UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Form 10-Q


Quarterly report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2020

-OR_

Transition report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______ to _______.


Commission file number 000-49819


GLOBAL ARENA HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


Delaware
(State or other jurisdiction of incorporation or organization)

33-0931599
(I.R.S. Employer Identification No.)



208 East 51 Street, Suite 112

New York, New York
(Address of principal executive offices)


10022
(Zip code)


(646) 801-6146
(Registrants
telephone number, including area code)


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


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


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


Large accelerated filer [  ]

Non-accelerated filer [  ]

Accelerated filer [  ]

Smaller reporting company [x]

Emerging growth company [  ]


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [x]


As of September 24, 2020, the registrant had 1,515,398,504 outstanding shares of common stock.




GLOBAL ARENA HOLDINGS, INC. TABLE OF CONTENTS


PART I - FINANCIAL INFORATION




Item 1.  Financial Statements


3




    Condensed Consolidated Balance Sheets at March 31, 2020 (Unaudited) and December 31, 2019


4




    Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019 (Unaudited)


5




    Condensed Consolidated Statements of Stockholders Equity (Deficit) for the Three Months Ended March 31, 2020 and 2019 (Unaudited)


6




    Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 (Unaudited)


7




Notes to Condensed Consolidated Financial Statements (Unaudited)


8




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


20

Item 3.  Quantitative and Qualitative Disclosure About Market Risk


23

Item 4.  Controls and Procedures


23


PART II - OTHER INFORMATION


Item 1.  Legal Proceedings


25

Item 1A. Risk Factors


25

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


25

Item 3.  Defaults Upon Senior Securities


25

Item 4.  Mine Safety Disclosures


25

Item 5.  Other Information


25

Item 6.  Exhibits


26




Signatures


27


2




2


PART I - FINANCIAL INFORMATION

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


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


3





GLOBAL ARENA HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATE BALANCE SHEETS



March 31,

December 31,


2020

2019


(unaudited)


ASSETS


Current Assets:


    Cash and cash equivalents

$           9,031

$        17,502

       Total current assets

9,031

 17,502




Deposits for proposed acquisitions

546,150

546,150

            TOTAL ASSETS

$      555,181

$      563,652




LIABILITIES AND STOCKHOLDERS' DEFICIT



 Current Liabilities:



    Accounts payable

$      275,414

$      281,241

    Accrued expenses

2,255,151

2,081,167

    Convertible promissory notes payable,  



       net of debt discount of $241,091 and $197,296

4,728,833

4,639,628

    Promissory notes payable

230,000

230,000

    Deferred revenue

79,313

40,500

    Derivative liability

645,302

742,280

      Total current liabilities

8,214,013

8,014,816




STOCKHOLDERS' DEFICIT




Global Arena Holdings, Inc.




   Preferred stock, $0.001 par value; 2,000,000 shares    

     authorized;


 


      Series B preferred stock; 250,000 shares authorized




      49,202 and 60,000 issued and outstanding

49

60


   Common stock, $0.001 par value; 2,000,000,000 shares authorized;




      1,125,507,119 and 985,539,957 shares issued and outstanding

1,125,507

985,540


   Additional paid-in capital

18,652,567

18,524,842


   Accumulated deficit

 (27,413,913)

 (26,961,606)


      Total Global Arena Holdings, Inc. stockholders deficit

 (7,635,790)

 (7,451,164)


Noncontrolling interest

(23,042)

-


      Total stockholders deficit

(7,658,832)

(7,451,164)


            TOTAL LIABILITIES AND STOCKHOLDERS'

                DEFICIT

$      555,181

$      563,652


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


4


GLOBAL ARENA HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)






Three Months Ended March 31,





2020

2019

Revenues:






Services



$        108,429

$        57,354







Operating expenses:





Salaries and benefits


117,713

72,979


Marketing and advertising

1,058

-


Software development

65,285

-


Professional fees


47,492

66,213


General and administrative

157,158

74,785


Printing



48,836

3,055


     Total operating expenses

437,542

217,032







Loss from operations


(329,113)

(159,678)







Other expenses:






Interest expense and financing costs

(243,214)

(262,182)


Change in fair value of derivative liability

96,978

(28,692)


     Total other expenses

(146,236)

(290,874)

Income (loss) before provision for taxes

(475,349)

(450,552)

Provision for income taxes


-

-

Net loss


(475,349)

(450,552)

Net loss attributed to noncontrolling interest


(23,042)

-

Net loss attributed to Global Arena Holdings, Inc.


$      (452,307)

$      (450,552)







Weighted average shares outstanding

   - basic and diluted

1,025,996,664

937,006,785







Earnings (loss) per share - basic and diluted

$           (0.00)

$            (0.00)





$           (0.00)

$           ( 0.00)


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


5


GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT



Series B Preferred Stock

Common Stock

Additional Paid-in

Accumulated

Total Global Stockholders'


Shares

Amount

Shares

Amount

Capital

Deficit

Deficit

Balance, December 31, 2019

60,000

$       60

985,359,957

$985,540

$18,524,842

$(26,961,606)

$(7,451,164)

Issuance of common stock for

  convertible debt and accrued

  interest



103,447,553

103,448

18,752


122,200

Issuance of common stock for Series

  B Preferred Stock

(10,978)

(11)

36,519,609

36,519

(36,508)


