Amended Quarterly Report (10-q/a)

Date : 01/16/2020 @ 3:54PM
Source : Edgar (US Regulatory)
Stock : Global Arena Holding, Inc. (PN) (GAHC)
Quote : 0.0018  -0.0002 (-10.00%) @ 10:00PM

Amended Quarterly Report (10-q/a)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q/A

 

[x]     Quarterly Report Pursuant to Section 13 or 15(d) Securities Exchange Act of 1934 for Quarterly Period Ended September 30, 2019

-OR-

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

 

Commission File Number  000-49819

 

Global Arena Holding, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

 

Delaware

 

33-0931599

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

208 East 51st Street, Suite 112, New York, NY

 

10022

(Address of principal executive offices)

 

(Zip Code)

 

(646) 801-6146

(Registrant's telephone number, including area code)

 

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

 

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


1


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   [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. [  ]

 

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

 

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

January 16, 2020:  Common Stock  -  985,539,957

 

EXPLANATORY NOTE

This amendment to the Form 10-Q, as filed on January 14, 2020, is being filed solely to correctly add the XBRL documentation.  No other changes have been made to the document.


2


GLOBAL ARENA HOLDING, INC.

FORM 10-Q

For the three and nine months ended September 30, 2019

INDEX

 

PART 1 – FINANCIAL INFORMATION

 

 

 

 

 

Page

Item 1.  Financial Statements (Unaudited)

 

5

Item 2.  Management's Discussion and Analysis of

 Financial Condition and Results of Operations

 

27

Item 3.  Quantitative and Qualitative Disclosure

 About Market Risk

 

32

Item 4.  Controls and Procedures

 

32

 

PART II – OTHER INFORMATION

 

 

 

 

 

Item 1.  Legal Proceedings

 

34

Item 1A.  Risk Factors

 

34

Item 2.  Unregistered Sales of Equity Securities and

 Use of Proceeds

 

34

Item 3.  Defaults upon Senior Securities

 

34

Item 4.  Mine Safety Disclosures

 

34

Item 5.  Other Information

 

34

Item 6.  Exhibits

 

35

 

 

 

SIGNATURES

 

36


3


PART I – FINANCIAL INFORMATION

 

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

 

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


4


GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

September 30,

December 31,

 

2019

2018

 

(unaudited)

 

ASSETS

 

 

 

 

 

Current Assets:

 

 

Cash and cash equivalents

$10,621  

$43,574  

Total current assets

10,621  

43,574  

 

 

 

Deposit for proposed acquisition

506,150  

501,150  

Investment

284,270  

284,270  

Other assets

3,346  

3,346  

TOTAL ASSETS

$804,387  

$832,340  

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

Current Liabilities:

 

 

Accounts payable

$295,766  

$316,986  

Accrued expenses

1,700,829  

1,423,842  

Convertible promissory notes payable,  net of debt discount of

 $109,966 and $297,608

4,514,235  

3,639,165  

Promissory notes payable

230,000  

230,000  

Deferred revenue

12,750  

12,000  

Derivative liability

649,285  

1,269,238  

Total current liabilities

7,402,865  

6,891,231  

 

 

 

STOCKHOLDERS' DEFICIT

 

 

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

 Series B preferred stock; 250,000 shares authorized 60,000 and

 60,000 issued and outstanding

60  

60  

Common stock, $0.001 par value; 1,000,000,000 shares authorized;

 985,539,957 and 934,568,736 shares issued and outstanding

985,540  

934,569  

Additional paid-in capital

18,380,654  

18,028,413  

Accumulated deficit

(25,964,732) 

(25,021,933) 

Total stockholders' deficit

(6,598,478) 

(6,058,891) 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$804,387  

$832,340  

 

 

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 OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(UNAUDITED)

 

 

Three Months Ended

September 30,

Nine Months Ended

September 30,

 

2019

2018

2019

2018

 

 

 

 

 

Revenues:

 

 

 

 

