Attached files
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) Securities
Exchange Act of 1934 for Quarterly Period Ended June 30, 2011
-OR-
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities And Exchange Act of 1934 for the transaction period from
_________ to________
Commission file number: 0-49819
Global Arena Holding, Inc.
(Exact name of registrant as specified in its charter)
Delaware 33-0931599
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
708 Third Avenue
New York, NY 10017
(address of principal executive offices) (Zip Code)
Issuer's telephone number: 212-508-4700
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 [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerate filer, or a small reporting company
as defined by Rule 12b-2 of the Exchange Act):
Large accelerated filer [ ] Non-accelerated filer [ ]
Accelerated filer [ ] Smaller reporting company [x]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [x]
The number of outstanding shares of the registrant's common stock, August
18, 2011: Common Stock - 19,317,551
2
GLOBAL ARENA HOLDING, INC.
FORM 10-Q
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3
Condensed Consolidated Statement of Financial
Condition as of June 30, 2011 and December 31, 2010
Condensed Consolidated Statements of Operations for
the three and six months ended June 30, 2011 and June
30, 2010
Condensed Consolidated Statement of Changes in
Stockholders' equity for the six months ended June
30, 2011
Condensed Consolidated Statements of Cash Flows for
the six months ended June 30, 2011 and 2010
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 18
Item 3. Quantitative and Qualitative Disclosure About
Market Risk 22
Item 4. Controls and Procedures 22
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. (Removed and Reserved) 25
Item 5. Other Information 25
Item 6. Exhibits 25
SIGNATURES 26
3
PART I - FINANCIAL INFORMATION
This Quarterly Report includes forward-looking statements within the
meaning of the Securities Exchange Act of 1934 (the "Exchange Act").
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.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
June 30, December 31,
2011 2010
---------- ----------
ASSETS
Cash $ 26,759 $ 22,401
Cash - restricted 613 325,872
Due from clearing broker 68,937 5,818
Investment in GACC 480,000 480,000
Other receivable - related party 264,610 62,611
Advances to registered
representatives and employees 24,197 23,500
Fixed assets, net of accumulated depreciation 781 1,074
Prepaid expenses and other current assets 1,975 2,123
Intangible asset, customer list, net 113,021 140,145
---------- ----------
TOTAL ASSETS $ 980,893 $1,063,544
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 98,013 $ 61,211
Payable to affiliates 124,570 -
Convertible promissory notes payable,
net of debt discount of $112,700
as of June 30, 2011 87,300 -
Derivative liability 185,300 343,000
---------- ----------
TOTAL LIABILITIES $ 495,183 $ 404,211
---------- ----------
Stockholders' Equity:
Common stock, par value $0.0001 per share;
100,000,000 shares authorized;
19,317,551 and 18,000,000 shares issued
and outstanding respectively 1,932 1,800
Additional paid-in capital 2,891,458 2,170,200
Stock subscription (50,000) -
Accumulated deficit (2,201,878) (1,400,560)
---------- ----------
Stockholders' equity attributable to
Global Arena Holding, Inc. 641,512 771,440
Non-controlling interest (155,802) (112,107)
---------- ----------
Total Stockholders' Equity 485,710 659,333
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 980,893 $1,063,544
========== ==========
Difference $ (0) $ 0
5
GLOBAL ARENA HOLDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2011 2010 2011 2010
------- ------- --------- --------
Revenues:
Investment advisory fees $226,066 $215,280 $ 445,348 $416,874
Commissions and other - 2,505 7,324 3,562
-------- -------- ---------- --------
Total Revenues 226,066 217,785 452,672 420,436
Operating Expenses:
Commissions 175,084 163,035 352,360 321,173
Salaries and benefits 79,091 110,558 138,346 232,057
Occupancy 27,876 32,453 56,337 63,311
Business development 31,071 33,394 49,283 71,662
Professional fees 88,427 763 241,189 42,536
Clearing and operations 223 7,036 6,642 13,041
Regulatory fees 10,287 - 12,218 -
Office and other expenses 63,139 9,515 233,010 20,557
-------- -------- ---------- --------
Total Operating Expenses 475,198 356,754 1,089,385 764,337
-------- -------- ---------- --------
Loss from Operations (249,132) (138,969) (636,713) (343,901)
-------- -------- ---------- --------
Other (Income) Expense
Interest expense 195,300 - 195,300 -
(Gain) Loss on change in fair
value of derivative liability (14,000) - 13,000 -
-------- -------- ---------- --------
Total Other (Income) Expense 181,300 - 208,300 -
-------- -------- ---------- --------
Net Loss (430,432) (138,969) (845,013) (343,901)
