 2013. In October 2013, the Company entered into a senior unsecured convertible promissory note (discussed in Note 9) which required the use of those financing proceeds to pay down the subordinated debt. As such, as of December 31, 2013, the remaining balance was $0.

As part of the Subordinated Offering, the Company granted to investors common stock purchase warrants (the “Warrants”) to purchase an aggregate of 200,000 shares of common stock of the Company at an exercise price of $0.01 per share. The 200,000 shares of common stock contemplated to be issued upon exercise of the Warrants are based on an anticipated cumulative debt raise of $750,000. The investors are granted the Warrants pro rata based on their percentage of investment relative to the $750,000 aggregate principal amount of notes contemplated to be issued in the Subordinated Offering. A total of 112,000 warrants were issued. The Warrants shall have a term of seven years, exercisable from January 31, 2015 to January 31, 2017. During 2015, 6,667 of the 112,000 warrants were purchased for $67 and converted to common stock.

The Company follows the provisions of ASC 815, “Derivatives and Hedging”. ASC 815 requires freestanding contracts that are settled in a company’s own stock to be designated as an equity instrument, assets or liability. Under the provisions of ASC 815, a contract designated as an asset or liability must be initially recorded and carried at fair value until the contract meets the requirements for classification as equity, until the contract is exercised or until the contract expires. Accordingly, the Company determined that the warrants should be accounted for as derivative liabilities and has recorded the initial value as a debt discount which was amortized into interest expense using the effective interest method. As of December 31, 2013, the balance of the debt discount was $0 (fully amortized). Subsequent changes to the marked-to-market value of the derivative liability are recorded in earnings as derivative gains and losses. As of September 30, 2015 and December 31, 2014, there were 105,333 and 112,000 warrants outstanding, respectively, with a derivative liability of $2,434. The Warrants were valued using the Black-Scholes model, which resulted in the fair value of the warrants at $0.02 per share using the following assumptions:

	September 30, 2015
Risk-free rate		0.31	%
Expected volatility		625	%
Expected remaining life (in years)		1.33
Dividend yield		0.00	%

During August 2012, the Company entered into an additional $25,000 subordinated term note with a then current holder of the Company’s subordinated debt. The note pays an 18% coupon rate with a maturity date of August 31, 2015. There are no warrants associated with this subordinated term note. Repayment terms of the note included interest only payments through February 28, 2013. Thereafter, level monthly payments of principal and interest are made as calculated on a 60 month payment amortization schedule with final balloon payment due at maturity. The rights of the holder of this note is subordinated to any and all liens granted by the Company to a commercial bank or other qualified financial institution in connection with lines of credit or other loans extended to the Company in an amount not to exceed $2,000,000, and liens granted by the Company in connection with the purchase of furniture, fixtures or equipment. As of September 30, 2015, the remaining balance of this note totals $0 as the balance was paid in full. As of December 31, 2014, the remaining balance of this note totals $16,250, all of which is included in current portion of subordinated debt.

During October 2014, the Company entered into an additional $100,000 subordinated term note with the current holder of the Company’s subordinated debt. The note pays an 18% coupon rate with a maturity date of September 30, 2017. There are no warrants associated with this subordinated term note. Repayment terms of the note include interest only payments through March 31, 2015. Thereafter, level monthly payments of principal and interest are made as calculated on a 60 month payment amortization schedule with final balloon payment due at maturity. The rights of the holder of this note is subordinated to any and all liens granted by the Company to a commercial bank or other qualified financial institution in connection with lines of credit or other loans extended to the Company in an amount not to exceed $3,500,000, and liens granted by the Company in connection with the purchase of furniture, fixtures or equipment. As of September 30, 2015, the remaining balance of this note totals $90,000, of which $20,000 is included in current portion of subordinated debt. As of December 31, 2014, the remaining balance of this note totals $100,000, of which $15,000 is included in current portion of subordinated debt.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Nov. 06, 2015
Document And Entity Information
Entity Registrant Name	Halo Companies, Inc.
Entity Central Index Key	0000814286
Document Type	10-Q
Document Period End Date	Sep. 30, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		48,562,750
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2015

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Secured Asset Promissory Note

9 Months Ended

Sep. 30, 2015

SecuredAssetPromissoryNoteAbstract

Secured Asset Promissory Note

NOTE 11. SECURED ASSET PROMISSORY NOTE

During December 2010, the Company authorized a debt offering to be secured by real estate assets purchased in connection with Equitas Housing Fund, LLC, (“Equitas Offering”). The Equitas Offering generated $1,200,000 in proceeds. Of the $1,200,000 in proceeds received in December 2010, $300,000 was used to acquire non-performing, residential mortgage notes and the balance was used for mortgage note workout expenses and operational expenses of Halo Asset Management. The Secured Asset Promissory Notes consisted of a 25% coupon. In May 2013, the Secured Asset Promissory Note was paid in full, along with $150,000 of the outstanding accrued interest balance. Halo and the secured asset promissory note holder agreed to include the remaining accrued interest in a promissory note due December 31, 2014. The promissory note will accrue interest at a 10% annual rate, with interest only payments due periodically and final balloon payment due at maturity. At the time of the filing of these consolidated financial statements, the Company and note holder have not finalized an extended maturity date. As such, as of September 30, 2015, the entire accrued interest balance of $240,244 is included in current portion of accrued interest. As of December 31, 2014, the entire accrued interest balance of $223,987 is included in current portion of accrued interest. For the three and nine months ended September 30, 2015 and 2014, the Company incurred $5,419, $16,257, $5,419 and $16,257, respectively, in interest expense on the note.