-

Allocated value of warrants and

  beneficial conversion feature related

  to issuance of convertible debt





145,481


145,481

Net loss






(452,307)

(452,307)

Balance, March 31, 2020

49,202

$49

1,125,327,119

$1,125,507

$18,652,567

$(27,413,913)

$(7,635,790)









Balance, December 31, 2018

60,000

$       60

934,568,736

$934,569

$18,028,413

$(25,021,933)

$(6,058,891)

Issuance of common stock for

  accrued interest



10,971,221

10,971

(4,827)


6,144

Fair value of stock options issued for

  services







-

Allocated value of warrants and

  beneficial conversion feature related

  to issuance of convertible debt





43,220


43,220

Net loss






(450,552)

(450,552)

Balance, March 31, 2019

60,000

$60

945,539,957

$945,540

$18,066,806

$(25,472,485)

$(6,460,079)


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


6


GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)






Three Months Ended March 31,






2020

2019

 

OPERATING ACTIVITIES:



 


Net income (loss)


$  (475,349)

$  (450,552)

 


Adjustments to reconcile net income (loss) to



 


   net cash used in operating activities:



 




Amortization of debt discount

101,686

178,175

 




Change in fair value of derivative liability

(96,978)

28,692

 



Change in assets and liabilities:



 




Deferred revenue

38,813

11,000

 




Accounts payable

(5,827)

14,000

 




Accrued expenses

189,184

81,994

 


Net cash used in operating activities

(248,471)

(136,691)

 








 

FINANCING ACTIVITIES:



 



Proceeds from convertible promissory notes payable

250,000

122,500

 



Repayment of convertible promissory notes payable

(10,000)

(22,500)

 


Net cash used in financing activities

240,000

100,000

 








 

NET DECREASE IN CASH AND CASH EQUIVALENTS

(8,471)

(36,691)

 




 

CASH AND CASH EQUIVALENTS, BEGINNING BALANCE

17,502

43,574

 




 

CASH AND CASH EQUIVALENTS, ENDING BALANCE

$      9,031

$      6,883

 








 

CASH PAID FOR:




 


Interest


$    10,100

$              -

 


Income taxes


$              -

$              -

 








 

NON-CASH INVESTING AND FINANCING ACTIVITIES:



 


Allocated value of warrants and beneficial conversion features

related to debt

$  145,481

$    47,003

 


Debt converted to common stock

$  122,000

$      6,144

 


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


7


Global Arena Holdings, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2020 and 2019

(Unaudited)


NOTE 1 - ORGANIZATION


Organization and Business


On February 25, 2015, Global Election Services, Inc. (GES) formed on February 25, 2015, provides comprehensive technology-enabled paper absentee/mail ballot and internet election services to organizations such as craft and trade organizations, labor unions, political parties, co-operatives and housing organizations, associations and professional societies, universities, and political organizations. GES has developed proprietary election software for a data storage and retrieval registration system to determine voter eligibility and prevent duplicate votes with In-Person digital signature capture, as well as proprietary election software for scanning/tabulation utilizing advanced OMR/OCR/Barcode imaging software featuring de-skewing, de-speckling and image correction. This system provides three types of audit capabilities. The hardware includes high speed optical scanners that are hard lined to a computer with all Wi-Fi disabled so the entire tabulation process occurs offline, eliminating the opportunity for hacking.  GES is also working with multiple vendors and has made investments in companys who are developing Blockchain Technology for a data storage and retrieval registration system; tabulation of paper Absentee/Mail Ballots; and internet voting.


The Company has also signed a letter of Intent to acquire the assets of Election Services Solutions including all clients, contracts and employment contracts. This asset purchase is currently pending to close in the third quarter 2020.


On May 20th, 2015 the Company incorporated a new wholly owned entity in the State of Delaware called GAHI Acquisition Corp. This entity was incorporated at the time to be the merger subsidiary for the acquisition of Blockchain Technologies Corp. (BTC) and other software system development.


On May 20, 2015 the Company entered into an agreement and plan of merger with BTC. Under this agreement, BTC would have merged with GAHI Acquisition, and GAHI Acquisition, would have been the surviving corporation. As consideration for the merger, the Company was to reserve a number of shares equal to 1/3 the total issued and outstanding of the Company to be issued to BTC shareholders at closing. On October 20, 2015, the parties agreed to extend the closing date of the merger to December 15, 2015. This agreement expired on December 15, 2015.


Concurrently, on October 20, 2015, the Company paid $125,000 in cash to BTC and issued to Nikolaos Spanos 1,377,398 of its common shares and 1,993,911 warrants to purchase its common shares at the exercise price of $.10 per common share with an exercise period of three years. The warrants have expired. The common shares and warrants were issued for the purchase of 1,000,000 common shares of BTC. Said common shares of BTC represented ten percent (10%) of the outstanding equity in BTC on October 20, 2015. The securities issued by the Company were issued pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933. There has been no further activity in GAHI Acquisition Corp.


On March 28, 2017 the United States Patent Office issued patents to BTC covering Election Intellectual Property, US Patent #9,608,829, Issued March 28, 2017.  As an equity shareholder in BTC only, GAHC and GES have not used the BTC US Patent. Any use of the patent would require a new negotiation, and new contract with BTC.