Net loss attributable to
non-controlling interest (14,938) (14,124) (43,695) (36,228)
-------- -------- ---------- ----------
Net loss attributable to stockholders
of Global Arena Holding, Inc. $(415,494) $(124,845) $ (801,318) $(307,673)
-------- -------- ---------- ---------
Net loss per common share
- Basic and diluted $ (0.02) $ (0.01) $ (0.04) $ (0.02)
========= ========= ========== =========
Weighted average common shares
outstanding - Basic and diluted 18,866,464 15,370,500 18,270,323 15,206,150
========= ========= ========== =========
6
GLOBAL ARENA HOLDING, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the 6 Months Ended June 30, 2011
Additional Non-
Common Stock Paid-in Accumulated Stock controlling
Shares Amount Capital Deficit Subscription Interest Total
---------- ------ ---------- ----------- ------------ ----------- ----
Balance, December
31, 2010 18,000,000 $1,800 $2,170,200 $(1,400,560) - (112,107) $ 659,333
Reverse merger with
China Stationery, Inc. 409,524 41 (40,451) - - - (40,410)
Issuance of common
stock for the exercise
of warrants 908,027 91 289,909 - (50,000) - 240,000
Issuance of warrants in
connection with
convertible debt - - 150,000 - - - 150,000
Issuance of warrants in
connection with
convertible debt - - 40,700 - - - 40,700
Stock based compensation
charge for the modif-
cation of warrants - - 110,400 - - - 110,400
Reclassification of
derivative liability to
equity - - 170,700 - - - 170,700
Net Loss - - - (801,318) - (43,695) (845,013)
---------- ------ ---------- ----------- --------- --------- ----------
Balance, June
30, 2011 19,317,551 $1,932 $2,891,458 $(2,201,878) $ (50,000) $(155,802) $485,710
========== ====== ========== =========== ========= ========= ==========
7
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the 6 Months
Ended June 30,
2011 2010
--------- -----------
Cash Flows from Operating Activities
Net Loss $(845,013) $ (343,901)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 27,417 27,418
Accretion of debt discount 78,000 -
Stock-based compensation 110,400 -
Gain on fair value of derivative liability 13,000 -
Changes in operating assets and liabilities:
Due from clearing broker (63,119) (1,029)
Advances to registered representatives
and employees (697) 1,052
Prepaid expenses and other current assets 148 (1,527)
Accounts payable and accrued expenses (3,608) (11,897)
--------- -----------
Net cash Used in Operating Activities (683,472) (329,884)
--------- -----------
Cash Flows from Investing Activities
Investment in Affiliate - (50,000)
Return of escrow deposit - restricted cash 325,259 -
-------- -----------
Net Cash Provided by (Used in)
Investing Activities 325,259 (50,000)
-------- -----------
Cash Flows from Financing Activities:
Proceeds from the exercise of warrants 240,000 -
Proceeds from the issuance of common
stock and warrants - 325,000
Proceeds from convertible promissory notes 200,000 -
Advances to affiliate (201,999) (39,798)
Repayment of advances from affiliate 124,570 92,103
-------- -----------
Net Cash Provided by Financing Activities 362,571 377,305
-------- -----------
Net Increase in Cash and Cash Equivalents 4,358 (2,579)
Cash - Beginning $ 22,401 $ 2,696
-------- -----------
Cash - Ending $ 26,759 $ 117
======== ===========
8
Supplemental Disclosure of Cash Flow Information:
------------------------------------------------
Interest paid $ - $ -
-------- -----------
Non-Cash Investing and Financing Activities:
-----------------------------------------------
Issuance of warrants in connection
with convertible promissory notes $190,700 $ -
-------- ----------
Reclassification of derivative liability
To equity $170,700 $ -
-------- ----------
Shares issued related to assumption of net
Liabilities acquired with reverse merger $ 40,410 $ -
-------- ----------
9
GLOBAL ARENA HOLDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
Note 1 - Nature of Business
Global Arena Holding Corp. (formerly Global Arena Holding Subsidiary
Corp.) (the "Company"), was formed in February 2009, in the state of
Delaware. The Company is a financial services firm that services the
financial community through its subsidiaries as follows:
Global Arena Investment Management LLC ("GAIM") provides investment
advisory services to its clients. GAIM is registered with the
Securities and Exchange Commission (the "SEC") as an investment advisor
and clears all of its business through Fidelity Advisors ("Fidelity"),
its correspondent broker. Global Arena Commodities Corp. ("GACOM")
provides commodities brokerage services in return for commissions.
Global Arena Trading Advisors, LLC ("GATA") provides futures advisory
services in return for fees. GATA is registered with the National
Futures Association (NFA) as a commodities trading advisor. Lillybell
Entertainment, LLC ("Lillybell") provides finance services to the
entertainment industry.