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Consolidated Statements of Operations - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
REVENUE
REVENUE (including $104,153, $107,900, $334,538 and $326,155 from related parties, respectively)	$ 1,024,960	$ 555,466	$ 3,023,625	$ 1,975,659
OPERATING EXPENSES
Sales and marketing expenses	366,006	300,992	1,244,843	767,197
General and administrative expenses (including $111,780, $29,751, $245,339 and $89,244 to related parties, respectively)	200,067	160,084	642,429	535,748
Salaries, wages, and benefits	307,619	386,103	1,952,782	1,311,525
Total operating expenses	873,692	847,179	3,840,054	2,614,470
OPERATING INCOME (LOSS)	151,268	(291,713)	(816,429)	(638,811)
OTHER INCOME (EXPENSE)
Gain on change in fair value of derivative				13,533
Interest expense (including $92,619, $29,075, $215,875 and $78,085 to related parties, respectively)	(181,689)	(107,143)	(474,223)	(303,609)
Net income (loss) from operations, before income tax provision	(30,421)	(398,856)	(1,290,652)	(928,887)
INCOME TAX PROVISION		9,870	13,144	31,995
NET INCOME (LOSS)	$ (30,421)	$ (408,726)	$ (1,303,796)	$ (960,882)
Loss per share:
Basic and diluted	$ (0.00)	$ (.01)	$ (.02)	$ (.01)
Weighted Average Shares Outstanding
Basic and diluted	48,562,750	66,364,083	57,463,417	66,364,083

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Going Concern

9 Months Ended

Sep. 30, 2015

Going Concern

Going Concern

NOTE 5. GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the Company will need to manage additional asset units under contract and/or additional financing to fully implement its business plan, including continued growth and establishment of a stronger brand name of HAM’s asset management in the distressed asset sector.

The Company is actively seeking growth of its asset units under management, both organically and via new client relationships. Management, in the ordinary course of business, is trying to raise additional capital through sales of common stock as well as seeking financing via equity or debt, or both from third parties. There are no assurances that additional financing will be available on favorable terms, or at all. If additional financing is not available, the Company will need to reduce, defer or cancel development programs, planned initiatives and overhead expenditures. The failure to adequately fund its capital requirements could have a material adverse effect on the Company’s business, financial condition and results of operations. Moreover, the sale of additional equity securities to raise financing will result in additional dilution to the Company’s stockholders, and incurring additional indebtedness could involve an increased debt service cash obligation, the imposition of covenants that restrict the Company operations or the Company’s ability to perform on its current debt service requirements. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

The Company has incurred an accumulated deficit of $13,168,659 as of September 30, 2015. However, of the accumulated deficit, $2,110,748 of expense was incurred as stock-based compensation, $598,457 in depreciation expense, and $279,241 in impairment loss on investment in portfolio assets, all of which are noncash expenses. Further, $906,278 of the accumulated deficit is related to the issuance of stock dividends, also non cash reductions. The $3,894,724 total of these non-cash retained earnings reductions represents 30% of the total deficit balance.

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Operating Segments

9 Months Ended

Sep. 30, 2015

Operating Segments

Operating Segments

NOTE 4. OPERATING SEGMENTS

The Company has several operating segments as listed below and as defined in Note 1. The results for these operating segments are based on our internal management structure and review process. We define our operating segments by service industry. If the management structure and/or allocation process changes, allocations may change. See the following summary of operating segment reporting;

Operating Segments	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Revenue:
Halo Asset Management	$	425,429		$	219,125		$	942,148		$	1,101,544
Halo Portfolio Advisors		569,531			336,341			1,947,583			874,115
Other		30,000			—			133,894			—
Net revenue	$	1,024,960		$	555,466		$	3,023,625		$	1,975,659
Operating income (loss):
Halo Asset Management	$	366,583		$	70,014		$	682,695		$	502,426
Halo Portfolio Advisors		212,155			43,833			728,450			129,484
Other		—			—			—			—
Less: Corporate expenses (a)		(609,159	)		(522,573	)		(2,714,941	)		(1,592,792	)
Operating income (loss):	$	(30,421	)	$	(408,726	)	$	(1,303,796	)	$	(960,882	)

a. Corporate expenses include salaries, benefits and other expenses, including rent and general and administrative expenses, related to corporate office overhead and functions that benefit all operating segments. Corporate expenses also include interest expense. Corporate expenses are expenses that the Company does not directly allocate to any segment above. Allocating these indirect expenses to operating segments would require an imprecise allocation methodology. Further, there are no material amounts that are the elimination or reversal of transactions between the above reportable operating segments.

The assets of the Company consist primarily of cash, trade accounts receivable, and property, equipment and software. Cash is managed at the corporate level of the Company and not at the segment level. Each of the remaining primary assets have been discussed in detail, including the applicable operating segment for which the assets and liabilities reside, in the consolidated notes to the financial statements. As such, the duplication is not warranted in this footnote.

All debt of the Company is recorded at the corporate parent companies HCI and HGI. All interest expense is included in corporate expenses above. Interest expense is discussed in further detail in Notes 8, 9, 10 and 11.

For the three and nine months ended September 30, 2015 or 2014, there have been no material transactions between reportable units that would materially affect an operating segment profit or loss. Intercompany transactions are eliminated in the consolidated financial statements.

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Shareholders' (Deficit) Equity

9 Months Ended

Sep. 30, 2015

Shareholders Deficit Equity

Shareholders' (Deficit) Equity

NOTE 16. SHAREHOLDERS’ (DEFICIT) EQUITY

Common Stock

On December 13, 2010 (“the Closing”), the Company was party to an Assignment and Contribution Agreement (the “Agreement”).  Pursuant to the terms of Agreement, the members of Equitas Asset Management, LLC, (“EAM”), a non Halo entity, which owned 100% of the interests of Equitas Housing Fund, LLC (“EHF”), assigned and contributed 100% of the interests of EAM to HAM (a Halo subsidiary) in exchange for shares of 21,200,000 shares of the Company’s Common Stock, $0.001 par value, of the Company. The Agreement did not constitute a business combination.

The Company issued 7,500,000 shares of Halo common stock in exchange for $3,000,000 in debt or equity capital. The aggregate of 7,500,000 shares of Halo common stock was subject to clawback (and cancellation) by Halo in the event that EAM does not generate at least three million dollars ($3,000,000) in new capital to Halo within twelve months following the closing. Halo had the right to claw back 2.5 shares of Halo common stock for every dollar not raised within the twelve months. Any cash generated by EAM would have needed to be designated for use in Halo’s general operations and not that of the EHF business to release the clawback rights.

