Global Arena Holding, Inc. - Annual Report: 2014 (Form 10-K)

e)  Performance graph.  Not applicable.

f)  Sale of unregistered securities.  

Common Shares

On December 31, 2012, GAHI and GAIM entered into a securities purchase agreement with FireRock, pursuant to which FireRock purchased 714,286 shares of the Company’s common stock and membership interests representing 25% of GAIM for gross proceeds of $250,000.  On November 25, 2013, GAHI agreed with FireRock to repurchase for $250,000 the 714,286 shares of the Company’s common stock and membership interests representing 25% of GAIM. The 714,286 shares repurchased were included in treasury stock at cost in the consolidated financial statements.

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From March 31, 2013 to June 12, 2013, the Company and certain convertible debt holders entered into agreements to amend the notes to set the conversion price of the notes to $0.25 per share, and the holders elected to convert the principal and interest into 802,042 shares of common stock.

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

During the year ended December 31, 2013, under the private placement offering as described above, the Company sold 9.5 net units consisting of 1,900,000 shares of common stock with 950,000 warrants for net proceeds of $475,000. The Company is not selling the remaining units.

On December 5, 2013, the Company issued 200,000 shares of common stock at $0.49 per share to a consultant pursuant to a consulting agreement.  The Company recorded a charge of $98,000.

On March 13, 2015, the Company issued a six (6) month unsecured convertible promissory note in the principal amount of $100,000 at a stated interest rate of 12% per annum and a conversion price $0.25. The Company also issued 714,286 common shares of its treasury stock. In addition, the Company granted warrants to purchase 400,000 shares of common stock at an exercise price of $0.25 per share.

Warrants

On January 2, 2013, GAHI granted to a consultant of GAIM, warrants to purchase 1,000,000 shares of common stock. The warrants are exercisable at $0.25 per common share and expire on January 1, 2021.  400,000 warrants vested immediately upon signing the independent contractor agreement, with a fair value of approximately $91,000 at the grant date recognized in the year ended December 31, 2013. 50,000 warrants vest for every $25,000,000 assets under management (“AUM”) (up to 600,000 warrants for $300,000,000 AUM) brought into the Company. No additional warrants have vested and the consultant no longer works for GAIM.

On April 30, 2013, the Company, Daniel D. Rubino, Robert M. Pickus, and George C. Dolatly (collectively, the “GCA Principals”) and GCA Ventures, LLC (“GCA”) entered into a management and investor rights agreement.  Pursuant to the agreement, the Company will receive financial and management consulting services from GCA and the

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GCA Principals in return for warrants to purchase a total of 2,500,000 common shares, at an exercise price of $0.25 per share, which will be issued in three separate tranches. The first tranche of one million warrants have been issued and vested concurrently with the signing.  The second and third tranche of 750,000 warrants were issued and vested six months and one year after the date of the agreement, respectively.  Each tranche of warrants is to expire seven years after issuance. The fair value of approximately $891,500 at the grant date was recognized over the vesting period.   

On November 11, 2014, the Company entered into a consulting agreement with a consultant for the identification, analysis and due diligence of investment opportunities in either the technology or digital media business. In consideration for the services to be provided, the Company granted the consultant 2,500,000 warrants to acquire 2,500,000 the Company’s common stock at 0.25 per share and expire on November 11, 2017. The warrants vested immediately upon signing the independent contractor agreement with a fair value of approximately $374,000 at the grant date recognized in the year ended December 31, 2014.

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The following tables summarize the warrants activities:

	Shares			Weighted Average   Exercise Price		Weighted- Average Exercisable		Aggregate Intrinsic Value
Outstanding at December 31, 2012		10,604,173		$  0.33		10,604,173		$                  -
Granted		11,267,314		0.25		11,267,314		-
Exercised		-		-		-		-
Cancelled and surrendered		-		-		-		-
Outstanding at December 31, 2013		21,871,487		0.30		21,871,487		-
Granted		16,852,989	0.18		16,852,989				-
Expired		2,812,630	0.49		2,812,630				-
Cancelled and surrendered		-	-		-				-
Outstanding at December 31, 2014		35,911,846	$  0.24		35,911,846				$        426,580
Exercise Price		Average Outstanding	Average Contractual Life		Average Exercise price		Warrants Exercisable
0.001 $0.25 to $0.75		5,399,742 30,512,104	1.25 3.47		$   0.001 $     0.29		5,399,742 30,512,104
		35,911,846	-		-		35,311,846

     Item 5(b)  Use of Proceeds.  Not applicable.

    Item 5(c)  Purchases of Equity Securities by the issuer and affiliated purchasers.  Not applicable.

ITEM 6.  SELECTED FINANCIAL DATA

Not applicable to a smaller reporting company.

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ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking Statements

Statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operation, as well as in certain other parts of this Annual report on Form 10-K (as well as information included in oral statements or other written statements made or to be made by the Company) that look forward in time, are forward-looking statements made pursuant to the safe harbor provisions of the Private Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, expectations, predictions, and assumptions and other statements that are other than statements of historical facts. Although The Company believes such forward-looking statements are reasonable, it can give no assurance that any forward-looking statements will prove to be correct.  Such forward-looking statements are subject to, and are qualified by, known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by those statements. These risks, uncertainties and other factors include, but are not limited to the Company’s ability to estimate the impact of competition and of industry consolidation and risks, uncertainties and other factors set forth in the Company’s filings with the Securities and Exchange Commission, including without limitation to this Annual Report on Form 10-K.

GAHI undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Form 10-K.

Critical Accounting Policies

The Company’s financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by management's applications of accounting policies. Critical accounting policies for the Company include revenue recognition, valuation of convertible promissory notes and related warrants, stock and stock option compensation, estimates, and derivative financial instruments.

