10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORTPURSUANT TO SECTION13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF1934

For the quarterly period ended September 30, 2016

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934

Commission file number 000-54905

CAPSTONE FINANCIAL GROUP,INC.
(Exact name of registrant as specified in its charter)
Nevada	46-0684479
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
8600 Transit Road, East Amherst, NY	14051
(Address of principal executive offices)	(Zip Code)
(866) 798-4478
(Registrant's telephone number, including areacode)

Copies of Communicationsto:

Stradling Yocca Carlson & Rauth, P.C.

4365 Executive Drive

Suite 1500

San Diego, CA 92121

(858) 926-3000

Indicate by check mark if the registrant is not required to file reports pursuant toSection 13 or Section 15(d) ofthe Act. Yes ☐ No ☒ 

Indicate by check mark whether the registrant (1) has 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 ☒ 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 (§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-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer (Do not check if a smaller reporting company)	☐	Smaller reporting company	☒

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

The number of shares of Common Stock, $0.001 par value, outstanding as of December 10, 2016 was 98,347,988 shares.

CAPSTONE FINANCIAL GROUP, INC.

QUARTERLY REPORT FOR THE QUARTER ENDED

SEPTEMBER 30, 2016

Index to Report on Form 10-Q

PART I	Financial Information	Page
Item 1.	Financial Statements (Unaudited)	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
PART II	Other Information
Item 1.	Legal Proceedings	40
Item1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42

PART I     Financial Information

Item 1.     Financial Statements

CAPSTONE FINANCIAL GROUP, INC.

INDEX TO UNAUDITED FINANCIAL STATEMENTS

	PAGES
Unaudited Statements of Financial Condition as of September 30, 2016 and December 31, 2015	2
Unaudited Statements of Operations for the three months and nine months ended September 30, 2016 and 2015	3
Unaudited Statement of Stockholders’ Equity for the nine months ended September 30, 2016	4
Unaudited Statements of Cash Flows for the nine months ended September 30, 2016 and 2015	5
Notes to Unaudited Financial Statements	6

-1-

CAPSTONE FINANCIAL GROUP, INC.

UNAUDITED STATEMENTS OF FINANCIAL CONDITION

	September 30, 2016			December 31, 2015
ASSETS
Financial instruments, at fair value	$	9,812,979		$	13,161,718
Cash		155,319			136,849
Salary advance - related party		100,000			—
Prepaid expense		255,669			4,152
Furniture and equipment, net		10,704			12,645
Deposits		63,930			63,930
Total assets		10,398,601			13,379,294
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Accrued expenses	$	185,491		$	314,830
Accrued interest payable - related party		—			135
Short term advances payable - related party		168,199			49,600
Note payable - related party		—			68,416
Put and call option liability		462,558			619,122
Income taxes payable		3,200			2,400
Deferred tax liability		2,797,231			4,552,107
Total liabilities		3,616,679			5,606,610
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, 2,000,000,000 shares authorized;
96,322,093 and 94,364,148 issued and outstanding as of September 30, 2016 and December 31, 2015, respectively		96,511			94,565
Common stock subscribed but not issued (11,766 shares)		10,000			—
Treasury stock, $0.001 par value, 200,500 shares		(219,426	)		(219,426	)
Additional paid in capital		2,838,937			1,176,633
Retained earnings		4,055,900			6,720,912
Total stockholders' equity		6,781,922			7,772,684
Total liabilities and stockholders' equity	$	10,398,601		$	13,379,294

See Accompanying Notes to Unaudited Financial Statements.

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CAPSTONE FINANCIAL GROUP, INC.

UNAUDITED STATEMENTS OF OPERATIONS

	For the three months ended September 30,						For the nine months ended September 30,
	2016			2015			2016			2015
Revenues
Services income	$	—		$	16,660		$	—		$	116,662
Other income		21,624			1,800			37,224			1,800
Interest income – related party		—			—			—			14,460
		21,624			18,460			37,224			132,922
Expenses
Personnel		230,527			137,048			582,388			228,593
Professional fees		144,990			318,808			681,276			920,402
General and administrative		593,677			451,862			1,867,125			760,187
Interest expense – related party		—			2,200			345			10,724
		969,194			909,918			3,131,134			1,919,906
Realized and Unrealized Gain (Loss) on Financial Instruments
Realized gain (loss) on financial instruments, net		114,954			346,368			1,866,263			(480,088	)
Change in unrealized gain (loss) on financial instruments, net		(501,614	)		(2,213,158	)		(3,191,438	)		(4,069,194	)
Loss on financial instruments, net		(386,660	)		(1,866,790	)		(1,325,175	)		(4,549,282	)
Net loss before income taxes		(1,334,230	)		(2,758,248	)		(4,419,085	)		(6,336,266	)
Income tax benefit		(528,313	)		(1,076,278	)		(1,754,073	)		(2,519,324	)
Net loss	$	(805,917	)	$	(1,681,970	)	$	(2,665,012	)	$	(3,816,942	)
Net loss per share – basic and diluted	$	(0.01	)	$	(0.02	)	$	(0.03	)	$	(0.04	)
Weighted average shares outstanding – basic
and diluted		95,304,225			94,364,181			94,679,794			94,494,161

See Accompanying Notes to Unaudited Financial Statements.

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CAPSTONE FINANCIAL GROUP, INC.

UNAUDITED STATEMENT OF STOCKHOLDERS' EQUITY

					Common Stock					Additional					Total
	Common Shares				Subscribed		Treasury			Paid in		Retained			Stockholders’
	Shares		Amount		Unissued		Stock			Capital		Earnings			Equity
Balance, January 1, 2016		94,364,148	$	94,565	$	—	$	(219,426	)	$	1,176,633	$	6,720,912		$	7,772,684
Issuance of Common Stock for cash		1,946,179		1,946		—		—			1,662,304		—			1,664,250
Common Stock subscribed but not issued (11,766 shares) see Note 7		11,766		—		10,000		—			—		—			10,000
Net loss		—		—		—		—			—		(2,655,012	)		(2,655,012	)
Balance, September 30, 2016		96,322,093	$	96,511	$	10,000	$	(219,426	)	$	2,838,937	$	4,055,900		$	6,781,922

 See Accompanying Notes to Unaudited Financial Statements.

-4-

CAPSTONE FINANCIAL GROUP, INC.

UNAUDITED STATEMENTS OF CASH FLOWS

	For the nine months ended
	September 30,
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(2,665,012	)	$	(3,816,942	)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Proceeds from sale of financial instruments		1,867,000			2,841,731
Net change in unrealized gain on financial instruments		3,191,438			4,069,194
Net realized (loss) gain on financial instruments		(1,866,263	)		480,088
Depreciation		1,941			1,500
(Increase) decrease in assets:
Note receivable		—			400,000
Accrued interest receivable – related party		—			(14,459	)
Salary advance - related party		(100,000	)		—
Prepaid expense		(251,517	)		85,534
Deposits		—			(20,000	)
Increase (decrease) in liabilities:
Accrued expenses		(129,339	)		78,511
Accrued interest payable – related party		(135	)		(4,241	)
Income taxes payable		800			800
Deferred revenue		—			(116,662	)
Deferred tax liability		(1,754,876	)		(2,520,124	)
Net cash (used in) provided by operating activities		(1,705,963	)		1,464,930
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and equipment		—			(2,039	)
Net cash used in investing activities		—			(2,039	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from short term advances – related party		118,599			85,845
Net repayments on notes payable – related party		(68,416	)		(1,135,136	)
Proceeds from sale of common stock, net of offering costs		1,664,250			—
Proceeds from common stock subscribed - unissued		10,000			—
Purchase of treasury stock		—			(1,015	)
Net cash provided by (used in) financing activities		1,724,433			(1,050,306	)
Net increase in cash		18,470			412,585
Cash at beginning of period		136,849			12,685
Cash at end of period	$	155,319		$	425,270
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid	$	480		$	—
Noncash purchase of treasury stock	$	—		$	218,411

 See Accompanying Notes to Unaudited Financial Statements.

-5-

CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Organization

Capstone Financial Group, Inc. (the "Company") is a diversified company whose primary business focuses going forward include (a) investing in stock of other companies, (b) identification and pursuit of and capitalization on opportunities in the minerals and agricultural commodities industries and (c) commercial lending in foreign countries.

In the third quarter of 2016 the Company entered into mirroring agreements for the purchase and for the resale of quantities of livestock over time, thereby creating a “middleman” arbitrageur position as to this livestock. These agreements are characterized as best efforts supply and sale agreements and will be accounted for as livestock is purchased and sold as it appears there is no practical market mechanism to facilitate settlement of these transactions. At September 30, 2016, there was a $175,000 prepaid balance related to a purchase order for livestock (see Note 7).

In addition, in the third quarter of 2016 the Company entered into an agreement to sell quantities of gold over time, with the intention of arranging a mirroring supply of gold in order to thereby create a “middleman” position as to this gold. There were no gold transactions during the third quarter of 2016.

Until the second quarter of 2016, the Company considered its primary business focus to be investing its own capital to acquire the outstanding equity securities of other companies and to unlock and grow value in these privately-held or illiquid companies.

The Company sought, and seeks, to work with the management and boards of the other companies. While the Company does not manage the day-to-day operations of these companies, the Company sought, and seeks, to maintain a thorough understanding of operations and perform continual evaluations of performance and prospects on an ongoing basis.

The Company may also seek to actively trade in its strategic investment positions and/or enter into private securities transactions with regard to those positions, to capitalize on price fluctuations and realize profits or minimize losses.

The Company was incorporated on July 10, 2012 under the laws of the State of Nevada, as Creative App Solutions, Inc.  On August 23, 2013, the Company amended its articles of incorporation and changed its name to Capstone Financial Group, Inc.

-6-

CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)

Market, Credit and Liquidity Risk

At September 30, 2016 and December 31, 2015 the majority of Company’s investments are focused in one entity, Twinlab Consolidated Holdings, Inc. (“Twinlab”). Management believes that it will be able to liquidate a sufficient portion of its investment and/or raise additional capital to fund its obligations as and when they become due. However, no assurance can be given that market conditions in the future will continue to allow the Company to sell its investments in sufficient quantities to fund its obligations or to raise additional capital to do so.

Market risk is the potential loss the Company may incur as a result of changes in the market or fair value of a particular financial instrument. Risks arise in options and warrant contracts from changes in the market or fair value of their underlying financial instruments.

Credit risk is the potential loss the Company may incur as a result of the failure of a counterparty or an issuer to make payments according to the terms of a contract. Credit risk can arise from investment activities in financially distressed issuers. To manage this risk, the Company may seek to diversify its investment portfolio with respect to specific credits, sectors and asset classes.

The Company is also subject to market concentration risk since a significant portion of its investment portfolio has similar characteristics, and is therefore affected similarly by changes in economic conditions.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Investments of the Company trade in thin markets and throughout the year, depending upon market conditions, may be considered inactive. As a result, the market values can be more volatile and difficult to determine relative to other securities. In addition, if the Company is required to liquidate all or a portion of its portfolio quickly, it may realize significantly less than the value at which it previously recorded its investments.

Basis of Presentation

The accompanying financial statements have been prepared using the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the accounting and financial reporting conventions of the investment company industry and in accordance with the instructions to Form 10-Q and Article 8 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, they should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2015, included in the Company’s Annual Report on Form 10-K filed with the SEC on May 2, 2016. The unaudited condensed financial statements contain all normal recurring accruals and adjustments that in the opinion of management, are necessary to present fairly the financial position of the Company at September 30, 2016, the results of the Company’s operations for the three month and nine month periods ended September 30, 2016 and the Company’s cash flows for the nine months ended September 30, 2016. The results of operations for the three months and nine month periods ended September 30, 2016 are not necessarily indicative of the results to be expected for the full year or any future interim periods.

-7-

CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents

The Company considers any investments in short-term money market funds with original maturities of three months or less to be cash equivalents.

Investments

Investments primarily comprise strategic, non-controlling equity ownership interests in privately held businesses or public companies with very illiquid trading markets. These strategic investments are accounted for at fair value as determined by internal valuation guidelines and/or outside appraisals as there are no readily ascertainable fair market value prices in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946-10 and FASB ASC 820-10. Because the Company follows the financial accounting and reporting conventions of the investment company industry, it reports investments at estimated fair value.

FASB ASC 820-10-65-4 provides additional guidance for estimating fair value in accordance with FASB ASC 820-10 when the volume and level of market activity for the asset or liability have significantly decreased. FASB ASC 820-10-65-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. It acknowledges that in these circumstances quoted prices may not be determinative of fair value. FASB ASC 820-10-65-4 emphasizes that even if there has been a significant decrease in the volume and level of market activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. Under FASB ASC 820-10-65-4, quoted prices for assets or liabilities in inactive markets may require adjustment due to uncertainty as to whether the underlying transactions are orderly. There is little information, if any, to evaluate if individual transactions are orderly in an inactive market. Accordingly, the Company is required to evaluate the facts and circumstances to determine whether the transaction is orderly based on the weight of the evidence. FASB ASC 820-10-65-4 does not designate a specific method for adjusting a transaction or quoted price; however, it does provide guidance for determining how much weight to give a transaction or quoted price. Price quotes derived from transactions that are not orderly are not considered to be determinative of fair value and should be given less weight, if any, when estimating fair value. In the absence of observable market data at September 30, 2016 and December 31, 2015, the Company's fair value measurements included assumptions about future cash flow and appropriately risk-adjusted discount rates that it believes market participants would make in orderly market transactions.

-8-

CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fair Value Measurements and Valuation Methodologies

GAAP defines fair value as 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. GAAP establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels: 

• Level 1: Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.

• Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; inputs to the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs to the valuation methodology that are derived principally from or can be corroborated by observable market data by correlation or other means.

• Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

The Company’s financial instruments are valued by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The valuation methodology for each investment type and discussion of key unobservable inputs is described below.

The Company often invests in common stocks that are thinly traded where the closing trading price is not considered to be a fair indication of the value for which the Company can sell or buy the common stock. In such cases, as in the case of private-company limited liability company membership interests held by the Company, the common stock must be analyzed to determine what exit price the Company would receive when liquidating the position. These positions are classified as Level 3 securities.

The significant unobservable inputs used in the fair value measurement of the Company’s Level 3 common stocks are growth rate, risk premium, revenue multiples and EBITDA multiples. Increases or decreases in any of those inputs in isolation would result in a lower or higher fair value measurement, respectively.

-9-

CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Company has warrants and call options to purchase common stock in illiquid public companies. Generally, there is no established market for these investments. The Company values these warrants and call options by using a model that takes into consideration the exercise or call price of the warrant or call option, the price of the underlying common stock and the expiration date of the warrant or call option.

The significant unobservable inputs used in the fair value measurement of the Company’s warrants and call options includes the price of the underlying thinly traded common stock (determined based upon growth rate, risk premium, revenue multiples and EBITDA multiples), duration and discount rate and volatility. Increases or decreases in the premium-to-parity would result in a higher or lower fair value measurement, respectively.

Generally, when the Company invests in common stocks that are traded on the NASDAQ Markets or over-the-counter markets (such as the OTCBB, OTCQB or OTC Pink marketplaces), such common stocks are valued at the last traded price. If there is no trade on a measurement date, the Company will typically value the common stock at the closing bid price. However, in certain circumstances, the closing trading price is not considered to be a fair indication of the value for which the Company can sell the common stock. In such cases, the common stock must be analyzed to determine what exit price the Company would receive when liquidating the position. Investments in non-marketable common stocks at September 30, 2016 and December 31, 2015 were valued based, in part, on subsequent transactions with unrelated third parties and at December 31, 2015 were valued by the Company with the assistance of an independent valuation consultant. These positions are classified as Level 3 securities by the Company.

From time to time, the Company has investments in private limited liability companies. Generally, there is no established market for these investments. The Company values these interests by means of both quantitative and qualitative measures, generally including the financial stability of the company, the economic rights of the interests and the economic prospects of the company.

The significant unobservable input used in the fair value measurement of the Company’s limited liability company investments is the expected recovery of contributed capital. Increases or decreases in the expected recovery would result in a higher or lower fair value measurement, respectively.

Derivative Financial Instruments

Derivative financial instruments include call options and warrants at September 30, 2016 and December 31, 2015. Derivatives are accounted for at fair value with changes in fair value reported in operations. The significant unobservable inputs used in the fair value measurement of the Company’s derivative financial instruments include the underlying common stock, duration, volatility and discount rate, which are used in the option pricing model. Changes to any of those inputs in isolation would result in fluctuations in the fair value measurement.

-10-

CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Investment Transaction, Related Income and Expenses

Purchases and sales of investments are recorded on a trade-date basis. Realized gains and losses on investments are recognized on the first-in, first-out method. Dividend income on investments owned is recognized on the ex-dividend date, net of applicable withholding taxes.

Treasury Stock Purchases

The Company is authorized to repurchase shares of the Company’s common stock in private transactions from time to time. The Company records treasury stock purchases at cost. Any treasury stock removed from treasury is valued at cost using the specific identification method.

Revenue Recognition

The Company recognizes revenue for sales of physical commodities or other goods when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the physical commodities or other goods have been delivered to the customer; (3) the purchase price to be paid by the customer is fixed or determinable; and (4) the collection of the purchase price is reasonably assured.

The Company recognizes revenue for services when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the related service has been provided to the customer; (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of fees is reasonably assured.

Earnings per Share

Basic earnings per common share calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.  As of September 30, 2016 and 2015, there were no dilutive common shares equivalents outstanding.

Concentration Risks

During the three and nine months ended September 30, 2016, the Company had $21,624 and $37,224, respectively, of sublease income from two sublessees. During the three and nine months ended September 30, 2015, the Company had $16,660 and $116,662, respectively, in revenue generated from one customer for consulting services and had interest income from a related party of $0 and $14,460, respectively.

-11-

CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes

Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.

Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 allows the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination by the taxing authorities. As of September 30, 2016 the Company reviewed its tax positions and determined there were no outstanding or retroactive tax provisions with less than a 50% likelihood of being sustained upon examination by the taxing authorities.

The Company is required to file Federal and New York state income tax returns. The Company’s tax return status will remain open until a tax return has been filed.

Advertising costs

Advertising costs are expensed as incurred. For the three and nine month periods ended September 30, 2016, advertising costs of $1,068 and $16,283, respectively, were included in general and administrative expenses. For the three and nine month periods ended September 30, 2015, advertising costs of $2,502 and $38,792, respectively, were included in general and administrative expenses.

-12-

CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards update 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). ASU 2014-09 specifies a comprehensive model to be used in accounting for revenue arising from contracts with customers, and supersedes most of the current revenue recognition guidance, including industry specific guidance. It applies to all contracts with customers except those that are specifically within the scope of other FASB topics, and certain of its provisions also apply to transfers of nonfinancial assets, including in-substance nonfinancial assets that are not an output of an entity's ordinary activities. The core principal of the model is that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the transferring entity expects to be entitled in exchange. To apply the revenue model, an entity will: 1) identify the contract(s) with a customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue when (or as) the entity satisfies a performance obligation. For public companies, ASU 2014-09 (updated with ASU 2015-14) is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early adoption is not permitted. Upon adoption, entities can choose to use either a full retrospective or modified approach, as outlined in ASU 2014-09. As compared with current GAAP, ASU 2014-09 requires significantly more disclosures about revenue recognition. The Company has not yet assessed the potential impact of ASU 2014-09 on its financial statements.

In May 2015, the FASB issued amended guidance on the disclosures for investments in certain equities that calculate net asset value per share (or its equivalent). The amendments remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. The guidance is effective for fiscal years beginning after December 15, 2015 and for interim periods within those years. As of September 30, 2016, the Company does not own any investments in equities that calculate net asset value per share (or its equivalent).

In February 2016, the FASB issued Accounting Standards update 2016-02, Leases ("ASU 2016-02"). ASU 2016-02 requires a lessee to recognize a lease asset representing its right to use the underlying asset for the lease term, and a lease liability for the payments to be made to lessor, on its balance sheet for all operating leases greater than 12 months. ASU 2016-02 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company has not yet adopted ASU 2016-02 nor assessed its potential impact on its financial statements.

-13-

CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 3 – FAIR VALUE MEASUREMENTS

The Company’s financial instruments recorded at fair value have been categorized based upon a fair value hierarchy. The following fair value hierarchy tables set forth the Company’s recurring fair value measurements at September 30, 2016 and December 31, 2015.

	Assets and Liabilities Measured at
	Fair Value on a Recurring Basis
	September 30, 2016
	Level 1		Level 2		Level 3			Total
Assets
Financial instruments, at fair value:
Common Stocks	$	—	$	—	$	8,034,517		$	8,034,517
Real Estate Company Investments		—		—		277,500			277,500
2014 Call Options		—		—		1,135,863			1,135,863
Series B Warrants		—		—		365,099			365,099
Total Financial instruments, at fair value		—		—		9,812,979			9,812,979
Total assets held at fair value	$	—	$	—	$	9,812,979		$	9,812,979
Liabilities
Financial instruments, at fair value:
Third Party Call Options		—		—		(462,558	)		(462,558	)
Total liabilities held at fair value	$	—	$	—	$	(462,558	)	$	(462,558	)

	Assets and Liabilities Measured at
	Fair Value on a Recurring Basis
	December 31, 2015
	Level 1		Level 2		Level 3			Total
Assets
Financial instruments, at fair value:
Common Stocks	$	—	$	—	$	9,896,605		$	9,896,605
Real Estate Company Investments		—		—		277,500			277,500
2014 Call Options		—		—		1,135,863			1,135,863
Series B Warrants		—		—		1,851,750			1,851,750
Total Financial instruments, at fair value		—		—		13,161,718			13,161,718
Total assets held at fair value	$	—	$	—	$	13,161,718		$	13,161,718
Liabilities
Financial instruments, at fair value:
Third Party Call Options		—		—		(619,122	)		(619,122	)
Total liabilities held at fair value	$	—	$	—	$	(619,122	)	$	(619,122	)

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 3 – FAIR VALUE MEASUREMENTS (CONTINUED)

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. For some products or in certain market conditions, observable inputs used in valuing certain financial assets and liabilities were unavailable. In situations where there is little, if any, market activity for an asset or liability at the measurement date, the fair value measurement objective remains to measure the financial asset at the price that would be received by the holder of the financial asset (or liability) in an orderly transaction that is not a forced liquidation or distressed sale at the measurement date.

Details of the Company’s recurring fair value measurements are as follow:

September 30, 2016	Cost		Estimated Fair Value			Unrealized Gain (Loss)
ASSETS
Common Stocks	$	1,004,255	$	8,034,517		$	7,030,262
Real Estate Company Investments		277,500		277,500			—
2014 Call Options		450		1,135,863			1,135,413
Series B Warrants		—		365,099			365,099
	$	1,282,205	$	9,812,979		$	8,530,774
LIABILITIES
Third-Party Call Options	$	—	$	(462,558	)	$	(462,558	)

December 31, 2015	Cost		Estimated Fair Value			Unrealized Gain (Loss)
ASSETS
Common Stocks	$	1,004,992	$	9,896,605		$	8,891,613
Real Estate Company Investments		277,500		277,500			—
2014 Call Options		450		1,135,863			1,135,413
Series B Warrants		—		1,851,750			1,851,750
	$	1,282,942	$	13,161,718		$	11,878,776
LIABILITIES
Third Party Call Options	$	—	$	(619,122	)	$	(619,122	)

For the quarter ended September 30, 2016, the Company recorded a net change in unrealized gain on financial instruments of $(501,614) and a net realized gain on financial instruments of $114,954. For the quarter ended September 30, 2015, the Company recorded a net change in unrealized gain on financial instruments of $(2,213,158) and a net realized gain on financial instruments of $364,368.

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 3 – FAIR VALUE MEASUREMENTS (CONTINUED)

For the nine month period ended September 30, 2016, the Company recorded a change in net unrealized gain on financial instruments of $(3,191,438) and a net realized gain on financial instruments of $1,866,263. For the nine month period ended September 30, 2015, the Company recorded a change in net unrealized gain on financial instruments of $(4,069,194) and a net realized loss on financial instruments of $(480,088).

During the first quarter of 2014, the Company purchased shares in a company traded on the OTC Markets for a total of $2,919. The Company currently categorizes these holdings as Level 3 assets. As of September 30, 2016, this investment is carried at $0.

In August 2014, the Company purchased 10,987,500 split-adjusted shares of common stock of Twinlab in private transactions from 25 shareholders for total consideration of $3,296.  In November 2014, the Company sold 436,681 of these shares.

In August 2014, the Company purchased options to acquire 8,743,000 outstanding shares of Twinlab’s Common Stock (collectively, the “Call Options”) in a private transaction from 14 stockholders, for total consideration of $2,623. The Call Options exercise price is $0.0001 per share and the Call Options expired in August 2015. Such options were immediately exercisable and in February 2015, the Company exercised 7,244,500 of those options. As of September 30, 2016, the Company owns 1,498,500 of these options to acquire shares of Twinlab’s Common Stock.

In September 2014, Twinlab issued to the Company a Series A Warrant to purchase up to 52,631,579 shares of Twinlab’s Common Stock at an exercise price of $0.76 per share (the “Series A Warrant”) and a Series B Warrant to purchase up to 22,368,421 shares of Twinlab’s Common Stock at an exercise price of $0.76 per share (the “Series B Warrant”). Both the Series A Warrant and the Series B Warrant were exercisable from October 2014 through October 2017.

Twinlab and the Company also entered into a Common Stock Put Agreement, dated as of September 30, 2014, as amended on December 15, 2014 (the “Put Agreement”). Pursuant to the Put Agreement, if the Company did not exercise the Series A Warrant by February 16, 2015 and thereafter at a rate of no less than 1,461,988 shares of Common Stock (the “Minimum Amount”) per month (the “Minimum Rate”) over the term of the Series A Warrant, Twinlab had the right (subject to certain conditions) to require the Company to exercise the Series A Warrant at the Minimum Rate for the duration of the Series A Warrant.

In 2015, the Company sold an aggregate of 3,976,647 units of Twinlab securities to various unrelated third party accredited investors. Each unit consisted of one share of (unrestricted) Twinlab common stock and a detachable call option to purchase from the Company, for $1.00 per share, one (restricted) share of Twinlab common stock. The term of each such call option was three years from the respective unit sale date and the call option was valued at $0.156 per call option.

-16-

CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 3 – FAIR VALUE MEASUREMENTS (CONTINUED)

In addition, in 2015, the Company sold an aggregate of 2,078,255 shares of Twinlab common stock (without any associated detachable call options) to various unrelated third party accredited investors, for $0.76 per share.

In addition, in the first quarter of 2016, the Company sold an aggregate of 1,713,159 shares of Twinlab common stock (without any associated detachable call options) to various unrelated third party accredited investors, for $0.76 per share. In the second quarter of 2016, the Company sold an aggregate of 592,106 shares of Twinlab common stock (without any associated detachable call options) to various unrelated third party accredited investors, for $0.76 per share. In the third quarter of 2016, the Company sold an aggregate of 151,316 shares of Twinlab common stock (without any associated detachable call options) to various unrelated third party accredited investors, for $0.76 per share. As of September 30, 2016, the Company owned 10,599,626 shares of Twinlab’s common stock.

Twinlab and the Company entered into a Compromise Agreement and Release and an Amendment No. 1 to Series B Warrant, each dated as of May 28, 2015, pursuant to which, among other things: (a) the Company surrendered the entire remaining-unexercised portion of the Series A Warrant (51,973,684 warrants) and 4,368,421 of the warrants under the Series B Warrant; (b) the Put Agreement was terminated; (c) the remaining 18,000,000 warrants under the Series B Warrant were deemed divided into four tranches, each with an associated date beyond which it would no longer be exercisable: one tranche for 2,000,000 warrant shares (no longer exercisable after November 30, 2015; such tranche of warrants expired mostly unexercised), one for 4,000,000 warrant shares (expired on March 31, 2016), one for 6,000,000 warrant shares (expired on July 31, 2016) and another for 6,000,000 warrant shares (no longer exercisable after November 30, 2016); and (d) the Company granted Twinlab three contingent call options, at $0.01 per share, to acquire Twinlab shares from the Company to the extent that upon effective expiration of the second, third and fourth tranches the Company had not exercised the warrants within such tranches (the “Contingent Call Options”). The three Contingent Call Options would be for a number of Twinlab shares equal to 25% of such unexercised warrants (i.e., a maximum of 1,000,000 shares if the Company exercised no warrants from the second tranche, a maximum of 1,500,000 shares if the Company exercised no warrants from the third tranche and a maximum of 1,500,000 shares if the Company exercised no warrants from the fourth tranche). In addition, Twinlab could not exercise a Contingent Call Option unless it had satisfied such option’s “Liquidity Condition,” namely that for each of the three or four months before the tranche’s effective expiration date Twinlab must have a financial position sufficient to show a 1.15x fixed charge coverage ratio for a certain trailing period, all as defined by Twinlab’s Credit and Security Agreement dated January 22, 2015. Twinlab also agreed in the Compromise Agreement and Release that, given that the Company has identified, and may in the future identify, to Twinlab on a confidential basis persons to whom the Company might sell the Company’s Twinlab shares, Twinlab shall not, without the Company’s prior written consent, privately place Twinlab equity securities to any persons theretofore or thereafter first introduced to Twinlab by the Company; provided that Twinlab may, without the Company’s consent, privately place Twinlab equity securities to such a person at any time after the earlier of (a) the date the entire Series B Warrant has expired and/or been exercised, or (b) the first anniversary of such particular introduction. As of September 30, 2016, the Company held 6,000,000 warrants under the Series B Warrant.