The Company issued 13,700,000 shares of Halo common stock for the purchase of intangible assets owned by EAM which included trade secrets and business processes used in the EHF business. The aggregate 13,700,000 shares of Halo common stock was subject to clawback (and cancellation) by Halo in the event that EAM fails to generate at least $10,000,000 of net operating cash flows from the EHF business within twenty-four months following the closing. Halo had the right to claw back 1.37 shares of Halo common for every dollar not generated from the net operating cash flows of the EHF business. Once the $10,000,000 in net operating cash flows from the EHF business was generated, the clawback rights would be released.

In applying the guidance of ASC 505 “Equity” to the above transactions, the clawback provisions create a performance commitment that has not been met. As such, although the transaction did provide for a grant date at which time the equity shares are issued and outstanding, the equity shares have not met the measurement date requirements required by ASC 505. Accordingly, the par value of the shares issued and outstanding have been recorded at the grant date and as the clawback rights are released and the measurement dates established, the fair value of the transactions would have been determined and recorded.

As mentioned above, the Agreement provides for “clawback” provisions, pursuant to which all of the shares of Halo Common Stock issued to the member of EAM are subject to forfeiture in the event certain financial metrics are not timely achieved. The financial metrics call for significant cash generation by EHF within the first 12 months, and within the first 24 months following the closing date. We refer you to Section 2(b)(i) and (ii) of the Agreement, for the specifics of the clawback provisions. As of December 31, 2012, no cash was generated by EHF. The times to meet both the 12 month and 24 month financial metrics have lapsed and the metrics have not been met. Based upon the events that have transpired, and the lack of progress toward the financial metrics, the Company demanded that the recipients of the shares of Halo Common Stock give effect to both clawback provisions and immediately forfeit back all of the Halo shares issued to such recipients – an aggregate of 21,200,000 shares. Additionally, the Company has instructed the Company’s transfer agent to cancel all of the shares of Company Common Stock issued pursuant to the Agreement. As of December 31, 2014, the Company’s transfer agent refused to cancel the shares without either (i) presentation of the physical certificates to the transfer agent, or (ii) a court order requiring the transfer agent to cancel. As of December 31, 2014, the Company had been unsuccessful in its attempts to procure the physical certificates for presentment to the transfer agent, and the Company had yet to secure a court order requiring the transfer agent to cancel the certificates.

During March 2015, the Company entered into a $250,000 compromise and settlement agreement with the court appointed receivership holding 17,808,000 shares of the Company’s 21,200,000 common stock noted above. The physical stock certificate has been sent to the Company’s transfer agent to immediately cancel those respective outstanding shares of that Agreement. An additional 1,272,000 shares of the company’s common stock, all subject to the clawback provisions of the Agreement, have also been sent to the Company’s transfer agent to immediately cancel those respective common shares of that Agreement but as of the time of this filing those shares have not yet been canceled. The Company expects that to happen shortly. Secondarily, subject to the clawback provisions of the Agreement, the Company is actively pursuing the procurement of an additional physical certificate of 2,120,000 shares from a respective individual still in possession of the common stock certificate. As of the time of the filing of these consolidated financials, 3,392,000 of the 21,200,000 shares issued as part of the Agreement remain outstanding.

The Company’s total common shares outstanding totaled 48,562,750 at September 30, 2015.

Preferred Stock

In connection with the 2009 merger, the Company authorized 1,000,000 shares of Series Z Convertible Preferred Stock with a par value of $0.01 per share (the “Series Z Convertible Preferred”). The number of shares of Series Z Preferred Stock may be decreased by resolution of the Board; provided, however, that no decrease shall reduce the number of Series Z Preferred Shares to less than the number of shares then issued and outstanding.  In the event any Series Z Preferred Shares shall be converted, (i) the Series Z Preferred Shares so converted shall be retired and cancelled and shall not be reissued and (ii) the authorized number of Series Z Preferred Shares set forth in this section shall be automatically reduced by the number of Series Z Preferred Shares so converted and the number of shares of the Corporation’s undesignated Preferred Stock shall be deemed increased by such number. The Series Z Convertible Preferred is convertible into common shares at the rate of 45 shares of common per one share of Series Z Convertible Preferred. The Series Z Convertible Preferred has liquidation and other rights in preference to all other equity instruments. Simultaneously upon conversion of the remaining Series A Preferred, Series B Preferred, and Series C Preferred and exercise of any outstanding stock options issued under the HGI 2007 Stock Plan into Series Z Convertible Preferred, they will automatically, without any action on the part of the holders, be converted into common shares of the Company. Since the merger, in connection with the exercise of stock options into common stock and converted Series A Preferred, Series B Preferred and Series C Preferred as noted above, 82,508 shares of Series Z Convertible Preferred were automatically authorized and converted into shares of the Company’s common stock leaving 917,492 shares of authorized undesignated Preferred Stock in the Company in accordance with the Series Z Convertible Preferred certificate of designation. As of September 30, 2015, there were 82,508 shares of Series Z Preferred authorized with zero shares issued and outstanding.

The Company authorized 175,000 shares of Series X Convertible Preferred Stock with a par value of $0.01 per share (the “Series X Preferred”). The number of shares of Series X Preferred may be decreased by resolution of the Board; provided, however, that no decrease shall reduce the number of Series X Preferred to less than the number of shares then issued and outstanding. In the event any Series X Preferred Shares shall be redeemed, (i) the Series X Preferred so redeemed shall be retired and cancelled and shall not be reissued and (ii) the authorized number of Series X Preferred Shares set forth in this section shall be automatically reduced by the number of Series X Preferred Shares so redeemed and the number of shares of the Corporation's undesignated Preferred Stock shall be deemed increased by such number. The Series X Preferred Shares rank senior to the Company’s common stock to the extent of $10.00 per Series X Preferred Shares and on a parity with the Company’s common stock as to amounts in excess thereof. The holders of Series X Preferred shall not have voting rights. Holders of the Series X Preferred shall be entitled to receive, when and as declared by the board of directors, dividends at an annual rate of 9% payable in cash when declared by the board. Holders of Series X Preferred have a liquidation preference per share equal to $10.00. The liquidation preference was $536,770 as of September 30, 2015.

As of December 31, 2014, there were 143,677 shares authorized with 143,677 shares issued and outstanding. During March 2015, as part of the $250,000 compromise and settlement agreement with the court appointed receivership discussed above, the settlement agreement calls for a relinquishment and abandonment of any and all claims against Halo on 90,000 shares of the Company’s Series X Preferred stock belonging to the receivership. As such, as of September 30, 2015, there were 53,677 shares authorized, issued and outstanding. The 53,677 shares were related to the 2010 conversion from notes payable due to related parties.