Note 2 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
of the Company have been prepared in accordance with the instructions
to Form 10-Q of the Securities and Exchange Commission. Accordingly,
they do not include all of the information and disclosures required by
accounting principles generally accepted in the United States of
America. However, in the opinion of management, the accompanying
unaudited condensed consolidated financial statements contain all
normal and recurring adjustments necessary to present fairly the
financial position of the Company as of June 30, 2011 and the related
statements of operations and cash flows for the interim period then
ended. The statement of financial condition as of December 31, 2010
was derived from audited financial statements. For further information,
refer to the audited financial statements and related disclosures that
were filed by the Company with the Securities and Exchange Commission
on Form DEF 14C for the fiscal year ended December 31, 2010 on April
29, 2011.
Note 3 - Reverse Merger Transaction
On May 18, 2011, Global Arena Holding Subsidiary Corp. merged into
China Stationery and Office Supply, Inc., with China Stationery
continuing as the surviving corporation. The new name of the
corporation is Global Arena Holding, Inc.
At the effective date of the Merger, each share of the Company's common
stock, was be cancelled and converted automatically into the right to
receive 1.5 common shares of China Stationery for an aggregate of
18,000,000 common shares of China Stationery and were recorded as a
recapitalization of China Stationery.
10
GLOBAL ARENA HOLDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
Note 3 - Reverse Merger Transaction (Continued)
The Merger was effected pursuant to an Agreement and Plan of
Reorganization and the related Agreement and Plan of Merger dated as of
January 19, 2011, among China Stationery and Global Arena. The approval
of China Stationery's board of directors and the affirmative vote of
the holders of a majority of the outstanding common stock entitled to
vote were obtained in order to approve and adopt the Merger Agreement.
China Stationery's sole director approved the Merger Agreement and the
transactions contemplated by the Merger Agreement, including the
Merger, at a meeting of the board of directors on January 19, 2011. The
Merger Agreement was executed and delivered by the parties on January
19, 2011.
On January 19, 2011, immediately following the execution and delivery
of the Merger Agreement, and as a condition and inducement to the
willingness of the Company to enter into the Merger Agreement, certain
shareholders, who held, as of the date of the Merger Agreement, a
majority of the issued and outstanding common shares entitled to vote
on the adoption of the Merger Agreement, executed and delivered to the
Company a written consent approving the transactions contemplated
thereby, including the Merger. As a result of the certain
shareholder's written consent, no further action by any other China
Stationery stockholder is required in connection with the adoption of
the Merger Agreement.
Note 4 - Liquidity, Capital Resources and Going Concern
The accompanying condensed consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of the liabilities in the normal course
of business. The Company has incurred losses of approximately $430,000
and $845,000 during the three and six months ended June 30, 2011,
respectively. These conditions raise substantial doubt about its
ability to continue as a going concern. The accompanying condensed
consolidated financial statements do not include any adjustments
related to the recoverability or classification of asset-carrying
amounts or the amounts and classification of liabilities that may
result should the Company be unable to continue as a going concern.
Management believes that it will be successful in obtaining additional
financing, from which the proceeds will be primarily used to execute
its operating plan. The Company plans to use its available cash to
continue the development and execution of its business plan and expand
its client base and services.
However, the Company can give no assurance that such financing will be
available on terms advantageous to the Company, or at all. Should the
Company not be successful in obtaining the necessary financing to fund
its operations, the Company would need to curtail certain or all of its
11
GLOBAL ARENA HOLDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
operational activities. The accompanying condensed consolidated
financial statements do not include any adjustments that might be
necessary should the Company be unable to continue as a going concern.
Note 5 - Summary of Significant Accounting Policies
Principles of Consolidation
The condensed consolidated financial statements of the Company include
accounts of the Company and its wholly-owned subsidiary and majority
owned subsidiaries. Intercompany transactions and balances are
eliminated in consolidation.
Revenue Recognition
The Company earns revenues through various services it provides to its
clients. Advisory fees are on a contractual basis with the fee
stipulated in the contract and are recognized based on the terms of the
contract during the period service is provided.
Customer security transactions and the related commission income and
expense are recorded as of the trade date. The Company generally acts
as an agent in executing customer orders to buy or sell listed and
over-the-counter securities in which it does not make a market, and
charges commissions based on the services the Company provides to its
customers.
Derivative Financial Instruments
In connection with the issuance of certain warrants that include price
protection reset provisions. The Company determined that the exercise
price reset provision feature is an embedded derivative instrument
pursuant to ASC 815 "Derivatives and Hedging."
The accounting treatment of derivative financial instruments requires
that the Company record the related warrants at their fair values as of
the inception date of the financial instrument and at fair value as of
each subsequent balance sheet date. Any change in fair value was
recorded as non-operating, non-cash income or expense for each
reporting period at each balance sheet date. The Company reassesses the
classification at each balance sheet date. If the classification
changes as a result of events during the period, the contract is
reclassified as of the date of the event that caused the
reclassification.