Services

$220,928  

$189,312  

$376,438  

$418,925  

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

Salaries and benefits

122,832  

 

297,676  

9,613  

Marketing and advertising

5,529  

1,583  

5,529  

4,673  

Software development

17,770  

65,962  

52,470  

180,428  

Professional fees

74,297  

286,662  

320,979  

718,130  

General and administrative

132,788  

214,711  

301,821  

511,462  

Printing

56,908  

 

96,497  

43,500  

    Total operating expenses

410,124  

568,918  

1,074,972  

1,467,806  

 

 

 

 

 

Loss from operations

(189,196) 

(379,606) 

(698,534) 

(1,048,881) 

 

 

 

 

 

Other expenses:

 

 

 

 

Interest expense and financing costs

(317,067) 

(877,520) 

(864,218) 

(3,452,056) 

Change in fair value of derivative liability

970,407  

285,033  

619,953  

11,278,024  

    Total other expenses

653,340  

(592,487) 

(244,265) 

7,825,968  

 

 

 

 

 

Income (loss) before provision for taxes

464,144  

(972,093) 

(942,799) 

6,777,087  

 

 

 

 

 

Provision for income taxes

 

 

 

 

 

 

 

 

 

Net income (loss)

$464,144  

$(972,093) 

$(942,799) 

$6,777,087  

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding –

 basic and diluted

974,942,131  

805,779,738  

956,206,677  

740,023,169  

 

 

 

 

 

Earnings (loss) per share - basic

 and diluted

$0.00  

$(0.00) 

$(0.00) 

$0.01  

 

$0.00  

$(0.00) 

$(0.00) 

$0.01  

 

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 STOCKHOLDERS’ DEFICIT

(UNAUDITED)

 

 

Series B

Preferred Stock

 

Common Stock

 

Paid-in

 

Accumulated

 

Stockholders'

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Shares

 

Amount

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

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock

 for accrued interest

 

 

 

 

15,000,000

 

15,000

 

-

 

 

 

15,000

Allocated value of warrants

 and beneficial conversion

 feature related to issuance

 of convertible debt

 

 

 

 

 

 

 

 

199,386

 

 

 

199,386

Net loss

 

 

 

 

 

 

 

 

 

 

(956,391)

 

(956,391)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2019

60,000

 

60

 

960,539,957

 

960,540

 

18,266,192

 

(26,428,876)

 

(7,202,084)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock

 for accrued interest

 

 

 

 

25,000,000

 

25,000

 

43,000

 

 

 

68,000

Allocated value of warrants

 and beneficial conversion

 feature related to issuance

 of convertible debt

 

 

 

 

 

 

 

 

71,462

 

 

 

71,462

Net income

 

 

 

 

 

 

 

 

 

 

464,144

 

464,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September

 30, 2019

60,000

$

60

 

985,539,957

$

985,540

$

18,380,654

$

(25,964,732)

$

(6,598,478)


7


GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(UNAUDITED)

(Continued)

 

 

Series B

Preferred Stock

 

Common Stock

 

Paid-in

 

Accumulated

 

Stockholders'

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Shares

 

Amount

Balance, December

 31, 2017

90,000

$

90

 

639,660,023

$

639,660

$

16,558,470

$

(32,941,453)

$

(15,743,233)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock

 for convertible promissory

 notes and accrued interest

 

 

 

 

52,810,597

 

52,811

 

318,831

 

 

 

371,642

Issuance of common stock

 for conversion of series B

 preferred stock

(30,000)

 

(30)

 

30,743,885

 

30,744

 

(30,714)

 

 

 

-

Allocated value of warrants

 and beneficial conversion

 feature related to issuance

 of convertible debt

 

 

 

 

 

 

 

 

378,364

 

 

 

378,364

Net income

 

 

 

 

 

 

 

 

 

 

6,719,388

 

6,719,388

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2018

60,000

$

60

 

723,214,505

$

723,215

$

17,224,951

$

(26,222,065)