On October 1, 2015, Twinlab and the Company entered into Amendment No. 1 to Agreement for Limited Waiver of Non-Circumvention Provision and to Compromise Agreement and Release, pursuant to which a prior agreement calling for contingent payments of cash and equity to the Company was amended to remove the Company’s right to any such contingent payments of cash and equity compensation, and in return the three Contingent Call Options were immediately cancelled.

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 3 – FAIR VALUE MEASUREMENTS (CONTINUED)

As of September 30, 2016, the Company’s position in Twinlab securities was as follows, and the Company had no contingent liabilities to Twinlab:

- The Company held 10,599,626 outstanding Twinlab shares (9,612,784 unrestricted, free-trading Twinlab shares and 986,842 restricted Twinlab shares).

- The Company held 6,000,000 warrants under the Series B Warrant, at a $0.76 per share exercise price, with an effective expiration date of November 30, 2016.

- A Registration Rights Agreement remains in full force and effect to enable the Securities Act registration of all Twinlab shares issued upon prior or future exercises of the Company’s Warrants.

- The Company has a claim against third-party optionors for delivery to the Company of 1,498,500 Twinlab shares against the Call Options which they granted to the Company and which the Company has exercised.

- The Company is contingently obligated to deliver Twinlab shares to its accredited-investor counterparties under the 3,976,647 detachable call options, if and when the detachable call options are exercised.

- The Company has no actual or potential Put liability or Contingent Call Option liability.

As of September 30, 2016, the Company owned less than 10% of Twinlab’s outstanding common stock.

In July 2015, in exchange for $277,500, the Company acquired a 20% interest in privately-held Western New York real estate companies LC Strategic Realty, LLC and LC Strategic Holdings, LLC, as well as in all other business conducted or to be conducted by the firms’ majority holders to the extent such other business has a primary focus on (a) real estate (subject to the exclusion of certain specified projects), (b) media/entertainment/show business, or (c) endorsements/advertisements/personal appearances/use of likeness/monetization of celebrity.

-18-

CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 3 – FAIR VALUE MEASUREMENTS (CONTINUED)

The following table includes a roll forward of the amounts for the quarter ended September 30, 2016 for financial instruments classified within Level 3.

Level 3 Recurring Fair Value Measurements

For the Three Months Ended September 30, 2016

	Common Stock			Real Estate Company Investments		2014 Call Options		Series B Warrants			Third-Party Call Options Liability			Total
Fair value, net, July 1, 2016	$	8,149,214		$	277,500	$	1,135,863	$	840,047		$	(550,544	)	$	9,852,080
Unrealized gains (losses) included in earnings		303			—		—		(474,948	)		87,986			(386,659	)
Purchases		—			—		—		—			—			—
Sales		(115,000	)		—		—		—			—			(115,000	)
Settlements/exercises		—			—		—		—			—			—
Transfers in and/or out of Level 3		—			—		—		—			—			—
Fair value, net, September 30, 2016	$	8,034,517		$	277,500	$	1,135,863	$	365,099		$	(462,558	)	$	9,350,421
Unrealized gains (losses) still held	$	7,030,262		$	—	$	1,135,413	$	365,099		$	(462,558	)	$	8,068,216

Level 3 Recurring Fair Value Measurements

For the Nine Months Ended September 30, 2016

	Common Stock			Real Estate Company Investments		2014 Call Options		Series B Warrants			Third-Party Call Options Liability			Total
Fair value, net, January 1, 2016	$	9,896,605		$	277,500	$	1,135,863	$	1,851,750		$	(619,122	)	$	12,542,596
Unrealized gains (losses) included in earnings		4,912			—		—		(1,486,651	)		156,564			(1,325,175	)
Purchases		—			—		—		—			—			—
Sales		(1,867,000	)		—		—		—			—			(1,867,000	)
Settlements/exercises		—			—		—		—			—			—
Transfers in and/or out of Level 3		—			—		—		—			—			—
Fair value, net, September 30, 2016	$	8,034,517		$	277,500	$	1,135,863	$	365,099		$	(462,558	)	$	9,350,421
Unrealized gains (losses) still held	$	7,030,262		$	—	$	1,135,413	$	365,099		$	(462,558	)	$	8,068,216

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 3 – FAIR VALUE MEASUREMENTS (CONTINUED)

The following tables present quantitative information about the valuation techniques and unobservable inputs applied to Level 3 fair value measurements for financial instruments measured at fair value on a recurring and nonrecurring basis at September 30, 2016 and December 31, 2015.

		Quantitative Information about Level 3
		Fair Value Measurements at September 30, 2016
		Fair	Valuation	Unobservable	Range
		Value	Technique	Inputs
Assets
Common Stock	$	8,034,517	Discounted cash flow Guideline company transactions method Guideline publicly-traded company method	Growth rate Risk premium factors Revenue multiple EBITDA multiple	13.00%-15.20% (2.50%)-7.00% 1.10-2.10 9.30-13.80
2014 Call Options		1,135,863	Discounted cash flow Guideline company transactions method Guideline publicly-traded company method	Growth rate Risk premium factors Revenue multiple EBITDA multiple	13.00%-15.20% (2.50%)-7.00% 1.10-2.10 9.30-13.80
Series B Warrants		365,099	Option pricing model	Duration Risk-free interest rate Volatility	0.17 years 0.20%-0.45%  50%
Investment in Real Estate Companies		277,500	Recent transaction	Return of invested capital	100%
Total assets held at fair value	$	9,812,979
Liabilities
Call option liability	$	462,558	Option pricing model	Duration Risk-free interest rate Volatility	1.48-1.65 years 0.68%-0.71% 50%
Total liabilities held at fair value	$	462,558

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 3 – FAIR VALUE MEASUREMENTS (CONTINUED)

		Quantitative Information about Level 3
		Fair Value Measurements at December 31, 2015
		Fair	Valuation	Unobservable	Range
		Value	Technique	Inputs
Assets
Common Stock	$	9,896,605	Discounted cash flow Guideline company transactions method Guideline publicly-traded company method	Growth rate Risk premium factors Revenue multiple EBITDA multiple	13.00%-15.20% (2.50%)-7.00% 1.10-2.10 9.30-13.80
2014 Call Options		1,135,863	Discounted cash flow Guideline company transactions method Guideline publicly-traded company method	Growth rate Risk premium factors Revenue multiple EBITDA multiple	13.00%-15.20% (2.50%)-7.00% 1.10-2.10 9.30-13.80
Series B Warrants		1,851,750	Option pricing model	Duration Risk-free interest rate Volatility	0.25-0.92 years 0.16%-0.62%  50%
Investment in Real Estate Companies		277,500	Recent transaction	Return of invested capital	100%
Total assets held at fair value	$	13,161,718
Liabilities
Call option liability	$	619,122	Option pricing model	Duration Risk-free interest rate Volatility	2.23-2.40 years 1.12%-1.16%  50%
Total liabilities held at fair value	$	619,122

In the nine months ended September 30, 2016, the Company sold an aggregate of 2,456,581 shares of Twinlab common stock to various unrelated third party accredited investors, in private transactions, for $0.76 per share. In the three months ended September 30, 2016, the Company sold an aggregate of 151,316 shares of Twinlab common stock to various unrelated third party accredited investors, in private transactions, for $0.76 per share. In addition, 4,000,000 of the Company’s warrants to purchase Twinlab common stock (for $0.76 per share) expired on March 31, 2016 in accordance with their terms, and 6,000,000 of the Company’s warrants to purchase Twinlab common stock (for $0.76 per share) expired on July 31, 2016 in accordance with their terms.

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 4 – STOCKHOLDERS’ EQUITY

During the third quarter of 2016, the Company issued 1,946,179 shares to accredited investors for $1,664,250, of which $600,000 had been subscribed in the second quarter of 2016. In addition, accredited investors paid the Company $10,000 in the third quarter of 2016 in respect of subscriptions for 11,766 shares, which shares were not issued until the fourth quarter of 2016.

NOTE 5 – RELATED PARTY TRANSACTIONS

Salary Advance to Related Party 

In the first quarter of 2016 the Company paid salary amounts to two of its officers covering the second, third, and fourth quarters of 2016. As a result, the Company recorded a salary advance - related party of $100,000 at September 30, 2016 in connection with such payments.

Short-Term Advances from Related Party

After October 28, 2014 the Company’s controlling stockholder Darin Pastor made advances and direct-payments to assist the Company in covering expenses. In addition, the amounts of these advances and direct-payments are reimbursable to him upon his demand at any time. At September 30, 2016 and December 31, 2015, the unrepaid balance of such advances and direct-payments was $168,199 and $49,600, respectively.

Notes Payable to Related Party

On October 28, 2014, the Company entered into a transaction in which the Company acquired from Darin Pastor certain assets which had been assets of Affluent and assumed certain liabilities which had been liabilities of Affluent, including liabilities under demand notes in favor of Darin Pastor. The Company repaid these notes in their entirety on March 11, 2016. On December 31, 2015, the outstanding principal obligation on such assumed notes was $68,416. The interest rate on the demand notes was 2% per annum.

NOTE 6 – INCOME TAXES

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Income tax benefit for the three months ended September 30, 2016 was $528,313. Income tax benefit for the nine months ended September 30, 2016 was $1,754,073, which reflected an effective tax rate of 39.73%, which was greater than the federal statutory rate due to the state income tax expense.

The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. The Company believes that, as of September 30, 2016, it does not have any uncertain tax positions.

The disclosures regarding the Company's unrecognized tax benefits at December 31, 2015 included in the Company's 2015 Annual Report on Form 10-K continue to be relevant for the period ended September 30, 2016 as to the Company’s unrecognized tax benefits at September 30, 2016.

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 7 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date the financial statements were available to be issued. Except as noted below, there are no events which require adjustments to, or disclosure in, the financial statements for the periods ended September 30, 2016.

In October and November 2016, the Company issued 2,025,895 newly-issued shares of Company common stock to accredited investors, in consideration for their investment of a total of $1,722,000 cash.

At September 30, 2016 the Company had issued a purchase order to buy livestock at an approximate cost of $20 million and paid $175,000 which is reflected as a prepaid expense in the accompanying unaudited statements of financial condition. In October and November 2016, the Company received a total of 24,000 head of cattle and 16,000 head of sheep in a series of deliveries from its supplier, and delivered this livestock in a series of deliveries to its livestock customer. The Company has paid its supplier $1,025,000 (including the $175,000 which the Company prepaid in the third quarter of 2016) against the $2,360,000 account payable created in respect of these actual deliveries, and has received $80,000 from its livestock customer against the $13,922,192 account receivable created in respect of these actual deliveries.

-23-

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements and involves risks and uncertainties that could materially affect expected results of operations, liquidity, cash flows, and business prospects. Forward-looking statements may appear throughout this report, including without limitation, the following sections: Part I Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on May 2, 2016, and in particular, the risks discussed under the caption “Risk Factors” in Part I Item 1A thereof, and those discussed in other documents we file with the SEC. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Overview and Outlook

We are a diversified company whose primary business focuses going forward include (a) investing in stock of other companies, (b) identification and pursuit of and capitalization on opportunities in the minerals and agricultural commodities industries and (c) commercial lending in foreign countries.

On August 24, 2016, we entered into an agreement with a major live animal customer located in Oman to sell that company a total of 10,389,250 hundredweight of cattle and 3,142,600 hundredweight of sheep at fixed prices. (A “hundredweight” refers to 100 pounds of livestock.) We would deliver the livestock in 10 equal successive monthly installments with the first delivery to occur on September 15, 2016. Our customer would make corresponding monthly purchase-price payments. We have matching supply agreements with suppliers of livestock from Africa, under which we can call upon these suppliers to sell to us these same amounts of cattle and sheep, also at fixed prices. Accordingly, we occupy a “middleman” arbitrageur position as to this livestock.

-24-

There are significant inherent risks involved in these transactions, including the risks involved with foreign contracts (including the increased risks of counterparty nonperformance or slow performance, and the possibility of force majeure), the possible need for financing and the fact that we are inexperienced in transactions in livestock.

In addition, we and our customer amended our agreement as of September 25, 2016 to provide that the contractual delivery date for each respective livestock delivery installment is the 15th of the month “or on such other day or days on or around such 15th day of the month, as may be agreed upon by the parties”, beginning September 2016. In addition, in the amendment we and our customer agreed to reasonably accommodate each other with regard to the exact day or days of delivery, and we agreed to use reasonable commercial efforts to give our customer at least seven days’ notice of our intended actual day or days of delivery (if not the 15th of the month) and of the approximate hundredweight of cattle and the approximate hundredweight of sheep which we propose to deliver on such day or days (which shall be within certain livestock quantity ranges).

So far, deliveries from our supplier and deliveries to our customer have not been made on time and have not been made in full. Our supplier advised us that due to drought and famine in the geographic area, it was delayed in fulfilling the livestock quantities ordered pursuant to our initial option exercise notice. Our ability to meet our timing and delivery undertakings to our customer was correspondingly impacted. No livestock was delivered to us, and no livestock was delivered by us, until October 26, 2016. We made additional purchases and resales of livestock against the scheduled September 15, 2016 supply and resale commitments on November 3, 10 and 16, 2016. However, the aggregate quantities in the four deliveries were significantly below the quantities contemplated, by the original contracts, for September 15, 2016 supply and resale, so additional portions remain to be fulfilled; and no parts of the scheduled October 15, 2016 supply and resale or of the scheduled November 15, 2016 supply and resale have yet been fulfilled. It is likely that certain scheduled future delivery and resale dates (e.g., December 15, 2016, etc.) will also not be achieved during the catch-up process. We have not yet exercised any of our contractual options under our contracts with our livestock suppliers, for any quantities beyond that needed to fulfill our September 15 resale commitment to our livestock customer.

All parties are currently working cooperatively to fulfill the contracts as soon as practicable. The parties are at least temporarily not requiring rigorous adherence to the timing and quantity provisions of the contracts, although formal contractual waivers and forbearances have not been given. On November 17, 2016, we received an $80,000 partial payment from our livestock customer against the $13,922,192 our customer was obligated to pay us in respect of our actual October 26/November 3/November 10/November 16, 2016 livestock deliveries to the customer. In respect of the four corresponding actual deliveries from our supplier to us, we were obligated to pay our supplier $2,360,000; of that amount, we have paid our supplier $1,025,000 (including $175,000 which we prepaid in the third quarter of 2016).

We anticipate that going forward (and especially during the catch-up process), livestock may be delivered to us at less-than-monthly intervals in such quantities as are available, and that we would then promptly (i.e., at less-than-monthly intervals) redeliver such available livestock quantities to our customer.

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As the middleman, it is in our interest to facilitate informal adjustments and courses of dealing so long as doing so does not unduly prejudice our contractual rights. Investors are cautioned, however, that the course of performance raises some question regarding whether the total profit ultimately realized by us will necessarily be as high as initially indicated by the contracts, and regarding whether such profit will necessarily be realized in the same time periods as initially indicated by the contracts.

On September 22, 2016, we entered into an agreement to sell no less than 50 metric tons of gold (i.e., doré gold in bar or other form, with the purity of the gold in said doré being at least 95.8%) at a fixed price to a privately held trading company located in the Sydney, Australia metropolitan area. The agreement contemplated such gold would be delivered and purchased in periodic installments, but specific times and quantities for respective deliveries of gold were not fixed in the agreement. The contract stated that no gold delivery would be made by us before December 15, 2016, and that deliveries thereafter would be on dates (through September 30, 2019) and in amounts (each not less than 15 kilograms and not more than 2,500 kilograms) as may be agreed upon for the parties’ mutual convenience. To the extent that through no fault of our customer less than 50 metric tons of gold has been delivered by September 30, 2018, our customer’s obligation to purchase any remaining portion of the 50 metric tons will be relieved on such date. We have not yet established with our customer the dates or quantities for any particular delivery installments.

The agreement provided that our customer would be responsible to, as a closing condition for any delivery of gold to the customer, provide us in advance with a letter of credit from Westpac (a major Australian bank) for the entire purchase price amount with respect to the particular delivery. Our intention is to make arrangements with suppliers of gold on like delivery dates and in like quantities so as to enable essentially simultaneous resales of gold to our customer, thereby enabling us to occupy a profitable “middleman” position such as the livestock contracts were structured to do. There can be no assurance that we will succeed in doing so. We have not yet entered into contracts with any gold suppliers.

We may require substantial working capital resources to fund our purchases of livestock and gold from our suppliers pending our receipt of payment from our customers upon our resales.

We are also working toward other substantial opportunities in the precious minerals, mining and agricultural commodities industries and energy-related development projects, as well as other substantial international opportunities. We can give no assurance that such projects will come to fruition or, if any one or more of them do come to fruition, that they will be successful.

Until the second quarter of 2016, we considered our primary business focus to be investing our own capital to acquire the outstanding equity securities of other companies. We sought, and seek, to discover, unlock and grow value in privately-held or illiquid companies. We sought, and seek, to work closely and constructively with the management and boards of the other companies. While we do not manage the day-to-day operations of these companies, we sought, and seek, to maintain a thorough understanding of how they operate and evaluate their performance and prospects on an ongoing basis.

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We may also seek to actively trade in our strategic investment positions and/or enter into private securities transactions with regard to those positions, to capitalize on price fluctuations and realize profits or minimize losses.

We were initially formed to design and sell mobile apps for smartphones and other mobile platforms such as tablets. We never launched an active business based on this focus.

During the third quarter of 2013, we refocused ourselves as a financial services company.

On January 15, 2014, in support of our financial services business focus, we effected a reverse triangular merger whereby Capstone Affluent Strategies, Inc. (“Affluent”), a California corporation, became our wholly owned subsidiary. Affluent, a financial services company, had been wholly owned by Darin Pastor.

In March 2014, we refocused ourselves again, to the business model which was our primary focus until the second quarter of 2016.

On May 14, 2014, we effectively unwound the Affluent merger transaction, due to Affluent’s inability to produce audited financial statements as required and the change in our business focus. In October 2014, we acquired from Darin Pastor certain Affluent assets and assumed certain Affluent liabilities. (Affluent had been dissolved earlier in 2014.)

Currently our primary strategic investment position is in securities of Twinlab Consolidated Holdings, Inc. (“Twinlab”). In August 2014, we purchased 10,987,500 shares of common stock of Twinlab in private transactions from 25 shareholders, for nominal consideration. Additionally, in August 2014, we purchased options to acquire 8,743,000 currently-outstanding shares of Twinlab’s common stock (collectively, the “2014 Call Options”) from 14 shareholders in a private transaction, for nominal consideration. The 2014 Call Options exercise price was $0.0001 per share and the 2014 Call Options expiration date was August 2015. (In February 2015, we exercised the Call Options. Optionors honored the exercise as to 7,244,500 Twinlab shares. Other optionors have not yet honored the exercise, as to at least 1,498,500 Twinlab shares. We intend, if necessary, to file suit to enforce the exercises as to those shares.)

On September 30, 2014, Twinlab issued to us a Series A Warrant to purchase up to 52,631,579 shares of Twinlab common stock at an exercise price of $0.76 per share (the “Series A Warrant”), and a Series B Warrant to purchase up to 22,368,421 shares of Twinlab common stock at an exercise price of $0.76 per share (the “Series B Warrant”). By their original terms, the Series A Warrant and the Series B Warrant were both exercisable from October 2014 through October 2017.

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On September 30, 2014, Twinlab and we also entered into a Common Stock Put Agreement (as amended on December 15, 2014, the “Put Agreement”). Pursuant to the Put Agreement, if we did not exercise the Series A Warrant by February 16, 2015 and thereafter at a rate of no less than 1,461,988 shares of Twinlab common stock (the “Minimum Amount”) per month (the “Minimum Rate”) over the term of the Series A Warrant, Twinlab had the right (subject to certain conditions) to require us to exercise the Series A Warrant at the Minimum Rate for the duration of the Series A Warrant. In the event Twinlab exercised its right to require us to exercise the Series A Warrant, the purchase price per share of Twinlab common stock thereunder would have been $0.775. We did not exercise the “Minimum Amount” of shares per the Put Agreement. In April 2015 we exercised the Series A Warrant as to 657,895 Twinlab shares.

On October 28, 2014, we entered into a transaction in which we acquired from Darin Pastor certain assets which had been assets of Affluent and assumed certain liabilities which had been liabilities of Affluent, including liabilities under notes in favor of Darin Pastor. At December 31, 2015, the outstanding principal amount of such assumed notes was $68,416. We completed the full repayment of such assumed notes on March 11, 2016. In a transaction related to the October 28, 2014 transaction, the crossing lines of credit entered into between Affluent and us in 2013 were cancelled. At the time of the cancellation, we had a $1,089,617 net receivable from Darin Pastor (as Affluent’s successor) under the crossing lines of credit; accordingly, this $1,089,617 was applied to reduce the liabilities under the notes in favor of Darin Pastor, which had been liabilities of Affluent and which we assumed. As a result of such October 28, 2014 and related transactions, we recorded an expense item of $1,089,617 and we were deemed (for accounting purposes) to have paid a dividend to Darin Pastor in the amount of $1,484,204.

In November 2014, we sold 436,681 of our Twinlab shares for approximately $1,000,000.

During the three months ended March 31, 2015, we sold an aggregate of 3,976,647 units of Twinlab securities to various unrelated third party accredited investors. Each unit consisted of one share of (unrestricted) Twinlab common stock and a detachable call option (“Third-Party Call Options”) to purchase from us, for $1.00 per share, one (restricted) share of Twinlab common stock. The term of each such call option was three years from the respective unit sale date. In each case, the sale price per unit was $0.76 and the call option was valued at $0.156 per call option. (Our references to “unrestricted” shares mean free-trading shares, and our references to “restricted” shares mean shares that are not free-trading.).

In addition, in 2015 we sold 2,078,255 Twinlab shares (without any associated Third-Party Call Options) for $1,579,480.

In total, during 2015 we sold Twinlab securities for $4,601,732.

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On May 28, 2015, we entered into a Compromise Agreement and Release and an Amendment No. 1 to Series B Warrant, each between Twinlab and us. Pursuant to these two agreements:

- The Put Agreement was terminated.

- We surrendered the entire remaining-unexercised portion of the Series A Warrant (51,973,684 warrants).

- We surrendered 4,368,421 of the warrants under the Series B Warrant.

- The remaining 18,000,000 warrants under the Series B Warrant were deemed divided into four tranches, each with an associated date beyond which it would no longer be exercisable: one tranche for 2,000,000 warrant shares (no longer exercisable after November 30, 2015); one for 4,000,000 warrant shares (no longer exercisable after March 31, 2016); one for 6,000,000 warrant shares (no longer exercisable after July 31, 2016); and another for 6,000,000 warrant shares (no longer exercisable after November 30, 2016).

- We granted Twinlab three contingent call options, at $0.01 per share, to acquire Twinlab shares from us to the extent that upon effective expiration of the second, third and fourth tranches we had not exercised the warrants within such tranches (the “Contingent Call Options”). The three Contingent Call Options would be for a number of Twinlab shares equal to 25% of such unexercised warrants (i.e., a maximum of 1,000,000 shares if we exercised no warrants from the second tranche, a maximum of 1,500,000 shares if we exercised no warrants from the third tranche and a maximum of 1,500,000 shares if we exercised no warrants from the fourth tranche). In addition, Twinlab cannot exercise a Contingent Call Option unless it has satisfied such option’s “Liquidity Condition,” namely that for each of the three or four months before the tranche’s effective expiration date Twinlab must have a financial position sufficient to show a 1.15x fixed charge coverage ratio for a certain trailing period, all as defined by Twinlab’s Credit and Security Agreement dated January 22, 2015..

- Given that we have identified, and may in the future identify, to Twinlab on a confidential basis persons to whom we might sell our Twinlab shares, Twinlab agreed that it shall not, without our prior written consent, privately place Twinlab equity securities to any persons theretofore or thereafter first introduced to Twinlab by us (the “Noncircumvention Provision”); provided that Twinlab may, without our consent, privately place Twinlab equity securities to such a person at any time after the earlier of (a) the date the entire Series B Warrant has expired and/or been exercised, or (b) the first anniversary of such particular introduction.

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As a result of these two agreements, our investment position in Twinlab as of immediately after the two agreements was as follows:

- We had no further potential cash obligation to Twinlab under the Put Agreement; an imminent cash obligation to Twinlab of approximately $40.8 million was thereby avoided.

- We retained all of our 14,476,567 outstanding Twinlab shares (13,818,672 unrestricted, free-trading Twinlab shares and 657,895 restricted Twinlab shares).

- Later in 2015 (i.e., after May 28, 2015) we sold an additional 1,749,307 unrestricted, free-trading Twinlab shares to accredited investors.

- In the first quarter of 2016 we sold an additional 1,713,159 unrestricted, free-trading Twinlab shares to accredited investors.  In the second quarter of 2016 we sold an additional 592,106 unrestricted, free-trading Twinlab shares to accredited investors.  In the third quarter of 2016 we sold an additional 151,316 unrestricted, free-trading Twinlab shares to accredited investors.  

- We obtained an additional 526,316 restricted Twinlab shares upon a partial exercise of the Series B Warrant on July 7, 2015.

- We obtained an additional 131,579 restricted Twinlab shares upon a partial exercise of the Series B Warrant on July 23, 2015.

- Our obligations to our accredited-investor counterparties under the 3,976,647 Third-Party Call options continued unchanged.

- We retained 18,000,000 warrants under the Series B Warrant, at an unchanged $0.76 per share exercise price, with effective expiration dates ranging from November 30, 2015 to November 30, 2016.

- We exercised 526,316 of such warrants on July 7, 2015.

- We exercised 131,579 of such warrants on July 23, 2015.

- 1,342,105 of such warrants expired on November 30, 2015.

- 4,000,000 of such warrants expired on March 31, 2016.

- 6,000,000 of such warrants expired on July 31, 2016.

- The final 6,000,000 of such warrants expired on November 30, 2016.

- The Registration Rights Agreement remains in full force and effect to enable the Securities Act registration of all Twinlab shares issued upon exercise of the Series B Warrant.

- Under the Contingent Call Options, we undertook a contingent obligation to deliver to Twinlab (at $0.01 per share) up to 4,000,000 Twinlab shares, but the obligation would be reduced or entirely eliminated to the extent we exercise the last three deemed tranches of the Series B Warrant and/or to the extent that Twinlab fails to meet a required fixed charge coverage ratio for certain months. The redelivered Twinlab shares would not have to be free-trading Twinlab shares.

- As noted below, the Contingent Call Options were eliminated on October 1, 2015.

On July 5, 2015, Twinlab and we entered into an Agreement for Limited Waiver of Noncircumvention Provision (the “Limited Waiver Agreement”), pursuant to which we agreed to waive the Noncircumvention Provision as to a particular potential investor (B. Thomas Golisano) whom we had introduced to Twinlab in June 2015 and to whom the Noncircumvention Provision would otherwise apply, in exchange for substantial compensation in cash and Twinlab warrants calculated on the basis of the size and pricing of such investor’s purchase(s) of Twinlab securities.

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On October 1, 2015, Twinlab and we entered into an Amendment No. 1 to Agreement for Limited Waiver of Non-Circumvention Provision and to Compromise Agreement and Release, pursuant to which the Limited Waiver Agreement was amended to remove our right to any compensation for the waiver of the Noncircumvention Provision as to B. Thomas Golisano and his affiliates, and the Compromise Agreement and Release was amended to eliminate the three Contingent Call Options.

During the nine months ended September 30, 2016 we sold 2,456,581 Twinlab shares (without any associated Third-Party Call Options) for $1,867,000.