12
GLOBAL ARENA HOLDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
Note 5 - Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements
Recent accounting pronouncements issued by the FASB and the SEC did not
have, or are not believed by management to have, a material impact on
Global Arena Holding's present or future consolidated financial
statements.
Note 6 - Net Loss Per Share
Basic loss per share was computed using the weighted average number of
outstanding common shares. Diluted loss per share includes the effect
of dilutive common stock equivalents from the assumed exercise of
options, warrants, convertible preferred stock and convertible notes.
Common stock equivalents were excluded in the computation of diluted
loss per share since their inclusion would be anti-dilutive. Total
shares issuable upon the exercise of warrants and conversion of
convertible promissory notes for the six months ended June 30, 2011 and
2010 were as follows:
June 30,
2011 2010
--------------------
Warrants 3,842,437 1,633,500
Convertible debt 571,428 --
--------- ---------
Common stock equivalents 4,413,865 1,633,500
--------- ---------
Note 7 - Fair Value
ASC 820 "Fair Value Measurements and Disclosures" defines fair value,
establishes a framework for measuring fair value and requires enhanced
disclosures about fair value measurements. As defined in ASC 820, fair
value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants at the measurement date. The Standard clarifies that the
exchange price is the price in an orderly transaction between market
participants to sell an asset or transfer a liability at the
measurement date and emphasizes that fair value is a market-based
measurement and not an entity-specific measurement.
ASC 820 establishes the following hierarchy used in fair value
measurements and expands the required disclosures of assets and
liabilities measured at fair value:
Level 1 - Inputs use quoted prices in active markets for identical
assets or liabilities that the Company has the ability to access.
13
GLOBAL ARENA HOLDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
Note 7 - Fair Value (Continued)
Level 2 - Inputs use other inputs that are observable, either directly
or indirectly. These inputs include quoted prices for similar assets
and liabilities in active markets as well as other inputs such as
interest rates and yield curves that are observable at commonly quoted
intervals.
Level 3 - Inputs are unobservable inputs, including inputs that are
available in situations where there is little, if any, market activity
for the related asset or liability.
In instances where inputs used to measure fair value fall into
different levels in the above fair value hierarchy, fair value
measurements in their entirety are categorized based on the lowest
level input that is significant to the valuation. The Company's
assessment of the significance of particular inputs to these fair
measurements requires judgment and considers factors specific to each
asset or liability.
Liabilities measured at fair value as of June 30, 2011 are as follows:
Balance
June 30,
Level 1 Level 2 Level 3 2011
--------- --------- --------- ---------
Warrants $ - $ - $ 185,300 $ 185,300
========= ========= ========= =========
Financial assets are considered Level 3 when their fair values are
determined using pricing models, discounted cash flow methodologies or
similar techniques and at least one significant model assumption or
input is unobservable. Our Level 3 liability consisted of warrants with
dilutive price reset provisions issued to investors.
The following table provides a summary of the changes in fair value,
including net transfers in and/or out, of all financial assets measured
at fair value on a recurring basis using significant unobservable
inputs during the six months ended June 30, 2011:
Warrant
--------
Balance - January 1, 2011 $343,000
--------
Change in derivative liability included in:
Income and expenses 13,000
Stockholders' equity (170,700)
Transfers in and out of Level 3 -
--------
Balance - June 30, 2011 $185,300
========
14
GLOBAL ARENA HOLDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
NOTE 8 - Convertible Promissory Notes
a) On March 31, 2011 and June 1, 2011, the Company sold and issued
convertible promissory notes in the principal aggregate amount of
$150,000 at a stated interest rate of 12% per annum. In addition
the Company granted warrants to purchase 785,714 shares of common
stock at an exercise price of $0.35 per share. The warrants have
a life of 5 years. The convertible promissory notes mature on
September 30, 2011. The holder of the note is entitled to
convert all or a portion of the convertible notes plus any unpaid
interest, at the lender's sole option, into shares of common
stock at a conversion price of $0.35 per share.
The gross proceeds from the sale of the notes of $150,000 was
recorded net of a discount of $150,000. The debt discount was
comprised of $93,000 for the relative fair value of the warrants
and $106,000 for the beneficial conversion feature of the notes.
The fair value of the instruments exceeded the face value of the
notes and accordingly, the debt discount was limited to the face
value of the notes. The debt discount is being charged to
interest expense ratably over the term of the convertible notes.
b) On March 24, 2011, the Company sold and issued a convertible
promissory note in the principal amount of $50,000 at a stated
interest rate of 12% per annum. In addition the Company granted
warrants to purchase 100,000 shares of common stock at an
exercise price of $0.35 per share. The warrants have a life of 5
years. The convertible note matures on November 11, 2011. The
holder of the note is entitled to convert all or a portion of the
convertible note plus any unpaid interest, at the lender's sole
option, into shares of common stock at a conversion price of
$0.35 per share.
