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GLOBAL ARENA HOLDING INC.

(GAHC)
End-of-day quote OTC Markets  -  2022-11-27
0.002000 USD   -11.11%
11/21Global Arena Holding Inc. Reports Earnings Results for the Third Quarter and Nine Months Ended September 30, 2022
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09/20GLOBAL ARENA HOLDING, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q/A)
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08/22GLOBAL ARENA HOLDING, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)
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GLOBAL ARENA HOLDING, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/22/2022 | 04:15pm EST

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.

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

Current GES Corporate Operations

GES has developed and deployed proprietary Registration software, which was designed specifically to authenticate and register voters. This proprietary software functions as a data storage and retrieval registration system by cross-referencing eligibility status within a control voter database. In a mail ballot election, the voter's ID barcode, QR code, or signature on the Business Reply Envelope, can be scanned and the status of that voter is identified. If the voter is not eligible to vote or another ballot for that individual has already been registered in the system, that ballot is marked VOID and removed from the count. In an in-person election, the voter provides their name for look-up in the system. If they have not voted, a signature box pops up on the screen, the voter signs an electronic signature pad and the digital signature is captured next to their name. If a voter tries to vote more than once, an alert will pop up indicating that the voter has already registered, and the voter will not receive an additional ballot. Because we account for every single ballot, the system has multiple reporting options, which include the list of valid envelopes and list of voters whose ballot was void, detailing the reason. Once the voter is authenticated, the identifiers are removed to ensure a secret vote and the ballot is scanned for tabulation.

GES developed proprietary Scanning and Tabulation election software. This software features advanced OMR/OCR/Barcode scanning and tabulation system featuring de-skewing, de-speckling and image correction. The computer hardware was designed to run without Internet or Wi-Fi access and is hard wired, ensuring complete security. The system allows for triple-auditing capabilities, which are; electronically generated tabulation results, .jpeg imaging and storage, and the original physical ballot. This advancement gives GES the ability to tabulate elections faster and more efficiently. As experts in paper/mail ballot elections, GES began deploying this system in our elections in the third quarter of 2017 and it has been operating flawlessly.

In 2020 GES developed, built and implemented a propriety online election voting solution that is compliant with Title IV of the United States Department of Labor Office of Labor-Management Standards.

GES built the platform on one of the most secure global infrastructures Amazon Web Services (AWS) which is a comprehensive, evolving platform provided by Amazon that includes a mixture of infrastructure as a service (IaaS) platform as a service and packaged software (PaaS), and software as a service offerings (SaaS).


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The platform enables GES to protect individual client data, including the ability to encrypt it, move it, and manage retention (if required). All data flowing across the global network interconnects with the GES secured data center and is automatically encrypted at the physical layer before it leaves our secured facilities. Additional encryption layers exist as well.

GES controls where our client data is stored, who can access it, and what resources your organization is utilizing at any given moment. Fine-grain identity and access controls combined with continuous monitoring for near real-time security information ensures that the right resources have the right access at all times, wherever your information is stored.

GES encryption software uses AES 256 with a cryptographic key using a RSA elliptic curve of 4096, which is used to encrypt the communication of the client and the GES server, as well all client data hosted in the server. A six-digit security code, delivered to the voter's email address provided by the client, must be validated by the prospective voter in order to authenticate the identity of the voter before the voter may access the ballot. After validating the voter, the voter then votes anonymously, so that the identity of the voter and the ballot cast can never be matched.

The GES voting platform verifies that the users does not use the back and forward browser button, a safe mechanism against tampering. Distributed denial of service DDoS protection tools help secure websites and applications and prevent DDoS attacks, which bombard websites with traffic traditionally delivered via "botnets" that are created by networked endpoints connected via malware. The DDoS software protection provides always-on detection and automatic inline mitigations that minimize application downtime and latency.

Management believes there is an opportunity in conducting United States and Foreign Government Elections. GES' senior Management teams' primary business for 40 years has been mail/absentee ballot elections. The market for GES conducting paper/mail ballot elections grew exponentially in January of 2017, when first President Barack Obama, and then President Donald Trump designated U.S. Elections "Critical Infrastructure". The effect of these Executive Orders was to refocus the Department of Homeland Security, and the Elections Assistance Commission to reenergize compliance on U.S. Government elections, and assist by making available resources such as intelligence, funding, training and best practices in election software and hardware, for all 50 States.