The Company has determined that the initial investment of Blockchain Technologies Corp. will be written off.  The Companys Board of Directors cancelled all transactions previously proposed but never acted on concerning GAHI Acquisition. GAHI Acquisition will remain a subsidiary for the exclusive use of any future transactions involving Blockchain Technologies Corporation.


8


The Company, GAHI, and GES do not trade crypto currency, nor participate in Initial Coin Offerings.


On June 15, 2019, GES entered into a Term Sheet to create a joint venture with TrueVote, Inc. Under the terms of the agreement GES was to invest $50,000 into True Vote thru a 24 Month Debenture and issue a three year warrant exercisable at $0.01 for 4,500,000 common shares of the Company. The Company will receive 3 million common shares of TrueVote, representing 30% of TrueVote Inc.  On December 16, 2019 this Term Sheet was amended to provide for a December 17, 2019, payment by the Company for $ 40,000 to True Vote. As of the date of this filing the Company will pay an additional $ 10,000 and a 3 year warrant exercisable at $0.01 for 4,500,000 common shares of the Company, and the Company will receive 3,000,000 common shares of TrueVote Inc representing Thirty percent (30%) as part of the joint venture between the companies. This transaction is expected to close in the third quarter of 2020.


On November 19, 2019 the Company incorporated a new wholly owned entity in the State of Delaware called Tidewater Energy Group Inc. The Board of Directors appointed John S. Matthews and Jason Old as Board members. The Company is being formed to explore opportunities in the oil, gas, mineral and energy business.


Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the financial condition of the Company and its operating results for the respective periods. The condensed consolidated balance sheet at December 31, 2019 has been derived from the Companys audited consolidated financial statements. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Companys Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission. The results for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the full year ending December 31, 2020.


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 from operations and cash flow deficits from its operations since inception and has had to continually borrow to continue operating. In addition, certain of the Companys debt is in default as of March 31, 2020. These factors raise substantial doubt about the Companys 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 sufficient positive cash flows from operations.  The Company continues to raise funds from the issuance of additional convertible promissory note. Management is hopeful that with 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.


9


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Principles of Consolidation


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, GES, GAHI Acquisition Corp and Tidewater Energy Group, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation.


Noncontrolling Interest

 

The Company follows ASC Topic 810, Consolidation, which governs the accounting for and reporting of non-controlling interests (NCIs) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs be treated as a separate component of equity, not as a liability, that increases and decreases in the parents ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance.

 

The net income (loss) attributed to the NCI is separately designated in the accompanying condensed consolidated statements of operations and comprehensive loss.

 

Basic and Diluted Earnings (Loss) Per Share


Earnings per share is calculated in accordance with the ASC 260-10, Earnings Per Share. Basic earnings-per-share is based upon the weighted average number of common shares outstanding. Diluted earnings-per-share is based on the assumption that all dilutive convertible notes, stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive.


 

March 31,

 

2020

 

2019

Options

48,000,000

 

48,000,000

Warrants

466,276,590

 

466,276,590

Convertible notes

1,748,036,416

 

1,056,924,578

Total

2,262,313,006

 

1,571,201,168


Management 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. Significant estimates reflected in the consolidated financial statements include, but are not limited to, share-based compensation, and assumptions used in valuing derivative liabilities. Actual results could differ from those estimates.


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.  


10


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 relative fair value of any warrants issued with those instruments. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds to the warrants and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic value of the conversion features, both of which are credited to additional paid-in capital.  The Company calculates the fair value of warrants issued with the convertible instruments using the Black-Scholes valuation method, using the same assumptions used for valuing stock options, except that the contractual life of the warrant is used.  


Under these guidelines, the Company allocates the value of the proceeds received from a convertible debt transaction between the conversion feature and any other detachable instruments (such as warrants) on a relative fair value basis. The allocated fair value of the BCF and warrants are 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 in accordance with the ASC 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.




Derivative Financial Instruments


The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives pursuant to ASC 815, Derivatives and Hedging. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The Company uses the Black-Scholes-Merton model to value the derivative instruments. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.


Revenue Recognition


The Company recognizes revenue in accordance with FASB ASC 606, Revenue From Contracts with Customers. The Company earns revenues through various services it provides to its clients. GESs income is recognized at the presentation date of the certification of the election results. The payments received in advance are recorded as deferred revenue on the balance sheet. Should an election not proceed, all non-refundable deferred revenue will be recognized as revenue.


Share-Based Compensation


The Company records stock-based compensation in accordance with FASB ASC Topic 718, Compensation Stock Compensation. FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees.


11


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.


Fair Value Measurements


The Company applies the provisions of ASC 820-10, Fair Value Measurements and Disclosures. ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows:


·

Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

·

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

·

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.


Cash, accounts payable and accrued expenses and deferred revenue 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.


The Company uses Level 2 inputs for its valuation methodology for the beneficial conversion feature and warrant derivative liabilities as their fair values were determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Companys derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.


The following table presents the Companys assets and liabilities required to be reflected within the fair value hierarchy as of March 31, 2020 and December 31, 2019.