In April 2012, the Company authorized 100,000 shares of Series E Convertible Preferred Stock (the “Series E Preferred”) with a par value of $0.001 per share, at ten dollars ($10.00) per share with a conversion rate of fifty (50) shares of the Company’s common stock for one share of Series E Preferred. The number of shares of Series E Preferred may be decreased by resolution of the Board; provided, however, that no decrease shall reduce the number of Series E Preferred to less than the number of shares then issued and outstanding. In the event any Series E Preferred Shares shall be converted, (i) the Series E Preferred so converted shall be retired and cancelled and shall not be reissued and (ii) the authorized number of Series E Preferred Shares set forth shall be automatically reduced by the number of Series E Preferred Shares so converted and the number of shares of the Corporation's undesignated Preferred Stock shall be deemed increased by such number. The Series E Preferred Shares rank senior to the Company’s common stock to the extent of $10.00 per Series E Preferred Shares and on a parity with the Company’s common stock as to amounts in excess thereof. The holders of Series E Preferred shall not have voting rights. Holders of the Series E Preferred shall be entitled to receive, when and as declared by the board of directors, dividends at an annual rate of 9% payable in cash or common stock when declared by the board. Holders of Series E Preferred have a liquidation preference per share equal to $10.00. The liquidation preference was $700,000 as of September 30, 2015. Each share of Series E Preferred, if not previously converted by the holder, will automatically be converted into common stock at the then applicable conversion rate after thirty-six months from the date of purchase. As of September 30, 2015, there were 70,000 shares issued and outstanding with total cash consideration of $700,000, convertible into 3,500,000 shares of the Company’s common stock.

The HGI Series A Convertible Preferred Stock (the “Series A Preferred”) has a par value of $0.001 per share and has a liquidation preference of the greater of (a) the consideration paid to the Company for such shares plus all accrued but unpaid dividends, if any or (b) the per share amount the holders of the Series A Preferred would be entitled to upon conversion, as defined in the Series A Preferred certificate of designation. The liquidation preference was $753,826, of which $194,327 is an accrued (but undeclared) dividend as of September 30, 2015. Holders of the Series A Preferred are entitled to receive, if declared by the board of directors, dividends at a rate of 8% payable in cash or common stock of the Company. The Series A Preferred is convertible into the Company’s common stock at a conversion price of $1.25 per share. The Series A Preferred is convertible, either at the option of the holder or the Company, into shares of the Company’s Series Z Convertible Preferred Stock, and immediately, without any action on the part of the holder, converted into common stock of the Company. The Series A Preferred is redeemable at the option of the Company at $1.80 per share prior to conversion. As of September 30, 2015, there have been 127,001 shares of Series A Preferred converted or redeemed. The Series A Preferred does not have voting rights. The Series A Preferred ranks senior to the following capital stock of the Company: (a) Series B Preferred, and (b) Series C Preferred.

The HGI Series B Convertible Preferred Stock (the “Series B Preferred”) has a par value of $0.001 per share and has a liquidation preference of the greater of (a) the consideration paid to the Company for such shares plus all accrued but unpaid dividends, if any or (b) the per share amount the holders of the Series B Preferred would be entitled to upon conversion. The liquidation preference was $621,553, of which $161,641 is an accrued (but undeclared) dividend as of September 30, 2015. Holders of the Series B Preferred are entitled to receive, if declared by the board of directors, dividends at a rate of 8% payable in cash or common stock of the Company. The Series B Preferred is convertible into the Company’s common stock at a conversion price of $1.74 per share. The Series B Preferred is convertible, either at the option of the holder or the Company, into shares of the Company’s Series Z Convertible Preferred Stock, and immediately, without any action on the part of the holder, converted into common stock of the Company. The Series B Preferred is redeemable at the option of the Company at $2.30 per share prior to conversion. As of September 30, 2015, there have been 270,044 shares of Series B Preferred converted or redeemed. The Series B Preferred does not have voting rights. Series B Preferred ranks senior to the following capital stock of the Company: the Series C Preferred.

The HGI Series C Convertible Preferred Stock (the “Series C Preferred”) has a par value of $0.001 per share and has a liquidation preference of the greater of (a) the consideration paid to the Company for such shares plus all accrued but unpaid dividends, if any or (b) the per share amount the holders of the Series C Preferred would be entitled to upon conversion. The liquidation preference was $418,745, of which $108,745 is an accrued (but undeclared) dividend as of September 30, 2015. Holders of the Series C Preferred are entitled to receive, if declared by the board of directors, dividends at a rate of 8% payable in cash or common stock of the Company. The Series C Preferred is convertible into the Company’s common stock at an initial conversion price of $2.27 per share. The Series C Preferred is convertible, either at the option of the holder or the Company, into shares of the Company’s Series Z Convertible Preferred Stock, and immediately, without any action on the part of the holder, converted into common stock of the Company. The Series C Preferred is redeemable at the option of the Company at $2.75 per share prior to conversion. As of September 30, 2015, there have been 28,000 shares of Series C Preferred converted or redeemed. The Series C Preferred does not have voting rights. Series C Preferred ranks senior to the following capital stock of the Company: None.

The Company had issued and outstanding at September 30, 2015, 372,999 shares of Series A Preferred, 229,956 shares of Series B Preferred, and 124,000 shares of Series C Preferred, all with a par value of $0.001.

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Related Party Transactions

9 Months Ended

Sep. 30, 2015

Related Party Transactions [Abstract]

Related Party Transactions

NOTE 12. RELATED PARTY TRANSACTIONS

For the three and nine months ended September 30, 2015 and 2014, HAM recognized monthly servicing fee revenue totaling $104,153, $334,538, $107,900 and $326,155, respectively, from an entity that is an affiliate of the Company. Further, facilities rent expense discussed in Note 14 was expensed and paid to the same affiliate. Additionally, for the three and nine months ended September 30, 2015, the Company incurred $75,000 and $125,000, respectively, in the write off of notes receivable it invested during the three and nine months ended September 30, 2015 in the same affiliate of the Company. The write offs are included in general and administrative expenses on the consolidated statements of operations and discussed further in section Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations below.