On March 23, 2018, President Trump signed the Consolidated Appropriations Act of 2018 into law, which included $380 million in Help America Vote Act (HAVA) grants for states to make election security improvements. Among the authorized uses of the grant funds is the replacement of voting equipment, specifically equipment that does not produce a paper record or that is determined to be at the end of its useful life. Recent published examples are:

  • On December 20, 2019, President Trump signed the Consolidated Appropriations
    Act of 2020 into law. The Act includes $425 million in new HAVA funds made
    available.
  • In 2019, Hawaii (SB 166) allocated $789,598 for the purpose of a vote counting
    system contract.
  • In 2019, Georgia issued a $150 million bond package for the replacement of
    voting equipment statewide. The state also appropriated $12,840,000 from the
    General Fund for the purpose of financing projects and facilities for the
    Office of Secretary of State.
  • In 2019, Wyoming appropriated $7.5 million into an election readiness account
    (HB 21). The state's $3 million HAVA allocation will also be placed in this
    account, the majority of which will go toward replacing outdated voting
    equipment statewide.
  • In 2019, North Dakota enacted SB 2002, which included a one-time appropriation
    for voting equipment and electronic poll books statewide. The total amount of
    $11.2 million included $8.2 million in state funds and $3 million in HAVA
    funds.


The opportunity for mail/absentee ballots became a page one story in 2020 due to the Coronavirus Pandemic. Subsequent accusations of voter fraud, compounded by President Trump declaring the 2020 U.S. election voting as rigged and fraudulent, has led to almost 40% of the U.S. Electorate believing the 2020 election was fraudulent.


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On October 23, 2019, the Brennan Center has estimated that the national cost for some of the most critical election security measures to be approximately $ 2.2 Billion dollars over the next five years.

Every state has a vote by mail process right now. Voters may request an Absentee Mail Ballot from their County Board of Elections or a Vote by Mail ballot is sent. In either case, our proprietary registration and tabulation software has an immediate need. In the 2016 U.S. Presidential election, approximately 33 Million ballots were cast by mail making up about 25% of the votes. Most individuals think only of the Presidential election every four years as the Election. In reality, municipal Board of Elections throughout the U.S. are conducting elections annually for such elected positions as; Governor, Mayor, City Council, State Assembly, State Senate, Members of U.S. Congress (House every 2 years, Senate every 6) Civil and Criminal Justices, Sheriffs, School Boards, Village Trustees, etc. In short, most State and local municipal Board of Elections are in the market purchasing software and hardware every year.

In the U.S. there are 3,007 counties, 64 parishes, 19 organized boroughs, 11 census areas, 41 independent cities, and the District of Columbia, all of whom must buy updated Election Machines and Software. Each municipal county individually purchases election voting machines under the guidance of their own State's Secretary of State.

The United States Government, through the Elections Assistance Commission, certifies election software and hardware for use in U.S. Government Elections. On February 10, 2021 the U.S. Election Assistance Commission (EAC) announced the adoption of the Voluntary Voting System Guidelines (VVSG) 2.0. These guidelines have been formulated to improve cyber security, accessibility and usability requirements in the U.S. voting process.

Election Software Developers and Manufactures may also qualify by meeting individual requirements for individual States in the United States.

GES has begun undertaking the following six step benchmarks to qualify for the updated U.S. certification and is also considering individual State certifications;


Step 1 - Voting System Testing, Testing current developed systems to U.S.
Federal 2.0 Standards
Step 2 - Technical Data Package Review; Reviews submitted documents against
documentation requirements of outside agencies, published standards, or U.S.
specifications
Step 3 - Physical Configuration Audit; Examines the documentation of the system
against the actual submitted system
Step 4 - System Integration Testing; Executes tests on all components of a
system configured as if the system was deployed
Step 5 - Functional Configuration Audit; Examines submitted test data and
conducts additional testing to verify submitted system hardware and software
described in the documents submitted to the Elections Assistance Commission and
the Department of Homeland Security
Step 6 - Security Testing; Performs vulnerability assessments and penetration
analysis to assess system vulnerabilities

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.


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

The rapid advances in computing and telecommunications technology over the past several decades have brought with them increasingly sophisticated methods of delivering administrating elections. Along with these advances, though, have come risks regarding the integrity and privacy of data, and these risks apply to election companies, falling into the general classification of cybersecurity. While it is not possible for anyone to give an absolute guarantee that data will not be compromised, when applicable, the Company shall utilize third-party service providers to secure the 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 June 30, 2022, the Company has an accumulated deficit of $30,465,093 and a working capital deficit of $8,607,077. 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 six months ended June 30, 2022, the Company recorded net loss of $870,242. We recorded an amortization of debt discount of $157,805, and a change in fair value of derivative liability of $46, we had a decrease in accounts payable and accrued expenses of $16,434 and a decrease in deferred revenue of $21,500. We also had an increase in accrued expenses of 432,560. As a result, we had net cash used in operating activities of $317,857 for the six months ended June 30, 2022.

For the six months ended June 30, 2022, we received $376,250 as proceeds from the issuance of convertible promissory notes payable and repaid $43,000 of outstanding convertible note and repaid $16,744 of outstanding note payable resulting in net cash provided by financing activities of $346,506.