 

 

Fair Value

 

Fair Value Measurements at

 

 

As of

 

March 31, 2020

Description

 

March 31, 2020

 

Using Fair Value Hierarchy

 

 

 

 

Level 1

 

Level 2

 

Level 3

Beneficial conversion feature

$

645,302

$

-

$

645,302

$

-

 

 

 

 

 

 

 

 

 

Total

$

645,302

$

-

$

645,302

$

-

 

 

 

 

 

 

 

 

 











12


 

 

Fair Value

 

Fair Value Measurements at

 

 

As of

 

December 31, 2019

Description

 

December 31, 2019

 

Using Fair Value Hierarchy

 

 

 

 

Level 1

 

Level 2

 

Level 3

Beneficial conversion feature

$

742,280

$

-

$

742,280

$

-

 

 

 

 

 

 

 

 

 

Total

$

742,280

$

-

$

742,280

$

-

 

 

 

 

 

 

 

 

 


Income Taxes


The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.


Under ASC 740, a tax position is recognized as a benefit only if it is more likely than not that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the more likely than not test, no tax benefit is recorded. The adoption had no effect on the Companys consolidated financial statements.


Recently Issued Accounting Pronouncements


In June 2018, the FASB issued Accounting Standards Update (ASU) ASU 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to nonemployees with the requirements for share-based payments granted to employees. ASU 2018-07 is effective on January 1, 2019. Early adoption is permitted. The adoption of this ASU did not have a material impact on the Companys consolidated financial statements.


In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The adoption of this ASU did not have a material impact on the Companys consolidated financial statements.


In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The adoption of this ASU did not have a material impact on the Companys consolidated financial statements as the Company did not have any lease arrangements that were subject to this new pronouncement.


Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.


13

NOTE 3 - INVESTMENT


On October 20, 2015, the Company paid $125,000 in cash and issued to Nikolaos Spanos, 1,377,398 of its common stock (valued at $68,870) and 1,993,911 warrants to purchase its common shares at the exercise price of $0.10 per common share exercisable for three years (valued at $90,400).  The common shares and warrants are being issued for the purchase of 1,000,000 common shares of Blockchain Technologies Corporation (BTC).  Said common shares represent ten percent (10%) of the outstanding equity in BTC.  This investment is accounted for under the cost method.  During the year ended December 31, 2019, the Company determined that this investment was impaired and took an impairment charge of $284,270.



NOTE 4 ACQUISITION DEPOSITS


On May 10, 2019, the Company entered into an asset purchase agreement with Election Services Solutions, LLC (the APA). Under the APA, the Company will purchase 100% of the assets of Election Services Solutions, LLC. The Company will pay $550,000, of which $506,150 has already been paid, and issue 20,000,000 common shares to purchase these assets under this APA. The Company is in the process of closing this transaction in the third quarter of 2020.


On June 15, 2019 GES entered into a Term Sheet to create a joint venture with TrueVote, Inc. Under the terms of the agreement GES will invest $50,000 into a 24 Month Debenture and issue a 3 year warrant exercisable at $0.01 for 4,500,000 common shares of Global Arena Holding Inc., (GAHC). GAHC will receive 3 million common shares of TrueVote, representing 30% of TrueVote Inc.

 

TrueVote, Inc. is building a comprehensive end-to-end, de-centralized, completely digital voting system. This will be based on traditional, proven database methodologies, and layered with a "checksum" that's posted on the Blockchain, proving all data is immutable and unalterable. This design will ensure that every vote is transparently counted and verifiable.

 

Upon the closing of the agreement, GES will have invested $50,000 into a 24 Month Debenture and will have issued a 3 year warrant exercisable at $0.01 for 4,500,000 common shares of the Company, and the Company will receive 3,000,000 common shares of TrueVote Inc. as part of the joint venture between the companies. The Company on December 17, 2019 paid $ 40,000 to True Vote. The Company will pay an additional $10,000 and a 3 year warrant exercisable at $0.01 for 4,500,000 common shares of the Company, in the third quarter of 2020.



NOTE 5 ACCRUED EXPENSES


Accrued expenses at March 31, 2020 and December 31, 2019 consisted of the following:




March 31,


December 31,



2020


2019

Accrued interest

$

1,788,244

$

1,672,391

Accrued compensation


430,167


374,987

Other accrued expenses


36,740


33,789


$

2,255,151

$

2,081,167







14


NOTE 6 - PROMISSORY NOTES PAYABLE


In March 2014, the Company issued two promissory notes for a total of $230,000. The interest rate is the short-term applicable federal rate as determined by the Internal Revenue Service for the calendar month plus 10%. These two promissory notes are due on September 30, 2019, as amended.  The outstanding balance was $230,000 and $230,000 as of March 31, 2020 and December 31, 2019, respectively.



NOTE 7 - CONVERTIBLE PROMISSORY NOTES PAYABLE


Convertible promissory notes payable at March 31, 2020 and December 31, 2019 consist of the following:


 

 

March 31,

 

December 31,

 

 

2020

 

2019

Convertible promissory notes with interest at 10% to 12% per annum, convertible into common shares at a fixed price ranging from $0.001 to $0.25 per share. Maturity dates through January 31, 2021, as amended. ($2,019,000 in default)

$

2,669,000

$

2,519,000

Convertible promissory notes with interest at 12% per annum, convertible into common shares at a price ranging from $0.08 to $0.14 or a 50% to 60% discount from the lowest trade price in the 20-25 trading days prior to conversion (as of March 31, 2020 the conversion price would be $0.0007 to $0.0010 per share).  Maturity dates through December 31, 2020, as amended. ($1,057,924 in default)