For the three and nine months ended September 30, 2015 and 2014, the Company incurred interest expense to related parties (See Note 8).

For the three and nine months ended September 30, 2015 and 2014, the Company incurred $0, $20,000, $0 and $0, respectively, in commission expense to an entity that is an affiliate of the Company.

For the three and nine months ended September 30, 2015 and 2014, the Company incurred $15,000, $35,000, $0 and $0, respectively, in consulting expense to an entity that is an affiliate of the Company.

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Notes Payable to Related Parties

9 Months Ended

Sep. 30, 2015

Notes Payable To Related Parties

Notes Payable to Related Parties

NOTE 8. NOTES PAYABLE TO RELATED PARTIES

During March 2011, the Company entered into one unsecured promissory note with a related party (a previous company director) in the amount of $250,000 (the “2011 Related Party Note”). The 2011 Related Party Note had a fixed interest amount of $50,000 and a maturity date of July 31, 2011. On September 20, 2011, the 2011 Related Party Note was amended to include the 2011 Related Party Note plus $52,426 of accrued interest for a total note balance of $302,426. The 2011 Related Party Note has a 6% interest rate and is a monthly installment note with final balloon payment at maturity in September 2014. At the time of the filing of these consolidated financial statements, the Company and the related party had not finalized an extended maturity date, and as such the entire $194,701 2011 Related Party Note balance is included in current portion of notes payable to related parties as of September 30, 2015. As of December 31, 2014, the 2011 Related Party Note was $186,154, all of which is included in current portion of notes payable to related parties.

On September 1, 2011, several previous related party notes totaling $370,639 were amended and consolidated (“the 2011 Consolidated Related Party Note”). This note bears interest of 6% and has a maturity date of September 15, 2016. As of December 31, 2014, the 2011 Consolidated Related Party Note balance was $267,569, of which $88,211 is included in current portion of notes payable to related parties. As of September 30, 2015, the 2011 Consolidated Related Party Note balance was $267,569, all of which is included in current portion of notes payable to related parties.

As of December 31, 2014, a Company director had an outstanding advance to the Company of $500,000 for short term capital. As of September 30, 2015, the outstanding advance balance was $500,000. The maturity date for the advance repayment has been extended through September 30, 2016, and as such the entire balance is included in current portion of notes payable to related parties. Through March 31, 2015, the advance accrued interest at a rate of 15%. Effective in April 2015 and through September 30, 2015, the advance began accruing interest at a flat rate of $25,000 per month ($300,000 annualized fixed rate). As part of the extension for repayment of the advance through September 30, 2016, the annualized fixed interest amount will apply.

As of December 31, 2014, the Company’s President and Chief Legal Officer had an outstanding advance balance of $70,000 for short term capital. During the nine months ended September 30, 2015, the Company received advances of $100,000 and made $25,000 in principal advance repayments. As of September 30, 2015, the outstanding advance balance was $145,000. At the time of the filing of these consolidated financial statements, the Company and the President had not finalized a maturity date for the advance repayment, and as such the entire balance is included in current portion of notes payable to related parties. The advance accrued interest at a rate of 15%.

As of December 31, 2014, the Company’s CEO and Director of the Board had an outstanding advance balance of $115,000 for short term capital. As of September 30, 2015, the outstanding advance balance was $115,000. At the time of the filing of these consolidated financial statements, the Company and the CEO had not finalized a maturity date for the advance repayment, and as such the entire balance is included in current portion of notes payable to related parties. The advance accrued interest at a rate of 15%.

As of September 30, 2015, the notes payable to related party balance totaled $1,222,270, all of which is included in current portion of notes payable to related parties in the consolidated financial statements. As of December 31, 2014, the notes payable to related party balance totaled $1,138,723, of which $959,365 is included in current portion of notes payable to related parties in the consolidated financial statements.

The Company incurred $92,619, $215,875, $29,075 and $78,085 of interest expense to directors, officers, and other related parties during the three and nine months ended September 30, 2015 and 2014, respectively. Accrued interest due to directors and other related parties totaled $299,321 at September 30, 2015, all of which is included in accrued and other current liabilities. Accrued interest due to directors and other related parties totaled $166,992 at December 31, 2014, all of which is included in accrued and other current liabilities.

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Property, Equipment and Software

9 Months Ended

Sep. 30, 2015

Property Equipment And Software

Property, Equipment and Software

NOTE 6. PROPERTY, EQUIPMENT AND SOFTWARE

Property, equipment and software consist of the following as of September 30, 2015 and December 31, 2014, respectively:

Computers and purchased software	$	147,800		$	158,899
Furniture and equipment		203,427			203,427
		351,227			362,326
Less: accumulated depreciation		(298,394	)		(291,800	)
	$	52,833		$	70,526

Depreciation totaled $5,728, $17,693, $8,899 and $37,558 for the three and nine months ended September 30, 2015 and 2014, respectively. The Company retired $11,099 of fully depreciated assets during the nine months ended September 30, 2015, and as such there was no financial statement impact from the retired assets.

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Accrued and Other Liabilities

9 Months Ended

Sep. 30, 2015

Accrued And Other Liabilities

Accrued and Other Liabilities

NOTE 7. ACCRUED AND OTHER LIABILITIES

The Company had $1,941,950 in accrued liabilities at September 30, 2015. Included in this accrual is $539,565 in accrued interest ($240,244 of this balance is related to interest on the secured asset promissory note discussed in more detail in Note 11). The accrual also includes $659,754 in deferred compensation and $729,505 in variable wages payable and $13,126 in other. The Company had $915,900 in accrued liabilities at December 31, 2014. Included in this accrual is $392,756 in accrued interest ($223,987 of this balance is related to interest on the secured asset promissory note discussed in more detail in Note 12) and $523,144 in deferred compensation to several senior management personnel.