The gross proceeds from the sale of the note of $100,000 was
recorded net of a discount of $40,700. The debt discount was
comprised of $19,000 for the relative fair value of the warrants
and $21,700 for the beneficial conversion feature of the note.
The debt discount is being charged to interest expense ratably
over the term of the convertible note.
PAGE>15
GLOBAL ARENA HOLDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
Note 9 - Stockholders' Equity
During the six months ended June 30, 2011, the Company issued 908,027
shares of common stock for the exercise of warrants for cash proceeds
of $290,000. As of June 30, 2011, the Company was owed $50,000 for the
issuance of the shares and recorded a stock subscription receivable of
$50,000. Subsequent to June 30, 2011, the Company received the $50,000
from the warrant holder. Upon the exercise of warrants the Company
reclassified $170,700 of the derivative liability to equity.
On May 18, 2011 the Company modified 1,633,500 of warrants previously
granted pursuant to a 2009 private placement memorandum. The Company
reset the term of the warrants to three years as of the date the
reverse merger was completed. The Company recorded a charge of
$110,400 for the modification of the award and has been included as a
component of interest expense in the accompanying statement of
operations for the six months ended June 30, 2011.
Note 10 - Warrants
The following tables summarize information about warrants outstanding
as of June 30, 2011:
Weighted
Average Weighted
Exercise Average Intrinsic
Shares Price Exercisable Value
--------- ----- --------- -----
Outstanding at
January 1, 2011 3,864,750 $0.53 3,864,750 $ -
Granted 885,714 $0.35 885,714 $44,286
Exercised (908,027) ($0.32) (908,027) $76,642
Expired - - - -
Cancelled - - - -
--------- ----- --------- -------
Outstanding at June 30, 2011 3,842,437 $0.50 3,842,437 $ -
--------- ----- --------- -------
Average
Number Contractual Exercise Warrants
Exercise Price Outstanding Life Price Exercisable
--------- ------- ------- ---------
$0.31 to $0.35 2,208,937 3.09 $0.33 2,208,937
$0.67 1,633,500 2.88 $0.67 1,633,500
--------- ---------
Total 3,842,437 3,842,437
========= =========
16
GLOBAL ARENA HOLDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
Note 11 - Non-Controlling Interest
The Company has operating assets through two operating subsidiaries.
The Company has a 67% equity interest in Lillybell and a 95% equity
interest in GAIM. As of June 30, 2011 the third party non-controlling
interest was ($155,802).
Note 12 - Related Parties
The Company has an expense sharing agreement with GACC whereby GACC
pays certain general and administrative expenses on behalf of the
Company and its operating subsidiaries. During the year six months
ended June 30, 2011 and 2010, Global Arena Holding reimbursed GACC
approximately $200,500 and $192,600, respectively.
The Company has a month-to-month agreement with Broadsword, an
affiliated company, whereby Broadsword provides office space to the
Company. During the six months ended June 30, 2011 and 2010, Global
Arena was charged approximately $54,800 and $54,200, respectively, for
office space.
Note 13 - Commitments and Contingencies
Litigation
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. The Company currently is
not involved in any legal proceedings.
Indemnification
The Company is engaged in providing a broad range of investment
services to a diverse group of retail and institutional clientele.
Counterparties to the Company's business activities include broker-
dealers and clearing organizations, banks and other financial
institutions. The Company uses clearing brokers to process transactions
and maintain customer accounts on a fee basis, and the Company permits
the clearing firms to extend credit to its clientele secured by cash
and securities in the client's account. The Company's exposure to
credit risk associated with the non-performance by its customers and
counterparties in fulfilling their contractual obligations can be
directly impacted by volatile or illiquid trading markets, which may
impair the ability of customers and counterparties to satisfy their
obligations to the Company. The Company has agreed to indemnify the
clearing brokers on a limited basis for losses it incurs while
extending credit to the Company's clients.
It is the Company's policy to review, as necessary, the credit standing
of its customers and each counterparty. Amounts due from customers that
are considered uncollectible by the clearing broker are charged back to
17
GLOBAL ARENA HOLDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
Note 13 - Commitments and Contigencies (Continued)
the Company by the clearing broker when such amounts become
determinable. Upon notification of a charge back, such amounts, in
total or in part, are then either (i) collected from the customers,
(ii) charged to the broker initiating the transaction, and/or (iii)
charged as an expense in the accompanying statement of operations,
based on the particular facts and circumstances.