As of June 30, 2021, the Company has an accumulated deficit of $29,003,016 and a working capital deficit of $7,946,573. 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 six months ended June 30, 2021, the Company recorded net loss of $318,327. We recorded an amortization of debt discount of $150,455, a change in fair value of derivative liability of $202,274 and a gain on settlement of debt of $509,080. We had a decrease in accounts payable and accrued expenses of $28,694 and a decrease in deferred revenue of $173,223. We also had an increase in accrued expenses of 378,031. As a result, we had net cash used in operating activities of $(298,564) for the six months ended June 30, 2021.

For the six months ended June 30, 2021, we received $276,500 as proceeds from the issuance of convertible promissory notes payable resulting in net cash provided by financing activities of $276,500.

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.


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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, 2021 and 2020 have included a "going concern" modification in their auditors' reports. A "going concern" modification may make it more difficult for us to raise funds when needed. The outcome of this uncertainty cannot presently be determined.

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

Results of Operations for the Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021

Revenues for the three months ended June 30, 2022 were $199,513 compared to $350,676 for the three months ended June 30, 2021, an decrease of $151,163. The majority of our clients hold elections on a three year cycle. The majority of our clients hold elections on a three year cycle. This decrease in revenues is due primarily to less elections held during the three month period in 2022

Salaries and benefits totaled $167,552 for the three months ended June 30, 2022 compared to $117,713 for the three months ended June 30, 2021. Actual compensation paid was approximately $72,723. This increase was due to the employment compensation increase by 10% every year for John Matthews and Kathryn Weisbeck.

Professional fees for the three months ended June 30, 2022 totaled $100,809 compared to $168,669 for the three months ended June 30, 2021, an decrease of $67,860. This decrease is primarily due to lower professional services during the three months ended June 30, 2022.

For the three months ended June 30, 2022, we incurred marketing and advertising expenses of $24,096 compared to the $0 in the three months ended June 30, 2021. We incurred software development expenses of $667 in 2022 compared to $17,877 in 2021, we incurred printing costs of $78,367 in 2022 compared to $84,455 in 2021, and we incurred general and administrative expenses of $59,198 in 2022 compared to $158,987 in 2021. The decrease in general and administrative expenses was mainly due to a decrease in costs due to the decrease in revenue.

Total operating expenses for the three months ended June 30, 2022 were $430,689 compared to $543,692 for the three months ended June 30, 2021, a decrease of $113,003 principally due to reasons discussed above.

Results of Operations for the Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021

Revenues for the six months ended June 30, 2022 were $397,844 compared to $585,261 for the six months ended June 30, 2021, and decrease of $187,417. The majority of our clients hold elections on a three year cycle. This decrease in revenues is due primarily to less elections held during the six month period in 2022.

Salaries and benefits totaled $342,471 for the six months ended June 30, 2022 compared to $235,425 for the six months ended June 30, 2021. Actual compensation paid was approximately $132,815. This increase was due to the employment compensation increase by 10% every year for John Matthews and Kathryn Weisbeck.

Professional fees for the six months ended June 30, 2022 totaled $208,789 compared to $222,601 for the six months ended June 30, 2021, an decrease of $13,812. This decrease is primarily due to lower professional services during the six months ended June 30, 2022.

For the six months ended June 30, 2022, we incurred marketing and advertising expenses of $65,289 compared to the $0 in the six months ended June 30, 2021. We incurred software development expenses of $24,931 in 2022 compared to $21,729 in 2021, we incurred printing costs of $98,676 in 2022 compared to $142,089 in 2021, and we incurred general and administrative expenses of $131,823 in 2022 compared to $198,926 in 2021. The decrease in general and administrative expenses was primarily due to a decrease in costs due to the decrease in revenue.


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Total operating expenses for the six months ended June 30, 2022 were $854,878 compared to $820,770 for the six months ended June 30, 2021, an increase $34,108 principally due to reasons discussed above.

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

Revenue Recognition

The Company recognizes revenue in accordance with FASB ASC 606, Revenue From Contracts with Customers. The Company earns revenues through various services it provides to its clients. 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.

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.

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Derivative Financial Instruments

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

Share-Based Compensation

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

Recent Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40)-Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer are separated from the host contract. ASU 2020-06 also removes certain conditions that should be considered in the derivatives scope exception evaluation under Subtopic 815-40, Derivatives and Hedging-Contracts in Entity's Own Equity, and clarify the scope and certain requirements under Subtopic 815-40. In addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share (EPS) for convertible instruments and contract in entity's own equity. ASU 2020-06 is effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Company is currently evaluation the impact this ASU will have on its consolidated financial statements.

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.

© Edgar Online, source Glimpses

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