 

1,107,924

 

1,132,924

Convertible promissory notes with interest at 8% per annum, convertible into common shares at a fixed price of $0.02 per share. The maturity date was September 30, 2019, as amended.  ($161,000 in default)

 

161,000

 

203,000

Convertible promissory notes with interest at 12% per annum, convertible into common shares of GES. The maturity dates through November 25, 2020, as amended. ($807,000 in default)

 

1,032,000

 

982,000

Total convertible promissory notes payable

 

4,969,924

 

4,836,924

Unamortized debt discount

 

(241,091)

 

(197,296)

Convertible promissory notes payable, net discount

 

4,728,833

 

4,639,628

Less current portion

 

(4,728,833)

 

(4,639,628)

Long-term portion

$

-

$

-

 

 

 

 

 


15


A rollfoward of the convertible promissory notes payable from December 31, 2019 to March 31, 2020 is below:


Convertible promissory notes payable, December 31, 2019

$

4,639,628

Issued for cash


250,000

Repayment for cash


(10,000)

Conversion to common stock


(107,000)

Debt discount related to new convertible promissory notes


(145,481)

Amortization of debt discounts


101,686

Convertible promissory notes payable, March 31, 2020

$

4,728,833



NOTE 8 - DERIVATIVE FINANCIAL INSTRUMENTS


Certain of the Companys convertible promissory notes payable are convertible into shares of the Companys common stock at a percentage of the market price on the date of conversion.  The Company has determined that the variable conversion rate is an embedded derivative instrument. 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:


 

 

March 31,

 

December 31,

 

 

2020

 

2019

Risk-free interest rate

 

0.14%

 

1.59%

Expected life of the options (Years)

 

0.01

 

0.01

Expected volatility

 

135%

 

152%

Expected dividend yield

 

0%

 

0%

 

 

 

 

 

Fair Value

$

645,302

$

742,280

 

 

 

 

 


A rollfoward of the derivative liability from December 31, 2019 to March 31, 2020 is below:


Derivative liabilities, December 31, 2019

$

742,280

Change in fair value of derivative liabilities


(96,978)

Derivative liabilities, March 31, 2020

$

645,302






NOTE 9- STOCKHOLDERS DEFICIT


Series B Preferred Stock


Pursuant to the Companys Certificate of Incorporation, the Company has authorized 2,000,000 shares of $0.001 par value Preferred Stock.  The Company has designated 250,000 of the 2,000,000 shares as Series B Preferred Stock. The Series B Preferred stockholders are entitled to a cumulative stock dividend, up to a maximum of 10% additional common stock upon the conversion after one year.  The Series B Preferred Stock may be converted into common shares, at any time, at the option of the holder.  The conversion price shall be the greater of $0.01 or 90% of the lowest closing price during the five most recent trading days prior to conversion.  The number of common shares to be issued shall be the number of Series B Preferred shares times $10 per shares divided by the conversion price.  


16


During the year ended December 31, 2017, the Company sold 90,000 shares of Series B Preferred Stock for cash proceeds of $900,000. During the year ended December 31, 2018, 30,000 of these preferred shares were converted into 30,743,885 shares of common stock  During the three months ended March 31, 2020, 10,798 of these preferred shares were converted into 36,519,609 shares of common stock.


Common Stock


On April 28, 2016, the stockholders approved an amendment to the Companys articles of incorporation to increase the number of authorized common shares from 100,000,000 to 1,000,000,000. In addition, the stockholders also approved an amendment to the Companys Stock Awards Plan, originally filed June 27, 2011, which will increase the number of shares authorized to be issued under the Plan from 3,000,000 shares to 7,460,000 shares.


On October 11, 2019, the Companys shareholders approved an increase of the Companys authorized shares to Two Billion (2,000,000,000) Common Shares.


During the three months ended March 31, 2020, the Company issued 103,447,553 shares of common stock for convertible notes of $107,000 and accrued interest of $15,200.  


During the three months ended March 31, 2019, the Company issued 10,971 shares of common stock for accrued interest of $6,144.  


Option Activity


A summary of the option activity is presented below:


 

 

 

 

 

 

Weighted

 

 

 

 

 

 

Weighted

 

Average

 

 

 

 

 

 

Average

 

Remaining

 

Aggregate

 

 

Number of

 

Exercise

 

Contractual

 

Intrinsic

 

 

Options

 

Price ($)

 

Life (in years)

 

Value ($)

Outstanding, December 31, 2019

 

48,000,000

 

0.03

 

2.80

 

-

Granted

 

-

 

 

 

 

 

 

Exercised

 

-

 

 

 

 

 

 

Forfeited/Canceled

 

-

 

 

 

 

 

 

Outstanding, March 31, 2020

 

48,000,000

 

0.03

 

2.55

 

-

Exercisable, March 31, 2020

 

48,000,000

 

0.03

 

2.55

 

-

 

 

 

 

 

 

 

 

 


17


Warrant Activity


A summary of warrant activity is presented below:


 

 

 

 

 

 

Weighted

 

 

 

 

 

 

Weighted

 

Average

 

 

 

 

 

 

Average

 

Remaining

 

Aggregate

 

 

Number of

 

Exercise

 

Contractual

 

Intrinsic

 

 

Warrants

 

Price ($)

 