The financial statements of the Company and subsidiaries include the accounts of GAHI and its wholly-owned subsidiaries and majority owned subsidiaries, GAIM, GACOM, Lillybell, MGA from January 29, 2013, the date of acquisition, and GATA through March 7, 2013, the date of sale. The operations of GACC are included through August 5, 2014, the date of sale and have been reflected as discontinued operations.  All significant intercompany accounts and transactions have been eliminated in consolidation.  

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Revenue Recognition

The Company’s revenue recognition policies comply with SEC revenue recognition rules and FASB ASC 605-10-S99.  The Company earns revenues through various services it provides to its clients.  Advisory fees are on a contractual basis with the fee stipulated in the contract and are recognized based on the terms of the contract during the period the service is provided. Insurance commissions are recognized at the later of the billing or the effective date of the related insurance policies, net of an allowance for estimated policy cancellations.

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

Goodwill

In accordance with FASB ASC 805 “Business Combinations” (“ASC 805”), the Company recognized at the acquisition date and measured at their fair values, the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired company.  Goodwill represents the excess of purchase price over the fair value of net assets acquired in business combinations and is not amortized in accordance with FASB ASC 350, “Intangibles – Goodwill and Other” (“ASC 350”). ASC 350 addresses the amortization of intangible assets with defined lives and the impairment testing and recognition for goodwill and indefinite-lived intangible assets. The Company is required to evaluate the carrying value of its goodwill for potential impairment on an annual basis or more frequently if indicators arise. While the Company may use a variety of methods to estimate fair value for impairment testing, its primary methods are discounted cash flows and a market based analysis. When appropriate, the carrying value of these assets is reduced to fair value.   

Convertible Debt

Convertible debt is accounted for under FASB ASC 470, “Debt – Debt with Conversion and Other Options.”  The Company records a beneficial conversion feature (“BCF”) related to the issuance of convertible debt that has conversion features at fixed or adjustable rates that are in-the-money when issued and records the fair value of any warrants issued with those instruments. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds to the warrants and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic value of the conversion features, both of which are credited to additional paid-in-capital.  The Company calculates the fair value of warrants issued with the convertible instruments using the Black-Scholes valuation method, using the same assumptions used for valuing stock options, except that the contractual life of the warrant is used.  Under these guidelines, the Company allocates the value of the proceeds received from a convertible

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debt transaction between the conversion feature and any other detachable instruments (such as warrants) on a relative fair value basis.  The allocated fair value is recorded as a debt discount and is accreted over the expected term of the convertible debt as interest expense.  

The Company accounts for modifications of its Embedded Conversion Features (ECF’s) in accordance with the FASB ASC 470-50-40-12 and 40-15 through 16 which requires the modification of a convertible debt instrument that changes the fair value of an embedded conversion feature and the subsequent recognition of interest expense or the associated debt instrument when the modification does not result in a debt extinguishment pursuant to FASB ASC 470-50-40/55.

Derivative Financial Instruments

In connection with the issuance of certain warrants that include price protection reset or anti-dilution provisions, the Company determined that these provision features are embedded derivative instruments pursuant to FASB ASC 815 “Derivatives and Hedging.” These embedded derivatives are adjusted to fair value at each balance sheet date with the change recognized in operations.

Stock-Based Compensation

The fair value of stock options and stock warrants issued to third party consultants and to employees, officers and directors is recorded in accordance with the measurement and recognition criteria of FASB ASC 505-50, “Equity-Based Payments to Non-Employees” and FASB ASC 718, “Compensation – Stock Based Compensation,” respectively.

The options and warrants are valued using the Black-Scholes valuation method. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables.  These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected stock option and warrant exercise behaviors.

Because the Company’s stock options and warrants have characteristics different from those of its traded stock, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of such stock options and warrants.

Recent Accounting Pronouncements

Recent accounting pronouncements issued by the FASB and the SEC did not have, are not believed by management to have, a material impact, or currently evaluating the potential impact of updated authoritative guidance on its consolidated financial statements on the Company’s present or future consolidated financial statements.

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Trends and Uncertainties

The Company is a financial services firm that services the financial community through its subsidiaries. Demand for the Company’s services are dependent on general economic conditions, which are cyclical in nature.  Because a major portion of our activities are the receipt of revenues from financial services, our business operations may be adversely affected by competition, prolonged recessionary periods and other economic and political situations.

The Company has generated recurring losses and cash flow deficits from continuing operations since inception and has had to continually borrow to continue operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The continued operations of the Company are dependent upon its ability to raise additional capital, obtain additional financing and/or generate positive cash flows from operations.  As further described in “Liquidity and Capital Resources”, management believes that it will be successful in obtaining additional financing, from which the proceeds will be primarily used to execute its operating plan. The Company plans to use its available cash to continue the development and execution of its business plan and continue its business.  However, the Company can give no assurance that such financing will be available or on terms acceptable to the Company, or at all.  Should the Company not be successful in obtaining the necessary financing to fund its operations, and ultimately achieve adequate profitability and cash flows from operations, the Company would need to curtail certain or all of its operating activities.  

There are no material commitments for capital expenditures at this time. There are no trends, events or uncertainties that have had or are reasonably expected to have a material impact on the net sales or revenues or income from continuing operations. There are no significant elements of income or loss that do not arise from our continuing operations except for the fair value change on derivative financial instruments and settlement on arbitration.

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

The rapid advances in computing and telecommunications technology over the past several decades have brought with them increasingly sophisticated methods of delivering financial services through electronic channels. Along with these advances, though, have come risks regarding the integrity and privacy of data, and these risks apply to financial institutions, probably more than any other industry, falling into the general classification of cybersecurity. While it is not possible for anyone to give an absolute guarantee that data will not be compromised, the Company believes that its third-party service providers provide a reasonable assurance that the financial and personal data that it holds are secure.

