CAPITAL FINANCIAL HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
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North Dakota
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45-0404061
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(State or other jurisdiction
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(I.R.S. Employer
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of incorporation or organization)
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Identification No.)
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1 Main Street North
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Minot, North Dakota 58703
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(Address of principal executive offices) (Zip code)
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(701) 837-9600
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(Registrant's telephone number, including area code)
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Yes
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þ |
No
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o |
Yes
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þ
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No
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o
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Large accelerated filer
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o |
Accelerated filer
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o | |
Non-accelerated filer
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o |
Smaller reporting company
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þ |
Yes
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o |
No
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þ |
PART I
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FINANCIAL INFORMATION
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Page #
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Item 1.
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Financial Statements
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3 | |
Unaudited Condensed Consolidated Balance Sheets - March 31, 2014 and December 31, 2013
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3
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||
Unaudited Condensed Consolidated Statements of Operations - Three Months Ended March 31, 2014 and 2013
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5
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Unaudited Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2014 and 2013
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6 | ||
Notes to Unaudited Condensed Consolidated Financial Statements
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7
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Item 2.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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11
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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14
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Item 4.
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Controls and Procedures
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14
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PART II
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OTHER INFORMATION
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Item 1.
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Legal Proceedings
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15
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Item 1A.
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Risk Factors
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15
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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15
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Item 3.
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Defaults Upon Senior Securities
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16
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Item 4.
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Removed and Reserved
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16
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Item 5.
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Other Information
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16
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Item 6.
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Exhibits
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16
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SIGNATURES | 17 |
(Unaudited) | ||||||||
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
CURRENT ASSETS
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||||||||
Cash and cash equivalents
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$ | 1,218,661 | $ | 1,665,123 | ||||
Accounts receivable (net of an allowance of $24,000 for 2014 and 2013)
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2,020,402 | 1,733,765 | ||||||
Prepaids
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69,166 | 77,915 | ||||||
Total current assets
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$ | 3,308,229 | $ | 3,476,803 | ||||
PROPERTY AND EQUIPMENT
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||||||||
Property and equipment
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$ | 391,524 | $ | 387,974 | ||||
Less accumulated depreciation
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(308,156 | ) | (301,207 | ) | ||||
Net property and equipment
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$ | 83,368 | $ | 86,767 | ||||
OTHER ASSETS
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||||||||
Goodwill
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$ | 2,132,026 | $ | 2,132,026 | ||||
Severance escrow
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257,475 | 257,412 | ||||||
Deferred tax asset – non-current
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497,721 | 501,403 | ||||||
Other assets (net of accumulated amortization of $214,444 for 2014 and 2013) | 180,841 | 180,663 | ||||||
Total other assets
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$ | 3,068,063 | $ | 3,071,504 | ||||
TOTAL ASSETS
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$ | 6,459,660 | $ | 6,635,074 |
(Unaudited)
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||||||||
March 31,
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December 31,
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|||||||
2014
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2013
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|||||||
CURRENT LIABILITIES
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||||||||
Accounts payable
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$ | 110,854 | $ | 340,244 | ||||
Commissions payable
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2,032,875 | 1,861,049 | ||||||
Settlements payable
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22,000 | 22,000 | ||||||
Line of credit
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127,827 | 200,723 | ||||||
Other current liabilities
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55,269 | 48,096 | ||||||
Total current liabilities
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$ | 2,348,825 | $ | 2,472,112 | ||||
TOTAL LIABILITIES
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$ | 2,348,825 | $ | 2,472,112 | ||||
STOCKHOLDERS' EQUITY
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||||||||
Series A preferred stock – 5,000,000 shares authorized, $.0001 par value; 3,050,000 and 3,050,000 shares issued and 0 outstanding, respectively | $ | 305 | $ | 305 | ||||
Additional paid in capital – series A preferred stock
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1,524,695 | 1,524,695 | ||||||
Common stock – 1,000,000,000 shares authorized, $.0001 par value; 1,241 and 1,446 shares issued and outstanding, respectively | 1,241 | 1,241 | ||||||
Additional paid in capital – common stock
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10,221,515 | 10,221,515 | ||||||
Accumulated deficit