The maximum potential amount for future payments that the Company could
be required to pay under this indemnification cannot be estimated.
However, the Company believes that it is unlikely it will have to make
any material payments under these arrangements and has not recorded any
contingent liability in the consolidated financial statements for this
indemnification.
Note 14 - Revenue Concentrations
The Company considers significant revenue concentrations to be clients
or brokers who account for 10% or more of the total revenues generated
by the Company during the period. The Company had 3 brokers who
accounted for 82% of total revenues, which included revenues from a
single customer that accounted for 12% of total revenues, during the
three months ended June 30, 2011. During the six months ended June 30,
2011, the Company had 3 brokers who accounted for 82% of total
revenues, which included revenues from a single customer that accounted
for 12% of total revenues.
Note 15 - Subsequent Events
Management has evaluated subsequent events to determine if events or
transactions occurring through the date the condensed consolidated
financial statements are issued, require potential adjustment to or
disclosure in the consolidated financial statements.
18
Management's Discussion and Analysis of
Financial Condition And Results of Operations
-----------------------------------------------------------
Trends and Uncertainties
Global Arena is a financial services firm that services the financial
community through its subsidiaries. Demand for Global Arena's services
are dependent on general economic conditions, which are cyclical in
nature. Because a major portion of Global Arena's activities are the
receipt of revenues from financial services, our business operations
may be adversely affected by competitors and prolonged recessionary
periods.
There are no other known trends, events or uncertainties that have, or
are reasonably likely to have, a material impact on our short term or
long term liquidity. Sources of liquidity will come from the sale of
our services, as well as the private sale of our stock. There are no
material commitments for capital expenditure at this time. There are no
trends, events or uncertainties that have had or are reasonably
expected to have a material impact on the net sales or revenues or
income from continuing operations. There are no significant elements of
income or loss that do not arise from Global Arena's continuing
operations. There are no other known causes for any material changes
from period to period in one or more line items of our financial
statements.
Results of Operations
Six months ended June 30, 2011 compared to the six months ended June
30, 2010
Revenues for the six months ended June 30, 2011 consisted of investment
advisory fees of $445,348 and commissions and other of $7,324 resulting
in total revenues of $452,672. Comparatively for the six months ended
June 30, 2010, revenues consisted of investment advisory fees of
$416,874 and commissions and other of $3,562. The increase is primarily
attributable to increased operations.
Net loss for the six months ended June 30, 2011 was $(845,314) compared
to $(343,901) for the six months ended June 30, 2010. Operating
expenses for the six months ended June 30, 2011 were $1,089,385
compared to $764,337 for the six months ended June 30, 2010.
This increase is primarily attributable to increased operations which
resulted in:
- an increase of $31,187, or approximately 10%, in commissions,
- an increase of $212,453 in office and other expenses.
Professional fees increased $198,653, as Global Arena Holding completed
its reverse merger with China Stationery & Office Supply, Inc.
There was a loss on the fair value of a derivative liability for the
six months ended June 30, 2011 of $13,000 compared to $0 for the six
months ended June 30, 2010.
19
Liquidity and Capital Resources
During the six months ended June 30, 2011, Global Arena Holding reduced
its escrow deposit - restricted cash balance by $325,259, resulting in
net cash used in investing activities of $325,259.
Comparatively, for the six months ended June 30, 2010, Global Arena
Holding made an investment in GACC, an affiliate of $50,000, resulting
in net cash used in investing activities of $50,000.
During the six months ended June 30, 2011, Global Arena Holding
received proceeds from the issuance of common stock of $240,000,
extended an advance of $201,999 to affiliates, increased its payable to
affiliates by $124,570, and obtained a convertible loan of $200,000,
resulting in net cash used in financing activities of $362,571.
Comparatively, for the six months ended June 30, 2010, Global Arena
Holding received proceeds from the issuance of common stock of
$325,000, received payments of $312,718 on its receivable from
affiliates and received advances from affiliates of $92,103. Global
Arena Holding had net cash used in financing activities of $377,305 for
the six months ended June 30, 2010.
We reported a net increase in cash for the six months ended June 30,
2011 of $4,358 as compared to a net decrease in cash of $2,579 for the
six months ended June 30, 2010. At June 30, 2011, we had cash on hand
of $26,759.
Global Arena Holding has an expense sharing agreement with GACC whereby
GACC pays certain general and administrative expenses on behalf of the
Global Arena Holding and its operating subsidiaries. During the year
six months ended June 30, 2011 and the six months ended June 30, 2010,
Global Arena Holding reimbursed GACC $200,545 and $192,625,
respectively.