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Liquidity and Capital Resources

As of December 31, 2014, the Company has an accumulated deficit of $12,689,981 and a working capital deficiency of $2,313,385.  Our ability to continue as a going concern depends upon whether we can ultimately attain profitable operations, generate sufficient cash flow to meet our obligations, and obtain additional financing as needed.

During the year ended December 31, 2014, the Company had a loss from continuing operations of $2,617,133, net loss of $784,535, and net cash used in its operating activities was $1,962,320.  Comparatively, during the year ended December 31, 2013, the Company had a net loss from continuing operations of $4,477,313, net loss of $4,018,397 and net cash used in its operating activities amounted to $1,010,705.

For the year ended December 31, 2014, we received $2,000,000 as proceeds from the sale of GACC, resulting in net cash provided by investing activities of $2,000,000 for the period.

For the year ended December 31, 2013, we received $35,714 as proceeds from the sale of 25% interest in GAIM and $495 as proceeds from the sale of GATA.  As a result, we had net cash provided by investing activities of $36,209 for the period.

For the year ended December 31, 2014, the Company, using proceeds of $1,464,987 from the issuance of promissory notes with warrants and with available cash from the sale of GACC, was able to pay down convertible debt of $1,904,000 and advances from related parties of $7,300, resulting in net cash used in financing activities of $446,313 for the year ended December 31, 2014.

For the year ended December 31, 2013, the Company received proceeds of $475,000 from the issuance of common stock and warrants, and collected $89,286 of other receivables in connection with the issuance of common stock and warrants, proceeds of $630,000 from convertible promissory notes, repaid $150,000 of convertible promissory notes and received advances of $16,878 from related parties, resulting in net cash provided by financing activities of $1,061,164 for the year ended December 31, 2013.

In December 2014, the Company sold and issued convertible promissory notes in the principal aggregate amount of $500,000 at a stated interest rate of 12% per annum.  In addition, the Company granted warrants to purchase 6,200,000 shares of common stock at an exercise price of $0.25 per share.  The warrants have a life of 3 years and were fully vested on the date of the grant.  In addition, the warrant agreement has a cashless exercise provision.   The convertible promissory notes are to mature on June 30, 2015.  The holders of the notes are entitled to convert all or a portion of the convertible notes plus any unpaid interest, at the lender’s sole option, into shares of common stock at a conversion price of $0.25 per share.  

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The gross proceeds from the sale of the notes of $500,000 was recorded net of a discount of $298,000.  The debt discount was comprised of $288,000 for the relative fair value of the warrants and $10,000 for the beneficial conversion feature of the notes. The debt discount will be accreted as additional interest expense ratably over the term of the convertible notes.

In November 2014, the Company issued two convertible promissory notes in the principal aggregate amount of $60,000 at a stated interest rate of 12% per annum. The convertible promissory notes are to mature in February 2015 and subsequently extended to April 30, 2015.

On February 10, 2015, the Company issued an unsecured convertible promissory note in the principal amount of $75,000 at a stated interest rate of 12% per annum. The convertible note matures on August 30, 2015. The lender has the right to convert all or a portion of the convertible note plus any unpaid interest into shares at $0.25 per share.  Also, the Company issued a warrant to purchase 930,000 shares of common stock at $0.25 per share for a period of three years from the date of the convertible note.

Management believed the sale of Global Arena Capital Corp, provided it with the ability to reduce the Company’s debt burden, and enhance shareholder value. The sale also gave Management the ability to refocus its future broker dealer operations away from retail sales and towards Institutional Sales and Investment Banking.

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

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

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

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Management believes that it will be able to continue its operations and further advance its acquisition plans. However, management cannot give assurances that such plans will materialize and be successful in the near term or on terms advantageous to the Company, or at all. Should the Company not be successful in its new business plans or obtain additional financing, the Company would need to curtail certain or all of its operating activities.

The Company’s continuation as a going concern is dependent upon its ability to ultimately attain profitable operations, generate sufficient cash flow to meet its obligations, and obtain additional financing as may be required. Our auditors have included a “going concern” modification in their auditors’ report dated April 15, 2015.  A “going concern” modification may make it more difficult for us to raise funds when needed. The outcome of this uncertainty cannot presently be determined.

The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. There can be no assurance that management will be successful in implementing its business plan or that the successful implementation of such business plan will actually improve our operating results

Results of Operations for the Year Ended December 31, 2014 compared to the Year Ended December 31, 2013

Revenues from continuing operations for the year ended December 31, 2014 consisted of commissions and other revenue of $28,416 compared to $260,544 for the prior year ended December 31, 2013, a decrease of $232,128 due to decreased activity in commodities.  

Salaries and benefits and stock-based compensation from continuing operations totaled $1,375,822 for the year ended December 31, 2014 compared to $1,881,354 for the prior year ended December 31, 2013, a decrease of $505,532 due to the reduced number of employees principally in the commodities group and certain warrants issued for consulting services which were fully amortized in the current year.

Professional fees from continuing operations for the year ended December 31, 2014 amounted to $645,436 compared to $603,554 for the prior year ended December 31, 2013, an increase of $41,882 due to the increase of consulting fee.

For the year ended December 31, 2014, we had occupancy expenses from continuing operations of $100,244, business development expenses of $382,982, regulatory fees of $3,924 and office and other expenses of $152,535, totaling $639,685. Comparatively, for the year ended December 31, 2013, we had occupancy expenses of $121,126, business development expenses of $350,953, regulatory fees of $69,028, commissions of $71,285 and office and other expenses of $140,240 totaling $752,632.  Decrease in these expenses

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was $112,947 principally due to the decrease in occupancy cost of $20,882 due to our move to reduced office space resulting lower lease cost; regulatory fees decreased by $65,104 because the prior year included $50,000 in penalties related to GACOM; commissions decreased by $71,285 due to the inactive operation for GACOM in 2014; offset by increase in business development by $32,029 and increase in office and other expenses by $12,295 due to our efforts to increase business in investment advisory services.