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Note Payable

9 Months Ended

Sep. 30, 2015

Notes Payable [Abstract]

Note Payable

NOTE 9. NOTE PAYABLE

In October 2013, the Company entered into a senior unsecured convertible promissory note agreement of $1,500,000. The terms of the note include an interest rate of 15% with a maturity date of October 10, 2016. The Company, although not required, is entitled to capitalize any accrued interest into the outstanding principal balance of the note up until maturity. At the maturity date, all unpaid principal and accrued interest is due. As part of the promissory note, the Company was required to pay origination fees and expenses associated with this note agreement (discussed in Other Assets Note 2), pay the subordinated debt originated in January 2010, pay $375,000 to a related party note held by a director, with the remaining use of proceeds for general corporate purposes including payment of deferred compensation to several management personnel. Additionally, the noteholder has the right, but not the obligation, to convert up to $1,000,000 of the principal balance of the note into common shares of the Company. The $1,000,000 maximum conversion ratio would entitle the noteholder to a maximum total of 10% of the then outstanding common stock of the Company, calculated on a fully diluted basis. Any conversion of the principal amount of this note into common stock would effectively lower the outstanding principal amount of the note. As of September 30, 2015, the note payable balance was $2,021,009, which includes capitalized interest of $521,009. As of December 31, 2014, the note payable balance was $1,805,000, which includes capitalized interest of $305,000.

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Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Client service plan term		12 months
Boarding and initial asset management services performance period		first 30-60 days
Potentially dilutive convertible preferred stock		4,623,959	4,518,626
Shares not included in dilutive weighted average shares outstanding (in shares)	4,623,959	4,623,959	4,518,626
Deposits and Other Assets balance at end of period	$ 13,333	$ 13,333		$ 23,333
Deferred origination costs, gross	40,000	40,000		40,000
Accumulated amortization of deferred origination costs	$ 26,667	$ 26,667		$ 16,667
Minimum Range
Property and equipment useful lives		3 Years
Maximum Range
Property and equipment useful lives		7 Years
Halo Asset Management
Percentage of accounts receivable balance	32.00%	32.00%		84.00%
Percentage of allowance for doubtful accounts				96.00%
Halo Portfolio Advisors
Percentage of accounts receivable balance	68.00%	68.00%		11.00%
Percentage of allowance for doubtful accounts				4.00%
Halo Group, Inc.
Percentage of accounts receivable balance	0.00%	0.00%		5.00%

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Stock Options (Details Narrative) - $ / shares

9 Months Ended

59 Months Ended

70 Months Ended

Sep. 30, 2015

Sep. 30, 2015

Sep. 30, 2015

Dec. 31, 2014

Dec. 31, 2013

HGI 2007 Stock Plan

Option description

These options (i) vest over a period no greater than two years, (ii) are contingently exercisable upon the occurrence of a specified event as defined by the option agreements, and (iii) expire three months following termination of employment or five years from the date of grant depending on whether or not the options were granted as incentive options or non-qualified options.

Shares authorized under Plan

2,950,000

2,950,000

2,950,000

Option shares exercised during the period

438,300

Stock options outstanding

170,000

170,000

170,000

170,000

681,700

Weighted average remaining contractual life of outstanding options

2 years

Vesting period

2 years

Stock options awarded

2010 Stock Plan

Shares authorized under Plan

7,000,000

7,000,000

7,000,000

Expiration

Jul. 18, 2020

Stock options awarded

20,000

Weighted average exercise price of shares granted during period

$ .34

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2015

Commitments And Contingencies

Commitments and Contingencies

NOTE 14. COMMITMENTS AND CONTINGENCIES

The Company leases very limited office equipment, each under a non-cancelable operating lease providing for minimum monthly rental payments. In relation to its office facilities, the Company has not entered into any additional office lease whereby it is contractually committed. The Company currently pays for its office space on a month to month basis, and will continue to do so for the foreseeable future.

Future minimum rental obligations as of September 30, 2015 are as follows:

Years Ending December 31:
2015	$	1,848
2016		3,696
Total minimum lease commitments	$	5,544

For the three and nine months ended September 30, 2015 and 2014, the Company incurred facilities rent expense totaling $21,780, $65,339, $29,751 and $89,244, respectively.

In the ordinary course of conducting its business, the Company may be subject to loss contingencies including possible disputes or lawsuits. The Company notes the following:

The Company and certain of its affiliates, officers and directors have been named as defendants in an action filed on December 12, 2011 in the 191^st District Court of Dallas County, Texas. The Plaintiffs allege that the Company has misappropriated funds in connection with offerings of securities during 2010 and 2011. The complaint further alleges that Defendants engaged in fraudulent inducement, negligent misrepresentation, fraud, breach of fiduciary duty, negligence, breach of contract, unjust enrichment, conversion, violation of the Texas Securities Act, and civil conspiracy. The Plaintiffs amended their Petition on April 24, 2012 and dropped the conversion and civil conspiracy claims. The action seeks an injunction and a demand for accounting along with damages in the amount of $4,898,157. The Company has taken the position that the Plaintiff’s claims have no merit, and accordingly is defending the matter vigorously. Defendants have filed a general denial of the claims as well as a Motion to Designate Responsible Third Parties whom Defendants believe are responsible for any damages Plaintiffs may have incurred. Defendants have also filed a Motion for Sanctions against the Plaintiffs and their counsel arguing, among other things, that (i) Plaintiffs’ claims are “judicially stopped” from moving forward by virtue of the fact that the same Plaintiffs previously filed suit against separate entities and parties with dramatically opposed and contradicting views and facts; (ii) Plaintiffs have asserted claims against Defendants without any basis in law or fact; and (iii) Plaintiffs have made accusations against Defendants that Plaintiffs know to be false. Additionally, Defendants have filed a no evidence Motion for Summary Judgment which was scheduled to be heard in October of 2012. The Plaintiffs requested and were granted a six month continuance on the hearing of that motion. The Plaintiffs have also filed a Motion to Stay the case pending the outcome of the Company’s lawsuit with the insurance companies which the Company has opposed. Initially the motion to stay was granted and Defendants moved for reconsideration. The parties were alerted that the court had reversed the Stay on appeal. The no evidence Motion for Summary Judgment was heard on August 9, 2013. Prior to the hearing, the Plaintiff’s filed a 3^rd Amended Petition in which they dropped any claim of fraud including fraudulent inducement, fraud, conversion and civil conspiracy and added a new “control person” claim which was not subject to the no evidence Motion for Summary Judgment heard on August 9, 2013. On September 25, 2013, Defendants no evidence Motion for Summary Judgment was granted in its entirety. Defendants subsequently filed a no evidence Motion for Summary Judgment on the final remaining “control person” claim which was heard before the court on October 21, 2013. On December 18, 2013 a final Order Granting Defendant’s Second No-Evidence Motion of Final Summary Judgment was signed. The Plaintiff’s subsequently filed a motion for new trial. Following a hearing, the Plaintiff’s motion for new trial was denied by operation of law. The Plaintiff’s Filed a Notice of Appeal on March 11, 2014. The Plaintiffs have requested multiple extensions to their time to file their brief on the Appeal. After having multiple extensions granted, the Plaintiff’s requested that the Appeals court stay the Appeal pending the outcome of the Company’s approved settlement agreement with the court appointed Receiver for James G. Temme and Stewardship Fund, LLC, appointed by the Federal Court in the Eastern District of Texas. On September 16, 2014 the Sixth Appellate District Court of Appeals of Texas issued an order abating the Plaintiff’s appeal pending a final determination by the federal courts of an order issued by the federal district court in a separate action directing the Plaintiff’s, among others, not to further pursue this separate litigation. For administrative purposes, this case is abated and will be treated as closed. Any party may seek reinstatement by promptly filing a motion with the Sixth Appellate District Court of Appeals of Texas showing that the injunction or order of the federal court no longer restricts pursuit of this litigation and specifying what further action, if any, is required from the Court. As of the date of this filing, Plaintiffs/Appellants have filed a Motion for Involuntary Dismissal with the Court of Appeals for the Sixth District of Texas at Texarkana, Texas asking that the court dismiss the case on the basis that the United States District Court, Eastern District of Texas, Sherman Division entered an order permanently barring all Stewardship Creditors from continuing and/or asserting or prosecuting any claims or causes of action against Halo. Because Appellants in this action fall within the definition of “Stewardship Creditors” they are barred from continuing to pursue this appeal thereby divesting the Court of Appeals for the Sixth District of Texas, Sherman Division, of jurisdiction over this appeal. On November 6, 2015, the court granted the above mentioned Involuntary Motion to Dismiss.