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(6,336,921 | ) | (6,284,794 | ) | ||||
Less Treasury stock, 3,050,000 preferred shares at $0.4262
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(1,300,000 | ) | (1,300,000 | ) | ||||
TOTAL STOCKHOLDERS’ EQUITY
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$ | 4,110,835 | $ | 4,162,962 | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
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$ | 6,459,660 | $ | 6,635,074 |
(Unaudited)
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||||||||
Three Months Ended
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||||||||
March 31,
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||||||||
2014
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2013
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|||||||
OPERATING REVENUES
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||||||
Fee income
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$ | 366,267 | 229,585 | |||||
Commissions
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4,968,635 | 5,109,867 | ||||||
Interest and other income
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133,928 | 122,688 | ||||||
Total revenue
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$ | 5,468,830 | 5,462,140 | |||||
OPERATING EXPENSES
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||||||||
Compensation and benefits
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$ | 301,365 | 300,349 | |||||
Commission expense
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4,866,481 | 4,758,550 | ||||||
General and administrative expenses
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331,050 | 367,042 | ||||||
Depreciation
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6,949 | 6,604 | ||||||
Total operating expenses
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$ | 5,505,847 | 5,432,545 | |||||
OPERATING INCOME (LOSS)
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$ | (37,017 | ) | 29,595 | ||||
OTHER EXPENSES
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||||||||
Interest expense
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$ | (6,274 | ) | (3,907 | ) | |||
INCOME (LOSS) BEFORE INCOME TAX EXPENSE
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(43,291 | ) | 25,688 | |||||
INCOME TAX EXPENSE
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$ | (8,836 | ) | (19,966 | ) | |||
NET INCOME (LOSS)
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$ | (52,127 | ) | 5,722 | ||||
NET INCOME PER COMMON SHARE:
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||||||||
Basic
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$ | (42 | ) | 4 | ||||
Diluted
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$ | (42 | ) | 4 | ||||
SHARES USED IN COMPUTING NET PER COMMON SHARE:
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||||||||
Basic
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1,241 | 1,446 | ||||||
Diluted
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1,241 | 1,446 |
(Unaudited) | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2014 |
2013
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|||||||
CASH FLOWS FROM OPERATING ACTIVITIES
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Net income (loss)
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$ | (52,127 | ) | 5,722 | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
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||||||||
Depreciation
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6,949 | 6,604 | ||||||
Provision for income taxes
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24,925 | 7,126 | ||||||
(Increase) decrease in:
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||||||||
Accounts receivable
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(286,637 | ) | (145,866 | ) | ||||
Prepaids & other
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8,571 | 43,803 | ||||||
Severance escrow
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(63 | ) | (63 | ) | ||||
Accounts payable
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(229,390 | ) | (57,293 | ) | ||||
Commissions payable
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171,826 | 271,345 | ||||||
Other liabilities
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7,173 | (60,779 | ) | |||||
Net cash (used in) provided by operating activities
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$ | (370,016 | ) | 70,599 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES
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||||||||
Purchase of property and equipment
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$ | (3,550 | ) | (12,668 | ) | |||
Net cash used in investing activities
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$ | (3,550 | ) | (12,668 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES
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||||||||
Payments on short-term borrowings
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(72,896 | ) | (125,668 | ) | ||||
Increase in Settlements payable
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- | 22,000 | ||||||
Repayment of promissory note
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- | (67,173 | ) | |||||
Net cash used in financing activities
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$ | (72,896 | ) | (170,841 | ) | |||
NET DECREASE IN CASH AND CASH EQUIVALENTS
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$ | (446,462 | ) | (112,910 | ) | |||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
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$ | 1,665,123 | 1,221,606 | |||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD
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$ | 1,218,661 | 1,108,696 | |||||
SUPPLEMENTAL SCHEDULE OF NONCASH
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||||||||
INVESTING AND FINANCING ACTIVITIES:
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||||||||
Cash paid for interest
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6,274 | 5,512 |
Number of
Options
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Weighted Average Exercise Price per Share
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Weighted Average Grant Date Fair Value
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Aggregate
Intrinsic Value
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|||||||||||||
Outstanding on January 1, 2013
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539 | $ | 5,400 | $ | 2,800 | $ | - | |||||||||
Granted
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- | - | - | |||||||||||||
Exercised
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- | - | - | |||||||||||||
Canceled
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- | - | - | |||||||||||||
Outstanding on December 31, 2013
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539 | $ | 5,400 | $ | 2,800 | $ | - | |||||||||
Granted
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- | - | - | |||||||||||||
Exercised
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- | - | - | |||||||||||||
Canceled
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20 | - | - | |||||||||||||
Outstanding on March 31, 2014
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519 | $ | 5,400 | $ | 2,800 | $ | - |
Three Months Ended March 31, 2014
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Three Months Ended March 31, 2013 | |||||||||||||||||||||||
Numerator
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Denominator
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Per Share Amount
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Numerator
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Denominator
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Per Share Amount
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|||||||||||||||||||
Net (Loss) Income
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$ | (52,127 | ) | 5,722 | ||||||||||||||||||||
Less: Preferred Stock Dividends
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||||||||||||||||||||||||
Income Available to Common Shareholders – Basic Earnings per Share