$

(8,273,839)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock

 for convertible promissory

 notes and accrued interest

 

 

 

 

39,004,755

 

39,004

 

96,339

 

 

 

135,343

Issuance of common stock

 for settlement

 

 

 

 

10,000,000

 

10,000

 

108,000

 

 

 

118,000

Allocated value of warrants

 and beneficial conversion

 feature related to issuance

 of convertible debt

 

 

 

 

 

 

 

 

63,636

 

 

 

63,636

Net income

 

 

 

 

 

 

 

 

 

 

1,029,792

 

1,029,792

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2018

60,000

$

60

 

772,219,260

 

772,219

 

17,492,926

 

(25,192,273)

 

(6,927,068)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock

 for convertible promissory

 notes and accrued interest

 

 

 

 

56,313,955

 

56,314

 

53,686

 

 

 

110,000

Issuance of common stock

 for settlement

 

 

 

 

20,489,615

 

20,490

 

36,881

 

 

 

57,371

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocated value of warrants

 and beneficial conversion

 feature related to issuance

 of convertible debt

 

 

 

 

 

 

 

 

270,981

 

 

 

270,981

Fair value of warrants

 issued for services

 

 

 

 

 

 

 

 

14,603

 

 

 

14,603

Net loss

 

 

 

 

 

 

 

 

 

 

(972,093)

 

(972,093)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September

 30, 2018

60,000

$

60

 

849,022,830

$

849,023

$

17,869,077

$

(26,164,366)

$

(7,446,206)

 

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


8


GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(UNAUDITED)

 

Nine Months Ended September 30,

 

2019

2018

OPERATING ACTIVITIES:

 

 

Net income (loss)

$(942,799) 

$6,777,087 

 

 

 

Adjustments to reconcile net income (loss) to net cash used

in operating activities:

 

 Amortization of debt discount

501,710  

1,512,261  

 Change in fair value of derivative liability

(619,953) 

(11,278,024) 

 Non-cash financing costs

 

1,101,610  

 Convertible promissory notes payable issued for

   penalty interest

 

398,676  

 Common stock issued for settlements

 

175,371  

 Fair value of warrants issued for services

 

14,603  

 Common stock issued for services

 

 

Change in current assets and liabilities:

 

 

 Deferred revenue

750  

114,010  

 Accounts payable

(21,220) 

(1,480) 

 Accrued expenses

287,559  

385,844  

Net cash used in operating activities

(793,953) 

(800,042) 

 

 

 

INVESTING ACTIVITIES:

 

 

 Payment of deposit for acquisition

(5,000) 

(44,500) 

Net cash used in investing activities

(5,000) 

(44,500) 

 

 

 

FINANCING ACTIVITIES:

 

 

 Proceeds from convertible promissory notes payable

826,000  

881,500  

 Repayment of convertible promissory notes payable

(60,000) 

(22,500) 

Net cash provided by financing activities

766,000  

859,000  

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(32,953) 

14,458  

 

 

 

CASH AND CASH EQUIVALENTS, BEGINNING BALANCE

43,574  

20,887  

CASH AND CASH EQUIVALENTS, ENDING BALANCE

$10,621  

$35,345  

 

 

 

CASH PAID FOR:

 

 

 Interest

$12,250  

$ 

 Income taxes

$ 

$ 

 

 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 Allocated value of warrants and beneficial conversion features

   related to debt

$314,068 

$2,469,618 

 Debt converted to common stock

$89,144 

$616,985 

 

 

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


9


GLOBAL ARENA HOLDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(UNAUDITED)

 

NOTE 1 - ORGANIZATION

 

Organization and 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”) was previously a financial services firm and currently is focusing on the following businesses through these subsidiaries:

 

On February 25, 2015, Global Election Services, Inc. (“GES”), a wholly owned subsidiary was incorporated in the State of Delaware. GES provides comprehensive technology-enabled 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 scanning/tabulation software utilizing advanced OMR/OCR/Barcode imaging software featuring de-skewing, de-speckling and image correction. This system provides 3 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.