As noted above, the Company, in conjunction with its Directors and Officers insurance carrier, is defending the matter vigorously. Based on the facts alleged and the proceedings to date, the Company believes that the Plaintiffs’ allegations will prove to be false, and that accordingly, it is not probable or reasonably possible that a negative outcome for the Company or the remaining Defendants will occur. As with any action of this type the timing and degree of any effect upon the Company are uncertain. If the outcome of the action is adverse to the Company, it could have a material adverse effect on our business prospects, financial position, and results of operation.

The Company and certain of its affiliates, officers and directors named as defendants in an insurance action filed on April 27, 2012 in the United States District Court for the Northern District of Texas. The Plaintiffs allege that it had no duty to indemnify the Company, its affiliates, officers or directors because the claims set forth in the lawsuit mentioned herein above were not covered by the insurance policy issued by Plaintiff in favor of Defendants. The action sought declaratory judgment that the Plaintiff had no duty to indemnify the Defendants pursuant to the insurance policy that Defendants purchased from Plaintiff. The Company took the position that Plaintiff’s claim had no merit, and defended the matter vigorously. Additionally, Defendants filed a counterclaim against the insurer alleging breach of contract, violation of the Texas Insurance Code and violation of the duty of good faith and fair dealing. On March 12, 2013, Plaintiff and Defendants entered into an agreement whereby Plaintiff’s and Defendant’s claims, are to be dismissed without prejudice while the underlying liability suit in the 191^st District Court of Dallas County proceeds. An Agreed Motion to Dismiss Without Prejudice was filed on March 12, 2013, and the parties are awaiting the court’s entry of the Agreed Order of Dismissal Without Prejudice.

As noted above, the Company has defended this matter vigorously. Based on the status of the litigation, it is not probable or reasonably possible that a negative outcome for the Company or the remaining Defendants will occur. As with any action of this type the timing and degree of any effect upon the Company are uncertain. If the outcome of the action is adverse to the Company, it could have a material adverse effect on our financial position.

The Company and certain of its affiliates, officers and directors have been named as defendants in an action filed on July 19, 2012 in the United States District Court for the Northern District of Texas. The Plaintiff alleges that it has no duty to defend or indemnify the Company, its affiliates, officers or directors because the claims set forth in the lawsuit mentioned herein above are not covered by the insurance policy written by Plaintiff in favor or Defendants. The action seeks declaratory judgment that the Plaintiff has no duty to defend or indemnify the Defendants pursuant to the insurance policy that Defendants purchased from Plaintiff. Initially, the Company took the position that Plaintiff’s claims had no merit, and defended the matter vigorously. Additionally, Defendants filed a counterclaim against the insurer alleging breach of contract, violation of the Texas Insurance Code and violation of the duty of good faith and fair dealing. Plaintiff has filed a Motion for Summary Judgment seeking a judgment that it owes no duty to defend or indemnify Defendants. After careful consideration, Defendants decided not to oppose the Motion for Summary Judgment and a response in opposition was not filed. The Motion for Summary Judgment was granted in part and the remaining matter remains pending before the court.

Based on the current status of the litigation, the Company believes it is not probable or reasonably possible that a negative outcome for the Company or the remaining Defendants will occur. As with any action of this type the timing and degree of any effect upon the Company are uncertain. If the outcome of the action is adverse to the Company, it could have a material adverse effect on our financial position.

