0001077048-14-000287.txt : 20150107 0001077048-14-000287.hdr.sgml : 20150107 20141124172816 ACCESSION NUMBER: 0001077048-14-000287 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20141124 ITEM INFORMATION: Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review FILED AS OF DATE: 20141124 DATE AS OF CHANGE: 20141208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAPSTONE FINANCIAL GROUP, INC. CENTRAL INDEX KEY: 0001558432 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 460684479 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-54905 FILM NUMBER: 141247227 BUSINESS ADDRESS: STREET 1: 3960 HOWARD HUGHES PARKWAY STREET 2: SUITE 500 CITY: LAS VEGAS STATE: NV ZIP: 89169 BUSINESS PHONE: 1-866-798-4478 MAIL ADDRESS: STREET 1: 3960 HOWARD HUGHES PARKWAY STREET 2: SUITE 500 CITY: LAS VEGAS STATE: NV ZIP: 89169 FORMER COMPANY: FORMER CONFORMED NAME: Creative App Solutions, Inc. DATE OF NAME CHANGE: 20120918 8-K 1 capp8k.htm FORM 8-K AMENDMENT NO. 1 capp8k.htm

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

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

Form 8-K /A
(Amendment No. 1)

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) November 24, 2014

CAPSTONE FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)

Nevada
000-54905
46-0684479
(State or other jurisdiction of incorporation)
(Commission
File Number)
 
(IRS Employer Identification No.)
3960 Howard Hughes Pkwy.
Suite 500
Las Vegas, Nevada 89169
(Address of Principal Executive Offices, including zip code)

(866) 798-4478
(Registrant’s telephone number, including area code)

Copies of Communications to:
Stoecklein Law Group, LLP
Columbia Center
401 West A Street, Suite 1150
San Diego, CA 92101
(619) 704-1310
Fax (619) 704-0556

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
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Section 4 – Matters Related to Accountants and Financial Statements

Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
 
On November 13, 2014, the Board of Directors (the “Board”) of Capstone Financial Group, Inc. (the “Company”) concluded that the previously issued audited consolidated financial statements and other financial information contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 failed to properly account for certain financial information.  Consequently, the Board has concluded that for comparative purposes the previously issued unaudited financial statements and certain other financial information contained in the Company’s Quarterly Reports on Form 10-Q for the fiscal periods ended June 30, 2013, September 30, 2013, March 31, 2014, and June 30, 2014, and the Company’s earnings releases and other financial communications subsequent to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (collectively, the “Prior Financial Information”), should no longer be relied upon.
 
     In January 2014, the Company acquired Capstone Affluent Strategies, Inc. (“Affluent”), a California corporation owned solely by the Company’s chief executive officer), whereby Affluent would become a wholly-owned subsidiary of the Company, thus bringing into our consolidated group Affluent's expenses and the Affluent-owned assets from which the Company had benefitted (specifically staff, office building and spaces, furniture, office equipment, signage, and the proceeds of personal loans made to Affluent by a related party).  In May 2014, the Company and the former sole shareholder of Affluent rescinded the acquisition.

     The Company has engaged a new accountant and new auditor to revise and amend Prior Financial Information for the three months ending June 30, 2014 and properly reflect unrealized gains from trading in the Company's revenue.  In the process of that review, it was discovered that the Company's accounting had not properly reflected approximately $3.2 million in expenses in 2013 attributable to Affluent and $2.6 million in loans from a related party to Affluent, for which the Company had (and continues to have) responsibility/beneficial ownership.  The Company believes the cause of the incorrect financial statements was human error, rather than any sort of fraud or intentional impropriety.
 
     The Board has discussed the matters disclosed in this Form 8-K pursuant to this Item 4.02 with the Company's current independent registered public accounting firm, Squar, Milner, Peterson, Miranda & Williamson, LLP, and its former independent registered public accounting firm, Seale & Beers, CPAs.

     Management is reassessing its internal accounting process and control procedures and will report its conclusions in its amended 2013 Form 10-K and its 2014 Form 10-K.
 
 
 
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     The Company intends to file an amended Form 10-K with restated financial statements for the fiscal year ended December 31, 2013 on or before December 21, 2014 and amended Form 10-Q with restated financial statements for the fiscal quarters ended June 30, 2013, September 30, 2013,  March 31, 2014 and June 30, 2014 (collectively, the “Amended Reports”) on or before January 21, 2015 to correct the errors.  The Amended Reports may also correct certain other immaterial errors in connection with the restatement.

Caution Regarding Forward-Looking Statements

This Current Report on Form 8-K contains "forward-looking” statements, as that term is defined under the federal securities laws, relating to the Company's future plans, expectations, beliefs, intentions, and prospects.  Forward-looking statements include, among others, statements about our plans to restate our consolidated financial statements and amend prior SEC filings, the timing of such restatement, and the restatement’s effect on our prior consolidated financial statements.  These statements are often, but not always, made through the use of words or phrases such as "may", "will", "future", "anticipate", "estimate", "plan", "project", "continuing", "ongoing", "expect", "look forward to", "believe", "intend", "predict", "potential", "opportunity", and similar expressions or any other statements that are not historical facts.  These forward-looking statements are subject to substantial risks, estimates, assumptions, uncertainties, and changes in circumstances that may cause our actual results, performance, or achievements to differ materially from those expressed or implied in any forward-looking statement.  All information set forth in this Report is current as of November 13, 2014.  The Company disclaims any intention or obligation to update or revise any forward-looking statements to reflect subsequent events and circumstances, except to the extent required by applicable law.