Global Arena Holding has a month-to-month agreement with Broadsword, an
affiliated company, whereby Broadsword provides office space to Global
Arena Holding. During the six months ended June 30, 2011 and the six
months ended June 30, 2010, Global Arena was charged $54,812 and
$55,430, respectively, for office space
Going Concern
The accompanying condensed consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of the liabilities in the normal course
of business. Global Arena Holding has incurred losses of approximately
$845,000 and $344,000 during the six months ended June 30, 2011 and the
six months ended June 30, 2010, respectively. These conditions raise
substantial doubt about its ability to continue as a going concern.
For the year six months ended June 30, 2011 and the six months ended
June 30, 2010, Global Arena Holding sold common stock and warrants for
net proceeds of $240,000 and $325,000, respectively.
20
Management believes that it will be successful in obtaining additional
financing, from which the proceeds will be primarily used to execute
its operating plan. Global Arena Holding plans to use its available
cash to continue the development and execution of its business plan and
expand its client base and services. However, Global Arena Holding can
give no assurance that such financing will be available on terms
advantageous to Global Arena Holding, or at all. Should Global Arena
Holding not be successful in obtaining the necessary financing to fund
its operations, Global Arena Holding would need to curtail certain or
all of its operational activities.
Contractual Obligations
Global Arena Holding has a month to month lease for office space. Rent
expense for the six months ended June 30, 2011 and the six months ended
June 30, was $54,812 and $55,430, respectively.
Three months ended June 30, 2011 compared to the three months ended
June 30, 2010
Revenues for the three months ended June 30, 2011 were $226,066,
consisting of investment advisory fees. Comparatively for the three
months ended June 30, 2010, revenues consisted of investment advisory
fees of $215,280 and commissions and other of $2,505. The increase is
primarily attributable to increased operations.
Net loss for the three months ended June 30, 2011 was $(430,432)
compared to $(138,969) for the three months ended June 30, 2010.
Operating expenses for the three months ended June 30, 2011 were
$475,198 compared to $356,754 for the three months ended June 30, 2010.
This increase is primarily attributable to increased operations which
resulted in:
- an increase of $12,049, or approximately 7%, in commissions,
- an increase of $53,624 in office and other expenses.
Professional fees increased $87,664 as Global Arena Holding completed
its reverse merger with China Stationery & Office Supply, Inc.
There was a gain for the fair value of the derivative liability for the
three months ended June 30, 2011 of $14,000 compared to $0 for the
three months ended June 30, 2010.
Global Arena Holding has an expense sharing agreement with GACC whereby
GACC pays certain general and administrative expenses on behalf of the
Global Arena Holding and its operating subsidiaries. During the year
three months ended June 30, 2011 and the three months ended June 30,
2010, Global Arena Holding reimbursed GACC approximately $53,749 and
$86,114, respectively.
Global Arena Holding has a month-to-month agreement with Broadsword, an
affiliated company, whereby Broadsword provides office space to the
Global Arena Holding. During the three months ended June 30, 2011 and
the three months ended June 30, 2010, Global Arena was charged $26,498
and $28,268, respectively, for office space.
21
Going Concern
The accompanying consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of assets
and the satisfaction of the liabilities in the normal course of
business. Global Arena Holding has incurred losses of approximately
$430,000 and $139,000 during the three months ended June 30, 2011 and
the three months ended June 30, 2010, respectively. These conditions
raise substantial doubt about its ability to continue as a going
concern.
For the three months ended June 30, 2011 and the three months ended
June 30, 2010, Global Arena Holding sold common stock and warrants for
net proceeds of $200,000 and $69,000, respectively.
Management believes that it will be successful in obtaining additional
financing, from which the proceeds will be primarily used to execute
its operating plan. Global Arena Holding plans to use its available
cash to continue the development and execution of its business plan and
expand its client base and services. However, Global Arena Holding can
give no assurance that such financing will be available on terms
advantageous to Global Arena Holding, or at all. Should Global Arena
Holding not be successful in obtaining the necessary financing to fund
its operations, Global Arena Holding would need to curtail certain or
all of its operational activities.
Contractual Obligations
Global Arena Holding has a month to month lease for office space. Rent
expense for the three months ended June 30, 2011 and the three months
ended June 30, was $26,498 and $28,268, respectively.
Critical Accounting Policies
Global Arena Holding's financial statements and accompanying notes are
prepared in accordance with generally accepted accounting principles in
the United States. Preparing financial statements requires management
to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenue and expenses. These estimates and
assumptions are affected by management's applications of accounting
policies. Critical accounting policies for the registrant include the
revenue recognition, cash and cash equivalents and derivative financial
instruments.
Revenue Recognition
Global Arena Holding earns revenues through various services it
provides to its clients. Advisory fees are on a contractual basis with
the fee stipulated in the contract and are recognized based on the
terms of the contract during the period service is provided.