As of September 30, 2016, our position in Twinlab securities was as follows, and we had no contingent liabilities to Twinlab:

- We held 10,599,626 outstanding Twinlab shares (9,612,784 unrestricted, free-trading Twinlab shares and 986,842 restricted Twinlab shares).

- We held 6,000,000 warrants under the Series B Warrant, at a $0.76 per share exercise price, with an effective expiration date of November 30, 2016.

- The Registration Rights Agreement remained in full force and effect to enable the Securities Act registration of all Twinlab shares issued upon prior or future exercises of our Warrants.

- We had a claim against third-party optionors for delivery to us of 1,498,500 Twinlab shares against the Call Options which they granted to us and which we have exercised.

- We were contingently obligated to deliver Twinlab shares to our accredited-investor counterparties under the 3,976,647 Third-Party Call options if and when the detachable call options are exercised.

- We had no actual or potential Put liability or Contingent Call Option liability.

At September 30, 2016, the fair value of the liability under the 3,976,647 Third-Party Call Options was recorded on our balance sheet at $462,558. 

The determination of the fair value of our Twinlab stock and derivative securities as of September 30, 2016 is highly significant to our balance sheet and our income statement. In determining the fair value, our Board of Directors relied upon a valuation report dated March 2, 2016 by FFG Valuations, Inc., an independent third party valuation firm. This valuation report, which we commissioned, values Twinlab common stock at $0.758 per share as of December 31, 2015. Twinlab stock is essentially illiquid; accordingly, valuations such as FFG’s are opinions, and other observers might have valued Twinlab stock differently if they chose to emphasize other factors than FFG did. For example, Twinlab issued significant numbers of shares in the second half of 2015 at prices well below $0.758 per share. If we used in our financial statements a valuation of Twinlab stock (as of September 30, 2016) which was well below $0.758 per share, with corresponding valuations for our Twinlab derivative securities, our net assets as of September 30, 2016 would have been significantly reduced and we would have had a significantly larger net loss in the third quarter and first nine months of 2016.

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In July 2015, in exchange for $277,500, we acquired a 20% interest in privately-held Western New York real estate companies LC Strategic Realty, LLC and LC Strategic Holdings, LLC, as well as in all other business conducted by the firms’ majority holders to the extent such other business has a primary focus on (a) real estate (subject to the exclusion of certain specified projects), (b) media/entertainment/show business, or (c) endorsements/advertisements/personal appearances/use of likeness/ monetization of celebrity.

On June 17 and 18, 2015, we filed a Form 4 and an amended Schedule 13D statement to report a June 10, 2015 sale by us of 13,157,895 shares of Twinlab common stock to a third party. The third party did not timely honor its payment obligation under the sale contract and we have treated the transaction as a non-event for financial reporting purposes. On December 18, 2015, we terminated the sale contract.

We continue to investigate possible acquisitions of positions in new businesses, securities and assets, and evaluate the retention and disposition of our existing holdings.  Changes in the mix of our businesses and investments should be expected. We have in the past taken preliminary steps toward acquisitions and investments in various companies, which transactions were never completed, and we have made an unsuccessful investment (in Blackcraft Cult, Inc. common stock) which we continue to hold but have written down to a zero valuation.

Results of Operations for the Quarterly Periods Ended September 30, 2016 and 2015

Revenues.  Total revenues (excluding gain and loss on investment securities) for the quarters ended September 30, 2016 and 2015 were $21,624 (sublease income) and $18,460. The 2015 period included services income of $16,660. Due to our current business focus, we do not expect to regularly generate material amounts of services income.

Realized and Unrealized Gain (Loss) on Financial Instruments. We recorded a $114,954 realized gain on financial instruments for the quarter ended September 30, 2016, as a result of our sales of Twinlab shares to third parties during the quarter for $115,000.

We also recorded a $(501,614) change in unrealized gain on financial instruments for the quarter ended September 30, 2016, primarily as a result of the July 31, 2016 expiration of 6,000,000 of our Twinlab common stock warrants, as well as reduction in the valuation of our remaining Twinlab warrants as the remaining time until their expiration date decreases, and the transformation of unrealized gain into realized gain upon our sales of Twinlab shares to third parties during the quarter.

The overall net loss on financial instruments for the quarter was $386,660.

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If our assessments/estimates of the fair value of our holdings of Twinlab securities change from quarter to quarter, there will be significant changes in our unrealized gain on such holdings, which in turn would result in significant gain or loss on our statement of operations for the quarter in question. At December 31, 2014, March 31, 2015 and September 30, 2015, our determination was that the fair value of Twinlab common stock was $0.76 per Twinlab share. However, at September 30, 2015, our determination was that the fair value of Twinlab common stock was $0.65 per Twinlab share and at December 31, 2015, March 31, 2016, June 30, 2016 and September 30, 2016, our determination was that the fair value of Twinlab common stock was $0.758 per Twinlab share. We ourselves continued to sell Twinlab shares for $0.76 in the third quarter of 2016.

We first acquired ownership of any Twinlab securities in the third quarter of 2014.

Personnel Expense.  Personnel expense for the quarters ended September 30, 2016 and 2015 was $230,527 and $137,048, respectively; the increase in 2016 was primarily due to salary payments of $360,000 to Darin Pastor and $40,000 to Tracy Pastor in the first quarter of 2016. These amounts are attributable to the entire 2016 year, so $100,000 of such amounts were recognized as personnel expense for the third quarter of 2016 and $100,000 of such amounts were recorded at September 30, 2016 as a salary advance - related party asset. Before 2016, we had held the salaries of our most senior officers at very low levels.

Professional Fees.  Professional fees for the quarters ended September 30, 2016 and 2015 were $144,990 and $318,808, respectively, each primarily due to legal fees for preparing documents for production as required by legal process.

General and Administrative.  General and administrative expenses (excluding personnel expense and professional fees) for the quarters ended September 30, 2016 and 2015 were $593,677 and $451,862, respectively; the increase in 2016 was primarily due to overseas business development efforts.

Results of Operations for the Nine Month Periods Ended September 30, 2016 and 2015

Revenues.  Total revenues (excluding gain and loss on investment securities) for the nine month periods ended September 30, 2016 and 2015 were $37,224 and $132,922. There was $37,224 of sublease income from two sublessees in the 2016 period. The 2015 period included services income of $116,662. Due to our current business focus, we do not expect to regularly generate material amounts of services income.

Realized and Unrealized Gain (Loss) on Financial Instruments. We recorded a $1,866,263 realized gain on financial instruments for the nine month period ended September 30, 2016, as a result of our sales of Twinlab shares to third parties during the nine month period for $1,867,000.

We also recorded a $(3,191,438) change in unrealized gain on financial instruments for the nine month period ended September 30, 2016, primarily as a result of the March 31, 2016 expiration of 4,000,000 of our Twinlab common stock warrants and the July 31, 2016 expiration of 6,000,000 of our Twinlab common stock warrants.

The overall net loss on financial instruments for the nine month period was $1,325,175.

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If our assessments/estimates of the fair value of our holdings of Twinlab securities change from quarter to quarter, there will be significant changes in our net unrealized gain on such holdings, which in turn would result in significant gain or loss on our statement of operations for the quarter in question. At December 31, 2014, March 31, 2015 and June 30, 2015, our determination was that the fair value of Twinlab common stock was $0.76 per Twinlab share. However, at September 30, 2015, our determination was that the fair value of Twinlab common stock was $0.65 per Twinlab share and at December 31, 2015, March 31, 2016, June 30, 2016 and September 30, 2016, our determination was that the fair value of Twinlab common stock was $0.758 per Twinlab share. We ourselves continued to sell Twinlab shares for $0.76 in the first, second and third quarters of 2016.

We first acquired ownership of any Twinlab securities in the third quarter of 2014.

Personnel Expense.  Personnel expense for the nine month periods ended September 30, 2016 and 2015 was $582,388 and $228,593, respectively; the increase in 2016 was primarily due to salary payments of $360,000 to Darin Pastor and $40,000 to Tracy Pastor in the first quarter of 2016. These amounts are attributable to the entire 2016 year, so $100,000 of such amounts were recognized as personnel expense for each of the first, second and third quarters of 2016 and $100,000 of such amounts were recorded at September 30, 2016 as a salary advance - related party asset. Before 2016, we had held the salaries of our most senior officers at very low levels.

Professional Fees.  Professional fees for the nine month periods ended September 30, 2016 and 2015 were $681,276 and $920,402, respectively, each primarily due to legal fees for preparing documents for production as required by legal process. The reduction in the 2014 period was primarily due to a lower amount of accounting fees.

General and Administrative.  General and administrative expenses (excluding personnel expense and professional fees) for the nine month periods ended September 30, 2016 and 2015 were $1,867,125 and $760,187, respectively; the increase in 2016 was primarily due to overseas business development efforts.

Liquidity and Capital Resources

As of September 30, 2016, we had $155,319 in cash and cash equivalents, Twinlab and other securities owned which we recorded at a $9,812,979 fair value, and $63,930 of deposits.  There is no active liquid public market for our Twinlab or other securities.

Our contracts for the purchase and resale of livestock and gold contemplate periodic purchases from our suppliers and essentially simultaneous resales to our customers. Our experience under our livestock contracts so far has indicated that our purchases and our corresponding resales of livestock will not necessarily occur on the scheduled delivery dates and will not necessarily include full delivery of the scheduled quantities of livestock. No deliveries have yet been scheduled under our gold agreement.

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We may require substantial working capital resources to fund our purchases of livestock and gold from our suppliers pending our receipt of payment from our customers upon our resales. Also, any unpredictability in the timing and size of our trading profits would have a positive effect on our working capital and our ability to make and honor other major commitments. We anticipate obtaining additional financing to fund operations from our operating profits, if any, and through common stock offerings, sales of Twinlab stock and sales of future-acquired strategic investment securities, and bank loans, to the extent available. (During the quarter ended September 30, 2016, we received a commitment for a $26,072,891 secured revolving line of credit from a foreign bank; however, this loan facility has not yet been documented with definitive agreements.) There can be no assurance we will be successful in raising the necessary funds to execute our business plan.

In the third quarter of 2016, we received $1,674,250 in cash from sales of our newly-issued common stock in a private placement to accredited investors (including $10,000 attributable to subscriptions for which shares were not issued until the fourth quarter of 2016). Additional sales and issuances in this private placement have been made in the fourth quarter of 2016.

The realization of cash proceeds, if any, from private placements of our own shares and/or on sales of our securities positions would likely be “bunchy,” unpredictable and irregular. We can make no assurances and therefore we may incur operating losses and/or negative cash flows in one or more future periods.  

The September 30, 2016 balance sheet included a $462,558 liability item arising from the Third-Party Call Options we granted to certain accredited investors in connection with certain of our 2015 sales of Twinlab common stock to such investors. Our actual risk under the Third-Party Call Options would be magnified if, due to sales of Twinlab common stock, we do not have as many Twinlab shares as the number of shares we could be obliged to deliver under the Third-Party Call Options (i.e., to the extent we in effect are “short” Twinlab shares). If we wish to avoid being “short” Twinlab shares in the manner just described, it may be necessary for us to purchase and/or hold Twinlab shares through the expiration date of the Third-Party Call Options, which would tie up a large amount of otherwise available cash. If insufficient cash is available for this purpose, it may be necessary for us to run the risk of having what in effect is a short position.

The $2,797,231 deferred tax liability item on our September 30, 2016 balance sheet represents the income taxes we would owe if we sold, during tax years in which our taxable income levels were large enough to support such current income taxes, all the Twinlab securities which we held as of September 30, 2016, at a price resulting in realization of all of the unrealized gain we recorded for such assets on our balance sheet (based on our fair value assessment as of September 30, 2016). No such taxes would be actually payable unless and until after we sell the Twinlab securities, and the amount of actual taxes payable would depend on the actual sales prices.

From time to time after October 28, 2014 our controlling stockholder Darin Pastor has made advances and direct-payments to assist us in covering expenses; he is not obligated to make any such advances and direct-payments and there can be no assurance that any such advances and direct-payments will continue. In addition, the amounts of these advances and direct-payments are reimbursable to him upon his demand at any time. At September 30, 2016, $168,199 of such advances and direct-payments had not yet been reimbursed.

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The entire $68,416 remaining balance on the notes payable to Darin Pastor, which we assumed as part of our October 2014 transaction involving assets and liabilities of the former Capstone Affluent Strategies, Inc., plus $19 of accrued but unpaid interest, was repaid on March 11, 2016.

We remind readers that our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by emerging companies. Also, our limited operating history makes predictions of future operating results and cash needs difficult to ascertain.

The following table provides detailed information about our net cash flow for the respective first nine months of our 2016 and 2015 fiscal years.  

	For the nine month periods ended September 30,
	2016			2015
Net cash (used in) provided by operating activities	$	(1,705,963	)	$	1,464,930
Net cash used in investing activities		—			(2,039	)
Net cash provided by (used in) financing activities		1,724,433			(1,050,306	)
Net increase in cash		18,470			412,585
Cash, beginning		136,849			12,685
Cash, ending	$	155,319		$	425,270

Operating activities

Net cash used in operating activities was $1,705,963 for the first nine months of 2016, primarily due to our $2,665,012 after-tax net loss for that nine month period. Although our sales of Twinlab securities in the first nine months of 2016 generated $1,867,000 in cash proceeds, the $(3,191,438) net change in unrealized gain on financial instruments, which was primarily due to the expiration of a total of 10,000,000 of our Twinlab warrants, was a noncash item. Our determination was that the fair value of Twinlab common stock was $0.758 per share as of both September 30, 2016 and December 31, 2015.

For the first nine month period of 2015, net cash provided by operating activities was $1,464,930, despite our $3,816,942 after-tax net loss for that nine month period. Although our sales of Twinlab securities in the first nine months of 2015 generated substantial cash proceeds, we did not record an overall net gain on financial instruments on such sales to the extent that the sales prices (ranging from $0.60 to $0.76 per share) were below or equal to the fair value we had determined for our Twinlab stock and at which we were carrying the Twinlab stock on our books.

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Financing activities

Net cash provided by financing activities in the first nine months of 2016 was primarily attributable to $1,674,250 received in the third quarter of 2016 from accredited investors in a private placement of our newly-issued common stock (including $10,000 attributable to subscriptions for which shares were not issued until the fourth quarter of 2016). Our final repayment of notes owed to our controlling stockholder Darin Pastor was more than offset by a net increase in Darin Pastor’s advances and direct-payments to us during the nine-month period to assist us in covering expenses; he is not obligated to make any such advances and direct-payments and there can be no assurance that any such advances and direct-payments will continue. In addition, the amounts of these advances and direct-payments are reimbursable to him upon his demand at any time.

The net cash used in financing activities in the first nine months of 2015 was primarily attributable to repayments on notes payable to Darin Pastor.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Critical Accounting Policies and Estimates

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States and the accounting and financial reporting conventions of the investment company industry requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities.  We base our estimates and judgments on historical experience and on various other assumptions, we believe to be reasonable under the circumstances.  Future events, however, may differ markedly from our current expectations and assumptions.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

This item is not applicable, as we are classified as a smaller reporting company.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

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As required by Rule 13a-15 under the Securities Exchange Act, as of September 30, 2016 we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures.  This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, who concluded that our disclosure controls and procedures are effective. The errors which required the restatement of financial statements and the amendments of periodic reports, as reported and summarized in our Current Report on Form 8-K filed on November 13, 2014 (as amended on November 24, 2014) and in such amendments and as further stated in the following paragraph of this item, were, in their judgment, not due to ineffectiveness of our disclosure controls and procedures.

Internal Control Over Financial Reporting

Our management is responsible for preparing our annual consolidated financial statements and for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

· Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

· Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

· Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

All internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2016. In making our assessment, we used the framework and criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework in 2014. Based on that assessment, our management has identified certain material weaknesses in our internal control over financial reporting.

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Our management concluded that as of September 30, 2016 our internal control over financial reporting was not effective, and that material weaknesses existed in the following areas as of September 30, 2016:

(1)	we do not employ full time in-house personnel with the technical knowledge to identify and address some of the reporting issues surrounding certain complex or non-routine transactions. With respect to material, complex and non-routine transactions, management has and will continue to seek guidance from third-party experts and/or consultants to gain a thorough understanding of these transactions;
(2)	we have inadequate segregation of duties consistent with the control objectives including but not limited to the disbursement process, transaction or account changes, and the performance of account reconciliations and approval;
(3)	we have ineffective controls over the period end financial disclosure and reporting process caused by reliance on third-party experts and/or consultants and insufficient accounting staff; and
(4)	we do not have a functioning audit committee of the Board of Directors and our Board of Directors, in its performance of the functions generally associated with audit committees, lacks a majority of (indeed, lacks any) independent members and lacks a majority of (indeed, lacks any) outside directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls, approvals and procedures.

To attempt to remediate these material weaknesses (which have also been noted during previous quarterly assessments), we have in previous quarters increased (and plan to enhance in the future) our use of external accounting services, adopted in previous quarters (and plan to further adopt in the future) policies to improve timely reviews by management and coordination with accounting consultants, and are increasing our use of experienced corporate and securities legal counsel, and we plan to add financial department employees as our resource priorities allow. We believe these actions will continue to improve items (1), (2) and (3) noted above.

Changes in Internal Control Over Financial Reporting

No substantial changes in our internal control over financial reporting occurred during the third quarter of 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

Item 1. Legal Proceedings

We are not a party to any material legal proceedings.

Item 1A. Risk Factors

This item is not applicable, as we are classified as a smaller reporting company. To better inform the readers of this Quarterly Report on Form 10-Q, however, we refer to the Risk Factors set forth in Part I, Item 1A of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 2, 2016, and to certain other risks identified within this Quarterly Report on Form 10-Q.

In addition, investors should take note that we carry our strategic investments at market value or, if there is no readily available market value, at fair value as determined by our board of directors in conformity with accounting principles generally accepted in the United States of America and the accounting and financial reporting conventions of the investment company industry. Typically, there is not a liquid public market for the securities of the companies in which we intend to invest. Where a liquid public market exists we would simply use market value, but where there is no public market or where the public market is illiquid (with the result that the reported public trading is not a reliable indicator of true value), we will value these securities quarterly at fair value as determined in good faith by our Board of Directors.

Because such valuations are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Due to this uncertainty, our determinations of the fair value of our trading positions on a given date may be materially understated or overstated compared to the value that we may ultimately realize upon the sale of those positions. Indeed, our determinations might be inaccurate even as of the determination date.

There is no guarantee that we will be able to realize the fair value as evaluated by our Board of Directors upon disposition of the asset.

Given that a large percentage of our assets and net income are currently based on our fair value figures for Twinlab securities, readers should be especially aware of the risk.

In addition, investors should be aware that the opportunities we are pursuing in the livestock trading and minerals industries tend to be exceptionally high-risk, and investors should also be aware that the initial transactions called for under our livestock supply and sale agreements have not yet been fully performed.

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

In a private placement of our newly-issued common stock to accredited investors at $0.85 per share, we received an aggregate of $1,074,250 in cash on various dates in the third quarter of 2016; and in exchange we issued 1,252,063 shares of our common stock in the third quarter of 2016 and 11,766 shares of our common stock in the fourth quarter of 2016. (In addition, in July 2016, we received $600,000 in cash in respect of 705,882 shares of our common stock which had been subscribed for in this private placement, but not yet paid for, in the second quarter of 2016. These 705,882 shares were issued in the third quarter of 2016.)

These stock issuances were exempt from the registration requirement of the Securities Act, by virtue of the exemption provided in Section 4(a)(2) of the Securities Act.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits

(a) The following exhibits are included as part of this report:

			Incorporated by reference
Exhibit		Filed			Filing
Number	Exhibit Description	herewith	Form	Exhibit	date
2.1	Stock Purchase Agreement dated September 6, 2013 between Ryan Faught and Darin Pastor		10-K	2.1	2/18/2015
2.2	Stock Purchase Agreement dated September 6, 2013 between Ryan Faught and George L. Schneider		10-K	2.2	2/18/2015
2.3	Agreement and Plan of Merger among the Company, Capstone Sub Co. and Capstone Affluent Strategies, Inc., dated December 13, 2013		8-K	2.1	12/13/2013
2.3.1	Articles of Merger filed January 15, 2014, between Capstone Sub Co. and Capstone Affluent Strategies, Inc.		8-K	3(i)(d)	1/16/2014
2.3.2	Rescission of Agreement and Plan of Merger among the Company, Capstone Sub Co. and Capstone Affluent Strategies, Inc.		8-K	10.1	5/1/2014
3.1	Articles of Incorporation of Creative App Solutions, Inc. dated July 10, 2012		S-1	3(i)(a)	10/17/2012
3.1.1	Certificate of Amendment to Articles of Incorporation filed August 26, 2013		8-K	3(i)(a)	8/29/2013
3.1.2	Certificate of Change filed September 6, 2013		8-K	3(i)(c)	9/12/2013
3.2	Bylaws		S-1	3(ii)	10/17/2012
3.2.1	Amended Bylaws, adopted August 26, 2013		10-K	3.2.1	2/18/2015
10.1†	Agreement for Livestock, dated August 16, 2016 [with livestock supplier 1]	X
10.2†	Agreement for Livestock, dated August 17, 2016 [with livestock supplier 2]	X
10.3†	Agreement for Livestock, dated August 25, 2016 [with livestock customer]	X
10.3.1†	First Amendment of Agreement for Livestock, dated September 26, 2016 [with livestock customer]	X
10.4†	Sale and Purchase Agreement for Gold, dated September 22, 2016 [with gold customer]	X
31.1	Certification pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – CEO	X
31.2	Certification pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – CFO	X
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – CEO	X
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – CFO	X

† Confidential treatment has been requested for portions of this exhibit. These portions have been omitted and submitted separately to the Securities and Exchange Commission.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

CAPSTONE FINANCIAL GROUP, INC.

By: /s/ Darin R. Pastor

Darin R. Pastor, Chief Executive Officer

Date: December 14, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Darin R. Pastor	Chairman of the Board of Directors,	December 14, 2016
Darin R. Pastor	Chief Executive Officer (Principal Executive Officer)
/s/ Halford W. Johnson	Chief Financial Officer	December 14, 2016
Halford W. Johnson	(Principal Financial Officer and Principal Accounting Officer)

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EX-10.1

EXHIBIT 10.1

Agreement for Livestock

This Agreement for Livestock is made and entered into as of August 16, 2016 by and between:

Company:	Capstone Financial Group, Inc.
Address:	8600 Transit Road, East Amherst, New York 14051, USA
Country of Company Formation:	USA
Telephone:	1-(866)-798-4478
Email:	dpastor@capstonefg.com
Represented by:	Darin Pastor
Nationality:	USA
Company Reg.  No.:	NV20121429901 (State of Nevada’s business identification number)

Hereinafter referred to as "Buyer"

AND

Company:	[***]1
Address:	[***]
Country of Company Formation:	[***]
Telephone:	[***]
Email:	[***]
Represented by:	[***]

Hereinafter referred to as "Seller"

1. QUANTITIES AND TIMES FOR SALES/PURCHASES.

In consideration for valuable consulting advice provided by Buyer regarding United States matters, the receipt and adequacy of which are hereby acknowledged, and in further consideration of Buyer undertaking to expend time and resources toward its [***]-related operations, Seller agrees to sell and deliver to Buyer under the terms and conditions of this Agreement, and Buyer agrees to buy from Seller under the terms and conditions of this Agreement, (a) a number of cattle and of sheep stated in a written notice (an “Option Notice”), if any, delivered by Buyer to Seller (at least [***] but no more than [***] head of cattle, unless Buyer and Seller mutually agree on a different number, and at least [***] but no more than [***] head of sheep, unless Buyer and Seller mutually agree on a different number) in a single Shipment on a date to be agreed for the parties’ mutual convenience but in no event earlier than the 20^th day after the date of such Option Notice and in no event later than the 30^th day after the date of such Option Notice (and if not otherwise mutually agreed then on the 30^th day after the date of such Option Notice), and (b) thereafter a number of cattle and of sheep stated by Buyer in applicable Option Notice (in each case at least [***] but no more than [***] head of cattle, unless Buyer and Seller mutually agree on a different number, and at least [***] but no more than [***] head of sheep, unless Buyer and Seller mutually agree on a different number) in a single Shipment on a date to be agreed for the parties’ mutual convenience but in no event earlier than the 20^th day after the date of such applicable Option Notice and in no event later than the 30^th day after the date of such applicable Option Notice (and if not otherwise mutually agreed then on the 30^th day after the date of such applicable Option Notice), and (c) thereafter a number of cattle and of sheep stated by

_________________________________________________

¹ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

Buyer in applicable Option Notice (in each case at least [***]²but no more than [***] head of cattle, unless Buyer and Seller mutually agree on a different number, and at least [***] but no more than [***] head of sheep, unless Buyer and Seller mutually agree on a different number) in a single Shipment on a date to be agreed for the parties’ mutual convenience but in no event earlier than the 20^th day after the date of such applicable Option Notice and in no event later than the 30^th day after the date of such applicable Option Notice (and if not otherwise mutually agreed then on the 30^th day after the date of such applicable Option Notice), and (d) thereafter et cetera – up to a maximum total of 10 such Option Notices.

Each Option Notice shall be delivered, if at all, by Buyer in Buyer’s sole discretion and for a quantity of cattle and of sheep determined by Buyer in Buyer’s sole discretion (but subject to the limits stated in this Agreement, which limits may, of course, be modified by mutual consent of the parties); provided, that the aggregate total number of cattle in all Shipments combined shall not be more than [***] and the aggregate total number of sheep in all Shipments combined shall not be more than [***]. In addition, no Option Notice may be delivered after [***].

Each such respective purchase and sale of the stated quantity of Livestock is referred to in this Agreement as a “Closing,” and the Livestock actually delivered by Seller for a particular Closing is referred to in this Agreement as a “Shipment.”

For avoidance of doubt: it is expressly understood that with respect to any proposed Closing, Buyer shall have no obligation to purchase any Livestock at such proposed Closing and shall have no liability of any kind for declining to purchase Livestock at such Closing, if there has been less than full satisfaction by Seller (separately as to such Closing as distinct from any other Closings) of all of the conditions stated in this Agreement for Buyer’s obligations at such particular Closing.

2. SPECIFICATIONS SUMMARY.

QUANTITY	As set forth in Section 1 above.
DELIVERY TERMS	FOB (Incoterms 2010) to Buyer at [***] (on a vessel or vessels selected by Buyer), in pens/cages customary for ocean transport of such Livestock.
SPECIFICATIONS	Each head of cattle shall be [***]; alive; not more than three years old; not blind, crippled, locoed, lump-jawed, or otherwise deformed or unmerchantable; free of infectious disease; [***]-certified; and having a mass of at least 300 kilograms. In addition, the average body mass of all cattle in a Shipment shall be at least 325 kilograms. Each head of sheep shall be [***] breed; alive; not more than three years old; not blind, crippled, locoed, lump-jawed, or otherwise deformed or unmerchantable; free of infectious disease; [***]-certified; and having a mass of at least 35 kilograms. In addition, the average body mass of all sheep in a Shipment shall be at least 37.5 kilograms.
PRICE	Cattle: [***] per head. Sheep: [***] per head.
PRODUCT HISTORY	Non-terrorist origin; no terrorist intermediaries; clean and clear

_________________________________________________

² CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

AND TITLE title, no adverse claims, no liens.

3. DELIVERY TERMS

The Livestock shall be delivered by Seller to Buyer FOB (Incoterms 2010) at [***]³ (on a vessel or vessels selected by Buyer), in pens/cages customary for ocean transport of such Livestock.

4. PRICE TERMS

The purchase/sale price for the Livestock shall be [***] per head of cattle conforming to the specifications set forth in Section 2 above and [***] per head per head of sheep conforming to the specifications set forth in Section 2 above. The stated purchase/sale price for the Livestock at each respective Closing is referred to in this Agreement as the “Purchase Price.”

5. PAYMENT TIMING AND TERMS

It is not required or expected that Buyer pay the Purchase Price directly to Seller or that the Purchase Price be paid indirectly to Seller at the exact moment of the applicable Closing. Unless Seller provides Buyer with different wire transfer instructions by written notice to Buyer before the applicable Delivery, Buyer shall within two business days after the applicable Closing wire the purchase price in US Dollars to Seller as follows:

BANK INFORMATION	[***]
BANK ADDRESS	[***]
BENEFICIARY	[***]
ACCOUNT No	[***]
A/C	[***]
SWIFT CODE	[***]
BANK OFFICER NAME	[***]
TELEPHONE	[***]
EMAIL	[***]
INTERMEDIARY BANK	[***]
INTERMEDIARY BANK ADDRESS	[***]
SWIFT CODE	[***]
A/C	[***]

6. REPRESENTATIONS, WARRANTIES AND COVENANTS

With regard to each respective Closing, Seller confirms, represents, warrants and covenants to Buyer that:

a. Seller has all right, power and authority to execute, deliver and perform this Agreement, and has duly authorized the execution, delivery and performance of this Agreement, and this Agreement has been duly executed and delivered by Seller.