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 hereunto duly authorized.


 
CAPSTONE FINANCIAL GROUP, INC.
   
   
   
 
By: /S/ Darin Pastor
 
Darin Pastor, CEO
Date:  November 24, 2014


 
3
 

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November 24, 2014


Amit Pande
United States Securities and Exchange Commission
100 F. Street, N.W.
Washington, D.C. 20549

RE:           Capstone Financial Group, Inc.
Item 4.02 Form 8-K
Filed November 13, 2014
File No. 000-54905

Dear Mr. Pande,

This correspondence is in response to your letter dated November 18, 2014 in reference to our filing of the Item 4.02 Form 8-K filed November 13, 2014.

Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

1.  
We note that you intend to file restated financial statements. Please tell us how, and when, you will file them.

Response: We intend to file amended Forms 10-K and 10-Q with restated financial statements to correct the errors following this timetable (which our newly engaged independent registered public accounting firm Squar, Milner, Peterson, Miranda & Williamson, LLP advises us they will be able to assist us to meet):

a.  
Amended 2013 10-K will be filed on or before December 21, 2014
b.  
Amended 10-Qs for the three-month periods ended June 30, 2013, September 30, 2013, March 31, 2014, June 30, 2014 and September 30, 2014 will be filed on or before January 21, 2014
c.  
Our 2014 10-K will be filed on time

2.  
When you amend your periodic reports to file your restated financial statements, describe the effect of the restatement on the officers' conclusions regarding the effectiveness of the company’s disclosure controls and procedures.  See Item 307 of Regulation S-K. If the officers' conclude that the disclosure controls and procedures were effective, despite the restatement, describe the basis for the officers' conclusions.

Response: When we file the amendments to our financial statements, we intend to describe the effect of the restatements on our officers’ conclusions regarding the effectiveness of our disclosure controls and procedures and our internal control over financial reporting.  Additionally, in our amended 2013 Form 10-K we intend to disclose that our management has been assessing the effectiveness of our internal controls over financial reporting and disclosure controls.  Based on this assessment, we expect to report a material weakness in our internal controls over financial reporting and, therefore, conclude internal control over financial reporting as of December 31, 2013 was not effective.  Although the assessment is not yet complete, we have already upgraded the quality of our outside professional advisors, retaining new accountants and a new auditor, and have enhanced our internal controls to include the following:
 
 
Corporate Offices: 3960 Howard Hughes Parkway, Suite 500, Las Vegas, NV 89169
Executive Offices: 2600 Michelson Drive, Suite 700, Irvine, CA 92612
 
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a.  
Monthly outside reviews on a timely basis to ensure proper accounting and timing of financial issues,
 
b.  
Complete account certifications reviewed by management to ensure accuracy, completeness and classifications,
 
c.  
Institute further processes, procedures and controls as recommended by our newly engaged independent registered public accounting firm Squar, Milner, Peterson, Miranda & Williamson, LLP.
 

Management expects to recommend to the Company's board of directors additional remedial actions that include a thorough review of the accounting department to ensure that the areas of responsibilities are properly matched to the staff competencies and that the lines of communication and processes are as effective as possible, as well as a thorough review of the processes and procedures used in our accounting.

3.  
Please tell us and revise your Form 8-K to include a more detailed description of the facts underlying your conclusion to restate.

Response: We will file an amended 8-K on or before November 25, 2014.  That amended Form 8-K will include a more detailed description of the facts underlying our conclusion to restate as follows:

In January 2014, the Company acquired Capstone Affluent Strategies, Inc. (“Affluent”), a California corporation owned solely by the Company’s chief executive officer), whereby Affluent would become a wholly-owned subsidiary of the Company, thus bringing into our consolidated group Affluent's expenses and the Affluent-owned assets from which the Company had benefitted (specifically staff, office building and spaces, furniture, office equipment, signage, and the proceeds of personal loans made to Affluent by a related party).  In May 2014, the Company and the former sole shareholder of Affluent rescinded the acquisition.

The Company has engaged a new accountant and new auditor to revise and amend Prior Financial Information for the three months ending June 30, 2014 and properly reflect unrealized gains from trading in the Company's revenue.  In the process of that review, it was discovered that the Company's accounting had not properly reflected approximately $3.2 million in expenses in 2013 attributable to Affluent and $2.6 million in loans from a related party to Affluent, for which the Company had (and continues to have) responsibility/beneficial ownership.  The Company believes the cause of the incorrect financial statements was human error, rather than any sort of fraud or intentional impropriety.

Finally, in connection with the response to your comments, Capstone Financial Group, Inc. (the “Company”) acknowledges that:

a.  
the Company is responsible for the adequacy and accuracy of the disclosure in filings;

b.  
staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

c.  
the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.



 
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We believe that our response addresses all of your concerns.  If you have any additional questions, please do not hesitate to contact the undersigned at 716-462-3080.

Sincerely,


/S/ Darin Pastor         
Darin Pastor
Chief Executive Officer
Capstone Financial Group, Inc.

 

 
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