Life (in years)

 

Value ($)

Outstanding, December 31, 2019

 

596,532,925

 

0.009

 

1.47

 

79,800

Granted

 

91,923,000

 

0.002

 

 

 

 

Exercised

 

-

 

 

 

 

 

 

Forfeited/Canceled

 

(195,833,333)

 

0.002

 

 

 

 

Outstanding, March 31, 2020

 

492,622,592

 

0.011

 

2.08

 

12,950

Exercisable, March 31, 2020

 

492,622,592

 

0.011

 

2.08

 

12,950

 

 

 

 

 

 

 

 

 


During the three months ended March 31, 2020, the Company issued a total of 91,923,000 warrants in connection with a new convertible promissory note payable. The fair values of the warrants were determined using the Black-Scholes option pricing model with the following assumptions:

·

Expected life of 3.00-3.25 years

·

Volatility of 152%;

·

Dividend yield of 0%;

·

Risk free interest rate of 0.72% - 1.59%



NOTE 10 - COMMITMENTS AND CONTINGENCIES


The Company may be involved in legal proceedings in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance.


On October 10, 2013, GACOM settled a complaint with the National Futures Association for a fine of $50,000 for certain noncompliance with Commodity Futures Trading Commission regulations. The fine has not been paid and is included in accounts payable and accrued expenses at March 31, 2020 and December 31, 2019. The Company is currently attempting to adjudicate and settle this fine.


On December 26, 2017, the Company entered into a settlement agreement with a prior attorney with regards to outstanding legal fees owed. Pursuant to this settlement agreement, the Company paid $25,000 on January 5, 2018, and $ 25,000 on February 5, 2018, and was required to pay an additional $200,000 during 2018. The $ 200,000 settlement is in default, and is carried in the accounts payable, however the Company is in the process of settling the outstanding balance. The Company made payments of $10,000 on the owed legal fees in 2020.



NOTE 11 AGREEMENTS


On May 13, 2019, the Company entered into a joint venture agreement with Voting Portals, LLC (VP), a Florida limited liability company. Pursuant to this agreement, the joint venture will be making use of the VP online e-voting web portal solutions and proprietary e-voting software programs to service and fulfill GESs clients online elections and other e-voting events pursuant to the terms of the agreement, as well as any other ventures and relationships agreed


18


to pursuant to the goals of the agreement. The Agreement was amended and as part of this agreement, the Company will be issuing 10,000,000 common shares to VP for services rendered, upon approval of the corporate actions at the 2019 annual meeting. VP will own 100% of the rights to the software, while GES will be responsible for all administrative and other election procedures. The Company is in the process of closing this transaction in the third quarter of 2020.


On May 13, 2019, the Company amended the master services agreement with HCAS Technologies (the MSA), Under the MSA, the Company will be acquiring information technology services and management from HCAS Technologies, as well as retaining Mr. Magdiel Rodriguez to act as Chief Information Officer. Pursuant to this Amended MSA, the Company will issue a total of 30,000,000 warrants to purchase the Companys common shares at a price of $0.005 as consideration for the services of HCAS and Mr. Magdiel. The Company is in the process of closing this transaction in the third quarter of 2020.


On June 19, 2019, GES Inc. signed an engagement letter with Blockchain Valley Ventures (BVV) of Zug Switzerland. Under the terms of the agreement, GES will pay BVV 50,000 Swiss Francs (CHF) and BVV will serve as an advisor in connection with a Voter Registration, Voter Authentication, and Voter Eligibility using a Blockchain Platform primarily covering the following matters:


·

Development and facilitation of an extended workshop with relevant and best in class third party blockchain technology companies such as Phoenix Systems AG, Securosys AG and others as well as any subject matter expert to be invited by Global Election Services Inc.

·

Development of a high-level technology solution architecture and its requirements for the blockchain based voting registration platform with inputs from third party blockchain technology.

·

Documentation of the results of a) and b) in order to provide the basis of the technical development of the platform.

·

Development of an implementation recommendation with respect to Voting on the Blockchain Platform.

·

Legal facilitation with respect to outside tax and legal advisors in connection with compliance with local and international regulation.

·

Project Management during the engagement.


This will be delivered as a Working Paper discussing a high-level envisaged Blockchain platform, including a foundational flowchart, and implementation recommendation;


BVV is a Crypto Valley, Switzerland based venture capital firm who consists of highly successful entrepreneurs, finance experts, blockchain technology experts and ICO experienced analysts and consultants. The documents created will be used by GES, to create a Minimal Viable Product. This Product, along with GES licensing rights on GES existing Registration and Tabulation Software will be owned by GES.


On June 27, 2019 BVV and GES signed and amended agreement calling for a $25,000 CHF Payment for the development and facilitation of an extended workshop with relevant and best in class third party blockchain technology companies, and a $ 25,000 CHF payment upon completion of the engagement. GES made payments of $25,000 CHF payment.


On September 12, 2019, representatives of GES attended a Blockchain workshop in Zurich Switzerland to discuss the specifics of using the Blockchain in the Elections Industry. GES representatives met with a Blockchain Technology Companies who have technology solution architecture and its requirements for the blockchain based on a voting registration platform. Currently this Blockchain Development is still being developed and GES and BVV are working on a Working Paper discussing a high-level envisaged Blockchain platform, including a foundational flowchart, and implementation recommendation.