_________________________________________________

³ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

b. Seller’s execution, delivery and performance of this Agreement did not and will not violate any applicable laws or regulations or result in the breach of any other agreement to which Seller is a party.

c. The Livestock to be sold at each applicable Closing is of non-terrorist origin, there have been no terrorist intermediaries for the Livestock, and the Livestock is owned by Seller free and clear of any adverse claims, liens and encumbrances, and is transferable and exportable.

d. To Seller’s best knowledge, each such applicable Shipment of Livestock consists solely of Livestock conforming to the requirements of Section 2 above.

e. All required export duties for the Livestock from [***]⁴ has been paid and all required permits for the export of the Livestock from [***] have been paid.

f. Seller shall pay any and all sales taxes or transfer taxes applicable to Seller’s sale of Livestock to Buyer.

g. Seller shall indemnify and hold harmless Buyer against and from any losses, liabilities, penalties, claims, actions, awards, settlements or judgments arising from Seller’s actual or alleged breach of the foregoing (including reasonable attorneys’ fees and expenses).

With regard to each respective Closing, Buyer confirms, represents, warrants and covenants to Seller that:

a. Buyer has all right, power and authority to execute, deliver and perform this Agreement, and has duly authorized the execution, delivery and performance of this Agreement, and this Agreement has been duly executed and delivered by Buyer.

b. Buyer’s execution, delivery and performance of this Agreement did not and will not violate any applicable laws or regulations or result in the breach of any other agreement to which Buyer is a party.

c. Buyer shall indemnify and hold harmless Seller against and from any losses, liabilities, penalties, claims, actions, awards, settlements or judgments arising from Buyer’s actual or alleged breach of the foregoing (including reasonable attorneys’ fees and expenses).

7. CLOSING.

Conditions to Closing Obligations of Buyer. Buyer’s obligations at each respective applicable Closing shall be subject to the satisfaction (or express waiver in writing by Buyer) at or before the time of the Closing of each of the following conditions as to such applicable Closing:

a. All of Seller’s representations and warranties made in this Agreement shall be true and correct in all material respects on and as of such Closing.

b. Seller shall have performed and complied in all material respects with all of its covenants and obligations to be performed at or before such Closing.

c. Seller shall have delivered to Buyer, at or before the Closing, the following documents with respect to the Shipment (the “Delivery Documents”):

i. Commercial Invoices addressed to Buyer.

ii. Evidence of ownership of the Livestock.

_________________________________________________

⁴ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

iii. Declaration that the Livestock is of non-terrorist origin, that there have been no terrorist intermediaries for the Livestock, and that the Livestock is owned by Seller free and clear of any adverse claims, liens and encumbrances, and is transferable and exportable.

iv. Bill of Sale in favor of Buyer.

v. Customs Declaration Form(s) and Export Permit (if applicable).

d. Seller shall have delivered the Livestock to Buyer FOB (Incoterms 2010) at [***]⁵ (on a vessel or vessels selected by Buyer), in pens/cages customary for ocean transport of such Livestock.

e. Buyer shall have had the opportunity to, if Buyer so requested, inspect (or have a third party designated by Buyer inspect) any or all of the Livestock the Buyer intends to purchase.

Conditions to Closing Obligations of Seller. Seller’s obligations at each respective applicable Closing shall be subject to the satisfaction (or express waiver in writing by Seller) at or before the time of the Closing of each of the following conditions as to such applicable Closing:

a. All of Buyer’s representations and warranties made in this Agreement shall be true and correct in all material respects on and as of such Closing.

b. Buyer shall have performed and complied in all material respects with all of its covenants and obligations to be performed at or before such Closing.

Sequencing. As stated in Section 5, it is expressly understood, agreed and expected that the Closing will be completed before Buyer has had an opportunity to wire the Purchase Price to Seller, but that nonetheless upon the applicable Closing all title and ownership to and in the applicable Livestock shall transfer to Buyer.

8. NOTICES

Any notice, report, request, approval or consent required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been sufficiently given if delivered in person to ________________ (if to Seller) or to 8600 Transit Road, East Amherst, New York 14051, USA, attention: Darin Pastor, Chief Executive Officer (if to Buyer) or if emailed to [***] (if to Seller) or to dpastor@capstonefg.com (if to Buyer). Either party may change its address or email address for all future notices, reports, requests, approvals and consents by giving, pursuant to this Section 8, written notice of such change of address or email address.

9. FORCE MAJEURE

Neither party shall be liable for failure to perform, or delay in the performance of, its obligations under this Agreement when such failure or delay is caused by an event of force majeure. For purposes of this Agreement, an event of force majeure means any event or circumstance beyond the reasonable control of the affected party and not reasonably preventable using industry standard practices, including but not limited to, war, insurrection, act of terrorism, riot, fire, flood or other unusual weather condition, explosion, act of God, peril of the sea, sabotage, accident, embargo, act of governmental authority, compliance with governmental order on national defense requirements, or

_________________________________________________

⁵ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

inability due to general industry wide shortages to obtain fuel, power, raw materials, labor or transportation facilities. If, due to any event of force majeure, either party shall be unable to fulfill its obligations under this Agreement, the affected party shall immediately notify the other party of such inability and of the period during which such inability is expected to continue, shall use reasonable commercial efforts to cure and remedy such non-performance and the time for performance shall be extended for a number of days equal to the duration of the force majeure, and the parties shall meet promptly to determine an equitable solution to the effects of such event.

10. ENTIRE AGREEMENT.

This Agreement is the entire agreement between the parties with regard to the subject matter hereof, and supersedes any and all prior or contemporaneous negotiations, understandings, commitments and agreements (whether oral or in writing) with regard to the subject matter hereof. No waivers, changes, alterations or substitutions shall be permitted unless the same shall be notified in writing and signed by both parties. The English language version of this Agreement shall be controlling over any version in any other language.

11. SEVERABILITY.

This Agreement is severable. When possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law; but if any provision of this Agreement is determined by a final and binding court or arbitration judgment to be invalid, illegal or unenforceable to any extent, such provision shall not be affected or impaired up to the limits of such invalidity, illegality or unenforceability; the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected or impaired in any way; and the parties agree to negotiate in good faith to replace such invalid, illegal and unenforceable provision (or portion of provision) with a valid, legal and enforceable provision that achieves, to the greatest lawful extent under this Agreement, the economic, business and other purposes of such invalid, illegal or unenforceable provision (or portion of provision).

12. APPLICABLE LAW AND BINDING ARBITRATION.

Any and all disputes or controversies arising out of or relating to this Agreement shall be exclusively and finally resolved by binding arbitration (using the English language) in accordance with the commercial arbitration rules of the International Chamber of Commerce then in effect, in New York City, USA. The arbitration proceedings shall be conducted promptly and in accordance with the commercial arbitration rules of the International Chamber of Commerce then in effect. The expenses of any arbitration, including the reasonable attorney fees of the prevailing party, shall be borne by the party deemed to be at fault or on a pro-rata basis should the arbitration conclude in a finding of mutual fault.

This Agreement shall be governed by and construed in accordance with the laws of the State of New York, USA (without giving effect to any conflicts of law principles that require the application of the law of a different state or country). The parties agree that the United Nations Convention on Contracts for the International Sale of Goods shall be inapplicable to this Agreement and transactions hereunder and thereunder.

Each party recognizes that the covenants and agreements herein and their continued performance as set forth in this Agreement are necessary and critical to protect the legitimate interests of the other party, that the other party would not have entered into this Agreement in the absence of such covenants and agreements and the assurance of continued performance as set forth in this Agreement, and that a party’s breach or threatened breach of such covenants and agreements may cause the other

party irreparable harm and significant injury, the amount of which will be extremely difficult to estimate and ascertain, thus potentially making any remedy at law or in damages inadequate. Therefore, each party confirms and agrees that the other party shall be entitled to seek on an interim or permanent basis specific performance, an order restraining any breach or threatened breach of any or all provisions of this Agreement, and any other equitable relief (including but not limited to temporary, preliminary and/or permanent injunctive relief), all without need to post any bond or security, and in addition to and not exclusive of any other remedy available to such other party at law or in equity.

Neither party shall commence any court proceeding or action against the other to resolve any dispute, except to enforce an arbitral award rendered pursuant to this Section. For all purposes of this Agreement, the parties hereby submit to the jurisdiction of the state and federal courts located in New York City, USA. In addition, the party in whose favor an arbitral award rendered pursuant to this Section was granted shall have the right to enforce such arbitral award in any court of any country which it wishes.

To the extent that any of the provisions of this Section 12 are forbidden by a mandatory provision of an applicable [***]⁶ law, the mandatory provision of the applicable [***] law shall apply instead of the forbidden portion of this Section 12.

13. ELECTRONIC COPIES; COUNTERPARTS.

This Agreement may be executed and delivered in counterparts (portable document format (.pdf)/electronic transmission included), each of which shall constitute an original document, but both of which shall constitute one and the same instrument. Delivery of a portable document format (.pdf) copy of an executed signature page of this Agreement (or of any other notice, report, request, approval or consent required or permitted to be given under this Agreement) shall be as valid, for all purposes of contract formation and evidence and otherwise, as delivery of an executed original.

14. ASSIGNMENT.

Either party may assign its rights under this Agreement. Either party may assign its duties, liabilities and/or obligations under this Agreement, but the effect of doing so is that the assignee will become responsible for such duties, liabilities and/or obligations and the assignor will remain jointly and severally responsible for such duties, liabilities and/or obligations.

15. FEES, COSTS AND EXPENSES.

Each party is responsible for its own fees, costs and expenses in connection with this Agreement, except as otherwise expressly provided in this Agreement.

16. BEST EFFORTS; FURTHER ASSURANCES.

The parties hereby covenant and agree to use their respective best efforts to, without the necessity of any further consideration, execute, acknowledge and deliver any and all such other documents and instruments and take any such other action as may be reasonably necessary, proper or advisable to consummate, make effective, comply with and carry out the intent and purposes of this Agreement.

_________________________________________________

⁶ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

17. RELATIONSHIP OF PARTIES.

Each of the parties hereto is an independent contractor and nothing in this Agreement is intended or shall be deemed to constitute a partnership, agency, employer-employee or joint venture relationship between the parties. Neither party shall have the right to, and each party agrees not to purport to, incur any debts, liabilities or obligation for which the other is or will be responsible, or make any commitments or contracts for the other. Each party represents and warrants that it has not incurred any debts, liabilities or obligations for which the other is or will be responsible, or made any commitments or contracts for the other.

IN WITNESS WHEREOF, the parties have set their hands to this Agreement for Livestock as of the day and year first above written.

BUYER:

CAPSTONE FINANCIAL GROUP, INC.

By: /s/ Darin Pastor

Name: Darin Pastor

Title: Chief Executive Officer

Date: 08/17/2016

SELLER:

[***]⁷

By: /s/ [***]

Name: [***]

Title: General Manager

Date: 16-8-2016

_________________________________________________

⁷ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

EX-10.2

EXHIBIT 10.2

Agreement for Livestock

This Agreement for Livestock is made and entered into as of August 17, 2016 by and between:

Company:	Capstone Financial Group, Inc.
Address:	8600 Transit Road, East Amherst, New York 14051, USA
Country of Company Formation:	USA
Telephone:	1-(866)-798-4478
Email:	dpastor@capstonefg.com
Represented by:	Darin Pastor
Nationality:	USA
Company Reg.  No.:	NV20121429901 (State of Nevada’s business identification number)

Hereinafter referred to as "Buyer"

AND

Company:	[***]1
Address:	[***]
Country of Company Formation:	[***]
Telephone:	[***]
Email:	[***]
Represented by:	[***]

Hereinafter referred to as "Seller"

1. QUANTITIES AND TIMES FOR SALES/PURCHASES.

In consideration for valuable consulting advice provided by Buyer regarding United States matters, the receipt and adequacy of which are hereby acknowledged, and in further consideration of Buyer undertaking to expend time and resources toward its [***]-related operations, Seller agrees to sell and deliver to Buyer under the terms and conditions of this Agreement, and Buyer agrees to buy from Seller under the terms and conditions of this Agreement, (a) a number of cattle and of sheep stated in a written notice (an “Option Notice”), if any, delivered by Buyer to Seller (at least [***] but no more than [***] head of cattle, unless Buyer and Seller mutually agree on a different number, and at least [***] but no more than [***] head of sheep, unless Buyer and Seller mutually agree on a different number) in a single Shipment on a date to be agreed for the parties’ mutual convenience but in no event earlier than the 20^th day after the date of such Option Notice and in no event later than the 30^th day after the date of such Option Notice (and if not otherwise mutually agreed then on the 30^th day after the date of such Option Notice), and (b) thereafter a number of cattle and of sheep stated by Buyer in applicable Option Notice (in each case at least [***] but no more than [***] head of cattle, unless Buyer and Seller mutually agree on a different number, and at least [***] but no more than [***] head of sheep, unless Buyer and Seller mutually agree on a different number) in a single Shipment on a date to be agreed for the parties’ mutual convenience but in no event earlier than the 20^th day after the date of such applicable Option Notice and in no event later than the 30^th day after the date of such applicable Option Notice (and if not otherwise mutually agreed then on the 30^th day after the date of such applicable Option Notice), and (c) thereafter a number of cattle and of sheep stated by

_________________________________________________

¹ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

Buyer in applicable Option Notice (in each case at least [***]² but no more than [***] head of cattle, unless Buyer and Seller mutually agree on a different number, and at least [***] but no more than [***] head of sheep, unless Buyer and Seller mutually agree on a different number) in a single Shipment on a date to be agreed for the parties’ mutual convenience but in no event earlier than the 20^th day after the date of such applicable Option Notice and in no event later than the 30^th day after the date of such applicable Option Notice (and if not otherwise mutually agreed then on the 30^th day after the date of such applicable Option Notice), and (d) thereafter et cetera – up to a maximum total of 10 such Option Notices.

Each Option Notice shall be delivered, if at all, by Buyer in Buyer’s sole discretion and for a quantity of cattle and of sheep determined by Buyer in Buyer’s sole discretion (but subject to the limits stated in this Agreement, which limits may, of course, be modified by mutual consent of the parties); provided, that the aggregate total number of cattle in all Shipments combined shall not be more than [***] and the aggregate total number of sheep in all Shipments combined shall not be more than [***]. In addition, no Option Notice may be delivered after [***].

Each such respective purchase and sale of the stated quantity of Livestock is referred to in this Agreement as a “Closing,” and the Livestock actually delivered by Seller for a particular Closing is referred to in this Agreement as a “Shipment.”

For avoidance of doubt: it is expressly understood that with respect to any proposed Closing, Buyer shall have no obligation to purchase any Livestock at such proposed Closing and shall have no liability of any kind for declining to purchase Livestock at such Closing, if there has been less than full satisfaction by Seller (separately as to such Closing as distinct from any other Closings) of all of the conditions stated in this Agreement for Buyer’s obligations at such particular Closing.

2. SPECIFICATIONS SUMMARY.

QUANTITY	As set forth in Section 1 above.
DELIVERY TERMS	FOB (Incoterms 2010) to Buyer at [***] (on a vessel or vessels selected by Buyer), in pens/cages customary for ocean transport of such Livestock.
SPECIFICATIONS	Each head of cattle shall be [***]; alive; not more than three years old; not blind, crippled, locoed, lump-jawed, or otherwise deformed or unmerchantable; free of infectious disease; [***]-certified; and having a mass of at least 300 kilograms. In addition, the average body mass of all cattle in a Shipment shall be at least 325 kilograms. Each head of sheep shall be [***] breed; alive; not more than three years old; not blind, crippled, locoed, lump-jawed, or otherwise deformed or unmerchantable; free of infectious disease; [***]-certified; and having a mass of at least 35 kilograms. In addition, the average body mass of all sheep in a Shipment shall be at least 37.5 kilograms.
PRICE	Cattle: [***] per head. Sheep: [***] per head.
PRODUCT HISTORY	Non-terrorist origin; no terrorist intermediaries; clean and clear

_________________________________________________

² CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

AND TITLE title, no adverse claims, no liens.

3. DELIVERY TERMS

The Livestock shall be delivered by Seller to Buyer FOB (Incoterms 2010) at [***]³ (on a vessel or vessels selected by Buyer), in pens/cages customary for ocean transport of such Livestock.

4. PRICE TERMS

The purchase/sale price for the Livestock shall be [***] per head of cattle conforming to the specifications set forth in Section 2 above and [***] per head per head of sheep conforming to the specifications set forth in Section 2 above. The stated purchase/sale price for the Livestock at each respective Closing is referred to in this Agreement as the “Purchase Price.”

5. PAYMENT TIMING AND TERMS

It is not required or expected that Buyer pay the Purchase Price directly to Seller or that the Purchase Price be paid indirectly to Seller at the exact moment of the applicable Closing. Unless Seller provides Buyer with different wire transfer instructions by written notice to Buyer before the applicable Delivery, Buyer shall within two business days after the applicable Closing wire the purchase price in US Dollars to Seller as follows:

BANK INFORMATION	Standard Chartered Bank
BANK ADDRESS	[***]
BENEFICIARY	[***]
ACCOUNT No	[***]
A/C
SWIFT CODE	[***]
BANK OFFICER NAME	[***]
TELEPHONE	[***]
EMAIL	[***]
INTERMEDIARY BANK	N/A
INTERMEDIARY BANK ADDRESS	N/A
SWIFT CODE	N/A
A/C	N/A

6. REPRESENTATIONS, WARRANTIES AND COVENANTS

With regard to each respective Closing, Seller confirms, represents, warrants and covenants to Buyer that:

a. Seller has all right, power and authority to execute, deliver and perform this Agreement, and has duly authorized the execution, delivery and performance of this Agreement, and this Agreement has been duly executed and delivered by Seller.

_________________________________________________

³ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

b. Seller’s execution, delivery and performance of this Agreement did not and will not violate any applicable laws or regulations or result in the breach of any other agreement to which Seller is a party.

c. The Livestock to be sold at each applicable Closing is of non-terrorist origin, there have been no terrorist intermediaries for the Livestock, and the Livestock is owned by Seller free and clear of any adverse claims, liens and encumbrances, and is transferable and exportable.

d. To Seller’s best knowledge, each such applicable Shipment of Livestock consists solely of Livestock conforming to the requirements of Section 2 above.

e. All required export duties for the Livestock from [***]⁴ has been paid and all required permits for the export of the Livestock from [***] have been paid.

f. Seller shall pay any and all sales taxes or transfer taxes applicable to Seller’s sale of Livestock to Buyer.

g. Seller shall indemnify and hold harmless Buyer against and from any losses, liabilities, penalties, claims, actions, awards, settlements or judgments arising from Seller’s actual or alleged breach of the foregoing (including reasonable attorneys’ fees and expenses).

With regard to each respective Closing, Buyer confirms, represents, warrants and covenants to Seller that:

a. Buyer has all right, power and authority to execute, deliver and perform this Agreement, and has duly authorized the execution, delivery and performance of this Agreement, and this Agreement has been duly executed and delivered by Buyer.

b. Buyer’s execution, delivery and performance of this Agreement did not and will not violate any applicable laws or regulations or result in the breach of any other agreement to which Buyer is a party.

c. Buyer shall indemnify and hold harmless Seller against and from any losses, liabilities, penalties, claims, actions, awards, settlements or judgments arising from Buyer’s actual or alleged breach of the foregoing (including reasonable attorneys’ fees and expenses).

7. CLOSING.

Conditions to Closing Obligations of Buyer. Buyer’s obligations at each respective applicable Closing shall be subject to the satisfaction (or express waiver in writing by Buyer) at or before the time of the Closing of each of the following conditions as to such applicable Closing:

a. All of Seller’s representations and warranties made in this Agreement shall be true and correct in all material respects on and as of such Closing.

b. Seller shall have performed and complied in all material respects with all of its covenants and obligations to be performed at or before such Closing.

c. Seller shall have delivered to Buyer, at or before the Closing, the following documents with respect to the Shipment (the “Delivery Documents”):

i. Commercial Invoices addressed to Buyer.

ii. Evidence of ownership of the Livestock.

_________________________________________________

⁴ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

iii. Declaration that the Livestock is of non-terrorist origin, that there have been no terrorist intermediaries for the Livestock, and that the Livestock is owned by Seller free and clear of any adverse claims, liens and encumbrances, and is transferable and exportable.

iv. Bill of Sale in favor of Buyer.

v. Customs Declaration Form(s) and Export Permit (if applicable).

d. Seller shall have delivered the Livestock to Buyer FOB (Incoterms 2010) at [***]⁵ (on a vessel or vessels selected by Buyer), in pens/cages customary for ocean transport of such Livestock.

e. Buyer shall have had the opportunity to, if Buyer so requested, inspect (or have a third party designated by Buyer inspect) any or all of the Livestock the Buyer intends to purchase.

Conditions to Closing Obligations of Seller. Seller’s obligations at each respective applicable Closing shall be subject to the satisfaction (or express waiver in writing by Seller) at or before the time of the Closing of each of the following conditions as to such applicable Closing:

a. All of Buyer’s representations and warranties made in this Agreement shall be true and correct in all material respects on and as of such Closing.

b. Buyer shall have performed and complied in all material respects with all of its covenants and obligations to be performed at or before such Closing.

Sequencing. As stated in Section 5, it is expressly understood, agreed and expected that the Closing will be completed before Buyer has had an opportunity to wire the Purchase Price to Seller, but that nonetheless upon the applicable Closing all title and ownership to and in the applicable Livestock shall transfer to Buyer.

8. NOTICES

Any notice, report, request, approval or consent required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been sufficiently given if delivered in person to ________________ (if to Seller) or to 8600 Transit Road, East Amherst, New York 14051, USA, attention: Darin Pastor, Chief Executive Officer (if to Buyer) or if emailed to [***] (if to Seller) or to dpastor@capstonefg.com (if to Buyer). Either party may change its address or email address for all future notices, reports, requests, approvals and consents by giving, pursuant to this Section 8, written notice of such change of address or email address.

9. FORCE MAJEURE

Neither party shall be liable for failure to perform, or delay in the performance of, its obligations under this Agreement when such failure or delay is caused by an event of force majeure. For purposes of this Agreement, an event of force majeure means any event or circumstance beyond the reasonable control of the affected party and not reasonably preventable using industry standard practices, including but not limited to, war, insurrection, act of terrorism, riot, fire, flood or other unusual weather condition, explosion, act of God, peril of the sea, sabotage, accident, embargo, act of governmental authority, compliance with governmental order on national defense requirements, or

_________________________________________________

⁵ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

inability due to general industry wide shortages to obtain fuel, power, raw materials, labor or transportation facilities. If, due to any event of force majeure, either party shall be unable to fulfill its obligations under this Agreement, the affected party shall immediately notify the other party of such inability and of the period during which such inability is expected to continue, shall use reasonable commercial efforts to cure and remedy such non-performance and the time for performance shall be extended for a number of days equal to the duration of the force majeure, and the parties shall meet promptly to determine an equitable solution to the effects of such event.

10. ENTIRE AGREEMENT.

This Agreement is the entire agreement between the parties with regard to the subject matter hereof, and supersedes any and all prior or contemporaneous negotiations, understandings, commitments and agreements (whether oral or in writing) with regard to the subject matter hereof. No waivers, changes, alterations or substitutions shall be permitted unless the same shall be notified in writing and signed by both parties. The English language version of this Agreement shall be controlling over any version in any other language.

11. SEVERABILITY.

This Agreement is severable. When possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law; but if any provision of this Agreement is determined by a final and binding court or arbitration judgment to be invalid, illegal or unenforceable to any extent, such provision shall not be affected or impaired up to the limits of such invalidity, illegality or unenforceability; the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected or impaired in any way; and the parties agree to negotiate in good faith to replace such invalid, illegal and unenforceable provision (or portion of provision) with a valid, legal and enforceable provision that achieves, to the greatest lawful extent under this Agreement, the economic, business and other purposes of such invalid, illegal or unenforceable provision (or portion of provision).

12. APPLICABLE LAW AND BINDING ARBITRATION.

Any and all disputes or controversies arising out of or relating to this Agreement shall be exclusively and finally resolved by binding arbitration (using the English language) in accordance with the commercial arbitration rules of the International Chamber of Commerce then in effect, in New York City, USA. The arbitration proceedings shall be conducted promptly and in accordance with the commercial arbitration rules of the International Chamber of Commerce then in effect. The expenses of any arbitration, including the reasonable attorney fees of the prevailing party, shall be borne by the party deemed to be at fault or on a pro-rata basis should the arbitration conclude in a finding of mutual fault.

This Agreement shall be governed by and construed in accordance with the laws of the State of New York, USA (without giving effect to any conflicts of law principles that require the application of the law of a different state or country). The parties agree that the United Nations Convention on Contracts for the International Sale of Goods shall be inapplicable to this Agreement and transactions hereunder and thereunder.

Each party recognizes that the covenants and agreements herein and their continued performance as set forth in this Agreement are necessary and critical to protect the legitimate interests of the other party, that the other party would not have entered into this Agreement in the absence of such covenants and agreements and the assurance of continued performance as set forth in this Agreement, and that a party’s breach or threatened breach of such covenants and agreements may cause the other

party irreparable harm and significant injury, the amount of which will be extremely difficult to estimate and ascertain, thus potentially making any remedy at law or in damages inadequate. Therefore, each party confirms and agrees that the other party shall be entitled to seek on an interim or permanent basis specific performance, an order restraining any breach or threatened breach of any or all provisions of this Agreement, and any other equitable relief (including but not limited to temporary, preliminary and/or permanent injunctive relief), all without need to post any bond or security, and in addition to and not exclusive of any other remedy available to such other party at law or in equity.

Neither party shall commence any court proceeding or action against the other to resolve any dispute, except to enforce an arbitral award rendered pursuant to this Section. For all purposes of this Agreement, the parties hereby submit to the jurisdiction of the state and federal courts located in New York City, USA. In addition, the party in whose favor an arbitral award rendered pursuant to this Section was granted shall have the right to enforce such arbitral award in any court of any country which it wishes.

13. ELECTRONIC COPIES; COUNTERPARTS.

This Agreement may be executed and delivered in counterparts (portable document format (.pdf)/electronic transmission included), each of which shall constitute an original document, but both of which shall constitute one and the same instrument. Delivery of a portable document format (.pdf) copy of an executed signature page of this Agreement (or of any other notice, report, request, approval or consent required or permitted to be given under this Agreement) shall be as valid, for all purposes of contract formation and evidence and otherwise, as delivery of an executed original.

14. ASSIGNMENT.

Either party may assign its rights under this Agreement. Either party may assign its duties, liabilities and/or obligations under this Agreement, but the effect of doing so is that the assignee will become responsible for such duties, liabilities and/or obligations and the assignor will remain jointly and severally responsible for such duties, liabilities and/or obligations.

15. FEES, COSTS AND EXPENSES.

Each party is responsible for its own fees, costs and expenses in connection with this Agreement, except as otherwise expressly provided in this Agreement.

16. BEST EFFORTS; FURTHER ASSURANCES.

The parties hereby covenant and agree to use their respective best efforts to, without the necessity of any further consideration, execute, acknowledge and deliver any and all such other documents and instruments and take any such other action as may be reasonably necessary, proper or advisable to consummate, make effective, comply with and carry out the intent and purposes of this Agreement.

17. RELATIONSHIP OF PARTIES.

Each of the parties hereto is an independent contractor and nothing in this Agreement is intended or shall be deemed to constitute a partnership, agency, employer-employee or joint venture relationship between the parties. Neither party shall have the right to, and each party agrees not to purport to, incur any debts, liabilities or obligation for which the other is or will be responsible, or make any commitments or contracts for the other. Each party represents and warrants that it has not incurred

any debts, liabilities or obligations for which the other is or will be responsible, or made any commitments or contracts for the other.

IN WITNESS WHEREOF, the parties have set their hands to this Agreement for Livestock as of the day and year first above written.

BUYER:

CAPSTONE FINANCIAL GROUP, INC.