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$ | (52,127 | ) | 1,241 | (42 | ) | 5,722 | 1,446 | $ | 4 | ||||||||||||||
Effect of Dilutive Securities:
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||||||||||||||||||||||||
Preferred Stock Dividends
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||||||||||||||||||||||||
Stock Options and Warrants
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||||||||||||||||||||||||
Income Available to Common Shareholders – Diluted Earnings per Share
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$ | (52,127 | ) | 1,241 | (42 | ) | 5,722 | 1,446 | $ | 4 | ||||||||||||||
Carrying Value at March 31, 2014
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Quarter ended
March 31, 2013
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|||||||||||||||||||
Total
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Level 1
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Level 2
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Level 3
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Total Losses
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Other Investment | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Severance Escrow | 257,475 | 257,475 | - | - | - |
Carrying Value at March 31, 2013
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Quarter ended
March 31, 2014
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|||||||||||||||||||
Total
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Level 1
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Level 2
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Level 3
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Total Losses
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Other Investment | $ | 12,214 | $ | - | $ | - | $ | 12,214 | $ | - | ||||||||||
Severance Escrow | 254,259 | 254,259 | - | - | - |
Three Months Ended
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||||||||
March 31,
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||||||||
2014
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2013
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|||||||
Net income (loss)
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(52,127 | ) | 5,722 | |||||
Income per share:
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||||||||
Basic
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(42 | ) | 4 | |||||
Diluted
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(42 | ) | 4 |
●
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Business strategies and investment policies,
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●
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Possible or assumed future results of operations and operating cash flows,
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●
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Financing plans and the availability of short-term borrowing,
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●
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Competitive position,
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●
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Potential growth opportunities,
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●
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Recruitment and retention of the Company’s key employees,
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●
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Potential operating performance, achievements, productivity improvements, efficiency and cost reduction efforts,
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●
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Likelihood of success and impact of litigation,
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●
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Expected tax rates,
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●
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Expectations with respect to the economy, securities markets, the market for merger and acquisition activity, the market for asset management activity, and other industry trends,
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●
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Competition, and
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●
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Effect from the impact of future legislation and regulation on the Company.
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●
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General political and economic conditions which may be less favorable than expected;
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●
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The effect of changes in interest rates, inflation rates, the stock markets, or other financial markets;
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●
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Unfavorable legislative, regulatory, or judicial developments;
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●
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Adverse findings or rulings in arbitrations, litigation or regulatory proceedings;
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●
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Incidence and severity of catastrophes, both natural and man-made;
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●
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Changes in accounting rules, policies, practices, and procedures which may adversely affect the business;
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●
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Terrorist activities or other hostilities which may adversely affect the general economy.
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Period
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Total Number of Shares Purchased
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Average Price Per Share
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Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
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Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
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||||||||||||
January 2014
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- | - | - | $ | 597,754 | |||||||||||
February 2014
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- | - | - | $ | 597,754 | |||||||||||
March 2014
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- | - | - | $ | 597,754 | |||||||||||
Total
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- | - | - | $ | 597,754 |
31.1
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CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act and Rules 13a-14(a) and 15d-14(a) of the Exchange Act
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31.2
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CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act and Rules 13a-14(a) and 15d-14(a) of the Exchange Act
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32.1
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CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act and 18 U.S.C. Section 1350
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32.2
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CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act and 18 U.S.C. Section 1350
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CAPITAL FINANCIAL HOLDINGS, INC.
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Date: May 15, 2014
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By:
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/s/ John Carlson | |
John Carlson
|
|||
Chief Executive Officer & President
|
|||
(Principal Executive Officer) | |||
Date: May 15, 2014
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By: | /s/ Elizabeth Redding | |
Elizabeth A. Redding
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|||
Chief Financial Officer & Corporate Secretary
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|||
(Principal Financial Officer)
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