On June 7, 2019, the Companys second subsidiary, GAHI Acquisition Corp. (GAHI) was authorized by the Companys Board of Directors to infuse an initial deposit of $50,000 into the subsidiary for general capital and administrative expenses. GAHI Acquisition will be repurposed in order to explore potential new business ventures in


19

an effort to increase shareholder value. The Company will cause GAHI Acquisition to explore opportunities in the energy and minerals business, which may provide investment opportunities, including the possibility of providing blockchain technology software to energy and mineral companies. The Company added Mr. Jason N. Old to the GAHI Acquisition Board as a Director.


On November 28, 2019 the Companys Board of Directors authorized the termination of the transaction previously authorized to infuse an initial deposit of $50,000 into GAHI Acquisition for general capital and administrative expenses and have GAHI Acquisition repurposed in order to explore opportunities in the energy and minerals business, which may provide investment opportunities, including the possibility of providing blockchain technology software to energy and mineral companies. GAHI Acquisition will remain a 100% subsidiary of the Company and will focus on Blockchain related companies for investments and acquisition.



NOTE 12 SUBSEQUENT EVENTS


Subsequent to March 31, 2020, the Company issued:


·

226,526,001 shares of common stock for the conversion of $346,000 of convertible debt; and

·



6


163,365,384 shares of common stock to officers and directors for services rendered.


In August 2020, the Company entered into an advisory agreement for strategic business development, capital sourcing and market development management services.  The agreement is for 18 months but may be canceled within the first 90 days.  Per the terms of the agreement the Company will pay the following compensation:

·

$50,000 retainer payable within 150 days of the date of the agreement;

·

Warrants to purchase 4% of GES (cashless warrants);

·

Warrants to purchase 50,000,000 shares of the Company common stock for $0.002 per shares;

·

Monthly compensation of $10,000 commencing October 1, 2020;

·

1% of net revenue from election services provided to municipal jurisdictions in the United States for 12 months; and

·

2% of all revenue generated from election services provided to municipal jurisdictions in the United States that were introduced by consultant.


Also, in August 2020, the Company entered into a software development agreement that provides for payments totaling $43,000 through September 30, 2020.


20


Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements


Statements in this Managements Discussion and Analysis of Financial Condition and Results of Operation, as well as in certain other parts of this Quarterly Report on Form 10-Q (as well as information included in oral statements or other written statements made or to be made by 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 Companys ability to estimate the impact of competition and of industry consolidation and risks, uncertainties and other factors set forth in the Companys filings with the Securities and Exchange Commission, including without limitation to our Annual Report on Form 10-K.


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


Critical Accounting Policies


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


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 the Company and its wholly-owned and majority owned subsidiaries, GES, GAHI Acquisition Corp and Tidewater Energy Group, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation.


Revenue Recognition


The Company recognizes revenue in accordance with FASB ASC 606, Revenue From Contracts with Customers. The Company earns revenues through various services it provides to its clients. GESs income is recognized at the presentation date of the certification of the election results. The payments received in advance are recorded as deferred revenue on the balance sheet. Should an election not proceed, all non-refundable deferred revenue will be recognized as revenue.


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 relative 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.


21


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 are 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 in accordance with the ASC 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.


Derivative Financial Instruments


The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The Company uses the Black-Scholes-Merton model to value the derivative instruments. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.


Share-Based Compensation


The Company records stock-based compensation in accordance with FASB ASC Topic 718, Compensation Stock Compensation. FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees.


Recent Accounting Pronouncements


In June 2018, the FASB issued Accounting Standards Update (ASU) ASU 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to nonemployees with the requirements for share-based payments granted to employees. ASU 2018-07 is effective on January 1, 2019. Early adoption is permitted. The adoption of this ASU did not have a material impact on the Companys consolidated financial statements.

 

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The adoption of this ASU did not have a material impact on the Companys consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The adoption of this ASU did not have a material impact on the Companys consolidated financial statements as the Company did not have any lease arrangements that were subject to this new pronouncement.


Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.


22


Trends and Uncertainties


The Company currently has minimal revenues and operations and is investigating potential businesses and companies for acquisition to create and/or acquire a sustainable business. Our ability to acquire or create a sustainable business may be adversely affected by our current financial conditions, availability of capital and/ or loans, general economic conditions which can be cyclical in nature along with prolonged recessionary periods, and other economic and political situations.  


The Company has generated recurring losses and cash flow deficits from its operations since inception and has had to continually borrow to continue operations. These matters raise substantial doubt about the Companys 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 new operating plans. The Company plans to use its available cash and new financing to develop and execute its new business plan and hopefully create and maintain a self-sustaining business.  However, the Company can give no assurances that it will be successful in achieving its plans or if financing will be available or, if available, 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 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 rapid advances in computing and telecommunications technology over the past several decades have brought with them increasingly sophisticated methods of delivering administrating elections. Along with these advances, though, have come risks regarding the integrity and privacy of data, and these risks apply to election companies, 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, when applicable, the Company shall utilize third-party service providers to secure the Companys financial and personal data; the Company believes that third-party service providers provide reasonable assurance that the financial and personal data that they hold are secure.


Liquidity and Capital Resources


As of March 31, 2020, the Company has an accumulated deficit of $27,413,913 and a working capital deficit of $8,204,982.  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.