By: /s/ Darin Pastor

Name: Darin Pastor

Title: Chief Executive Officer

Date: 8/18/2016

SELLER:

[***]^[6]

By: /s/ [***]

Name: [***]

Title: Marketing Manager

Date:

_________________________________________________

⁶ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

EX-10.3

EXHIBIT 10.3

Agreement for Livestock

This Agreement for Livestock is made and entered into as of August 24, 2016 by and between:

Company:	Capstone Financial Group, Inc.
Address:	8600 Transit Road, East Amherst, New York 14051, USA
Country of Company Formation:	USA
Telephone:	1- (716) 462-3080
Email:	dpastor@capstonefg.com
Represented by:	Darin Pastor
Nationality:	USA
Company Reg.  No.:	NV20121429901 (State of Nevada’s business identification number)

Hereinafter referred to as "Seller"

AND

Company:	[***]1
Address:	[***], Sultanate of Oman
Country of Company Formation:	Oman
Telephone:	[***]
Email:	[***]
Represented by:	[***]

Hereinafter referred to as "Buyer"

1. QUANTITIES AND TIMES FOR SALES/PURCHASES.

Seller agrees to sell and deliver to Buyer under the terms and conditions of this Agreement, and Buyer agrees to buy from Seller under the terms and conditions of this Agreement, on the __ day of each calendar month from ________ 2016 through ______ 2017, inclusive, 1,038,925 cwt of cattle and 3,142,600 cwt of sheep – making an overall total of 10,389,250 cwt of cattle and 3,142,600 cwt of sheep. A hundredweight (“cwt”) is understood to mean 100 pounds of livestock.

Each such respective purchase and sale of the stated quantity of Livestock is referred to in this Agreement as a “Closing,” and the Livestock actually delivered by Seller for a particular Closing is referred to in this Agreement as a “Shipment.”

2. SPECIFICATIONS SUMMARY.

QUANTITY	As set forth in Section 1 above.
DELIVERY TERMS	FCA (Incoterms 2010) to Buyer at [***] (alongside a vessel or vessels selected by Buyer).
SPECIFICATIONS	Each head of cattle shall be [***]; alive; not more than three years old; not blind, crippled, locoed, lump-jawed, or otherwise deformed or unmerchantable; free of infectious disease; [***]-certified; and having a mass of at least 300 kilograms (661.4 pounds). In addition, the average body mass of all cattle in a

¹ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

	Shipment shall be at least 325 kilograms (716.5 pounds). Each head of sheep shall be [***]2 breed; alive; not more than three years old; not blind, crippled, locoed, lump-jawed, or otherwise deformed or unmerchantable; free of infectious disease; [***]-certified; and having a mass of at least 35 kilograms (77.2 pounds). In addition, the average body mass of all sheep in a Shipment shall be at least kilograms (82.7 pounds).
PRICE	Cattle: [***] per cwt. Sheep: [***] per cwt.
PRODUCT HISTORY  AND TITLE	Non-terrorist origin; no terrorist intermediaries; clean and clear title, no adverse claims, no liens.

3. DELIVERY TERMS

The Livestock shall be delivered by Seller to Buyer FCA (Incoterms 2010) at [***] (alongside a vessel or vessels selected by Buyer).

4. PRICE TERMS

The purchase/sale price for the Livestock shall be [***] per cwt of cattle conforming to the specifications set forth in Section 2 above and [***] per cwt of sheep conforming to the specifications set forth in Section 2 above. The stated purchase/sale price for the Livestock at each respective Closing is referred to in this Agreement as the “Purchase Price.”

5. PAYMENT TIMING AND TERMS

It is not required or expected that Buyer pay the Purchase Price directly to Seller or that the Purchase Price be paid indirectly to Seller at the exact moment of the applicable Closing. Unless Seller provides Buyer with different wire transfer instructions by written notice to Buyer before the applicable Delivery, Buyer shall within one business days after the applicable Closing wire the purchase price in US Dollars to Seller as follows:

BANK INFORMATION	Citibank
BANK ADDRESS	3996 Barranca Pkwy, Irvine, CA  92606
BENEFICIARY	Capstone Financial Group, Inc.
ACCOUNT No	[***]
A/C
SWIFT CODE	CITI US 33
BANK OFFICER NAME
TELEPHONE	+1 949-726-5124
EMAIL
INTERMEDIARY BANK
INTERMEDIARY BANK ADDRESS
SWIFT CODE
A/C

² CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

6. REPRESENTATIONS, WARRANTIES AND COVENANTS

With regard to each respective Closing, Seller confirms, represents, warrants and covenants to Buyer that:

a. Seller has all right, power and authority to execute, deliver and perform this Agreement, and has duly authorized the execution, delivery and performance of this Agreement, and this Agreement has been duly executed and delivered by Seller.

b. Seller’s execution, delivery and performance of this Agreement did not and will not violate any applicable laws or regulations or result in the breach of any other agreement to which Seller is a party.

c. The Livestock to be sold at each applicable Closing is of non-terrorist origin, there have been no terrorist intermediaries for the Livestock, and the Livestock is owned by Seller free and clear of any adverse claims, liens and encumbrances, and is transferable and exportable.

d. To Seller’s best knowledge, each such applicable Shipment of Livestock consists solely of Livestock conforming to the requirements of Section 2 above.

e. Seller shall indemnify and hold harmless Buyer against and from any losses, liabilities, penalties, claims, actions, awards, settlements or judgments arising from Seller’s actual or alleged breach of the foregoing (including reasonable attorneys’ fees and expenses).

With regard to each respective Closing, Buyer confirms, represents, warrants and covenants to Seller that:

a. Buyer has all right, power and authority to execute, deliver and perform this Agreement, and has duly authorized the execution, delivery and performance of this Agreement, and this Agreement has been duly executed and delivered by Buyer.

b. Buyer’s execution, delivery and performance of this Agreement did not and will not violate any applicable laws or regulations or result in the breach of any other agreement to which Buyer is a party.

c. Buyer shall indemnify and hold harmless Seller against and from any losses, liabilities, penalties, claims, actions, awards, settlements or judgments arising from Buyer’s actual or alleged breach of the foregoing (including reasonable attorneys’ fees and expenses).

7. CLOSING.

Conditions to Closing Obligations of Buyer. Buyer’s obligations at each respective applicable Closing shall be subject to the satisfaction in all material respects (or express waiver in writing by Buyer) at or before the time of the Closing of each of the following conditions as to such applicable Closing:

a. All of Seller’s representations and warranties made in this Agreement shall be true and correct on and as of such Closing.

b. Seller shall have performed and complied with its covenants and obligations to be performed at or before such Closing.

c. Seller shall have delivered to Buyer, at or before the Closing, the following documents with respect to the Shipment (the “Delivery Documents”):

i. Commercial Invoices addressed to Buyer.

ii. Evidence of ownership of the Livestock.

iii. Declaration that the Livestock is of non-terrorist origin, that there have been no terrorist intermediaries for the Livestock, and that the Livestock is owned by Seller free and clear of any adverse claims, liens and encumbrances, and is transferable.

iv. Bill of Sale in favor of Buyer.

d. Seller shall have delivered the Livestock to Buyer FCA (Incoterms 2010) at [***]³ (alongside a vessel or vessels selected by Buyer).

e. Buyer shall have had the opportunity to, if Buyer so requested, inspect (or have a third party designated by Buyer inspect) any or all of the Livestock the Buyer intends to purchase.

Conditions to Closing Obligations of Seller. Seller’s obligations at each respective applicable Closing shall be subject to the satisfaction in all material respects (or express waiver in writing by Seller) at or before the time of the Closing of each of the following conditions as to such applicable Closing:

a. All of Buyer’s representations and warranties made in this Agreement shall be true and correct on and as of such Closing.

b. Buyer shall have performed and complied with its covenants and obligations to be performed at or before such Closing.

Sequencing. As stated in Section 5, it is expressly understood, agreed and expected that the Closing will be completed before Buyer has had an opportunity to wire the Purchase Price to Seller, but that nonetheless upon the applicable Closing all title and ownership to and in the applicable Livestock shall transfer to Buyer. It shall be Buyer’s responsibility to verify the weight and quality of the Livestock in a Shipment before loading onto the vessel(s), and such loading shall be deemed to constitute a waiver of any deficiencies of weight or of quality. Title and risk of loss pass to Buyer immediately upon each respective Closing alongside the vessel(s).

8. NOTICES

Any notice, report, request, approval or consent required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been sufficiently given if delivered in person to ________________ (if to Buyer) or to 8600 Transit Road, East Amherst, New York 14051, USA, attention: Darin Pastor, Chief Executive Officer (if to Seller) or if emailed to ____@_______________ (if to Buyer) or to dpastor@capstonefg.com (if to Seller). Either party may change its address or email address for all future notices, reports, requests, approvals and consents by giving, pursuant to this Section 8, written notice of such change of address or email address.

9. FORCE MAJEURE

Neither party shall be liable for failure to perform, or delay in the performance of, its obligations under this Agreement when such failure or delay is caused by an event of force majeure. For purposes of this Agreement, an event of force majeure means any event or circumstance beyond the

³ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

reasonable control of the affected party and not reasonably preventable using industry standard practices, including but not limited to, war, insurrection, act of terrorism, riot, fire, flood or other unusual weather condition, explosion, act of God, peril of the sea, sabotage, accident, embargo, act of governmental authority, compliance with governmental order on national defense requirements, or inability due to general industry wide shortages to obtain fuel, power, raw materials, labor or transportation facilities. If, due to any event of force majeure, either party shall be unable to fulfill its obligations under this Agreement, the affected party shall immediately notify the other party of such inability and of the period during which such inability is expected to continue, shall use reasonable commercial efforts to cure and remedy such non-performance and the time for performance shall be extended for a number of days equal to the duration of the force majeure, and the parties shall meet promptly to determine an equitable solution to the effects of such event.

10. ENTIRE AGREEMENT.

This Agreement is the entire agreement between the parties with regard to the subject matter hereof, and supersedes any and all prior or contemporaneous negotiations, understandings, commitments and agreements (whether oral or in writing) with regard to the subject matter hereof. No waivers, changes, alterations or substitutions shall be permitted unless the same shall be notified in writing and signed by both parties. The English language version of this Agreement shall be controlling over any version in any other language.

11. SEVERABILITY.

This Agreement is severable. When possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law; but if any provision of this Agreement is determined by a final and binding court or arbitration judgment to be invalid, illegal or unenforceable to any extent, such provision shall not be affected or impaired up to the limits of such invalidity, illegality or unenforceability; the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected or impaired in any way; and the parties agree to negotiate in good faith to replace such invalid, illegal and unenforceable provision (or portion of provision) with a valid, legal and enforceable provision that achieves, to the greatest lawful extent under this Agreement, the economic, business and other purposes of such invalid, illegal or unenforceable provision (or portion of provision).

12. APPLICABLE LAW AND BINDING ARBITRATION.

Any and all disputes or controversies arising out of or relating to this Agreement shall be exclusively and finally resolved by binding arbitration (using the English language) in accordance with the commercial arbitration rules of the International Chamber of Commerce then in effect, in New York City, USA. The arbitration proceedings shall be conducted promptly and in accordance with the commercial arbitration rules of the International Chamber of Commerce then in effect. The expenses of any arbitration, including the reasonable attorney fees of the prevailing party, shall be borne by the party deemed to be at fault or on a pro-rata basis should the arbitration conclude in a finding of mutual fault.

This Agreement shall be governed by and construed in accordance with the laws of the State of New York, USA (without giving effect to any conflicts of law principles that require the application of the law of a different state or country). The parties agree that the United Nations Convention on Contracts for the International Sale of Goods shall be inapplicable to this Agreement and transactions hereunder and thereunder.

Each party recognizes that the covenants and agreements herein and their continued performance as set forth in this Agreement are necessary and critical to protect the legitimate interests of the other party, that the other party would not have entered into this Agreement in the absence of such covenants and agreements and the assurance of continued performance as set forth in this Agreement, and that a party’s breach or threatened breach of such covenants and agreements may cause the other party irreparable harm and significant injury, the amount of which will be extremely difficult to estimate and ascertain, thus potentially making any remedy at law or in damages inadequate. Therefore, each party confirms and agrees that the other party shall be entitled to seek on an interim or permanent basis specific performance, an order restraining any breach or threatened breach of any or all provisions of this Agreement, and any other equitable relief (including but not limited to temporary, preliminary and/or permanent injunctive relief), all without need to post any bond or security, and in addition to and not exclusive of any other remedy available to such other party at law or in equity.

Neither party shall commence any court proceeding or action against the other to resolve any dispute, except to enforce an arbitral award rendered pursuant to this Section. For all purposes of this Agreement, the parties hereby submit to the jurisdiction of the state and federal courts located in New York City, USA. In addition, the party in whose favor an arbitral award rendered pursuant to this Section was granted shall have the right to enforce such arbitral award in any court of any country which it wishes.

13. ELECTRONIC COPIES; COUNTERPARTS.

This Agreement may be executed and delivered in counterparts (portable document format (.pdf)/electronic transmission included), each of which shall constitute an original document, but both of which shall constitute one and the same instrument. Delivery of a portable document format (.pdf) copy of an executed signature page of this Agreement (or of any other notice, report, request, approval or consent required or permitted to be given under this Agreement) shall be as valid, for all purposes of contract formation and evidence and otherwise, as delivery of an executed original.

14. ASSIGNMENT.

Either party may assign its rights under this Agreement. Either party may assign its duties, liabilities and/or obligations under this Agreement, but the effect of doing so is that the assignee will become responsible for such duties, liabilities and/or obligations and the assignor will remain jointly and severally responsible for such duties, liabilities and/or obligations.

15. FEES, COSTS AND EXPENSES.

Each party is responsible for its own fees, costs and expenses in connection with this Agreement, except as otherwise expressly provided in this Agreement.

16. BEST EFFORTS; FURTHER ASSURANCES.

The parties hereby covenant and agree to use their respective best efforts to, without the necessity of any further consideration, execute, acknowledge and deliver any and all such other documents and instruments and take any such other action as may be reasonably necessary, proper or advisable to consummate, make effective, comply with and carry out the intent and purposes of this Agreement.

17. RELATIONSHIP OF PARTIES.

Each of the parties hereto is an independent contractor and nothing in this Agreement is intended or shall be deemed to constitute a partnership, agency, employer-employee or joint venture relationship between the parties. Neither party shall have the right to, and each party agrees not to purport to, incur any debts, liabilities or obligation for which the other is or will be responsible, or make any commitments or contracts for the other. Each party represents and warrants that it has not incurred any debts, liabilities or obligations for which the other is or will be responsible, or made any commitments or contracts for the other.

IN WITNESS WHEREOF, the parties have set their hands to this Agreement for Livestock as of the day and year first above written.

SELLER:

CAPSTONE FINANCIAL GROUP, INC.

By: /s/ Darin Pastor

Name: Darin Pastor

Title: Chief Executive Officer

Date: 8/24/2016

BUYER:

[***]⁴

By: /s/ [***]

Name: [***]

Title: Managing Director

Date: 24/8/2016

⁴ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

EX-10.3.1

EXHIBIT 10.3.1

First Amendment of Agreement for Livestock

This First Amendment of Agreement for Livestock (this “Amendment”) is made and entered into as of September 26, 2016, with respect to the Agreement for Livestock dated August 24, 2016 by and between Capstone Financial Group, Inc. and [***]^[1] (the “Agreement”).

1.The first paragraph of Section 1 of the Agreement is hereby amended to read in full as follows:

“Seller agrees to sell and deliver to Buyer under the terms and conditions of this Agreement, and Buyer agrees to buy from Seller under the terms and conditions of this Agreement, on the 15th day of each calendar month (or on such other day or days on or around such 15^th day of the month, as may be agreed upon by the parties) from September 2016 through June 2017, inclusive, a number of cwt of cattle which is at least 716,500 cwt and no more than 2,400,300 cwt, and a number of cwt of sheep which is at least 248,000 cwt and no more than 744,100 cwt – with the aggregate total cwt of cattle in all Shipments combined not exceeding 10,389,250 and the aggregate total cwt of sheep in all Shipments combined not exceeding 3,142,600. The parties agree to reasonably accommodate each other with regard to the exact day or days of delivery, and Seller agrees to use reasonable commercial efforts to give Buyer at least seven days’ notice of Seller’s intended actual day or days of delivery (if not the 15^th of the month) and of the approximate cwt of cattle and the approximate cwt of sheep which Seller proposes to deliver on such day or days (which shall be within the ranges stated in the previous sentence). A hundredweight (“cwt”) is understood to mean 100 pounds of livestock.”

2.The parties acknowledge that the initial Shipment has been delayed for a number of days past September 15, 2016, and the parties acknowledge that they have a satisfactory understanding as to the intended actual day or days of delivery and of the approximate cwt of cattle and the approximate cwt of sheep which Seller proposes to deliver on such day or days, for the “September 15, 2016” Shipment.

3.            Section 8 of the Agreement is hereby amended to read in full as follows:

“Any notice, report, request, approval or consent required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been sufficiently given if delivered in person to [***] (if to Buyer) or to 8600 Transit Road, East Amherst, New York 14051, USA, attention: Darin Pastor, Chief Executive Officer (if to Seller) or if emailed to [***] (if to Buyer) or to dpastor@capstonefg.com (if to Seller). Either party may change its address or email address for all future notices, reports, requests, approvals and consents by giving, pursuant to this Section 8, written notice of such change of address or email address.”

4.            Except as otherwise expressly set forth in this Amendment, the Agreement remains unchanged and in full force and effect.

IN WITNESS WHEREOF, the parties have set their hands to this First Amendment of Agreement for Livestock as of the day and year first above written.

CAPSTONE FINANCIAL GROUP, INC.

By: /s/ Darin Pastor

Name: Darin Pastor

Title: Chief Executive Officer

Date: 9/25/16

^[1] CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

[***]²

By: /s/ [***]

Name: [***]

Title: Managing Director

Date: 25/9/16

² CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

EX-10.4

EXHIBIT 10.4

Sale and Purchase Agreement for Gold

This Sale and Purchase Agreement for Gold is made and entered into as of September 21, 2016 by and between:

Company:	[***]1
Address:	[***] Australia
Country of Company Formation:	Australia
Telephone:	[***]
Email:	[***]
Represented by:	[***]

Hereinafter referred to as "Buyer"

AND

Company:	Capstone Financial Group, Inc.
Address:	8600 Transit Road, East Amherst, New York 14051, USA
Country of Company Formation:	USA
Telephone:	+1 (866)-798-4478
Email:	dpastor@capstonefg.com
Represented by:	Darin Pastor
Nationality:	USA
Company Reg.  No.:	NV20121429901 (State of Nevada’s business identification number)

Hereinafter referred to as "Seller"

WHEREAS, Seller, through best efforts, has available for sale doré gold in bar or other form, with the purity of the gold in said doré being at least 95.8% (in such doré, less-than-perfectly-pure form, the "Gold"), and

WHEREAS, Buyer agrees to purchase no less than 50,000 kilograms (i.e. 50 metric tons) of Gold from the Seller at an agreed price, in portions, and at a time (or times) as mutually agreed and as provided in this Agreement, with any sale and purchase of Gold in excess of 50,000 kilograms by mutual agreement;

NOW THEREFORE: Both parties agree as follows:

1. QUANTITIES AND TIMES FOR SALES/PURCHASES.

Seller agrees to sell and deliver to Buyer under the terms and conditions of this Agreement, and Buyer agrees to buy from Seller under the terms and conditions of this Agreement, during the period from December 15, 2016 through September 30, 2019, inclusive, (a) a quantity of Gold mutually agreed upon delivered as soon as practicable for both parties, but in no event

¹CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

sooner than December 15, 2016, and thereafter (b) a mutually agreed upon number of kilograms of Gold to be delivered in a single or multiple Shipments on a date or dates for the parties’ mutual convenience (with the quantities and dates of each Shipment to be agreed upon in writing before delivery, but with the parties’ current understanding being that the quantities and dates shall be consistent with the proposed schedule set forth as Exhibit A to this Agreement). The aggregate total number of kilograms of Gold in all Shipments combined shall not be less than 50,000, subject to the best efforts of Seller and to Seller's compliance with its obligations under this Agreement. Any Shipments of Gold in excess of 50,000 kilograms shall be by mutual agreement between the parties.

Each such respective purchase and sale of the stated quantity of the Gold is referred to in this Agreement as a “Closing,” and the Gold actually delivered by Seller for a particular Closing is referred to in this Agreement as a “Shipment.”

With respect to any proposed Closing, Buyer shall have no obligation to purchase any Gold at such proposed Closing and shall have no liability of any kind for declining to purchase Gold at such Closing, if there has been less than full satisfaction by Seller (separately as to such Closing as distinct from any other Closings) of all of the conditions stated in this Agreement for Buyer’s obligations at such particular Closing.

If at [***]², the aggregate total of Gold in all Shipments combined is less than 50,000 kilograms through no fault of Buyer, including (but not limited to) Buyer declining to purchase Gold at any Closing or Closings in accordance with provisions of this Agreement which authorize Buyer to so decline, Buyer is relieved of any obligation under this Agreement to purchase any additional Gold (beyond that which has already been purchased). Any additional sale and purchase of Gold will be by agreement of the parties.

2. SPECIFICATIONS SUMMARY.

QUANTITY	At each respective Closing: A mutually agreed upon number of kilograms of Gold, being not less than 15 kilograms and not more than 2,500 kilograms of Gold per Closing.  (It is understood that this means doré gold in bar or other form with the purity of the gold in said doré being at least 95.8%).  The aggregate total number of kilograms of Gold in all Closings combined shall not be less than 50,000 kilograms, subject to the best efforts of Seller and shall not be more than 50,000, except by agreement of the parties.
DELIVERY TERMS	CIF (Incoterms 2010 as amended by the terms and conditions of this Agreement) the gold refinery where the Assay (as defined below) is performed (the “Delivery Point”). In the event of any inconsistency between the terms of this Agreement and CIF (Incoterms 2010), the terms of this Agreement prevail.
PRICE	[***] per troy ounce of Gold ([***] per metric ton of Gold).
PRODUCT HISTORY	Clean, clear, no adverse claims, no liens.  No person in the chain of title shall be "specially designated nationals” or “blocked persons" under the US Office of Foreign Assets Control or the USA PATRIOT Act or subject to blocking, limitation or sanctions by the Commonwealth Government of Australia.
ORIGIN	One or more countries reasonably acceptable to Buyer.  To be identified

² CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

	with more particularity (by country, and mine by mine and with chain of title) by Seller in a writing delivered to Buyer at least three days before each respective Closing with respect to the Shipment delivered for such respective Closing.  The origin country(ies) will not necessarily be the same for each of the Closings.  For the first Closing, the sole country(ies) of origin will be in the Americas.
ASSAY	Directly before each respective Closing, Seller will deliver all the Gold for the Shipment to the Perth Mint gold refinery or a Johnson Matthey or ABC Refinery gold refinery in Australia (to be selected by Buyer in its discretion subject to approval by Seller, such approval not to be unreasonably withheld), where Buyer will cause all such Gold to be weighed and will (using one of the following two methods (to be selected by Buyer in its discretion subject to approval by Seller, such approval not to be unreasonably withheld) assay the Gold in order to determine the overall gold purity percentage of the selected Gold sample, which will then also be conclusively deemed to be the overall gold purity percentage of the entire Shipment (the “Assay”).  The two alternative methods are: (a) Buyer will select in Buyer’s discretion a random sample of the Gold (of approximately 50-100 kilograms) to be refined at the refinery; or (b) Buyer will cause the entire Shipment of Gold to be smelted at the refinery and dip samples from each smelting to be taken while the Gold is molten and stirred to ensure an accurate and homologous sample is taken – all metal dip samples collected will then be tested through either ICP, AAS or Fire assay analysis to determine an accurate purity percentage of the entire Shipment.  (The Assay shall be all at Buyer’s expense, regardless of the Assay method chosen.)
PACKING	The Gold will be delivered by Seller (to the Delivery Point) in metal containers.

3. DELIVERY TERMS

a. The Gold shall be delivered by Seller to Buyer CIF (Incoterms 2010 as amended by the terms and conditions of this Agreement) the Delivery Point.

b. Seller shall notify Buyer via email of the exact date and time Seller will deliver the Shipment to such gold refinery for the Assay process (such email to be sent at least 48 hours in advance, unless Buyer agrees in writing to a specified Assay process time and date which entails a shorter notice).

4. PRICE TERMS

a. The purchase/sale price for the Gold shall be [***]³ per troy ounce of Gold ([***] per metric ton of Gold). The stated purchase/sale price for the Gold at each respective Closing (calculated from the weight of the Shipment to be delivered at such Closing) is referred to in this Agreement as the “Purchase Price.” For example, the Purchase Price for a Shipment of 10 metric tons would be [***] (subject to possible adjustment under Section 4.b below). Each Purchase Price is stated in and shall be paid in United States Dollars (US$). The Purchase

³ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

Price shall be calculated based on the weight of the Shipment, and shall not be adjusted for deviations in weight or purity except as expressly set forth in Section 4.b below.

b. The purity of the gold in the doré is to be at least 95.8%. If for any respective Shipment it is determined at the Assay that the indicated gold content of the doré is less than 95.8% or the weight of the Shipment is more than 10% lower or 5% higher than advised by the Seller, then Buyer shall have in its sole discretion the option either to decline to accept delivery (in which case Seller shall pursuant to Section 6 be liable to make a compensation payment to Buyer of 0.75% of the indicative Purchase Price for that Shipment, calculated on the basis of the notice delivered by Seller under Section 5) or to accept delivery (in which case Buyer’s responsibility to pay the Purchase Price for the Shipment at the applicable Closing shall be reduced to an amount equal to the “Adjusted Price” (defined as US$905.15 times WxP, where W = the actual gross Gold weight; and P is the actual purity determined by “the Assay” defined in Section 2);

and for avoidance of doubt: if for any Shipment the Gold is of such high gross weight and/or is determined by the Assay to be of such high purity that the indicated gold content is more than the contracted-for weight times 95.8% purity, Buyer shall nonetheless be entitled to purchase (and Seller shall nonetheless be required to deliver and sell) the entire Shipment for the Purchase Price without any immediate or future price adjustment).

c. In the absence of fraud, Seller shall not be responsible for any negative difference in weight and/or purity percentage from those determined at the Assay.

d. Buyer acknowledges and agrees that risk and ownership of each respective Shipment remains with Seller until the applicable Closing, and upon the applicable Closing (i.e., upon satisfaction or express waiver in writing of all the closing conditions as set forth herein) all title and ownership to and in the applicable Shipment Gold (i.e., including the refined gold resulting from refining the 50-100 kilogram random sample of Gold selected by Buyer, or the dip samples (as the case may be), and also including the remaining Gold in doré bar or other form and all other minerals contained in the doré) shall automatically transfer to Buyer without any requirement for further instrument of transfer on the part of Seller.

5. PAYMENT TERMS

It is not required or expected that Buyer pay the Purchase Price directly to Seller or that the Purchase Price be paid indirectly to Seller at the exact moment of the applicable Closing. Instead, at least 20 days before the applicable Closing (25 days, in the case of the first Closing), Seller shall deliver to Buyer a notice in respect of the proposed Shipment detailing the anticipated weight and indicative Purchase Price of the Shipment and its mine(s) of origin; at least 15 days before the applicable Closing (20 days, in the case of the first Closing), Buyer shall deliver to Seller an original executed irrevocable commercial letter of credit (the "LC") issued by Westpac or another commercial bank in Australia or the United States of equivalent stature and financial strength (the "Issuing Bank") and in an amount equal to or greater than the indicative Purchase Price for the applicable Closing. Such LC shall provide that, upon presentation by Seller to the Issuing Bank of the documentary requirements set forth in such LC (the “Satisfaction Documents”), the Issuing Bank shall satisfy the full applicable Purchase Price payment obligation to Seller under the LC.

In the case of a LC for a Closing other than the first Closing, such LC shall provide that, upon presentation by Seller to the Issuing Bank from time to time of the documentary requirements set forth as such applicable other LC’s Satisfaction Documents (which shall be of like tenor as the Satisfaction Documents in the first LC except for the changes in dates and amounts), the

Issuing Bank shall satisfy the full applicable Purchase Price payment obligation to Seller under the applicable other LC.

Unless Seller provides Buyer with different wire transfer instructions by written notice to Buyer before the issuance of the applicable LC, the applicable LC shall provide that upon presentation by Seller to the Issuing Bank of the applicable Satisfaction Documents, the Issuing Bank shall wire the purchase price as follows:

BANK INFORMATION	Citibank
BANK ADDRESS	3996 Barranca Parkway, Irvine, California 92606, USA
BENEFICIARY	Capstone Financial Group, Inc.
ACCOUNT No	[***]4
SWIFT CODE	CITI US 33
TELEPHONE	+1 949-726-5124

6. CLOSING.

Obligation of Buyer for Delivery of Satisfaction Documents. At each respective Closing, Buyer shall (if the conditions to the closing obligations of Buyer as set forth below shall have been satisfied at or before such Closing) deliver to Seller the applicable Satisfaction Documents for such Closing.