Customer security transactions and the related commission income and
expense are recorded as of the trade date. Global Arena Holding
generally acts as an agent in executing customer orders to buy or sell
listed and over-the-counter securities in which it does not make a
market, and charges commissions based on the services Global Arena
provides to its customers.
22
Derivative Financial Instruments
In connection with the issuance of certain warrants that include price
protection reset provisions. Global Arena Holding determined that the
exercise price reset provision feature is an embedded derivative
instrument pursuant to ASC 815 "Derivatives and Hedging."
The accounting treatment of derivative financial instruments requires
that Global Arena Holding record the related warrants at their fair
values as of the inception date of the financial instrument and at fair
value as of each subsequent balance sheet date. Any change in fair
value was recorded as non-operating, non-cash income or expense for
each reporting period at each balance sheet date. Global Arena Holding
reassesses the classification at each balance sheet date. If the
classification changes as a result of events during the period, the
contract is reclassified as of the date of the event that caused the
reclassification.
Off-balance Sheet Arrangements
Global Arena Holding has not entered into any other financial
guarantees or other commitments to guarantee the payment obligations of
any third parties.
Global Arena Holding does not have any retained or contingent interest
in assets transferred to an unconsolidated entity that serves as
credit, liquidity or market risk support to such entity. We do not have
any variable interest in any unconsolidated entity that provides
financing, liquidity, market risk or credit support to us or engages in
leasing, hedging or research and development services with us.
Recent Accounting Pronouncements
Recent accounting pronouncements issued by the FASB and the SEC did not
have, or are not believed by management to have, a material impact on
Global Arena Holding's present or future consolidated financial
statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable for a smaller reporting company.
Item 4. Controls and Procedures.
During the quarter ended June 30, 2011, there were no changes in our
internal controls over financial reporting (as defined in Rule 13a-
15(f) and 15d-15(f) under the Exchange Act) that have materially
affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
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 June 30, 2011. Based on this evaluation, our chief executive
23
officer and chief principal financial officers have concluded such
controls and procedures were not effective as of June 30, 2011 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.
In connection with the December 31, 2010 audit of our consolidated
financial statements and our review of the three and six months ended
June 30, 2011, our independent auditors identified significant
deficiencies that together constitute a material weakness in our
internal control over financial reporting. These significant
deficiencies primarily relate to our lack of lack of appropriate
resources to handle the accounting for certain complex equity
transactions and our lack of a sophisticated financial reporting
system. The accounting department constituted of one Officer and one
Controller. Therefore, we have relied heavily on entity or management
review controls to lessen the issue of segregation of duties. Upon
receiving adequate financing the Company plans to increase its controls
in these areas by hiring more employees in financial reporting, and
establishing an audit committee. These significant deficiencies
together constitute a material weakness in our internal control over
financial reporting.
A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of
the control system are met. The design of any system of controls is
also based in part on certain assumptions regarding the likelihood of
future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future
conditions. Given these and other inherent limitations of control
systems, there is only reasonable assurance that our controls will
succeed in achieving their stated goals under all potential future
conditions.
Although we have taken steps to remedy some of these issues with our
internal control over financial reporting, we still have additional
work to do to bring our financial reporting procedures up to public-
company standards. Because the Merger occurred in the second quarter of
2011 and because the Company was a small privately-held company, we
were unable to upgrade our internal controls over financial reporting
to the level required of a public company prior to the end of the
period covered by this annual report. Nevertheless, we are initiating
the remediation steps to rectify the identified significant
deficiencies that together constitute a material weakness in our
internal control over financial reporting. Because these remediation
steps have not yet been completed, we have performed additional
analyses and other post-closing procedures to ensure that our condensed
consolidated financial statements contained in this annual report were
24
prepared in accordance with U.S. GAAP and applicable SEC regulations.
Our planned remediation include determining the appropriate resources
to handle complex transactions as they arise in the future, upgrade our
financial reporting systems, and to establish an audit committee.
25
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
Not applicable for smaller reporting company
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Pursuant to an existing subscription agreement, during the
three months ended June 30, 2011, Global Arena issued 777,592
shares of common stock based on the exercise of warrants for
net proceeds of $200,000. During the six months ended June
30, 2011, Global Arena issued 908,027 shares of common stock
based on the exercise of warrants for net proceeds of
$240,000.
These common shares were issued to sophisticated investors
pursuant to an exemption under Section 4(2) of the Securities
Act of 1933.
Item 3. Defaults Upon Senior Securities
None
Item 4. (Removed and Reserved)
Item 5. Other Information
None
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.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
**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.
26
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: August 22, 2011
Global Arena Holding, Inc.
By: /s/ John S. Matthews
---------------------------
John S. Matthews, Chief Executive Officer
/s/Joshua Winkler
-----------------------------
Joshua Winkler, Chief Financial Officer