Total operating expenses for the year ended December 31, 2014 were $2,660,943 compared to $3,237,540 for the year ended December 31, 2013, a decrease of $576,597 principally due to decrease in salaries and benefits and stock based compensation as discussed above.

For the year ended December 31, 2014, other income totaled $15,394 compared to other loss of $1,500,317 for the prior year ended December 31, 2013, an increase of $1,515,711 which was principally due to the increase in the fair value of a derivative liability as a result of the decrease in our stock price.  Interest expense, net in other income for the year ended December 31, 2014 was $1,156,720 compared to $780,550 for the prior year ended December 31, 2013, increased by $376,170, principally due to  more amortization for debt discount in 2014 compared to 2013.

Income from discontinued operations for the year ended December 31, 2014 amounted to $1,832,598 compared to $458,916 for the prior year ended December 31, 2013, an increase of $1,373,682 principally due to the gain on the sale of GACC.  GACC was sold on August 5, 2014 and resulted in a gain on disposition of $1,660,900 for the year ended December 31, 2014.

Disclosure of Contractual Obligations

Payments due by period

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable

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ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Global Arena Holding, Inc. and Subsidiaries

Index to the Financial Statements

		Page
Report of Independent Registered Public Accounting Firm		29
Consolidated Balance Sheets at December 31, 2014 and 2013		30
Consolidated Statements of Operations for the years ended December 31, 2014 and 2013		32
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 31, 2014 and 2013		33
Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013		34
Notes to Consolidated Financial Statements		36

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Global Arena Holding Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Global Arena Holding Inc. and Subsidiaries (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, changes in stockholders’ deficiency, and cash flows for each of the years in the two year period ended December 31, 2014.  The Company’s management is responsible for these consolidated financial statements.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.  

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Global Arena Holding Inc. and Subsidiaries as of December 31, 2014 and 2013, and the consolidated results of their operations and their cash flows for each of the years in the two year period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements as of and for the years ended December 31, 2014 and 2013 have been prepared assuming that the Company will continue as a going concern.  As more fully described in Note 1 to the financial statements, the Company has suffered recurring losses since inception, experiences a deficiency of cash flow from operations, sold its principal operating business, is currently in default of certain outstanding notes, and has a stockholders’ deficiency. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 1.  The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. Our opinion is not modified with respect to this matter.

/s/Wei Wei & Co. LLP

Flushing, New York

April 15, 2015

29

GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2014 AND 2013

(Continued on next page)

30

GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2014 AND 2013

(continued from previous page)

See report of independent registered public accounting firm and notes to consolidated financial statements

31

GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

See report of independent registered public accounting firm and notes to consolidated financial statements.

32

GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIENCY) FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

See report of independent registered public accounting firm and notes to consolidated financial statements.

33

GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

(Continued on next page)

34

GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

(Continued from previous page)

See report of independent registered public accounting firm and notes to consolidated financial statements.

35

GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

1.  ORGANIZATION

Description of the Business

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

Global Arena Investment Management LLC (“GAIM”), a wholly owned subsidiary, provides investment advisory services to its clients.  GAIM was formally registered with the SEC as an investment advisor, and  formally cleared all of its business through Fidelity Advisors (“Fidelity”), its correspondent broker.

Sale of Global Arena Capital Corp.

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

On August 5, 2014, GAHI entered into an Agreement with PMC Capital, LLC (“PMC Capital”) and Barbara Desiderio pursuant to which GAHI agreed to sell its 100% interest in GACC to PMC Capital, subject to the approval from FINRA.  The cash consideration for the common stock was $2,000,000 and the forgiveness of the intercompany amounts payable by GAHI and its subsidiaries to GACC of $1,330,877.

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

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

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

Revenue and operating expenses of the discontinued operations for the period through August 7, 2014 and for the year ended December 31, 2013 are as follows:

	For the Period Ended August 7, 2014	For the Year Ended December 31, 2013
Revenues
Commissions and other	$   18,455,830	$10,864,301
Total revenues	18,455,830	10,864,301
Operating expenses
Commissions	15,481,994	8,124,205
Salaries and benefits	571,631	611,797
Occupancy	61,255	101,162
Business development	25,387	51,711
Professional fees	477,589	252,448
Legal settlement	650,000	-
Clearing and operations	881,268	980,109
Communication and data	5,439	45,613
Regulatory fees	64,135	160,714
Office and other	58,789	71,501
Total operating expenses	18,277,487	10,399,260
Income from operations	178,343	465,041
Income taxes	6,645	6,125
Income from discontinued operations	$      171,698	$     458,916

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Acquisition of MGA International Brokerage LLC

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

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

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

Sale of Global Arena Trading Advisors, LLC

On March 7, 2013, the Company sold its 100% interest in GATA to Courtney Smith for $500.  The related loss of $2,353 was included in the accompanying statement of operations for the year ended December 31, 2013.  In accordance with SEC Regulation S-X Rule 3-05, GATA was not a significant subsidiary as of the disposal date.  Therefore, no pro forma financial information related to the disposal was required to be presented in accordance with SEC Regulation S-X Rule 11-01. GATA had minimal activities and did not require disclosure as a discontinued operation.