Refinery Test Leading to Closing. Immediately after Seller’s delivery of the respective Shipment of Gold to the gold refinery selected by Buyer, Buyer shall cause the Assay to be performed, and the true purity of the Gold (as Delivered) shall thereby be conclusively deemed to have been determined as to the entire Shipment. The time for the applicable Closing shall be 24 hours after Buyer has received the results of the Assay, and Seller shall be deemed to have delivered at such Closing the entire applicable Shipment of Gold (i.e., including the pure refined gold resulting from refining the 50-100 kilogram sample, or the dip samples (as the case may be), and also including the remaining Gold in doré bar or other form and all other minerals contained in the doré).

If a Section 4.b Adjusted Price is indicated, it shall be applied and shall be determined solely and conclusively based upon the true purity as determined by the Assay and upon the gross Shipment weight as determined by the refinery.

Default in Shipment. If a notice is delivered by Seller under Section 5 but the proposed Shipment referred to in the notice does not occur, whether due to Seller's suppliers of Gold defaulting on their obligations to deliver the indicated amount of Gold for that proposed shipment, or otherwise, Seller must make a compensation payment to Buyer of 0.75% of the indicative Purchase Price for that Shipment, calculated on the basis of the notice delivered by Seller under Section 5.

Conditions to Closing Obligations of Buyer. Buyer’s obligations at each respective applicable Closing shall be subject to the satisfaction (or express waiver in writing by Buyer)

⁴ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

at or before the time of the Closing of each of the following conditions as to such applicable Closing:

a. All of Seller’s representations and warranties made in this Agreement shall be true and correct in all material respects on and as of such Closing.

b. Seller shall have performed and complied in all material respects with all of its covenants and obligations to be performed at or before such Closing.

c. The Assay process shall have been completed, and if a Section 4.b Adjusted Price is indicated then Buyer shall have in its sole discretion an election whether or not to accept delivery of the Gold in the applicable Shipment. (If Buyer has such an election but does not expressly notify Seller before the applicable Closing that Buyer has elected not to accept delivery of the Gold in the applicable Shipment, then it shall be conclusively deemed that Buyer has waived such right to decline such Shipment and has elected to accept delivery of the Gold in the applicable Shipment, and the Purchase price payable for such Shipment shall be reduced to the Adjusted Price.)

d. Seller shall have delivered the Shipment CIF (Incoterms 2010 as amended by the terms and conditions of this Agreement) to the Delivery Point, in metal containers.

e. Seller shall have delivered to Buyer, not less than two Sydney business days before the Closing, the following documents with respect to the Shipment in form and substance reasonably satisfactory to Buyer (the “Delivery Documents”):

i.Three originals of Commercial Invoices in favor of Buyer.

ii.Certificate of Ownership of the Gold.

iii.A written certification of Seller identifying (to Seller’s knowledge) the exact mine or mines from which the Gold in the Shipment was extracted, and the chain of title of the Gold. No person in such chain of title shall be "specially designated nationals” or “blocked persons" under the US Office of Foreign Assets Control or the USA PATRIOT Act or subject to blocking, limitation or sanctions by the Commonwealth Government of Australia.

iv.Certificate of Free Circulation of Goods (EUR1).

v.Declaration that the Gold is free and clear and of non-criminal and non-terrorist origin, unencumbered and free of any adverse claims, liens and encumbrances, and is transferable and exportable.

vi.Customs Declaration Form(s) and Export Permit (if applicable).

vii.Proof of export duty paid (if applicable).

viii.Statement of gross weight of the Shipment as determined, before delivery to the Delivery Point, by Seller.

ix.Certificate that the Gold does not contain any mercury and/or cyanide.

f. Buyer shall have had the opportunity to, if Buyer so requested, have a third party designated by Buyer inspect any or all of the mines identified in Seller’s written certification delivered pursuant to item “(e)(iii)” above.

g. Buyer shall have had the opportunity to, if Buyer so requested, spot-check the Gold for purity level before transport of the Gold to the country where the Assay is to be performed.

For avoidance of doubt: the parties confirm that a separate and completely compliant (for legal purposes and to comply with the compliance requirements of the Issuing Bank and the relevant refinery) set of Delivery Documents (and a separate performance of each of the other closing conditions stated above, in addition to the Delivery Documents) is required for each separate Closing; without a separate and completely compliant set of Delivery Documents (and a separate performance of each of the other closing conditions stated above, in addition to the Delivery Documents) for any applicable separate Closing, the closing conditions shall be deemed not to have been satisfied as to such applicable separate Closing and Buyer shall have no obligation to proceed with the purchase of any Gold at such Closing and shall have no liability of any kind for declining to proceed with the purchase of any Gold at such Closing.

Conditions to Closing Obligations of Seller. Seller’s obligations at each respective applicable Closing shall be subject to the satisfaction (or express waiver in writing by Seller) at or before the time of the Closing of each of the following conditions as to such applicable Closing:

a. All of Buyer’s representations and warranties made in this Agreement shall be true and correct in all material respects on and as of such Closing.

b. Buyer shall have performed and complied in all material respects with all of its covenants and obligations to be performed at or before such Closing.

c. The Assay process (as defined in Section 2 of this Agreement) shall have been completed, and Buyer shall have informed Seller in writing of the total weight of the delivered Gold as determined by Buyer and the refinery and the overall gold purity percentage as determined by the Assay. If a Section 4.b Adjusted Price is indicated, the Buyer has in its sole discretion elected or has been deemed hereunder to elect to accept delivery of the Gold in the applicable Shipment.

d. Buyer shall have at least 15 days before such Closing (20 days, in the case of the first Closing) delivered to Seller an original executed LC for an amount equal to or greater than the applicable indicative Purchase Price (as contemplated by and in accordance with Section 5 of this Agreement).

e. Buyer shall have delivered the Satisfaction Documents to Seller at the Closing.

Sequencing. It is expressly understood, agreed and expected that the applicable Closing might be completed before Seller has had an opportunity to present the Satisfaction Documents to the Issuing Bank and thereby receive the Purchase Price from the Issuing Bank, but that nonetheless upon the applicable Closing (i.e., upon satisfaction or express waiver in writing of all the closing conditions as set forth herein) all title and ownership to and in the applicable Shipment Gold (i.e., including the refined gold resulting from refining the 50-100 kilogram sample of Gold selected by Buyer, or the dip samples (as the case may be), and also including the remaining Gold in doré bar or other form and all other minerals contained in the doré) shall automatically transfer to Buyer – and without any requirement for further instrument of transfer on the part of Seller.

7. REPRESENTATIONS, WARRANTIES AND COVENANTS

With regard to each respective Closing, Seller confirms, represents, warrants and covenants to Buyer that:

a.Seller has all right, power and authority to execute, deliver and perform this Agreement, and has duly authorized the execution, delivery and performance of this Agreement, and this Agreement has been duly executed and delivered by Seller.

b.Seller’s execution, delivery and performance of this Agreement did not and will not violate any applicable laws or regulations or result in the breach of any other agreement to which Seller is a party.

c.The Gold to be sold at such Closing will at the time of delivery be owned by Seller free and clear of any and all adverse claims, liens and encumbrances.

d.Such Gold was legally acquired by Seller and there was and will be no infringement whatsoever on the part of Seller or at any point in Seller’s chain of title of any laws and regulations from the moment of extraction through to the Delivery Point and through the moment that ownership of the Gold passes to Buyer.

e.Seller has applied and will apply the greatest care and due diligence in the process of acquiring the Gold and has observed and will observe all laws and regulations that apply to this process.

f.There is no fact that Seller or any of its agents are or could be aware of that would taint the object of this sale transaction in any way or would be a product or means of any illicit or unethical action.

g.To Seller’s best knowledge, each such applicable Shipment of Gold (i.e., of doré gold in bar or other form) will have a purity of gold (in said doré) of at least 95.8%.

h.Seller shall prepare and/or procure (and provide to Buyer originals or complete copies of) all the documents required for export and import of the Gold from the source country through to the Delivery Point, as well as certification documentation from the government of the source country.

i.Seller shall pay (or see to it that others have paid) all the required export and import duties and charges for the Gold in each country from the source country through to the Delivery Point.

j.Seller shall see to it that Buyer witnesses any Australian customs clearance, if Buyer has expressed a wish to do so.

k.Seller shall prepare, procure and deliver to Buyer the Delivery Documents.

l.Seller shall indemnify and hold harmless Buyer against and from any losses, liabilities, penalties, claims, actions, awards, settlements or judgments arising from Seller’s actual or alleged breach of the foregoing (including reasonable attorneys’ fees and expenses).

With regard to each respective Closing, Buyer confirms, represents, warrants and covenants to Seller that:

a.Buyer has all right, power and authority to execute, deliver and perform this Agreement, and has duly authorized the execution, delivery and performance of this Agreement, and this Agreement has been duly executed and delivered by Buyer.

b.Buyer’s execution, delivery and performance of this Agreement did not and will not violate any applicable laws or regulations or result in the breach of any other agreement to which Buyer is a party.

c.Buyer shall see to it that Seller witnesses the entire Assay, if Seller has expressed a wish to do so and subject to the regulations of the relevant refinery.

d.Buyer shall indemnify and hold harmless Seller against and from any losses, liabilities, penalties, claims, actions, awards, settlements or judgments arising from Buyer’s actual or alleged breach of the foregoing (including reasonable attorneys’ fees and expenses).

8. NOTICES

Any notice, report, request, approval or consent required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been sufficiently given if delivered in person to [***]⁵ at the address noted at the beginning of this Agreement (if to Buyer) or to 8600 Transit Road, East Amherst, New York 14051, USA, attention: Darin Pastor, Chief Executive Officer (if to Seller) or if emailed to [***] (if to Buyer) or to dpastor@capstonefg.com (if to Seller). Either party may change its address or email address for all future notices, reports, requests, approvals and consents by giving, pursuant to this Section 8, written notice of such change of address or email address.

9. FORCE MAJEURE

Neither party shall be liable for failure to perform, or delay in the performance of, its obligations under this Agreement when such failure or delay is caused by an event of force majeure. For purposes of this Agreement, an event of force majeure means any event or circumstance beyond the reasonable control of the affected party and not reasonably preventable using industry standard practices, including but not limited to, war, insurrection, act of terrorism, riot, fire, flood or other unusual weather condition, explosion, act of God, peril of the sea, sabotage, accident, embargo, act of governmental authority, compliance with governmental order on national defense requirements, or inability due to general industry wide shortages to obtain fuel, power, raw materials, labor or transportation facilities. The source country’s governmental acts or orders shall not constitute force majeure as to Seller’s obligations. If, due to any event of force majeure, either party shall be unable to fulfill its obligations under this Agreement, the affected party shall immediately notify the other party of such inability and of the period during which such inability is expected to continue, shall use reasonable commercial efforts to cure and remedy such non-performance (including, for example, by substituting other acceptable Gold for the sourced Gold which is subject to force majeure) and the time for performance shall be extended for a number of days equal to the duration of the force majeure, and the parties shall meet promptly to determine an equitable solution to the effects of such event. If such force majeure has continued for at least six months and the affected party has, despite use of reasonable commercial efforts, been unable to cure and remedy such non-performance, either party may terminate this Agreement by written notice to the other.

10. ETHICS: (NON-CIRCUMVENTION and NON-DISCLOSURE).

Both Buyer and Seller acknowledge that they are subject to the terms of the Non-Disclosure/Non-Use/Non-Circumvention Agreements dated August 2, 2016 and August 25, 2016 between Buyer and Seller. It is expressly agreed that Seller may, in its discretion, disclose this Agreement to prospective suppliers of Seller, in order to induce them to enter into and/or proceed with the supply transaction with Seller.

11. ENTIRE AGREEMENT.

This Agreement is the entire agreement between the parties with regard to the subject matter hereof, and supersedes any and all prior or contemporaneous negotiations, understandings,

⁵ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

commitments and agreements (whether oral or in writing) with regard to the subject matter hereof. No waivers, changes, alterations or substitutions shall be permitted unless the same shall be notified in writing and signed by both parties. The English language version of this Agreement shall be controlling over any version in any other language.

12. SEVERABILITY.

This Agreement is severable. When possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law; but if any provision of this Agreement is determined by a final and binding court or arbitration judgment to be invalid, illegal or unenforceable to any extent, such provision shall not be affected or impaired up to the limits of such invalidity, illegality or unenforceability; the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected or impaired in any way; and the parties agree to negotiate in good faith to replace such invalid, illegal and unenforceable provision (or portion of provision) with a valid, legal and enforceable provision that achieves, to the greatest lawful extent under this Agreement, the economic, business and other purposes of such invalid, illegal or unenforceable provision (or portion of provision).

13. APPLICABLE LAW AND BINDING ARBITRATION.

Any and all disputes or controversies arising out of or relating to this Agreement shall be exclusively and finally resolved by binding arbitration (using the English language) in accordance with the commercial arbitration rules of the International Chamber of Commerce then in effect, in New York City, USA. The arbitration proceedings shall be conducted promptly and in accordance with the commercial arbitration rules of the International Chamber of Commerce then in effect. The expenses of any arbitration, including the reasonable attorney fees of the prevailing party, shall be borne by the party deemed to be at fault or on a pro-rata basis should the arbitration conclude in a finding of mutual fault.

This Agreement shall be governed by and construed in accordance with the laws of the State of New York, USA (without giving effect to any conflicts of law principles that require the application of the law of a different state or country). The parties agree that the United Nations Convention on Contracts for the International Sale of Goods shall be inapplicable to this Agreement and transactions hereunder and thereunder.

Each party recognizes that the covenants and agreements herein and their continued performance as set forth in this Agreement are necessary and critical to protect the legitimate interests of the other party, that the other party would not have entered into this Agreement in the absence of such covenants and agreements and the assurance of continued performance as set forth in this Agreement, and that a party’s breach or threatened breach of such covenants and agreements may cause the other party irreparable harm and significant injury, the amount of which will be extremely difficult to estimate and ascertain, thus potentially making any remedy at law or in damages inadequate. Therefore, each party confirms and agrees that the other party shall be entitled to seek on an interim or permanent basis specific performance, an order restraining any breach or threatened breach of any or all provisions of this Agreement, and any other equitable relief (including but not limited to temporary, preliminary and/or permanent injunctive relief), all without need to post any bond or security, and in addition to and not exclusive of any other remedy available to such other party at law or in equity.

Neither party shall commence any court proceeding or action against the other to resolve any dispute, except to enforce an arbitral award rendered pursuant to this Section. For all purposes

of this Agreement, the parties hereby submit to the jurisdiction of the state and federal courts located in New York City, USA. In addition, the party in whose favor an arbitral award rendered pursuant to this Section was granted shall have the right to enforce such arbitral award in any court of any country which it wishes.

14. ELECTRONIC COPIES; COUNTERPARTS.

This Agreement may be executed and delivered in counterparts (portable document format (.pdf)/electronic transmission included), each of which shall constitute an original document, but both of which shall constitute one and the same instrument. Delivery of a portable document format (.pdf) copy of an executed signature page of this Agreement (or of any other notice, report, request, approval or consent required or permitted to be given under this Agreement) shall be as valid, for all purposes of contract formation and evidence and otherwise, as delivery of an executed original.

15. ASSIGNMENT.

Either party may assign its rights under this Agreement. Either party may assign its duties, liabilities and/or obligations under this Agreement, but the effect of doing so is that the assignee will become responsible for such duties, liabilities and/or obligations and the assignor will remain jointly and severally responsible for such duties, liabilities and/or obligations.

16. FEES, COSTS AND EXPENSES.

Each party is responsible for its own fees, costs and expenses in connection with this Agreement, except as otherwise expressly provided in this Agreement.

17. FURTHER ASSURANCES.

The parties hereby covenant and agree to reasonably cooperate and assist to, without the necessity of any further consideration, execute, acknowledge and deliver any and all such other documents and instruments and take any such other action as may be reasonably necessary, proper or advisable to consummate, make effective, comply with and carry out the intent and purposes of this Agreement. Each party shall reasonably assist and facilitate to aid the other party’s compliance, and evidence of compliance, with all applicable governmental, refinery and/or bank requirements and regulations.

18. RELATIONSHIP OF PARTIES.

Each of the parties hereto is an independent contractor and nothing in this Agreement is intended or shall be deemed to constitute a partnership, agency, employer-employee or joint venture relationship between the parties. Neither party shall have the right to, and each party agrees not to purport to, incur any debts, liabilities or obligation for which the other is or will be responsible, or make any commitments or contracts for the other. Each party represents and warrants that it has not incurred any debts, liabilities or obligations for which the other is or will be responsible, or made any commitments or contracts for the other.

IN WITNESS WHEREOF, the parties have set their hands to this Sale and Purchase Agreement for Gold as of the day and year first above written.

BUYER:

[***]⁶

By: /s/[***]

Name/Title:

Date: 21 September 2016

By: /s/[***]

Name/Title:

Date: 22 September 2016

SELLER:

CAPSTONE FINANCIAL GROUP, INC.

By: /s/ Darin Pastor

Name/Title: Darin Pastor, Chief Executive Officer

Date: 9/22/2016

⁶ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

EXHIBIT A

PROPOSED SCHEDULE

Fortnight	Shipment Size (Kilograms)	Purchase Price	Cumulative Shipments (Metric Tons)
1	[***]7	[***]	[***]
2	[***]	[***]	[***]
3	[***]	[***]	[***]
4	[***]	[***]	[***]
5	[***]	[***]	[***]
6	[***]	[***]	[***]
7	[***]	[***]	[***]
8	[***]	[***]	[***]
9	[***]	[***]	[***]
10	[***]	[***]	[***]
11	[***]	[***]	[***]
12	[***]	[***]	[***]
13	[***]	[***]	[***]
14	[***]	[***]	[***]
15	[***]	[***]	[***]
16	[***]	[***]	[***]
17	[***]	[***]	[***]
18	[***]	[***]	[***]
19	[***]	[***]	[***]
20	[***]	[***]	[***]
21	[***]	[***]	[***]
22	[***]	[***]	[***]
23	[***]	[***]	[***]
24	[***]	[***]	[***]
25	[***]	[***]	[***]
26	[***]	[***]	[***]
27	[***]	[***]	[***]
28	[***]	[***]	[***]
29	[***]	[***]	[***]
30	[***]	[***]	[***]
31	[***]	[***]	[***]
32	[***]	[***]	[***]
33	[***]	[***]	[***]
34	[***]	[***]	[***]
35	[***]	[***]	[***]
36	[***]	[***]	[***]
37	[***]	[***]	[***]

⁷ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

38	[***]8	[***]	[***]
39	[***]	[***]	[***]
40	[***]	[***]	[***]
41	[***]	[***]	[***]
42	[***]	[***]	[***]
43	[***]	[***]	[***]
44	[***]	[***]	[***]
45	[***]	[***]	[***]
46	[***]	[***]	[***]
47	[***]	[***]	[***]
48	[***]	[***]	[***]
49	[***]	[***]	[***]
50	[***]	[***]	[***]
51	[***]	[***]	[***]
52	[***]	[***]	[***]

⁸ CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH A SERIES OF ASTERISKS [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

EX-31.1

 EXHIBIT 31.1

CERTIFICATION

I, Darin Pastor, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Capstone Financial Group, Inc. (the “Company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.  

Date: December 14, 2016

/s/ Darin Pastor

Darin Pastor

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Halford W. Johnson, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Capstone Financial Group, Inc. (the “Company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

b.. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.  

Date: December 14, 2016

/s/ Halford W. Johnson

Halford W. Johnson

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Capstone Financial Group, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Darin Pastor, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: December 14, 2016	/s/ Darin Pastor
	Darin Pastor
	Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Capstone Financial Group, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Halford W. Johnson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: December 14, 2016	/s/ Halford W. Johnson
	Halford W. Johnson
	Chief Financial Officer

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Dec. 10, 2016
Document And Entity Information
Entity Registrant Name	CAPSTONE FINANCIAL GROUP, INC.
Entity Central Index Key	0001558432
Document Type	10-Q
Document Period End Date	Sep. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Trading Symbol	capp
Entity Common Stock, Shares Outstanding		98,347,988
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2016

XML

UNAUDITED STATEMENTS OF FINANCIAL CONDITION (Unaudited) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
ASSETS
Financial instruments, at fair value	$ 9,812,979	$ 13,161,718
Cash	155,319	136,849
Salary advance - related party	100,000	0
Prepaid expense	255,669	4,152
Furniture and equipment, net	10,704	12,645
Deposits	63,930	63,930
Total assets	10,398,601	13,379,294
LIABILITIES
Accrued expenses	185,491	314,830
Accrued interest payable - related party	0	135
Short term advances payable - related party	168,199	49,600
Note payable - related party	0	68,416
Put and call option liability	462,558	619,122
Income taxes payable	3,200	2,400
Deferred tax liability	2,797,231	4,552,107
Total liabilities	3,616,679	5,606,610
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, 2,000,000,000 shares authorized; 96,322,093 and 94,364,148 issued and outstanding as of September 30, 2016 and December 31, 2015, respectively	96,511	94,565
Common stock subscribed but not issued (11,766 shares)	10,000
Treasury stock, $0.001 par value, 200,500 shares	(219,426)	(219,426)
Additional paid in capital	2,838,937	1,176,633
Retained earnings	4,055,900	6,720,912
Total stockholders' equity	6,781,922	7,772,684
Total liabilities and stockholders' equity	$ 10,398,601	$ 13,379,294

XML

UNAUDITED STATEMENTS OF FINANCIAL CONDITION (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Common stock par value	$ 0.001	$ 0.001
Common stock shares authorized	2,000,000,000	2,000,000,000
Common stock shares issued	96,322,093	94,364,148
Common stock shares outstanding	96,322,093	94,364,148

XML

UNAUDITED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Revenues
Services income	$ 0	$ 16,660	$ 0	$ 116,662
Other income	21,624	1,800	37,224	1,800
Interest income - related party	0	0	0	14,460
Total revenue	21,624	18,460	37,224	132,922
Expenses
Personnel	230,527	137,048	582,388	228,593
Professional fees	144,990	318,808	681,276	920,402
General and administrative	593,677	451,862	1,867,125	760,187
Interest expense - related party	0	2,200	345	10,724
Total operating expenses	969,194	909,918	3,131,134	1,919,906
Realized and Unrealized Gain Loss on Financial Instruments
Realized gain on financial instruments, net	114,954	346,368	1,866,263	(480,088)
Change in unrealized gain (loss) on financial instruments, net	(501,614)	(2,213,158)	(3,191,438)	(4,069,194)
Loss on financial instruments, net	(386,660)	(1,866,790)	(1,325,175)	(4,549,282)
Net loss before income taxes	(1,334,230)	(2,758,248)	(4,419,085)	(6,336,266)
Income tax benefit	(528,313)	(1,076,278)	(1,754,073)	(2,519,324)
Net loss	$ (805,917)	$ (1,681,970)	$ (2,665,012)	$ (3,816,942)
Net loss per share - basic and diluted	$ (0.01)	$ (0.02)	$ (0.03)	$ (0.04)
Weighted average shares outstanding - basic and diluted	95,304,225	94,364,181	94,679,794	94,494,161

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SUNAUDITED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) - 9 months ended Sep. 30, 2016 - USD ($)	Common Stock	Common Stock Subscribed Unissued	Treasury Stock	Additional Paid-In Capital	Retained Earnings (Deficit)	Total
Beginning Balance at Dec. 31, 2015	$ 94,565	$ 0	$ (219,426)	$ 1,176,633	$ 6,720,912	$ 7,772,684
Beginning Balance, Shares at Dec. 31, 2015	94,364,148	0
Issuance of Common Stock for cash	$ 1,946	$ 0	0	1,662,304	0	1,664,250
Issuance of Common Stock for cash, Shares	1,946,179	0
Common Stock subscribed but not issued		$ 10,000
Common Stock subscribed but not issued,shares	11,766
Net income	$ 0	0	0	0	(2,655,012)	(2,655,012)
Ending Balance at Sep. 30, 2016	$ 96,511	$ 10,000	$ (219,426)	$ 2,838,937	$ 4,055,900	$ 6,781,922
Ending Balance, Shares at Sep. 30, 2016	96,322,093

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UNAUDITED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (2,665,012)	$ (3,816,942)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Proceeds from sale of financial instruments	1,867,000	2,841,731
Net change in unrealized gain on investment securities	3,191,438	4,069,194
Net realized (loss) gain on financial instruments	(1,866,263)	480,088
Depreciation	1,941	1,500
(Increase) decrease in assets:
Note receivable	0	400,000
Accrued interest receivable - related party	0	(14,459)
Salary advance - related party	(100,000)	0
Prepaid expense	(251,517)	85,534
Deposits	0	(20,000)
Increase (decrease) in liabilities:
Accrued expenses	(129,339)	78,511
Accrued interest payable - related party	(135)	(4,241)
Income taxes payable	800	800
Deferred revenue	0	(116,662)
Deferred tax liability	(1,754,876)	(2,520,124)
Net cash (used in) provided by operating activities	(1,705,963)	1,464,930
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and equipment	0	(2,039)
Net cash used in investing activities	0	(2,039)
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayments on short term advances - related party	118,599	85,845
Net repayments on notes payable - related party	(68,416)	(1,135,136)
Proceeds from sale of common stock, net of offering costs	1,664,250	0
Proceeds from sale of common stock, subscribed - unissued	10,000	0
Purchase of treasury stock	0	(1,015)
Net cash provided by (used in) financing activities	1,724,433	(1,050,306)
Net increase in cash	18,470	412,585
Cash at beginning of period	136,849	12,685
Cash at end of period	155,319	425,270
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid	480	0
Noncash purchase of treasury stock	$ 0	$ 218,411

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ORGANIZATION AND DESCRIPTION OF BUSINESS

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

ORGANIZATION AND DESCRIPTION OF BUSINESS

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Organization

Capstone Financial Group, Inc. (the "Company") is a diversified company whose primary business focuses going forward include (a) investing in stock of other companies, (b) identification and pursuit of and capitalization on opportunities in the minerals and agricultural commodities industries and (c) commercial lending in foreign countries.

In the third quarter of 2016 the Company entered into mirroring agreements for the purchase and for the resale of quantities of livestock over time, thereby creating a “middleman” arbitrageur position as to this livestock. These agreements are characterized as best efforts supply and sale agreements and will be accounted for as livestock is purchased and sold as it appears there is no practical market mechanism to facilitate settlement of these transactions. At September 30, 2016, there was a $175,000 prepaid balance related to a purchase order for livestock (see Note 7).

In addition, in the third quarter of 2016 the Company entered into an agreement to sell quantities of gold over time, with the intention of arranging a mirroring supply of gold in order to thereby create a “middleman” position as to this gold. There were no gold transactions during the third quarter of 2016.

Until the second quarter of 2016, the Company considered its primary business focus to be investing its own capital to acquire the outstanding equity securities of other companies and to unlock and grow value in these privately-held or illiquid companies.

The Company sought, and seeks, to work with the management and boards of the other companies. While the Company does not manage the day-to-day operations of these companies, the Company sought, and seeks, to maintain a thorough understanding of operations and perform continual evaluations of performance and prospects on an ongoing basis.

The Company may also seek to actively trade in its strategic investment positions and/or enter into private securities transactions with regard to those positions, to capitalize on price fluctuations and realize profits or minimize losses.

The Company was incorporated on July 10, 2012 under the laws of the State of Nevada, as Creative App Solutions, Inc.  On August 23, 2013, the Company amended its articles of incorporation and changed its name to Capstone Financial Group, Inc.

Market, Credit and Liquidity Risk

At September 30, 2016 and December 31, 2015 the majority of Company’s investments are focused in one entity, Twinlab Consolidated Holdings, Inc. (“Twinlab”). Management believes that it will be able to liquidate a sufficient portion of its investment and/or raise additional capital to fund its obligations as and when they become due. However, no assurance can be given that market conditions in the future will continue to allow the Company to sell its investments in sufficient quantities to fund its obligations or to raise additional capital to do so.

Market risk is the potential loss the Company may incur as a result of changes in the market or fair value of a particular financial instrument. Risks arise in options and warrant contracts from changes in the market or fair value of their underlying financial instruments.