 

On May 20, 2015, the Company incorporated GAHI Acquisition Corp. as a wholly owned entity in the State of Delaware. Currently the Company, along with its software developers, is exploring blockchain technologies for voter registration, tabulation and election balloting.

 

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, 2018 has been derived from the Company's 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 Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission. The results for the nine months ended September 30, 2019


10


are not necessarily indicative of the results to be expected for the full year ending December 31, 2019.

 

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 Company’s debt is in default as of September 30, 2019. 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 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.

 

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 and GAHI Acquisition Corp.  All significant intercompany accounts and transactions have been eliminated in consolidation.  

 

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.


11


 

September 30,

 

2019

 

2018

Options

48,000,000

 

48,000,000

Warrants

466,276,590

 

461,839,515

Convertible notes

1,484,245,515

 

1,312,368,328

Total

1,998,522,105

 

1,822,207,843

 

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.  


12


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. GES’s 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.


13


Share-Based Compensation

 

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC 718-10, Compensation – Stock Compensation, and the conclusions reached by ASC 505-50, Equity – Equity-Based Payments to Non-Employees. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment is reached or completion of performance by the provider of goods or services as defined by ASC 505-50.

 

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.


14


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 Company’s 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 Company’s assets and liabilities required to be reflected within the fair value hierarchy as of September 30, 2019 and December 31, 2018.

 

 

 

Fair Value

 

Fair Value Measurements at

 

 

As of

 

September 30, 2019

Description

 

September 30, 2019

 

Using Fair Value Hierarchy

 

 

 

 

Level 1

 

Level 2

 

Level 3

Beneficial conversion feature

$

649,285

$

-

$

649,285

$

-

 

 

 

 

 

 

 

 

 

Total

$

649,285

$

-

$

649,285

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value

 

Fair Value Measurements at

 

 

As of

 

December 31, 2018

Description

 

December 31, 2018

 

Using Fair Value Hierarchy

 

 

 

 

Level 1

 

Level 2

 

Level 3

Beneficial conversion feature

$

1,269,238

$

-

$

1,269,238

$

-

 

 

 

 

 

 

 

 

 

Total

$

1,269,238

$

-

$

1,269,238

$

-

 

 

 

 

 

 

 

 

 

 

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.

 


15


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 Company’s 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 Company’s 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 Company’s 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 Company’s 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.

 


16


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.

 

NOTE 4 - 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 September 30, 2019 and December 31, 2018, respectively.


17


NOTE 5 - CONVERTIBLE PROMISSORY NOTES PAYABLE

 

Convertible promissory notes payable at September 30, 2019 and December 31, 2018 consist of the following:

 

 

 

September 30,

 

December 31,

 

 

2019

 

2018

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 December 31, 2019, as amended. ($300,000 in default)

 

2,429,000  

 

1,939,000  

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 September 30, 2019 the conversion price would be $0.0009 to $0.0011 per share).  Maturity dates through December 31, 2019, as amended. ($240,157 in default)

 

1,124,701  

 

1,717,701  

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 is September 30, 2019, as amended.  

 

203,000  

 

213,572  

Convertible promissory notes with interest at 12% per annum, convertible into common shares of GES. The maturity dates through August 7, 2010, as amended. ($417,500 in default)

 

867,500  

 

591,500  

Total convertible promissory notes payable

 

4,624,201  

 

4,461,773  

Unamortized debt discount

 

(109,966) 

 

(297,608) 

Convertible promissory notes payable, net discount

 

4,514,235  

 

4,164,165  

Less notes receivable collateralized by convertible promissory notes payable

 

 

 

(525,000) 

 

 

4,514,235  

 

3,639,165  

Less current portion

 

(4,514,235) 

 

(3,639,165) 

Long-term portion

 

 

 

 


18


During the year ended December 31, 2018, the Company issued convertible promissory notes payable totaling $982,000 to one investor for which the Company received $335,000 in cash and notes receivable from the same investor totaling $575,000.  During the year ended December 31, 2018, the Company received $50,000 from a note receivable.  These convertible promissory notes payable also contained an original issue discount of $72,000.  Since the notes receivable were issued to the Company as payment for certain convertible promissory notes payable, the Company has not presented these notes receivable as an asset, but as an offset to the convertible promissory notes payable balance as the investor has the right of offset.  During the nine months ended September 30, 2019, the Company and the investor agreed to cancel convertible promissory notes payable for $525,000 and the notes receivable for $525,000.