Going Concern

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates the continuation of the Company as a going concern. The Company has generated recurring losses and cash flow deficits from its continuing operations since inception and has had to continually borrow to continue operating. In addition, with the sale of GACC, which was the Company’s principal operating business, the Company’s continuing operations are insufficient to support its ongoing activities. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The continued operations of the Company are dependent upon its ability to raise additional capital, obtain additional financing and/or acquire or develop a business that generates

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sufficient positive cash flows from operations.  In November, 2014, management also entered into a non-binding letter of intent to purchase a company that provides comprehensive technology-enabled election services principally for organized labor, and whose chairman is the father of the Company’s Chief Executive Officer. The management of the Company is also in negotiation for other companies they believe will be beneficial to the Company’s operations. Management also has plans to launch a conservative global macro fund and is in discussion to hire a fund manager. Subsequent to year end through March 31, 2015, the Company raised an additional $175,000 from the issuance of convertible promissory notes. Management is hopeful that with its new focus on business operations and their ability to raise additional funds that the Company should be able to continue as a going concern.

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

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Presentation

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

Revenue Recognition

The Company’s revenue recognition policies comply with SEC revenue recognition rules and the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605-10-S99.  The Company earns revenues through various services it provides to its clients.  Advisory fees are on a contractual basis with the fee stipulated in the contract and are recognized based on the terms of the contract during the period the service is provided.  Insurance commissions are recognized at the later of the billing or the effective date of the related insurance policies, net of an allowance for estimated policy cancellations.

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Customer security transactions and the related commission income and expenses were recorded as of the trade date.  GACC generally acted as an agent in executing customer orders to buy or sell listed and over-the-counter securities in which it did not make a market, and charged commissions based on the services the Company provided to its customers.

Use of Estimates

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

Fair Value of Financial Instruments

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

Goodwill

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

Cash and Cash Equivalents

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

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Deposits with Clearing Organizations

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

Property and Equipment

Property and equipment is recorded at cost.  Depreciation is calculated using the straight-line method based on the estimated useful lives of the related assets, which range from three to five years.  Maintenance and repairs are charged to expense as incurred; costs of major additions and betterments that extend the useful life of the asset are capitalized. When assets are retired or otherwise disposed of, the costs and related accumulated depreciation or amortization are removed from the accounts and any gain or loss on disposal is recognized.

Impairment of Long-Lived Assets

The Company assesses the recoverability of its long lived assets when there are indications that the assets might be impaired.  When evaluating assets for potential impairment, the Company first compares the carrying amount of the asset to the asset’s estimated future cash flows (undiscounted and without interest charges).  If the estimated future cash flows used in this analysis are less than the carrying amount of the asset, an impairment loss calculation is prepared. The impairment loss calculation compares the carrying amount of the asset to the asset’s estimated future cash flows (discounted and with interest charges).

If the carrying amount exceeds the asset’s estimated future cash flows (discounted and with interest charges), the loss is allocated to the long-lived assets of the group on a pro rata basis using the relative carrying amounts of those assets.  Based on its assessments, the Company did not incur any impairment charges for the year ended December 31, 2014 and 2013.

Convertible Debt

Convertible debt is accounted for under FASB ASC 470, “Debt – Debt with Conversion and Other Options.”  The Company records a beneficial conversion feature (“BCF”) related to the issuance of convertible debt that has conversion features at fixed or adjustable rates that are in-the-money when issued and records the fair value of any warrants issued with those instruments. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds to the warrants and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic value of the conversion features, both of which are credited to additional paid-in capital.  The

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Company calculates the fair value of warrants issued with the convertible instruments using the Black-Scholes valuation method, using the same assumptions used for valuing stock options, except that the contractual life of the warrant is used.  Under these guidelines, the Company allocates the value of the proceeds received from a convertible debt transaction between the conversion feature and any other detachable instruments (such as warrants) on a relative fair value basis.  The allocated fair value of the BCF and warrants is recorded as a debt discount and is accreted over the expected term of the convertible debt as interest expense.  

The Company accounts for modifications of its Embedded Conversion Features (ECF’s) in accordance with the FASB ASC 470-50-40-12 and 40-15-16 which requires the modification of a convertible debt instrument that changes the fair value of an embedded conversion feature and the subsequent recognition of interest expense or the associated debt instrument when the modification does not result in a debt extinguishment pursuant to FASB ASC 470-50-40/55.

Derivative Financial Instruments

In connection with the issuance of certain warrants that include price protection, reset or anti-dilution provisions, the Company determined that these provision features are embedded derivative instruments pursuant to FASB ASC 815 “Derivatives and Hedging.”  These embedded derivatives are adjusted to fair value at each balance sheet date with the change recognized in operations.

Advertising Costs

Advertising costs are expensed as incurred.  Advertising costs, which are included in business development expenses, were deemed to be de minimus for the years ended December 31, 2014 and 2013.

Stock-Based Compensation

The fair value of stock options and stock warrants issued to third party consultants and to employees, officers and directors are recorded in accordance with the measurement and recognition criteria of FASB ASC 505-50, “Equity-Based Payments to Non-Employees” and FASB ASC 718, “Compensation – Stock Based Compensation,” respectively.

The options and warrants are valued using the Black-Scholes valuation method. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables.  These subjective variables include, but are not limited to the Company’s expected stock price volatility over the expected term of the awards, and actual and projected stock option and warrant exercise behaviors.

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Because the Company’s stock options and warrants have characteristics different from those of its traded stock, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of such stock options and warrants.

Noncontrolling Interests

The Company accounts for its less than 100% interest in consolidated subsidiaries in accordance with FASB ASC 810, “Consolidation,” and accordingly the Company presents noncontrolling interests as a component of equity on its consolidated balance sheets and reports the noncontrolling interests’ share of net income or loss under the heading “net income (loss) attributable to noncontrolling interests” in the consolidated statements of operations.