Credit risk is the potential loss the Company may incur as a result of the failure of a counterparty or an issuer to make payments according to the terms of a contract. Credit risk can arise from investment activities in financially distressed issuers. To manage this risk, the Company may seek to diversify its investment portfolio with respect to specific credits, sectors and asset classes.

The Company is also subject to market concentration risk since a significant portion of its investment portfolio has similar characteristics, and is therefore affected similarly by changes in economic conditions.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Investments of the Company trade in thin markets and throughout the year, depending upon market conditions, may be considered inactive. As a result, the market values can be more volatile and difficult to determine relative to other securities. In addition, if the Company is required to liquidate all or a portion of its portfolio quickly, it may realize significantly less than the value at which it previously recorded its investments.

Basis of Presentation

The accompanying financial statements have been prepared using the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the accounting and financial reporting conventions of the investment company industry and in accordance with the instructions to Form 10-Q and Article 8 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, they should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2015, included in the Company’s Annual Report on Form 10-K filed with the SEC on May 2, 2016. The unaudited condensed financial statements contain all normal recurring accruals and adjustments that in the opinion of management, are necessary to present fairly the financial position of the Company at September 30, 2016, the results of the Company’s operations for the three month and nine month periods ended September 30, 2016 and the Company’s cash flows for the nine months ended September 30, 2016. The results of operations for the three months and nine month periods ended September 30, 2016 are not necessarily indicative of the results to be expected for the full year or any future interim periods.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents

The Company considers any investments in short-term money market funds with original maturities of three months or less to be cash equivalents.

Investments

Investments primarily comprise strategic, non-controlling equity ownership interests in privately held businesses or public companies with very illiquid trading markets. These strategic investments are accounted for at fair value as determined by internal valuation guidelines and/or outside appraisals as there are no readily ascertainable fair market value prices in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946-10 and FASB ASC 820-10. Because the Company follows the financial accounting and reporting conventions of the investment company industry, it reports investments at estimated fair value.

FASB ASC 820-10-65-4 provides additional guidance for estimating fair value in accordance with FASB ASC 820-10 when the volume and level of market activity for the asset or liability have significantly decreased. FASB ASC 820-10-65-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. It acknowledges that in these circumstances quoted prices may not be determinative of fair value. FASB ASC 820-10-65-4 emphasizes that even if there has been a significant decrease in the volume and level of market activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. Under FASB ASC 820-10-65-4, quoted prices for assets or liabilities in inactive markets may require adjustment due to uncertainty as to whether the underlying transactions are orderly. There is little information, if any, to evaluate if individual transactions are orderly in an inactive market. Accordingly, the Company is required to evaluate the facts and circumstances to determine whether the transaction is orderly based on the weight of the evidence. FASB ASC 820-10-65-4 does not designate a specific method for adjusting a transaction or quoted price; however, it does provide guidance for determining how much weight to give a transaction or quoted price. Price quotes derived from transactions that are not orderly are not considered to be determinative of fair value and should be given less weight, if any, when estimating fair value. In the absence of observable market data at September 30, 2016 and December 31, 2015, the Company's fair value measurements included assumptions about future cash flow and appropriately risk-adjusted discount rates that it believes market participants would make in orderly market transactions.

Fair Value Measurements and Valuation Methodologies

GAAP defines fair value as 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. GAAP establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels: 

• Level 1: Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.

• Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; inputs to the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs to the valuation methodology that are derived principally from or can be corroborated by observable market data by correlation or other means.

• Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

The Company’s financial instruments are valued by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The valuation methodology for each investment type and discussion of key unobservable inputs is described below.

The Company often invests in common stocks that are thinly traded where the closing trading price is not considered to be a fair indication of the value for which the Company can sell or buy the common stock. In such cases, as in the case of private-company limited liability company membership interests held by the Company, the common stock must be analyzed to determine what exit price the Company would receive when liquidating the position. These positions are classified as Level 3 securities.

The significant unobservable inputs used in the fair value measurement of the Company’s Level 3 common stocks are growth rate, risk premium, revenue multiples and EBITDA multiples. Increases or decreases in any of those inputs in isolation would result in a lower or higher fair value measurement, respectively.

The Company has warrants and call options to purchase common stock in illiquid public companies. Generally, there is no established market for these investments. The Company values these warrants and call options by using a model that takes into consideration the exercise or call price of the warrant or call option, the price of the underlying common stock and the expiration date of the warrant or call option.

The significant unobservable inputs used in the fair value measurement of the Company’s warrants and call options includes the price of the underlying thinly traded common stock (determined based upon growth rate, risk premium, revenue multiples and EBITDA multiples), duration and discount rate and volatility. Increases or decreases in the premium-to-parity would result in a higher or lower fair value measurement, respectively.

Generally, when the Company invests in common stocks that are traded on the NASDAQ Markets or over-the-counter markets (such as the OTCBB, OTCQB or OTC Pink marketplaces), such common stocks are valued at the last traded price. If there is no trade on a measurement date, the Company will typically value the common stock at the closing bid price. However, in certain circumstances, the closing trading price is not considered to be a fair indication of the value for which the Company can sell the common stock. In such cases, the common stock must be analyzed to determine what exit price the Company would receive when liquidating the position. Investments in non-marketable common stocks at September 30, 2016 and December 31, 2015 were valued based, in part, on subsequent transactions with unrelated third parties and at December 31, 2015 were valued by the Company with the assistance of an independent valuation consultant. These positions are classified as Level 3 securities by the Company.

From time to time, the Company has investments in private limited liability companies. Generally, there is no established market for these investments. The Company values these interests by means of both quantitative and qualitative measures, generally including the financial stability of the company, the economic rights of the interests and the economic prospects of the company.

The significant unobservable input used in the fair value measurement of the Company’s limited liability company investments is the expected recovery of contributed capital. Increases or decreases in the expected recovery would result in a higher or lower fair value measurement, respectively.

Derivative Financial Instruments

Derivative financial instruments include call options and warrants at September 30, 2016 and December 31, 2015. Derivatives are accounted for at fair value with changes in fair value reported in operations. The significant unobservable inputs used in the fair value measurement of the Company’s derivative financial instruments include the underlying common stock, duration, volatility and discount rate, which are used in the option pricing model. Changes to any of those inputs in isolation would result in fluctuations in the fair value measurement.

Investment Transaction, Related Income and Expenses

Purchases and sales of investments are recorded on a trade-date basis. Realized gains and losses on investments are recognized on the first-in, first-out method. Dividend income on investments owned is recognized on the ex-dividend date, net of applicable withholding taxes.

Treasury Stock Purchases

The Company is authorized to repurchase shares of the Company’s common stock in private transactions from time to time. The Company records treasury stock purchases at cost. Any treasury stock removed from treasury is valued at cost using the specific identification method.

Revenue Recognition

The Company recognizes revenue for sales of physical commodities or other goods when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the physical commodities or other goods have been delivered to the customer; (3) the purchase price to be paid by the customer is fixed or determinable; and (4) the collection of the purchase price is reasonably assured.

The Company recognizes revenue for services when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the related service has been provided to the customer; (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of fees is reasonably assured.

Earnings per Share

Basic earnings per common share calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.  As of September 30, 2016 and 2015, there were no dilutive common shares equivalents outstanding.

Concentration Risks

During the three and nine months ended September 30, 2016, the Company had $21,624 and $37,224, respectively, of sublease income from two sublessees. During the three and nine months ended September 30, 2015, the Company had $16,660 and $116,662, respectively, in revenue generated from one customer for consulting services and had interest income from a related party of $0 and $14,460, respectively.

Income Taxes

Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.

Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 allows the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination by the taxing authorities. As of September 30, 2016 the Company reviewed its tax positions and determined there were no outstanding or retroactive tax provisions with less than a 50% likelihood of being sustained upon examination by the taxing authorities.

The Company is required to file Federal and New York state income tax returns. The Company’s tax return status will remain open until a tax return has been filed.

Advertising costs

Advertising costs are expensed as incurred. For the three and nine month periods ended September 30, 2016, advertising costs of $1,068 and $16,283, respectively, were included in general and administrative expenses. For the three and nine month periods ended September 30, 2015, advertising costs of $2,502 and $38,792, respectively, were included in general and administrative expenses.

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards update 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). ASU 2014-09 specifies a comprehensive model to be used in accounting for revenue arising from contracts with customers, and supersedes most of the current revenue recognition guidance, including industry specific guidance. It applies to all contracts with customers except those that are specifically within the scope of other FASB topics, and certain of its provisions also apply to transfers of nonfinancial assets, including in-substance nonfinancial assets that are not an output of an entity's ordinary activities. The core principal of the model is that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the transferring entity expects to be entitled in exchange. To apply the revenue model, an entity will: 1) identify the contract(s) with a customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue when (or as) the entity satisfies a performance obligation. For public companies, ASU 2014-09 (updated with ASU 2015-14) is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early adoption is not permitted. Upon adoption, entities can choose to use either a full retrospective or modified approach, as outlined in ASU 2014-09. As compared with current GAAP, ASU 2014-09 requires significantly more disclosures about revenue recognition. The Company has not yet assessed the potential impact of ASU 2014-09 on its financial statements.

In May 2015, the FASB issued amended guidance on the disclosures for investments in certain equities that calculate net asset value per share (or its equivalent). The amendments remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. The guidance is effective for fiscal years beginning after December 15, 2015 and for interim periods within those years. As of September 30, 2016, the Company does not own any investments in equities that calculate net asset value per share (or its equivalent).

In February 2016, the FASB issued Accounting Standards update 2016-02, Leases ("ASU 2016-02"). ASU 2016-02 requires a lessee to recognize a lease asset representing its right to use the underlying asset for the lease term, and a lease liability for the payments to be made to lessor, on its balance sheet for all operating leases greater than 12 months. ASU 2016-02 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company has not yet adopted ASU 2016-02 nor assessed its potential impact on its financial statements.

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FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2016

Investments, All Other Investments [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 3 – FAIR VALUE MEASUREMENTS

The Company’s financial instruments recorded at fair value have been categorized based upon a fair value hierarchy. The following fair value hierarchy tables set forth the Company’s recurring fair value measurements at September 30, 2016 and December 31, 2015.

	Assets and Liabilities Measured at
	Fair Value on a Recurring Basis
	September 30, 2016
	Level 1		Level 2		Level 3			Total
Assets
Financial instruments, at fair value:
Common Stocks	$	—	$	—	$	8,034,517		$	8,034,517
Real Estate Company Investments		—		—		277,500			277,500
2014 Call Options		—		—		1,135,863			1,135,863
Series B Warrants		—		—		365,099			365,099
Total Financial instruments, at fair value		—		—		9,812,979			9,812,979
Total assets held at fair value	$	—	$	—	$	9,812,979		$	9,812,979
Liabilities
Financial instruments, at fair value:
Third Party Call Options		—		—		(462,558	)		(462,558	)
Total liabilities held at fair value	$	—	$	—	$	(462,558	)	$	(462,558	)

	Assets and Liabilities Measured at
	Fair Value on a Recurring Basis
	December 31, 2015
	Level 1		Level 2		Level 3			Total
Assets
Financial instruments, at fair value:
Common Stocks	$	—	$	—	$	9,896,605		$	9,896,605
Real Estate Company Investments		—		—		277,500			277,500
2014 Call Options		—		—		1,135,863			1,135,863
Series B Warrants		—		—		1,851,750			1,851,750
Total Financial instruments, at fair value		—		—		13,161,718			13,161,718
Total assets held at fair value	$	—	$	—	$	13,161,718		$	13,161,718
Liabilities
Financial instruments, at fair value:
Third Party Call Options		—		—		(619,122	)		(619,122	)
Total liabilities held at fair value	$	—	$	—	$	(619,122	)	$	(619,122	)

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. For some products or in certain market conditions, observable inputs used in valuing certain financial assets and liabilities were unavailable. In situations where there is little, if any, market activity for an asset or liability at the measurement date, the fair value measurement objective remains to measure the financial asset at the price that would be received by the holder of the financial asset (or liability) in an orderly transaction that is not a forced liquidation or distressed sale at the measurement date.

Details of the Company’s recurring fair value measurements are as follow:

September 30, 2016	Cost		Estimated Fair Value			Unrealized Gain (Loss)
ASSETS
Common Stocks	$	1,004,255	$	8,034,517		$	7,030,262
Real Estate Company Investments		277,500		277,500			—
2014 Call Options		450		1,135,863			1,135,413
Series B Warrants		—		365,099			365,099
	$	1,282,205	$	9,812,979		$	8,530,774
LIABILITIES
Third-Party Call Options	$	—	$	(462,558	)	$	(462,558	)

December 31, 2015	Cost		Estimated Fair Value			Unrealized Gain (Loss)
ASSETS
Common Stocks	$	1,004,992	$	9,896,605		$	8,891,613
Real Estate Company Investments		277,500		277,500			—
2014 Call Options		450		1,135,863			1,135,413
Series B Warrants		—		1,851,750			1,851,750
	$	1,282,942	$	13,161,718		$	11,878,776
LIABILITIES
Third Party Call Options	$	—	$	(619,122	)	$	(619,122	)

For the quarter ended September 30, 2016, the Company recorded a net change in unrealized gain on financial instruments of $(501,614) and a net realized gain on financial instruments of $114,954. For the quarter ended September 30, 2015, the Company recorded a net change in unrealized gain on financial instruments of $(2,213,158) and a net realized gain on financial instruments of $364,368.

For the nine month period ended September 30, 2016, the Company recorded a change in net unrealized gain on financial instruments of $(3,191,438) and a net realized gain on financial instruments of $1,866,263. For the nine month period ended September 30, 2015, the Company recorded a change in net unrealized gain on financial instruments of $(4,069,194) and a net realized loss on financial instruments of $(480,088).

During the first quarter of 2014, the Company purchased shares in a company traded on the OTC Markets for a total of $2,919. The Company currently categorizes these holdings as Level 3 assets. As of September 30, 2016, this investment is carried at $0.

In August 2014, the Company purchased 10,987,500 split-adjusted shares of common stock of Twinlab in private transactions from 25 shareholders for total consideration of $3,296.  In November 2014, the Company sold 436,681 of these shares.

In August 2014, the Company purchased options to acquire 8,743,000 outstanding shares of Twinlab’s Common Stock (collectively, the “Call Options”) in a private transaction from 14 stockholders, for total consideration of $2,623. The Call Options exercise price is $0.0001 per share and the Call Options expired in August 2015. Such options were immediately exercisable and in February 2015, the Company exercised 7,244,500 of those options. As of September 30, 2016, the Company owns 1,498,500 of these options to acquire shares of Twinlab’s Common Stock.

In September 2014, Twinlab issued to the Company a Series A Warrant to purchase up to 52,631,579 shares of Twinlab’s Common Stock at an exercise price of $0.76 per share (the “Series A Warrant”) and a Series B Warrant to purchase up to 22,368,421 shares of Twinlab’s Common Stock at an exercise price of $0.76 per share (the “Series B Warrant”). Both the Series A Warrant and the Series B Warrant were exercisable from October 2014 through October 2017.

Twinlab and the Company also entered into a Common Stock Put Agreement, dated as of September 30, 2014, as amended on December 15, 2014 (the “Put Agreement”). Pursuant to the Put Agreement, if the Company did not exercise the Series A Warrant by February 16, 2015 and thereafter at a rate of no less than 1,461,988 shares of Common Stock (the “Minimum Amount”) per month (the “Minimum Rate”) over the term of the Series A Warrant, Twinlab had the right (subject to certain conditions) to require the Company to exercise the Series A Warrant at the Minimum Rate for the duration of the Series A Warrant.

In 2015, the Company sold an aggregate of 3,976,647 units of Twinlab securities to various unrelated third party accredited investors. Each unit consisted of one share of (unrestricted) Twinlab common stock and a detachable call option to purchase from the Company, for $1.00 per share, one (restricted) share of Twinlab common stock. The term of each such call option was three years from the respective unit sale date and the call option was valued at $0.156 per call option.

In addition, in 2015, the Company sold an aggregate of 2,078,255 shares of Twinlab common stock (without any associated detachable call options) to various unrelated third party accredited investors, for $0.76 per share.

In addition, in the first quarter of 2016, the Company sold an aggregate of 1,713,159 shares of Twinlab common stock (without any associated detachable call options) to various unrelated third party accredited investors, for $0.76 per share. In the second quarter of 2016, the Company sold an aggregate of 592,106 shares of Twinlab common stock (without any associated detachable call options) to various unrelated third party accredited investors, for $0.76 per share. In the third quarter of 2016, the Company sold an aggregate of 151,316 shares of Twinlab common stock (without any associated detachable call options) to various unrelated third party accredited investors, for $0.76 per share. As of September 30, 2016, the Company owned 10,599,626 shares of Twinlab’s common stock.

Twinlab and the Company entered into a Compromise Agreement and Release and an Amendment No. 1 to Series B Warrant, each dated as of May 28, 2015, pursuant to which, among other things: (a) the Company surrendered the entire remaining-unexercised portion of the Series A Warrant (51,973,684 warrants) and 4,368,421 of the warrants under the Series B Warrant; (b) the Put Agreement was terminated; (c) the remaining 18,000,000 warrants under the Series B Warrant were deemed divided into four tranches, each with an associated date beyond which it would no longer be exercisable: one tranche for 2,000,000 warrant shares (no longer exercisable after November 30, 2015; such tranche of warrants expired mostly unexercised), one for 4,000,000 warrant shares (expired on March 31, 2016), one for 6,000,000 warrant shares (expired on July 31, 2016) and another for 6,000,000 warrant shares (no longer exercisable after November 30, 2016); and (d) the Company granted Twinlab three contingent call options, at $0.01 per share, to acquire Twinlab shares from the Company to the extent that upon effective expiration of the second, third and fourth tranches the Company had not exercised the warrants within such tranches (the “Contingent Call Options”). The three Contingent Call Options would be for a number of Twinlab shares equal to 25% of such unexercised warrants (i.e., a maximum of 1,000,000 shares if the Company exercised no warrants from the second tranche, a maximum of 1,500,000 shares if the Company exercised no warrants from the third tranche and a maximum of 1,500,000 shares if the Company exercised no warrants from the fourth tranche). In addition, Twinlab could not exercise a Contingent Call Option unless it had satisfied such option’s “Liquidity Condition,” namely that for each of the three or four months before the tranche’s effective expiration date Twinlab must have a financial position sufficient to show a 1.15x fixed charge coverage ratio for a certain trailing period, all as defined by Twinlab’s Credit and Security Agreement dated January 22, 2015. Twinlab also agreed in the Compromise Agreement and Release that, given that the Company has identified, and may in the future identify, to Twinlab on a confidential basis persons to whom the Company might sell the Company’s Twinlab shares, Twinlab shall not, without the Company’s prior written consent, privately place Twinlab equity securities to any persons theretofore or thereafter first introduced to Twinlab by the Company; provided that Twinlab may, without the Company’s consent, privately place Twinlab equity securities to such a person at any time after the earlier of (a) the date the entire Series B Warrant has expired and/or been exercised, or (b) the first anniversary of such particular introduction. As of September 30, 2016, the Company held 6,000,000 warrants under the Series B Warrant.

On October 1, 2015, Twinlab and the Company entered into Amendment No. 1 to Agreement for Limited Waiver of Non-Circumvention Provision and to Compromise Agreement and Release, pursuant to which a prior agreement calling for contingent payments of cash and equity to the Company was amended to remove the Company’s right to any such contingent payments of cash and equity compensation, and in return the three Contingent Call Options were immediately cancelled.

As of September 30, 2016, the Company’s position in Twinlab securities was as follows, and the Company had no contingent liabilities to Twinlab:

- The Company held 10,599,626 outstanding Twinlab shares (9,612,784 unrestricted, free-trading Twinlab shares and 986,842 restricted Twinlab shares).

- The Company held 6,000,000 warrants under the Series B Warrant, at a $0.76 per share exercise price, with an effective expiration date of November 30, 2016.

- A Registration Rights Agreement remains in full force and effect to enable the Securities Act registration of all Twinlab shares issued upon prior or future exercises of the Company’s Warrants.

- The Company has a claim against third-party optionors for delivery to the Company of 1,498,500 Twinlab shares against the Call Options which they granted to the Company and which the Company has exercised.

- The Company is contingently obligated to deliver Twinlab shares to its accredited-investor counterparties under the 3,976,647 detachable call options, if and when the detachable call options are exercised.

- The Company has no actual or potential Put liability or Contingent Call Option liability.

As of September 30, 2016, the Company owned less than 10% of Twinlab’s outstanding common stock.

In July 2015, in exchange for $277,500, the Company acquired a 20% interest in privately-held Western New York real estate companies LC Strategic Realty, LLC and LC Strategic Holdings, LLC, as well as in all other business conducted or to be conducted by the firms’ majority holders to the extent such other business has a primary focus on (a) real estate (subject to the exclusion of certain specified projects), (b) media/entertainment/show business, or (c) endorsements/advertisements/personal appearances/use of likeness/monetization of celebrity.

The following table includes a roll forward of the amounts for the quarter ended September 30, 2016 for financial instruments classified within Level 3.

Level 3 Recurring Fair Value Measurements

For the Three Months Ended September 30, 2016

	Common Stock			Real Estate Company Investments		2014 Call Options		Series B Warrants			Third-Party Call Options Liability			Total
Fair value, net, July 1, 2016	$	8,149,214		$	277,500	$	1,135,863	$	840,047		$	(550,544	)	$	9,852,080
Unrealized gains (losses) included in earnings		303			—		—		(474,948	)		87,986			(386,659	)
Purchases		—			—		—		—			—			—
Sales		(115,000	)		—		—		—			—			(115,000	)
Settlements/exercises		—			—		—		—			—			—
Transfers in and/or out of Level 3		—			—		—		—			—			—
Fair value, net, September 30, 2016	$	8,034,517		$	277,500	$	1,135,863	$	365,099		$	(462,558	)	$	9,350,421
Unrealized gains (losses) still held	$	7,030,262		$	—	$	1,135,413	$	365,099		$	(462,558	)	$	8,068,216

Level 3 Recurring Fair Value Measurements

For the Nine Months Ended September 30, 2016

	Common Stock			Real Estate Company Investments		2014 Call Options		Series B Warrants			Third-Party Call Options Liability			Total
Fair value, net, January 1, 2016	$	9,896,605		$	277,500	$	1,135,863	$	1,851,750		$	(619,122	)	$	12,542,596
Unrealized gains (losses) included in earnings		4,912			—		—		(1,486,651	)		156,564			(1,325,175	)
Purchases		—			—		—		—			—			—
Sales		(1,867,000	)		—		—		—			—			(1,867,000	)
Settlements/exercises		—			—		—		—			—			—
Transfers in and/or out of Level 3		—			—		—		—			—			—
Fair value, net, September 30, 2016	$	8,034,517		$	277,500	$	1,135,863	$	365,099		$	(462,558	)	$	9,350,421
Unrealized gains (losses) still held	$	7,030,262		$	—	$	1,135,413	$	365,099		$	(462,558	)	$	8,068,216

The following tables present quantitative information about the valuation techniques and unobservable inputs applied to Level 3 fair value measurements for financial instruments measured at fair value on a recurring and nonrecurring basis at September 30, 2016 and December 31, 2015.

		Quantitative Information about Level 3
		Fair Value Measurements at September 30, 2016
		Fair	Valuation	Unobservable	Range
		Value	Technique	Inputs
Assets
Common Stock	$	8,034,517	Discounted cash flow Guideline company transactions method Guideline publicly-traded company method	Growth rate Risk premium factors Revenue multiple EBITDA multiple	13.00%-15.20% (2.50%)-7.00% 1.10-2.10 9.30-13.80
2014 Call Options		1,135,863	Discounted cash flow Guideline company transactions method Guideline publicly-traded company method	Growth rate Risk premium factors Revenue multiple EBITDA multiple	13.00%-15.20% (2.50%)-7.00% 1.10-2.10 9.30-13.80
Series B Warrants		365,099	Option pricing model	Duration Risk-free interest rate Volatility	0.17 years 0.20%-0.45%  50%
Investment in Real Estate Companies		277,500	Recent transaction	Return of invested capital	100%
Total assets held at fair value	$	9,812,979
Liabilities
Call option liability	$	462,558	Option pricing model	Duration Risk-free interest rate Volatility	1.48-1.65 years 0.68%-0.71% 50%
Total liabilities held at fair value	$	462,558

		Quantitative Information about Level 3
		Fair Value Measurements at December 31, 2015
		Fair	Valuation	Unobservable	Range
		Value	Technique	Inputs
Assets
Common Stock	$	9,896,605	Discounted cash flow Guideline company transactions method Guideline publicly-traded company method	Growth rate Risk premium factors Revenue multiple EBITDA multiple	13.00%-15.20% (2.50%)-7.00% 1.10-2.10 9.30-13.80
2014 Call Options		1,135,863	Discounted cash flow Guideline company transactions method Guideline publicly-traded company method	Growth rate Risk premium factors Revenue multiple EBITDA multiple	13.00%-15.20% (2.50%)-7.00% 1.10-2.10 9.30-13.80
Series B Warrants		1,851,750	Option pricing model	Duration Risk-free interest rate Volatility	0.25-0.92 years 0.16%-0.62%  50%
Investment in Real Estate Companies		277,500	Recent transaction	Return of invested capital	100%
Total assets held at fair value	$	13,161,718
Liabilities
Call option liability	$	619,122	Option pricing model	Duration Risk-free interest rate Volatility	2.23-2.40 years 1.12%-1.16%  50%
Total liabilities held at fair value	$	619,122

 In the nine months ended September 30, 2016, the Company sold an aggregate of 2,456,581 shares of Twinlab common stock to various unrelated third party accredited investors, in private transactions, for $0.76 per share. In the three months ended September 30, 2016, the Company sold an aggregate of 151,316 shares of Twinlab common stock to various unrelated third party accredited investors, in private transactions, for $0.76 per share. In addition, 4,000,000 of the Company’s warrants to purchase Twinlab common stock (for $0.76 per share) expired on March 31, 2016 in accordance with their terms, and 6,000,000 of the Company’s warrants to purchase Twinlab common stock (for $0.76 per share) expired on July 31, 2016 in accordance with their terms.

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STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2016

Equity [Abstract]

STOCKHOLDERS' EQUITY

NOTE 4 – STOCKHOLDERS’ EQUITY

During the third quarter of 2016, the Company issued 1,946,179 shares to accredited investors for $1,664,250, of which $600,000 had been subscribed in the second quarter of 2016. In addition, accredited investors paid the Company $10,000 in the third quarter of 2016 in respect of subscriptions for 11,766 shares, which shares were not issued until the fourth quarter of 2016.

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RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

RELATED PARTY TRANSACTIONS

NOTE 4 – STOCKHOLDERS’ EQUITY

During the third quarter of 2016, the Company issued 1,957,945 shares to accredited investors for $1,664,250, of which $600,000 had been subscribed in the second quarter of 2016.In addition, accredited investors paid the Company $10,000 in the third quarter of 2016 in respect of subscriptions for 11,776 shares, which shares were not issued until the fourth quarter of 2016.

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INCOME TAXES

9 Months Ended

Sep. 30, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 6 – INCOME TAXES

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Income tax benefit for the three months ended September 30, 2016 was $528,313. Income tax benefit for the nine months ended September 30, 2016 was $1,754,073, which reflected an effective tax rate of 39.73%, which was greater than the federal statutory rate due to the state income tax expense.

The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. The Company believes that, as of September 30, 2016, it does not have any uncertain tax positions.

The disclosures regarding the Company's unrecognized tax benefits at December 31, 2015 included in the Company's 2015 Annual Report on Form 10-K continue to be relevant for the period ended September 30, 2016 as to the Company’s unrecognized tax benefits at September 30, 2016.

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2016

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 7 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date the financial statements were available to be issued. Except as noted below, there are no events which require adjustments to, or disclosure in, the financial statements for the periods ended September 30, 2016.

In October and November 2016, the Company issued 2,025,895 newly-issued shares of Company common stock to accredited investors, in consideration for their investment of a total of $1,722,000 cash.