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Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2015

Significant Accounting Policies Tables

Allowance for Doubtful Accounts

	Balance at Beginning of Period		Increase in the Provision		Accounts Receivable Write-offs		Balance at End of Period
Nine Months ended September 30, 2015
Allowance for doubtful accounts	$	375,665	$	116	$	375,781	$	0
Year ended December 31, 2014
Allowance for doubtful accounts	$	375,665	$	135	$	135	$	375,665

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Commitments and Contingencies (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Commitments And Contingencies Details Narrative
Facilities rent expense	$ 21,780	$ 29,751	$ 65,339	$ 89,244
Damages sought in legal action			$ 4,898,157

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Notes Payable to Related Parties (Details Narrative) - USD ($)	1 Months Ended		3 Months Ended			9 Months Ended
	Sep. 30, 2011	Mar. 31, 2011	Sep. 30, 2015	Mar. 31, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Note payable			$ 1,222,270			$ 1,222,270		$ 1,138,723
Cash advance from related party						100,000	$ 480,000
Current portion of notes payable			1,222,270			1,222,270		959,365
Interest expense to directors and other related parties			92,619		$ 29,075	215,875	78,085
Accrued interest due to directors and other related parties, current portion			299,321			299,321		166,992
Accrued interest due to directors and other related parties, total			299,321			299,321		166,992
Principal advance repayment during period						25,000	$ 6,117
2011 Related Party Note
Note payable		$ 250,000
Fixed interest amount on note		$ 50,000
Maturity date		Jul. 31, 2011
2011 Amended Related Party Note
Note payable	$ 302,426		194,701			194,701		186,154
Accrued interest	$ 52,426
Note interest rate	6.00%
Maturity date	Sep. 30, 2014
Current portion of notes payable			194,701			194,701		186,154
2011 Consolidated Related Party Note
Note payable	$ 370,639		267,569			267,569		267,569
Note interest rate	6.00%
Maturity date	Sep. 15, 2016
Current portion of notes payable			267,569			267,569		88,211
Director Cash Advance
Note interest rate				15.00%
Maturity date				Sep. 30, 2016
Current portion of notes payable			500,000			$ 500,000		500,000
Monthly interest accrued			25,000
President and Chief Legal Officer Advance
Note interest rate						15.00%
Cash advance from related party						$ 100,000
Current portion of notes payable			145,000			145,000		70,000
Principal advance repayment during period						$ 25,000
CEO and Director of the Board Advance
Note interest rate						15.00%
Current portion of notes payable			$ 115,000			$ 115,000		$ 115,000

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Consolidated Statements of Operations (Parenthetical) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
REVENUE
Revenue from related parties	$ 104,153	$ 107,900	$ 334,538	$ 326,155
OPERATING EXPENSES
General and administrative expenses to related parties	111,780	29,751	245,339	89,244
OTHER INCOME (EXPENSE)
Interest expense to related parties	$ 92,619	$ 29,075	$ 215,875	$ 78,085

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Concentrations of Credit Risk

9 Months Ended

Sep. 30, 2015

Concentrations Of Credit Risk

Concentrations of Credit Risk

NOTE 3. CONCENTRATIONS OF CREDIT RISK

The Company maintains aggregate cash balances, at times, with financial institutions, which are in excess of amounts insured by the Federal Deposit Insurance Corporation (“FDIC”). During the three and nine months ended September 30, 2015, the FDIC insured deposit accounts up to $250,000. At September 30, 2015, the Company’s cash accounts were all less than the $250,000 FDIC insured amount and as such were insured in full.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable.

In the normal course of business, the Company extends unsecured credit to its customers. Because of the credit risk involved, management has provided an allowance for doubtful accounts which reflects its estimate of amounts which will eventually become uncollectible. In the event of complete non-performance by the Company’s customers, the maximum exposure to the Company is the outstanding accounts receivable balance at the date of non-performance.

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Operating Segments (Tables)

9 Months Ended

Sep. 30, 2015

Operating Segments Tables

Operating Segment Reporting

Operating Segments	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Revenue:
Halo Asset Management	$	425,429		$	219,125		$	942,148		$	1,101,544
Halo Portfolio Advisors		569,531			336,341			1,947,583			874,115
Other		30,000			—			133,894			—
Net revenue	$	1,024,960		$	555,466		$	3,023,625		$	1,975,659
Operating income (loss):
Halo Asset Management	$	366,583		$	70,014		$	682,695		$	502,426
Halo Portfolio Advisors		212,155			43,833			728,450			129,484
Other		—			—			—			—
Less: Corporate expenses (a)		(609,159	)		(522,573	)		(2,714,941	)		(1,592,792	)
Operating income (loss):	$	(30,421	)	$	(408,726	)	$	(1,303,796	)	$	(960,882	)

a. Corporate expenses include salaries, benefits and other expenses, including rent and general and administrative expenses, related to corporate office overhead and functions that benefit all operating segments. Corporate expenses also include interest expense. Corporate expenses are expenses that the Company does not directly allocate to any segment above. Allocating these indirect expenses to operating segments would require an imprecise allocation methodology. Further, there are no material amounts that are the elimination or reversal of transactions between the above reportable operating segments.

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Property, Equipment and Software (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Property Equipment And Software Details
Computers and purchased software	$ 147,800	$ 158,899
Furniture and equipment	203,427	203,427
Property, equipment and software, gross	351,227	362,326
Less: accumulated depreciation	(298,394)	(291,800)
Property, equipment and software, net	$ 52,833	$ 70,526

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Income Taxes

9 Months Ended

Sep. 30, 2015

Income Taxes

Income Taxes

NOTE 13. INCOME TAXES

For the three and nine months ended September 30, 2015 and 2014, the effective tax rates of 0%, -2%, -1% and -3%, respectively, vary from the U.S. federal statutory rate primarily due to state income taxes, net losses, certain non-deductible expenses and an increase in the valuation allowance associated with the net operating loss carryforwards. Our deferred tax assets related to net operating loss carryforwards remain fully reserved due to uncertainty of utilization of those assets.

Deferred tax assets and liabilities are computed by applying the effective U.S. federal and state income tax rate to the gross amounts of temporary differences and other tax attributes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. At September 30, 2015, the Company believed it was more likely than not that future tax benefits from net operating loss carry-forwards and other deferred tax assets would not be realizable through generation of future taxable income and are fully reserved.

The Company has net operating loss (“NOL”) carry-forwards of approximately $6,700,000 available for federal income tax purposes, which expire from 2024 to 2034. Separately, because of the changes in ownership that occurred on June 30, 2004 and September 30, 2009, prior to GVC merging with HCI, and based on the Section 382 Limitation calculation, the Company will be allowed approximately $6,500 per year of GVC Venture Corp.’s federal NOLs generated prior to June 30, 2004 until they would otherwise expire. The Company would also be allowed approximately $159,000 per year of GVC Venture Corp.’s federal NOLs generated between June 30, 2004 and September 30, 2009 until they would otherwise expire.