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes,” which requires the recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes. Deferred tax assets and liabilities represent the future tax consequences for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled.  Deferred taxes are also recognized for operating losses that are available to offset future taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.  As of December 31, 2014 and 2013, the Company had deferred tax assets of approximately $4,626,000 and $3,787,000 for continuing operation, respectively, for net operating loss carryforwards, which were fully reserved by a valuation allowance due to the significant uncertainty with respect to their future realization.

The Company follows the provisions of FASB ASC 740-10-25, which prescribes a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or expected to be taken in income tax returns.  FASB ASC 740-10-25 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with tax positions.

Reclassifications

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

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3.  RECENTLY ISSUED ACCOUNTING STANDARDS

In January 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ASU 2015-01 – Income Statement – Extraordinary and Unusual Items (Subtopic 225-20). This ASU addressed the simplification of income statement presentation by eliminating the concept of extraordinary items. The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to the users of financial statements. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not expect a material impact on its consolidated financial statements.

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

In June 2014, the FASB issued ASU 2014-10, “Development Stage Entities: Elimination of Certain Financial Reporting Requirements”, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.  This ASU amends FASB ASC Topic 915, Development Stage Entities, to remove all incremental financial reporting requirements for development stage entities, thereby improving financial reporting by reducing the cost and complexity associated with providing that information. For public business entities, these amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein.  Earlier implementation is allowed for any period where the reporting entity’s annual or interim financial statements have not yet been made available for issuance.  This accounting standard update is not expected to have a material impact on the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, which supersedes the revenue recognition requirements in ASC 605, “Revenue Recognition”. The core principle of this updated guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new rule also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in

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judgments and assets recognized from costs incurred to obtain or fulfill a contract. This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Companies are permitted to adopt this new rule following either a full or modified retrospective approach. Early adoption is not permitted. The FASB, subject to final approval, has agreed to defer the effective date of this ASU by one year. The Company has not yet determined the potential impact of this updated authoritative guidance on its consolidated financial statements.

 

In April 2014, the FASB issued ASU 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”, which amends the requirements for reporting discontinued operations. Under ASU 2014-08, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the component or group of components meets the criteria to be classified as held for sale or when the component or group of components is disposed of by sale or other than by sale. In addition, this ASU requires additional disclosures about both discontinued operations and the disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. The guidance is effective for annual and interim periods beginning after December 15, 2014, with early adoption permitted. The Company is currently evaluating the potential impact of this updated authoritative guidance on its consolidated financial statements.

4.  NET INCOME (LOSS) PER SHARE

The Company computes net income (loss) per common share in accordance with FASB ASC 260, “Earnings Per Share” (“ASC 260”) and SEC Staff Accounting Bulletin No. 98 (“SAB 98”).  Under the provisions of ASC 260 and SAB 98, basic net income (loss) per common share is computed by dividing the amount available to common stockholders by the weighted average number of shares of common stock outstanding during the period.  

Diluted net income per common share for years ended December 31, 2014 and 2013 excluded the diluted effect of common stock equivalents. In accordance with ASR 260, if their inclusion would be antidilutive to the income (loss) from continuing operations, they are to be excluded and the number of shares utilized shall be used in reporting all other diluted per share amounts. As the Company has losses from continuing operations for these periods, no common stock equivalents were utilized in the per share calculations. The Company’s common stock equivalents were excluded in the computation of diluted net (loss) per share since their inclusion would be anti-dilutive. Total shares issuable upon the exercise of all outstanding stock options, warrants and conversion of convertible promissory notes and their related accrued interest for the year ended December 31, 2014 and 2013 was as follows:

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		2014		2013
Warrants		35,911,846		21,271,487
Convertible debt and accrued interest		6,768,237		8,495,897
Stock options		2,375,000		2,140,625
Common stock equivalents		45,055,083		31,908,009

5.  DERIVATIVE FINANCIAL INSTRUMENTS

In October 2010, in connection with a subscription agreement, the Company issued 2,231,250 warrants to an investor at an exercise price of $0.31 per share for 1,115,625 warrants and $0.35 per share for the remaining 1,115,625 warrants. The warrants had a term of three years. Per the terms of the subscription agreement, in the event the Company, at any time while all or any portion of these warrants are outstanding, sells any shares of common stock per share, or issue common stock equivalents at a conversion price, less than the warrants’ exercise price, the warrant price will be adjusted accordingly. In accordance with the provisions of ASC 815-40, these warrants are subject to derivative accounting treatment under ASC 815-10 and are recorded as a liability which is revalued at fair value each reporting date. Any change in fair value is recorded as non-operating, non-cash income or expense at each balance sheet date.  The Company reassesses the classification at each balance sheet date.  If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. The Company used the Black-Scholes valuation method to value the derivative instruments at inception and on subsequent valuation dates. The derivatives were extinguished on January 1, 2013 upon a mutual agreement reached between the Company and the warrants’ holder. Prior to extinguishment, the fair value of the derivatives measured using the Black-Scholes valuation method was $119,600, resulting in a gain of $3,800 recorded in the statements of consolidated operations for the year ended December 31, 2013.

On November 15, 2013, the expiration date of the remaining outstanding warrants to purchase 1,179,130 shares of common stock of the Company was extended until December 31, 2013, and subsequently for another two years and the warrants’ exercise prices were reduced to $0.25 and revalued accordingly. On December 31, 2014, the warrants were extended for another one year.