 

A rollfoward of the convertible promissory notes payable from December 31, 2018 to September 30, 2019 is below:

 

Convertible promissory notes payable, December 31, 2018

 

 

$

3,639,165

Issued for cash

 

 

 

826,000

Repayment for cash

 

 

 

(60,000)

Conversion to common stock

 

 

 

(78,572)

Debt discount related to new convertible promissory notes

 

 

 

(314,068)

Amortization of debt discounts

 

 

 

501,710

Convertible promissory notes payable, September 30, 2019

 

 

$

4,514,235

 

NOTE 6 - DERIVATIVE FINANCIAL INSTRUMENTS

 

Certain of the Company’s convertible promissory notes payable are convertible into shares of the Company’s 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:


19


 

 

September 30,

 

December 31,

 

 

2019

 

2018

Risk-free interest rate

 

1.75%

 

2.51%

Expected life of the options (Years)

 

0.01

 

0.43

Expected volatility

 

296%

 

314%

Expected dividend yield

 

0%

 

0%

 

 

 

 

 

Fair Value

$

649,285

$

1,269,238

 

A rollfoward of the derivative liability from December 31, 2018 to September 30, 2019 is below:

 

Derivative liabilities, December 31, 2018

$

1,269,238

Change in fair value of derivative liabilities

 

(619,953)

Derivative liabilities, September 30, 2019

$

649,285

 

NOTE 7- STOCKHOLDERS’ DEFICIT

 

Series B Preferred Stock

 

Pursuant to the Company’s 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.  

 

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

 

Common Stock

 

On April 28, 2016 the stockholders approved an amendment to the Company’s 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 Company’s 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.


20


During the nine months ended September 30, 2019, the Company issued 50,971,221 shares of common stock for convertible notes of $78,572 and accrued interest of $10,572.

 

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, 2018

 

48,000,000

 

0.03

 

3.80

 

-

Granted

 

-

 

 

 

 

 

 

Exercised

 

-

 

 

 

 

 

 

Forfeited/Canceled

 

-

 

 

 

 

 

 

Outstanding, September 30, 2019

 

48,000,000

 

0.03

 

3.05

 

-

Exercisable, September 30, 2019

 

48,000,000

 

0.03

 

3.05

 

-

 

 

 

 

 

 

 

 

 


21


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, 2018

 

466,276,590

 

0.013

 

1.95

 

14,560

Granted

 

104,200,000

 

0.004

 

 

 

 

Exercised

 

-

 

 

 

 

 

 

Forfeited/Canceled

 

(31,346,665)

 

0.040

 

 

 

 

Outstanding, September 30, 2019

 

539,129,925

 

0.010

 

1.42

 

143,067

Exercisable, September 30, 2019

 

539,129,925

 

0.010

 

1.42

 

143,067

 

During the nine months ended September 30, 2019, the Company issued a total of 104,200,000 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 years 

·Volatility of 296% - 308%; 

·Dividend yield of 0%; 

·Risk free interest rate of 1.75% - 2.5%1 

 

NOTE 8 - 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 September 30, 2019 and December 31, 2018.  The Company is currently attempting to adjudicate and settle this fine.

 


22


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.