For the three months ended March 31, 2020, the Company recorded a net loss of $475,349.  We recorded an amortization of debt discount of $101,686.   We recorded a gain from the change in fair value of derivative liability of $96,978.  We had an increase in accounts payable and accrued expenses of $2183,357 and a increase in deferred revenue of $38,813.  As a result, we had net cash used in operating activities of $248,471 for the three months ended March 31, 2020.


For the three months ended March 31, 2020, we received $250,000 as proceeds from the issuance of convertible promissory notes payable and repaid $10,000 of such convertible notes.  


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.


23


The Companys 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 for the years ended December 31, 2019 and 2018 have included a going concern modification in their auditors reports.  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 Three months Ended March 31, 2020 Compared to the Three months Ended March 31, 2019


Revenues for the three months ended March 31, 2020 were $108,429 compared to $57,354 for the three months ended March 31, 2019, an increase of $51,075.  The majority of our clients hold elections on a three year cycle.  This increase in revenues is due primarily to more elections held during the three month period in 2020.

 

Salaries and benefits totaled $117,713 for the three months ended March 31, 2020 compared to $72,979 for the three months ended March 31, 2019, an increase of $44,734.  This increase was due primarily to employment agreements entered into with our key employees.

 

Professional fees for the three months ended March 31, 2020 totaled $47,492 compared to $66,213 for the three months ended March 31, 2019, a decrease of $18,721.  This decrease is primarily due to a reduction in legal fees during the three months ended March 31, 2020.

 

For the three months ended March 31, 2020, we incurred marketing and advertising expenses of $1,058 compared to the $0 in the three months ended March 31, 2019.  We incurred software development expenses of $65,285 in 2020 compared to $0 in 2019, we incurred printing costs of $48,836 in 2020 compared to $3,055 in 2019, and we incurred general and administrative expenses of $157,158 in 2020 compared to $74,785 in 2018.  These increases are all due to efforts to expand the operations of our business.

 

Total operating expenses for the three months ended March 31, 2020 were $437,542 compared to $217,032 for the three months ended March 31, 2018, an increase of $220,510 principally due to reasons discussed above.



Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Not Applicable



Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures


Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of March 31, 2020.  


We do not have sufficient segregation of duties within accounting functions, which is a basic internal control.  Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible.  However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals.  Based on this evaluation, our chief executive officer and chief financial officer have concluded such controls and procedures to be not effective as of March 31, 2020 to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded,


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processed, summarized and reported, within the time periods specified in the Commission's rules and forms and to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.


Evaluation of Changes in Internal Control over Financial Reporting


Our chief executive officer and chief financial officer have evaluated changes in our internal controls over financial reporting that occurred during the three months ended March 31, 2020.  Based on that evaluation, our chief executive officer and chief financial officer, or those persons performing similar functions, did not identify any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


Important Considerations


The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time.


Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.


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PART II - OTHER INFORMATION


Item 1.  Legal Proceedings


The Company may be involved in legal proceedings in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance.


On October 10, 2013, GACOM settled a complaint with the National Futures Association for a fine of $50,000 for certain noncompliance with Commodity Futures Trading Commission regulations. The fine has not been paid and is included in accounts payable and accrued expenses at March 31, 2020 and December 31, 2019. The Company is currently attempting to adjudicate and settle this fine. The Company is currently attempting to adjudicate and settle this fine. The Company contacted the NFA and was the debt had been written off. GACOM ceased all activities in 2013.


On December 26, 2017, the Company entered into a settlement agreement with a prior attorney with regards to outstanding legal fees owed. Pursuant to this settlement agreement, the Company paid $25,000 on January 5, 2018, and $25,000 on February 5, 2018, and was required to pay an additional $200,000 during 2018. The $200,000 settlement is in default, and is carried in the accounts payable, however the Company is in the process of settling the outstanding balance. The Company made payments of $10,000 on the owed legal fees in 2020.



Item 1A.  Risk Factors


Not Applicable



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


During the three months ended March 31, 2020, the Company issued 103,447,553 shares of common stock for convertible notes of $107,000 and accrued interest of $15,200 and issued 36,519,609 shares of common stock for the conversion of Series B Preferred Stock.  


The above shares were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, for transactions not involving a public offering.



Item 3.  Defaults Upon Senior Securities


Not Applicable



Item 4.  Mine Safety Disclosures


Not Applicable.



Item 5.  Other Information


None.


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Item 6.  Exhibits


The following is a complete list of exhibits filed as part of the Quarterly Report on Form 10-Q, some of which are incorporated herein by reference from the reports, registration statements and other filings of the issuer with the Securities and Exchange Commission, as referenced below:


Exhibit 31* - Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32* - Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS -  XBRL Instance Document

101.SCH - XBRL Taxonomy Extension Schema Document

101.CAL -  XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF - XBRL Taxonomy Extension Definition Linkbase Document

101.LAB - XBRL Taxonomy Extension Label Linkbase Document

101.PRE - XBRL Taxonomy Extension Presentation Linkbase Document


*Filed Herewith


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

GLOBAL ARENA HOLDINGS, INC.

    a Nevada corporation

 

 

Date: September 24, 2020

By:

/s/ JOHN MATTHEWS        

 

 

John Matthews

 

 

Chief Executive Officer

Chief Financial Officer



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