On December 31, 2012, in connection with an extension of the maturity date of certain convertible notes which were due on May 31, 2012, the Company issued the holder a warrant to purchase shares of common stock of the Company not exceeding 9.99% of the issued and outstanding shares and potential issuable shares related to outstanding options,

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warrants and convertible debt of the Company. The warrants, originally due on December 31, 2014, were extended to March 31, 2016. The Company determined that the anti-dilution provision feature of the warrants to be an embedded derivative instrument.  This derivative is adjusted to fair value at each balance sheet with the changes in fair value recognized in operations.  The Company uses the Black-Scholes valuation method to value the derivative instruments at inception and on subsequent valuation dates. Weighted average assumptions used to estimate fair values are as follows:

		December 31, 2014	December 31, 2013	Issuance, December 31, 2012
Expected volatility		491%	316%	140%
Risk free interest rate		0.67%	0.13%	0.25%
Expected life (years)		1.25	1	2

For years ended December 31, 2014 and 2013, the Company recognized a change in the derivative liabilities of $1,136,400 and $(785,500), respectively in other income (expense) related to this warrant derivative instrument.

On November 25, 2013, the Company repurchased 714,286 shares of its common stock and the 25% of membership interest in GAIM, which was previously sold to FireRock in 2012, by issuing a convertible note in the amount of $250,000, which was originally due on December 31, 2013 and extended to and paid on January 6, 2014. The holder of the note was entitled to convert all or a portion of the convertible note plus any unpaid interest into shares of common stock at the lesser of $0.35 per share or 10% discount to the market value the day prior to the date of conversion. The Company determined that the embedded conversion option to be a derivative instrument.  This derivative was adjusted to fair value at each balance sheet with the changes in fair value recognized in operations prior to its extinguishment in January 2014. For the year ended December 31, 2014 and 2013, the Company recognized a change in the derivative liabilities of $35,714 and $64,286, respectively in other income (expense) related to this derivative instrument.

6.  FAIR VALUE MEASUREMENTS

FASB ASC 820 specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs).  In accordance with FASB ASC 820, the following summarizes the fair value hierarchy:

Level 1 Inputs – Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.

Level 2 Inputs – Inputs other than the quoted prices in active markets that are observable either directly or indirectly.

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Level 3 Inputs –Inputs based on prices or valuation techniques that are both unobservable and significant to the overall fair value measurements.

ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.  Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The Company’s assessment of the significance of particular inputs to these fair measurements requires judgment and considers factors specific to each asset or liability.

Cash, due from clearing organizations, accounts receivable, advances to registered representatives and employees, accounts payable and accrued expenses, commission payable – The carrying amounts reported in the consolidated balance sheets for these items are a reasonable estimate of fair value due to their short term nature.

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

Derivative financial instruments – The fair value of liabilities for warrants with dilutive price reset or anti-dilution provisions and for certain embedded conversion options are determined utilizing the Black-Scholes valuation method.

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

December 31, 2014		Level 1		Level 2		Level 3		Total
Derivative financial instruments		$                 -		$                -		$     431,400		$      431,400
Promissory notes		-		-		1,201,325		1,201,325
Total		$                 -		$                 -		$  1,632,725		$  1,632,725
December 31, 2013		Level 1		Level 2		Level 3		Total
Derivative financial instruments		$                 -		$                -		$  1,603,514		$  1,603,514
Promissory notes		-		-		1,502,353		1,502,353
Total		$                 -		$                 -		$  3,105,867		$  3,105,867

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

Balance, December 31, 2012	$	2,218,115
Issuing promissory notes to purchase treasury stock		250,000
Proceeds from promissory notes		630,000
Repayment/Convert of promissory notes		(330,000)
Net change of debt discount		(360,062)
Cancellation of derivative liability		(119,600)
Fair value of the embedded conversion option		100,000
Change in fair value included in other (income) expenses		717,414

Balance, December 31, 2013		3,105,867
Proceeds from promissory notes		1,464,987
Repayment of promissory notes		(1,904,000)
Net change of debt discount		137,985
Cancellation of derivative liability included in other (income)   expenses		(35,714)
Change in fair value included in other (income) expenses		(1,136,400)
Balance, December 31, 2014	$	1,632,725

7. STOCK OPTIONS

Stock Option Plan

On June 27, 2011, the Board of Directors adopted a Stock Awards Plan (“Plan”).  The purpose of the Plan is to attract, retain and motivate employees, directors and persons affiliated with the Company and to provide such participants with additional incentive and reward opportunities.  The awards may be in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, phantom stock awards, or any combination of the foregoing. The total number of shares of stock reserved and available for issuance under the Plan is 3,000,000.  On July 17, 2012, the Board of Directors approved the issuance of non-qualified stock options for the purchase of an aggregate of 1,725,000 shares of common stock under the Plan to certain employees, officers and directors. The options are exercisable at $0.45 per common share and expire three years after their issuance.  The options are to vest over a two-to-three-year period with a fair value of approximately $500,000 at the grant date to be recognized over the vesting period.

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

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

The stock-based compensation related to the Plan, included in stock compensation expense in the consolidated statements of operations, was $140,867 and $237,104 for years ended December 31, 2014 and 2013, respectively.

On December 27, 2012, GAHI granted to an employee, an option to purchase 350,000 shares of common stock. The option is exercisable at $0.45 per common share and expires on July 17, 2015.  The option is to vest 50% in July 2013 and 100% in July 2014 with a fair value of approximately $58,000 at the grant date to be recognized over the vesting period. The options granted to this employee became fully vested in March 2014 upon his departure from the Company in accordance with an arrangement with the Company. Weighted average assumptions used to estimate the fair value of stock options on the date of grant were as follows:

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

The stock-based compensation related to this option, included in stock compensation expense in the consolidated statements of operations, was $20,492 and $37,258 for years ended December 31, 2014 and 2013, respectively.

 Other Options

As disclosed in Note 1, on January 29, 2013, in connection with the acquisition of MGA, the Company issued an option to purchase 300,000 shares of common stock exercisable at $0.25 per common share, which expired on January 28, 2014. The option was extended for another year and expired in January 2015. The options vested on the grant date, with a fair value of approximately $34,000 at the grant date which was recognized as goodwill.