 

NOTE 9– AGREEMENTS

 

On June 28, 2018, the Company entered into an application development and services agreement with Synectic Advisors.  Under the terms of the agreement Synectic Advisors will connect the election software programs to the Blockchain. Under the terms of the agreement, the Company will pay $85,000, 4.99% of the Company’s common stock, upon approval of the corporate actions at the 2019 annual meeting, and a 6% net revenue participation. On August 2, 2018 the Company made a $20,000 payment and work is ongoing.  As of June 30, 2019, the Company is no longer pursuing this agreement.

 

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 GES’s clients’ online elections and other e-voting events pursuant to the terms of the agreement, as well as any other ventures and relationships agreed 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 1st 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 Company’s 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 1st quarter of 2020.

 

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 1st quarter of 2020.


23


On June 19, 2019, Global Election Services, 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:

 

(a)  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.

 

(b)  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.

 

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

 

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

 

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

 

(f) 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 27th 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.


24


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 15, 2019 Global Election Services Inc., (“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. 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, in the 1st quarter of 2020.

 

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


25


On November 28, 2019 the Board of Directors of GAHC authorized the termination of the transaction previously authorized to infuse an initial deposit of $50,000 into GAHI for general capital and administrative expenses and have GAHI 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 Global Arena Holding Inc. and will focus on Blockchain related Companies for Investments and Acquisition.

 

NOTE 10– SUBSEQUENT EVENTS

 

Subsequent to September 30, 2019, the Company received $300,000 from the issuance of a convertible note and issued 153,846,000 warrants.

 

On October 11, 2019 the Company’s shareholders approved an increase of the Company’s authorized shares by 1 Billion Common Shares. The Board of Directors John S. Matthews, Martin Doane, and Facundo Bacardi were elected to serve for 2020.

 

On October 21, 2019 the Company’s subsidiary Global Elections Services was retained to administer the North Dakota Dem-NPL Presidential Primary. GES will be handling a hybrid election where eligible voters in the state of North Dakota will have the option to call a GES managed call center to request a mail ballot for a period leading up to election day. On Election Day, GES will supervise 14 in-person voting locations around the state and upon polls closing, GES will process and tabulate all the ballots and report results for the state’s Democratic nominee. This contract is not material to the Company’s future earnings.

 

The Board authorized the forming of Tidewater Energy Group Inc. on November 18, 2019, a Delaware C Corporation, and 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.

 

Tidewater will be authorized to have 40,000,000 million shares in total, par value $0.001.

 

Tidewater will issue 10,000,000 million common shares to the following individuals:

 

-Global Arena Holding Inc. 5,100,000 common shares. (51%) 

-Thomas Kivisto 3,150,000 common shares. (31.5%) 

-Jason Old 1,250,000 common shares (12.5) 

-Thirty-One Ten Investments 500,000 common shares (5%) 

 

The Company invested $50,000 into Tidewater Energy Group Inc. for general capital and administrative expenses. This transaction closed in the 1st Quarter of 2020.


26


ITEM 2.  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 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 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 our 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-Q.

 

Critical Accounting Policies

 

The Company’s 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 GAHI and its wholly-owned and majority owned subsidiaries, GES and GAHI Acquisition Corp.  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. GES’s 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.


27


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. 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 accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC 718-10, Compensation – Stock Compensation, and the conclusions reached by ASC 505-50, Equity – Equity-Based Payments to Non-Employees. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment is reached or completion of performance by the provider of goods or services as defined by ASC 505-50.

 

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


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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 Company’s 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 Company’s 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 Company’s 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.

 

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 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 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


29


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 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, when applicable, the Company shall utilize third-party service providers to secure the Company’s 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 September 30, 2019, the Company has an accumulated deficit of $25,964,732 and a working capital deficit of $7,392,244.  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 nine months ended September 30, 2019, the Company recorded a net loss of $942,799.  We recorded an amortization of debt discount of $501,710.   We recorded a gain from the change in fair value of derivative liability of $619,953.  We had an increase in accounts payable and accrued expenses of $266,339 and a decrease in deferred revenue of $750.  As a result, we had net cash used in operating activities of $793,953 for the nine months ended September 30, 2019.

 

For the nine months ended September 30, 2019, we paid $5,000 for an acquisition deposit.  

 

For the nine months ended September 30, 2019, we received $826,000 as proceeds from the issuance of convertible promissory notes payable and repaid $60,000 of such convertible notes.  As a result, we had net cash provided by financing activities of $766,000 for the period.

 

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 for the years ended December 31, 2018 and 2017 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.


30


Results of operations for the three months ended September 30, 2019 compared to the three months ended September 30, 2018

 

Revenues for the three months ended September 30, 2019 were $220,928 compared to $189,312 for the three months ended September 30, 2018, an increase of $31,616.  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 2019.

 

Salaries and benefits totaled $122,832 for the three months ended September 30, 2019 compared to $0 for the three months ended September 30, 2018, an increase of $122,832.  This increase was due primarily to employment agreements entered into with our key employees.

 

Professional fees for the three months ended September 30, 2019 totaled $74,297 compared to $286,662 for the three months ended September 30, 2018, a decrease of $212,365.  This decrease is primarily due to a reduction in legal fees during the three months ended September 30, 2019.

 

For the three months ended September 30, 2019, we incurred marketing and advertising expenses of $5,529 compared to the $1,583 in the three months ended September 30, 2018.  We incurred software development expenses of $17,770 in 2019 compared to $65,962 in 2018, we incurred printing costs of $56,908 in 2019 compared to $0 in 2018, and we incurred general and administrative expenses of $132,788 in 2019 compared to $214,711 in 2018.  These decreases are all due to efforts to reduce overhead during the three months ended September 30, 2019.

 

Total operating expenses for the three months ended September 30, 2019 were $410,124 compared to $568,918 for the three months ended September 30, 2018, a decrease of $158,794 principally due to reasons discussed above.

 

Results of operations for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018

 

Revenues for the nine months ended September 30, 2019 were $376,438 compared to $418,925 for the nine months ended September 30, 2018, a decrease of $42,487.  The majority of our clients hold elections on a three year cycle.  This decrease in revenues is due primarily to fewer elections held during the six month period in 2019.

 

Salaries and benefits totaled $297,676 for the nine months ended September 30, 2019 compared to $9,613 for the nine months ended September 30, 2018, an increase of $288,063.  This increase was due primarily to employment agreements entered into with our key employees.

 

Professional fees for the nine months ended September 30, 2019 totaled $320,979 compared to $718,130 for the nine months ended September 30, 2018, a decrease of $397,151.  This decrease is primarily due to the reduced legal activities during the nine months ended September 30, 2019.

 

For the nine months ended September 30, 2019, we incurred marketing and advertising expenses of $5,529 compared to the $4,673 in the nine months ended September 30, 2018.  We incurred software development expenses of $52,470 in 2019 compared to $180,428 in 2018, we incurred printing costs of $96,497 in 2019 compared to $43,500 in 2018, and we incurred general and administrative expenses of $301,821 in 2019 compared to $511,462 in 2018.  These decreases are all due to efforts to reduce overhead during the nine months ended September 30, 2019.

 


31


Total operating expenses for the nine months ended September 30, 2019 were $1,074,972 compared to $1,467,806 for the nine months ended September 30, 2018, a decrease of $392,834 principally due to reasons discussed above.

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable for smaller reporting companies.

 

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 September 30, 2019.

 

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 September 30, 2019 to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, 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 nine months ended September 30, 2019.  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.


32


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.


33


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.  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.

 

Item 1A.  Risk Factors

 

Not applicable for smaller reporting company

 

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

 

During the three months ended September 30, 2019, the Company issued 25,000,000 shares of common stock for debt of $68,000.

 

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 


34


Item 6.   Exhibits

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.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

**XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. To be filed by amendment.


35


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.

 

Dated: January 16, 2020

 

Global Arena Holding, Inc.

 

 

/s/John Matthews

  John Matthews

  Chief Executive Officer

  Chief Financial Officer


36

 

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