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

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

The Company will issue new shares of common stock upon the exercise of outstanding stock options.  The following is a summary of stock option activity:

Resumes

John Matthews.  John Matthews has been the Chairman of the Board of Global Arena Holding since October 27, 2010.  From October 2010 to January 2012, Mr. Matthews was the chief executive officer of Global Arena Holding.  From January 2006 to February 2008, Mr. Matthews was the president of Clark Dodge, a FINRA registered broker/dealer.

From January 2003 to September 2005, Mr. Matthews was the chairman of JSM Capital Holding Corp., held the independent contractor agreement for two Office of Supervisory Jurisdictions with Finance Investments, Inc. and was responsible for the supervision of 35 registered representatives.

Concurrently, during the period from January 2003 until October 2004, Mr. Matthews served as the president of vFinance Investments and was responsible for all retail sales of 165 registered representatives and 28 branch offices.

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From 2001 through 2003, Mr. Matthews served as Chairman of Ehrenkranz, King & Nussbaum, a NASD broker/dealer.

From 1996 to 2000, Mr. Matthews served as chairman and chief executive officer of Weatherly Securities Corp., a full service NASD brokerage firm.  In May 2000, Weatherly Securities was sold to Weatherly International PLC, a publicly-traded company listed on the London Stock Exchange’s Alternative Investment Market.  From 1992 to 1996, Mr. Matthews worked as a registered representative, qualifying as a NASD Series 24 principal in 1992.  Over the course of his career, Mr. Matthews has gained extensive experience with the daily operation and administration of a financial services firm.

Mr. Matthews graduated with a bachelor of arts from Long Island University in 1986.

Anthony Crisci, Jr., age 45, is an attorney and certified public accountant with over twenty years of experience in tax, accounting, finance and corporate matters.  He was the associate general counsel for Health Quest Systems, Inc. from December 2009 until May 2014.  Since July 2014, he has been serving as a consultant to the Registrant.

Mr. Crisci, graduated from Hofstra University School of Law in May 1998, and received a B.B.A. in accounting from Hofstra University in May 1991.  

Facundo Bacardi, age 47, is a current shareholder and member of the family that owns and controls Bacardi Ltd., a worldwide liquor manufacturer and distributor.  From 1979 to 1991, he was in charge of Bacardi’s manufacturing and distribution division for Nassau, Brazil, Trinidad and Central America.  Currently, Mr. Bacardi serves as a director of Suramericana de Inversiones, S.A., an investment company located in Panama, and has served in that capacity since 1990.  Mr. Bacardi is a founding shareholder of JSM Capital Holding Corp. and a significant shareholder of Global Arena.

Martin J. Doane, age 50, is a director of Global Arena Holdings Corp. since November 7, 2011.  He has been a founding partner and CEO of Ubequity Capital since 2006.  He served as vice president and secretary of Northern Empire Energy Corporation from March 20, 2012 to September 4, 2013.  He was the chief executive officer of Adenyo Inc. from 2004 through 2009.  He has served as the chief executive officer of MeeMee Media Inc. since April 2013.  We as the vice president and secretary of EnDev Holdings Inc. from July 2010 to April 2013.  

Mr. Doane is a graduate of the University of Western Ontario and holds an LL.B. from Osgoode Hall Law School.

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Committees of the Board of Directors

We do not have standing audit, nominating or compensation committees, or committees performing similar functions. Our board of directors believes that it is not necessary to have standing audit, nominating or compensation committees at this time because the functions of such committees are adequately performed by our board of directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Under Section 16(a) of the Securities Exchange Act of 1934, as amended, an officer, director, or greater-than-10% shareholder of the Company must file a Form 4 reporting the acquisition or disposition of Company's equity securities with the Securities and Exchange Commission no later than the end of the second business day after the day the transaction occurred unless certain exceptions apply.  Transactions not reported on Form 4 must be reported on Form 5 within 45 days after the end of the Company's fiscal year.  Such persons must also file initial reports of ownership on Form 3 upon becoming an officer, director, or greater-than-10% shareholder.  To our knowledge, based solely on a review of the copies of these reports furnished to it, the officers, directors, and greater than 10% beneficial owners complied with all applicable Section 16(a) filing requirements during 2014.

Code of Ethics Policy

During July 2008, we adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.

Corporate Governance

There have been no changes in any state law or other procedures by which security holders may recommend nominees to our board of directors.  In addition to having no nominating committee for this purpose, we currently have no specific audit committee and no audit committee financial expert.  Based on the fact that our current business affairs are simple, any such committees are excessive and beyond the scope of our business and needs.

Indemnification

The Company shall indemnify to the fullest extent permitted by, and in the manner permissible under the laws of the State of Delaware, any person made, or threatened to be made, a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he is or was a director or officer of the Company, or served any other enterprise as director, officer or employee at the request of the Company.  

The board of directors, in its discretion, shall have the power on behalf of the Company to indemnify any person, other than a director or officer, made a party to any action, suit or proceeding by reason of the fact that he/she is or was an employee of the Company.  

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Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Company, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.  In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceedings) is asserted by such director, officer, or controlling person in connection with any securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issues.

INDEMNIFICATION OF OFFICERS OR PERSONS CONTROLLING THE REGISTRANT FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, IS HELD TO BE AGAINST PUBLIC POLICY BY THE SECURITIES AND EXCHANGE COMMISSION AND IS THEREFORE UNENFORCEABLE.

ITEM 11. EXECUTIVE COMPENSATION

The following table set forth certain information as to the compensation paid to our executive officers.

Summary Compensation Table

(1)

Mr. Winkler resigned as Chief Financial Officer as of February 11, 2015.

Outstanding Equity Awards at Fiscal Year End

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The following table sets forth the stock options outstanding to Global Arena's executive officers.

Option Awards

Outstanding Equity Awards at December 31, 2014