At September 30, 2016 the Company had issued a purchase order to buy livestock at an approximate cost of $20 million and paid $175,000 which is reflected as a prepaid expense in the accompanying unaudited statements of financial condition. In October and November 2016, the Company received a total of 24,000 head of cattle and 16,000 head of sheep in a series of deliveries from its supplier, and delivered this livestock in a series of deliveries to its livestock customer. The Company has paid its supplier $1,025,000 (including the $175,000 which the Company prepaid in the third quarter of 2016) against the $2,360,000 account payable created in respect of these actual deliveries, and has received $80,000 from its livestock customer against the $13,922,192 account receivable created in respect of these actual deliveries.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying financial statements have been prepared using the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the accounting and financial reporting conventions of the investment company industry and in accordance with the instructions to Form 10-Q and Article 8 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, they should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2015, included in the Company’s Annual Report on Form 10-K filed with the SEC on May 2, 2016. The unaudited condensed financial statements contain all normal recurring accruals and adjustments that in the opinion of management, are necessary to present fairly the financial position of the Company at September 30, 2016, the results of the Company’s operations for the three month and nine month periods ended September 30, 2016 and the Company’s cash flows for the nine months ended September 30, 2016. The results of operations for the three months and nine month periods ended September 30, 2016 are not necessarily indicative of the results to be expected for the full year or any future interim periods.

Use of estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

cash equivalents

Cash Equivalents

The Company considers any investments in short-term money market funds with original maturities of three months or less to be cash equivalents.

Investments

Investments

Investments primarily comprise strategic, non-controlling equity ownership interests in privately held businesses or public companies with very illiquid trading markets. These strategic investments are accounted for at fair value as determined by internal valuation guidelines and/or outside appraisals as there are no readily ascertainable fair market value prices in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946-10 and FASB ASC 820-10. Because the Company follows the financial accounting and reporting conventions of the investment company industry, it reports investments at estimated fair value.

FASB ASC 820-10-65-4 provides additional guidance for estimating fair value in accordance with FASB ASC 820-10 when the volume and level of market activity for the asset or liability have significantly decreased. FASB ASC 820-10-65-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. It acknowledges that in these circumstances quoted prices may not be determinative of fair value. FASB ASC 820-10-65-4 emphasizes that even if there has been a significant decrease in the volume and level of market activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. Under FASB ASC 820-10-65-4, quoted prices for assets or liabilities in inactive markets may require adjustment due to uncertainty as to whether the underlying transactions are orderly. There is little information, if any, to evaluate if individual transactions are orderly in an inactive market. Accordingly, the Company is required to evaluate the facts and circumstances to determine whether the transaction is orderly based on the weight of the evidence. FASB ASC 820-10-65-4 does not designate a specific method for adjusting a transaction or quoted price; however, it does provide guidance for determining how much weight to give a transaction or quoted price. Price quotes derived from transactions that are not orderly are not considered to be determinative of fair value and should be given less weight, if any, when estimating fair value. In the absence of observable market data at September 30, 2016 and December 31, 2015, the Company's fair value measurements included assumptions about future cash flow and appropriately risk-adjusted discount rates that it believes market participants would make in orderly market transactions.

Fair value of financial instruments

Fair Value Measurements and Valuation Methodologies

GAAP defines fair value as 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. GAAP establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels: 

• Level 1: Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.

• Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; inputs to the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs to the valuation methodology that are derived principally from or can be corroborated by observable market data by correlation or other means.

• Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

The Company’s financial instruments are valued by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The valuation methodology for each investment type and discussion of key unobservable inputs is described below.

The Company often invests in common stocks that are thinly traded where the closing trading price is not considered to be a fair indication of the value for which the Company can sell or buy the common stock. In such cases, as in the case of private-company limited liability company membership interests held by the Company, the common stock must be analyzed to determine what exit price the Company would receive when liquidating the position. These positions are classified as Level 3 securities.

The significant unobservable inputs used in the fair value measurement of the Company’s Level 3 common stocks are growth rate, risk premium, revenue multiples and EBITDA multiples. Increases or decreases in any of those inputs in isolation would result in a lower or higher fair value measurement, respectively.

The Company has warrants and call options to purchase common stock in illiquid public companies. Generally, there is no established market for these investments. The Company values these warrants and call options by using a model that takes into consideration the exercise or call price of the warrant or call option, the price of the underlying common stock and the expiration date of the warrant or call option.

The significant unobservable inputs used in the fair value measurement of the Company’s warrants and call options includes the price of the underlying thinly traded common stock (determined based upon growth rate, risk premium, revenue multiples and EBITDA multiples), duration and discount rate and volatility. Increases or decreases in the premium-to-parity would result in a higher or lower fair value measurement, respectively.

Generally, when the Company invests in common stocks that are traded on the NASDAQ Markets or over-the-counter markets (such as the OTCBB, OTCQB or OTC Pink marketplaces), such common stocks are valued at the last traded price. If there is no trade on a measurement date, the Company will typically value the common stock at the closing bid price. However, in certain circumstances, the closing trading price is not considered to be a fair indication of the value for which the Company can sell the common stock. In such cases, the common stock must be analyzed to determine what exit price the Company would receive when liquidating the position. Investments in non-marketable common stocks at September 30, 2016 and December 31, 2015 were valued based, in part, on subsequent transactions with unrelated third parties and at December 31, 2015 were valued by the Company with the assistance of an independent valuation consultant. These positions are classified as Level 3 securities by the Company.

From time to time, the Company has investments in private limited liability companies. Generally, there is no established market for these investments. The Company values these interests by means of both quantitative and qualitative measures, generally including the financial stability of the company, the economic rights of the interests and the economic prospects of the company.

The significant unobservable input used in the fair value measurement of the Company’s limited liability company investments is the expected recovery of contributed capital. Increases or decreases in the expected recovery would result in a higher or lower fair value measurement, respectively.

Derivative financial instruments

Derivative Financial Instruments

Derivative financial instruments include call options and warrants at September 30, 2016 and December 31, 2015. Derivatives are accounted for at fair value with changes in fair value reported in operations. The significant unobservable inputs used in the fair value measurement of the Company’s derivative financial instruments include the underlying common stock, duration, volatility and discount rate, which are used in the option pricing model. Changes to any of those inputs in isolation would result in fluctuations in the fair value measurement.

Investment Transaction, Related Income and Expenses

Investment Transaction, Related Income and Expenses

Purchases and sales of investments are recorded on a trade-date basis. Realized gains and losses on investments are recognized on the first-in, first-out method. Dividend income on investments owned is recognized on the ex-dividend date, net of applicable withholding taxes.

Treasury Stock Purchases

Treasury Stock Purchases

The Company is authorized to repurchase shares of the Company’s common stock in private transactions from time to time. The Company records treasury stock purchases at cost. Any treasury stock removed from treasury is valued at cost using the specific identification method.

Revenue recognition

Revenue Recognition

The Company recognizes revenue for sales of physical commodities or other goods when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the physical commodities or other goods have been delivered to the customer; (3) the purchase price to be paid by the customer is fixed or determinable; and (4) the collection of the purchase price is reasonably assured.

The Company recognizes revenue for services when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the related service has been provided to the customer; (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of fees is reasonably assured.

Earnings per share

Earnings per Share

Basic earnings per common share calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.  As of September 30, 2016 and 2015, there were no dilutive common shares equivalents outstanding.

Concentration Risks

Concentration Risks

During the three and nine months ended September 30, 2016, the Company had $21,624 and $37,224, respectively, of sublease income from two sublessees. During the three and nine months ended September 30, 2015, the Company had $16,660 and $116,662, respectively, in revenue generated from one customer for consulting services and had interest income from a related party of $0 and $14,460, respectively.

Income taxes

Income Taxes

Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.

Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 allows the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination by the taxing authorities. As of September 30, 2016 the Company reviewed its tax positions and determined there were no outstanding or retroactive tax provisions with less than a 50% likelihood of being sustained upon examination by the taxing authorities.

The Company is required to file Federal and New York state income tax returns. The Company’s tax return status will remain open until a tax return has been filed.

Advertising costs

Advertising costs

Advertising costs are expensed as incurred. For the three and nine month periods ended September 30, 2016, advertising costs of $1,068 and $16,283, respectively, were included in general and administrative expenses. For the three and nine month periods ended September 30, 2015, advertising costs of $2,502 and $38,792, respectively, were included in general and administrative expenses.

Recent pronouncements

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards update 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). ASU 2014-09 specifies a comprehensive model to be used in accounting for revenue arising from contracts with customers, and supersedes most of the current revenue recognition guidance, including industry specific guidance. It applies to all contracts with customers except those that are specifically within the scope of other FASB topics, and certain of its provisions also apply to transfers of nonfinancial assets, including in-substance nonfinancial assets that are not an output of an entity's ordinary activities. The core principal of the model is that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the transferring entity expects to be entitled in exchange. To apply the revenue model, an entity will: 1) identify the contract(s) with a customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue when (or as) the entity satisfies a performance obligation. For public companies, ASU 2014-09 (updated with ASU 2015-14) is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early adoption is not permitted. Upon adoption, entities can choose to use either a full retrospective or modified approach, as outlined in ASU 2014-09. As compared with current GAAP, ASU 2014-09 requires significantly more disclosures about revenue recognition. The Company has not yet assessed the potential impact of ASU 2014-09 on its financial statements.

In May 2015, the FASB issued amended guidance on the disclosures for investments in certain equities that calculate net asset value per share (or its equivalent). The amendments remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. The guidance is effective for fiscal years beginning after December 15, 2015 and for interim periods within those years. As of September 30, 2016, the Company does not own any investments in equities that calculate net asset value per share (or its equivalent).

In February 2016, the FASB issued Accounting Standards update 2016-02, Leases ("ASU 2016-02"). ASU 2016-02 requires a lessee to recognize a lease asset representing its right to use the underlying asset for the lease term, and a lease liability for the payments to be made to lessor, on its balance sheet for all operating leases greater than 12 months. ASU 2016-02 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company has not yet adopted ASU 2016-02 nor assessed its potential impact on its financial statements.

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FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2016

Investments At Fair Value Tables

Schedule of Assets and Liabilities measured at Fair Value on a Recurring Basis

The following fair value hierarchy tables set forth the Company’s recurring fair value measurements at September 30, 2016 and December 31, 2015.

	Assets and Liabilities Measured at
	Fair Value on a Recurring Basis
	September 30, 2016
	Level 1		Level 2		Level 3			Total
Assets
Financial instruments, at fair value:
Common Stocks	$	—	$	—	$	8,034,517		$	8,034,517
Real Estate Company Investments		—		—		277,500			277,500
2014 Call Options		—		—		1,135,863			1,135,863
Series B Warrants		—		—		365,099			365,099
Total Financial instruments, at fair value		—		—		9,812,979			9,812,979
Total assets held at fair value	$	—	$	—	$	9,812,979		$	9,812,979
Liabilities
Financial instruments, at fair value:
Third Party Call Options		—		—		(462,558	)		(462,558	)
Total liabilities held at fair value	$	—	$	—	$	(462,558	)	$	(462,558	)

	Assets and Liabilities Measured at
	Fair Value on a Recurring Basis
	December 31, 2015
	Level 1		Level 2		Level 3			Total
Assets
Financial instruments, at fair value:
Common Stocks	$	—	$	—	$	9,896,605		$	9,896,605
Real Estate Company Investments		—		—		277,500			277,500
2014 Call Options		—		—		1,135,863			1,135,863
Series B Warrants		—		—		1,851,750			1,851,750
Total Financial instruments, at fair value		—		—		13,161,718			13,161,718
Total assets held at fair value	$	—	$	—	$	13,161,718		$	13,161,718
Liabilities
Financial instruments, at fair value:
Third Party Call Options		—		—		(619,122	)		(619,122	)
Total liabilities held at fair value	$	—	$	—	$	(619,122	)	$	(619,122	)

Schedule of Investments in securities and unrealized gains

Details of the Company’s recurring fair value measurements are as follow:

September 30, 2016	Cost		Estimated Fair Value			Unrealized Gain (Loss)
ASSETS
Common Stocks	$	1,004,255	$	8,034,517		$	7,030,262
Real Estate Company Investments		277,500		277,500			—
2014 Call Options		450		1,135,863			1,135,413
Series B Warrants		—		365,099			365,099
	$	1,282,205	$	9,812,979		$	8,530,774
LIABILITIES
Third-Party Call Options	$	—	$	(462,558	)	$	(462,558	)

December 31, 2015	Cost		Estimated Fair Value			Unrealized Gain (Loss)
ASSETS
Common Stocks	$	1,004,992	$	9,896,605		$	8,891,613
Real Estate Company Investments		277,500		277,500			—
2014 Call Options		450		1,135,863			1,135,413
Series B Warrants		—		1,851,750			1,851,750
	$	1,282,942	$	13,161,718		$	11,878,776
LIABILITIES
Third Party Call Options	$	—	$	(619,122	)	$	(619,122	)

Schedule of financial instruments classified

The following table includes a roll forward of the amounts for the quarter ended September 30, 2016 for financial instruments classified within Level 3.

Level 3 Recurring Fair Value Measurements

For the Three Months Ended September 30, 2016

	Common Stock			Real Estate Company Investments		2014 Call Options		Series B Warrants			Third-Party Call Options Liability			Total
Fair value, net, July 1, 2016	$	8,149,214		$	277,500	$	1,135,863	$	840,047		$	(550,544	)	$	9,852,080
Unrealized gains (losses) included in earnings		303			—		—		(474,948	)		87,986			(386,659	)
Purchases		—			—		—		—			—			—
Sales		(115,000	)		—		—		—			—			(115,000	)
Settlements/exercises		—			—		—		—			—			—
Transfers in and/or out of Level 3		—			—		—		—			—			—
Fair value, net, September 30, 2016	$	8,034,517		$	277,500	$	1,135,863	$	365,099		$	(462,558	)	$	9,350,421
Unrealized gains (losses) still held	$	7,030,262		$	—	$	1,135,413	$	365,099		$	(462,558	)	$	8,068,216

Level 3 Recurring Fair Value Measurements

For the Nine Months Ended September 30, 2016

	Common Stock			Real Estate Company Investments		2014 Call Options		Series B Warrants			Third-Party Call Options Liability			Total
Fair value, net, January 1, 2016	$	9,896,605		$	277,500	$	1,135,863	$	1,851,750		$	(619,122	)	$	12,542,596
Unrealized gains (losses) included in earnings		4,912			—		—		(1,486,651	)		156,564			(1,325,175	)
Purchases		—			—		—		—			—			—
Sales		(1,867,000	)		—		—		—			—			(1,867,000	)
Settlements/exercises		—			—		—		—			—			—
Transfers in and/or out of Level 3		—			—		—		—			—			—
Fair value, net, September 30, 2016	$	8,034,517		$	277,500	$	1,135,863	$	365,099		$	(462,558	)	$	9,350,421
Unrealized gains (losses) still held	$	7,030,262		$	—	$	1,135,413	$	365,099		$	(462,558	)	$	8,068,216

Schedule of significant unobservable inputs used in the fair value measurements

The following tables present quantitative information about the valuation techniques and unobservable inputs applied to Level 3 fair value measurements for financial instruments measured at fair value on a recurring and nonrecurring basis at September 30, 2016 and December 31, 2015.

		Quantitative Information about Level 3
		Fair Value Measurements at September 30, 2016
		Fair	Valuation	Unobservable	Range
		Value	Technique	Inputs
Assets
Common Stock	$	8,034,517	Discounted cash flow Guideline company transactions method Guideline publicly-traded company method	Growth rate Risk premium factors Revenue multiple EBITDA multiple	13.00%-15.20% (2.50%)-7.00% 1.10-2.10 9.30-13.80
2014 Call Options		1,135,863	Discounted cash flow Guideline company transactions method Guideline publicly-traded company method	Growth rate Risk premium factors Revenue multiple EBITDA multiple	13.00%-15.20% (2.50%)-7.00% 1.10-2.10 9.30-13.80
Series B Warrants		365,099	Option pricing model	Duration Risk-free interest rate Volatility	0.17 years 0.20%-0.45%  50%
Investment in Real Estate Companies		277,500	Recent transaction	Return of invested capital	100%
Total assets held at fair value	$	9,812,979
Liabilities
Call option liability	$	462,558	Option pricing model	Duration Risk-free interest rate Volatility	1.48-1.65 years 0.68%-0.71% 50%
Total liabilities held at fair value	$	462,558

		Quantitative Information about Level 3
		Fair Value Measurements at December 31, 2015
		Fair	Valuation	Unobservable	Range
		Value	Technique	Inputs
Assets
Common Stock	$	9,896,605	Discounted cash flow Guideline company transactions method Guideline publicly-traded company method	Growth rate Risk premium factors Revenue multiple EBITDA multiple	13.00%-15.20% (2.50%)-7.00% 1.10-2.10 9.30-13.80
2014 Call Options		1,135,863	Discounted cash flow Guideline company transactions method Guideline publicly-traded company method	Growth rate Risk premium factors Revenue multiple EBITDA multiple	13.00%-15.20% (2.50%)-7.00% 1.10-2.10 9.30-13.80
Series B Warrants		1,851,750	Option pricing model	Duration Risk-free interest rate Volatility	0.25-0.92 years 0.16%-0.62%  50%
Investment in Real Estate Companies		277,500	Recent transaction	Return of invested capital	100%
Total assets held at fair value	$	13,161,718
Liabilities
Call option liability	$	619,122	Option pricing model	Duration Risk-free interest rate Volatility	2.23-2.40 years 1.12%-1.16%  50%
Total liabilities held at fair value	$	619,122

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Sub lease income	$ 21,624		$ 37,224
Interest Income	0	$ 0	0	$ 14,460
Advertising costs	$ 1,068	2,502	$ 16,283	38,792
Customer [Member]
Consulting Services		16,660		116,662
Interest Income		$ 0		$ 14,460

XML

FAIR VALUE MEASUREMENTS (Details) - Fair Value, Measurements, Recurring [Member] - USD ($)	Sep. 30, 2016	Jun. 30, 2016	Dec. 31, 2015
Fair Value, Inputs, Level 3 [Member]
Financial Investment owned at fair value	$ 9,852,080	$ 9,852,080	$ 12,542,596
Fair Value, Inputs, Level 3 [Member] | Warrant B [Member]
Financial Investment owned at fair value	365,099	840,047	1,851,750
Fair Value, Inputs, Level 3 [Member] | Third Party Call Options [Member]
Financial Investment owned at fair value	(462,558)	(550,544)	(619,122)
Fair Value, Inputs, Level 3 [Member] | Real Estate Company Investments [Member]
Financial Investment owned at fair value	277,500	277,500	277,500
Fair Value, Inputs, Level 3 [Member] | 2014 Call Options [Member]
Financial Investment owned at fair value	1,135,863	1,135,863	1,135,863
Fair Value, Inputs, Level 3 [Member] | Common Stock
Financial Investment owned at fair value	8,034,517	$ 8,149,214	9,896,605
Liabilities [Member]
Total Assets/Liabilities Held at Fair Value	(462,558)		(619,122)
Liabilities [Member] | Third Party Call Options [Member]
Financial Investment owned at fair value	(462,558)		(619,122)
Liabilities [Member] | Fair Value, Inputs, Level 3 [Member]
Total Assets/Liabilities Held at Fair Value	(462,558)		(619,122)
Liabilities [Member] | Fair Value, Inputs, Level 3 [Member] | Third Party Call Options [Member]
Financial Investment owned at fair value	(462,558)		(619,122)
Assets [Member]
Total Assets/Liabilities Held at Fair Value	9,812,979		13,161,718
Assets [Member] | Warrant B [Member]
Financial Investment owned at fair value	365,099		1,851,750
Assets [Member] | Real Estate Company Investments [Member]
Financial Investment owned at fair value	277,500		277,500
Assets [Member] | 2014 Call Options [Member]
Financial Investment owned at fair value	1,135,863		1,135,863
Assets [Member] | Common Stock
Financial Investment owned at fair value	8,034,517		9,896,605
Assets [Member] | Fair Value, Inputs, Level 3 [Member]
Total Assets/Liabilities Held at Fair Value	9,812,979		13,161,718
Assets [Member] | Fair Value, Inputs, Level 3 [Member] | Warrant B [Member]
Financial Investment owned at fair value	365,099		1,851,750
Assets [Member] | Fair Value, Inputs, Level 3 [Member] | Real Estate Company Investments [Member]
Financial Investment owned at fair value	277,500		277,500
Assets [Member] | Fair Value, Inputs, Level 3 [Member] | 2014 Call Options [Member]
Financial Investment owned at fair value	1,135,863		1,135,863
Assets [Member] | Fair Value, Inputs, Level 3 [Member] | Common Stock
Financial Investment owned at fair value	$ 8,034,517		$ 9,896,605

XML

FAIR VALUE MEASUREMENTS (Details 2) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Unrealized gain on investment securities, net	$ (501,614)	$ (2,213,158)	$ (3,191,438)	$ (4,069,194)
Liabilities [Member]
Unrealized gain on investment securities, net			(462,558)		$ (619,122)
Liabilities [Member] | Third Party Call Options [Member]
Unrealized gain on investment securities, net			(462,558)		(619,122)
Liabilities [Member] | Estimate of Fair Value [Member]
Unrealized gain on investment securities, net			(462,558)		(619,122)
Liabilities [Member] | Estimate of Fair Value [Member] | Third Party Call Options [Member]
Unrealized gain on investment securities, net			(462,558)		(619,122)
Liabilities [Member] | Cost [Member]
Unrealized gain on investment securities, net			0		0
Liabilities [Member] | Cost [Member] | Third Party Call Options [Member]
Unrealized gain on investment securities, net			0		0
Assets [Member]
Unrealized gain on investment securities, net			8,530,774		11,878,776
Assets [Member] | Warrant B [Member]
Unrealized gain on investment securities, net			365,099		1,851,750
Assets [Member] | Common Stock
Unrealized gain on investment securities, net			7,030,262		8,891,613
Assets [Member] | Real Estate Company Investments [Member]
Unrealized gain on investment securities, net			0
Assets [Member] | 2014 Call Options [Member]
Unrealized gain on investment securities, net			1,135,413		1,135,413
Assets [Member] | Estimate of Fair Value [Member]
Unrealized gain on investment securities, net			9,812,979		13,161,718
Assets [Member] | Estimate of Fair Value [Member] | Warrant B [Member]
Unrealized gain on investment securities, net			365,099		1,851,750
Assets [Member] | Estimate of Fair Value [Member] | Common Stock
Unrealized gain on investment securities, net			8,034,517		9,896,605
Assets [Member] | Estimate of Fair Value [Member] | Real Estate Company Investments [Member]
Unrealized gain on investment securities, net			277,500		277,500
Assets [Member] | Estimate of Fair Value [Member] | 2014 Call Options [Member]
Unrealized gain on investment securities, net			1,135,863		1,135,863
Assets [Member] | Cost [Member]
Unrealized gain on investment securities, net			1,282,205		1,282,942
Assets [Member] | Cost [Member] | Warrant B [Member]
Unrealized gain on investment securities, net			0		0
Assets [Member] | Cost [Member] | Common Stock
Unrealized gain on investment securities, net			1,004,255		1,004,992
Assets [Member] | Cost [Member] | Real Estate Company Investments [Member]
Unrealized gain on investment securities, net			277,500		277,500
Assets [Member] | Cost [Member] | 2014 Call Options [Member]
Unrealized gain on investment securities, net			$ 450		$ 450

XML

FAIR VALUE MEASUREMENTS (Details 3) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Unrealized gains (losses) still held	$ (501,614)	$ (2,213,158)	$ (3,191,438)	$ (4,069,194)
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Fair value, net	9,852,080		12,542,596
Unrealized gains (losses) included in earnings	(386,659)		(1,325,175)
Purchases	0		0
Sales	(115,000)		(1,867,000)
Settlements/exercises	0		0
Transfers in and/or out of Level 3	0		0
Fair value , net	9,852,080		9,852,080
Unrealized gains (losses) still held	8,068,216		8,068,216
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Common Stock
Fair value, net	8,149,214		9,896,605
Unrealized gains (losses) included in earnings	303		4,912
Purchases	0		0
Sales	(115,000)		(1,867,000)
Settlements/exercises	0		0
Transfers in and/or out of Level 3	0		0
Fair value , net	8,034,517		8,034,517
Unrealized gains (losses) still held	7,030,262		7,030,262
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Third Party Call Options [Member]
Fair value, net	(550,544)		(619,122)
Unrealized gains (losses) included in earnings	87,986		156,564
Purchases	0		0
Sales	0		0
Settlements/exercises	0		0
Transfers in and/or out of Level 3	0		0
Fair value , net	(462,558)		(462,558)
Unrealized gains (losses) still held	(462,558)		(462,558)
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Warrant B [Member]
Fair value, net	840,047		1,851,750
Unrealized gains (losses) included in earnings	(474,948)		(1,486,651)
Purchases	0		0
Sales	0		0
Settlements/exercises	0		0
Transfers in and/or out of Level 3	0		0
Fair value , net	365,099		365,099
Unrealized gains (losses) still held	365,099		365,099
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Real Estate Company Investments [Member]
Fair value, net	277,500		277,500
Unrealized gains (losses) included in earnings	0		0
Purchases	0		0
Sales	0		0
Settlements/exercises	0		0
Transfers in and/or out of Level 3	0		0
Fair value , net	277,500		277,500
Unrealized gains (losses) still held	0		0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | 2014 Call Options [Member]
Fair value, net	1,135,863		1,135,863
Unrealized gains (losses) included in earnings	0		0
Purchases	0		0
Sales	0		0
Settlements/exercises	0		0
Transfers in and/or out of Level 3	0		0
Fair value , net	1,135,863		1,135,863
Unrealized gains (losses) still held	$ 1,135,413		$ 1,135,413

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FAIR VALUE MEASUREMENTS (Details 4) - Fair Value, Measurements, Recurring [Member] - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Fair Value, Inputs, Level 3 [Member] | Third Party Call Options [Member]
Fair value of Assets and Liabilities		$ 619,122
Assets [Member] | Fair Value, Inputs, Level 3 [Member]
Fair value of Assets and Liabilities	$ 9,812,979	13,161,718
Assets [Member] | Fair Value, Inputs, Level 3 [Member] | Common Stock
Fair value of Assets and Liabilities	8,034,517	9,896,605
Assets [Member] | Fair Value, Inputs, Level 3 [Member] | 2014 Call Options [Member]
Fair value of Assets and Liabilities	1,135,863	1,135,863
Assets [Member] | Fair Value, Inputs, Level 3 [Member] | Warrant B [Member]
Fair value of Assets and Liabilities	$ 365,099	$ 1,851,750
Duration	2 months 1 day
Volatility	50.00%	50.00%
Return of invested capital	100.00%	100.00%
Assets [Member] | Fair Value, Inputs, Level 3 [Member] | Investment in Real Estate Companies [Member]
Fair value of Assets and Liabilities	$ 277,500
Assets [Member] | Fair Value, Inputs, Level 3 [Member] | Real Estate Company Investments [Member]
Fair value of Assets and Liabilities		$ 277,500
Assets [Member] | Fair Value, Inputs, Level 3 [Member] | Minimum [Member] | Common Stock
Growth rate	13.00%	13.00%
Risk premium factors	(2.50%)	(2.50%)
Revenue multiple	1.10	1.10
EBITDA multiple	9.30	9.30
Assets [Member] | Fair Value, Inputs, Level 3 [Member] | Minimum [Member] | 2014 Call Options [Member]
Growth rate	13.00%	13.00%
Risk premium factors	(2.50%)	(2.50%)
Revenue multiple	1.10	1.10
EBITDA multiple	9.30	9.30
Assets [Member] | Fair Value, Inputs, Level 3 [Member] | Minimum [Member] | Warrant B [Member]
Duration		3 months
Risk-free interest rate	0.20%	0.16%
Assets [Member] | Fair Value, Inputs, Level 3 [Member] | Maximum [Member] | Common Stock
Growth rate	15.20%	15.20%
Risk premium factors	7.00%	7.00%
Revenue multiple	2.10	2.10
EBITDA multiple	13.80	13.80
Assets [Member] | Fair Value, Inputs, Level 3 [Member] | Maximum [Member] | 2014 Call Options [Member]
Growth rate	15.20%	15.20%
Risk premium factors	7.00%	7.00%
Revenue multiple	2.10	2.10
EBITDA multiple	13.80	13.80
Assets [Member] | Fair Value, Inputs, Level 3 [Member] | Maximum [Member] | Warrant B [Member]
Duration		11 months 1 day
Risk-free interest rate	0.45%	0.62%
Liabilities [Member] | Third Party Call Options [Member]
Fair value of Assets and Liabilities	$ 550,544
Liabilities [Member] | Fair Value, Inputs, Level 3 [Member]
Fair value of Assets and Liabilities	$ 540,544	$ 619,122
Liabilities [Member] | Fair Value, Inputs, Level 3 [Member] | Third Party Call Options [Member]
Volatility	50.00%	50.00%
Liabilities [Member] | Fair Value, Inputs, Level 3 [Member] | Minimum [Member] | Third Party Call Options [Member]
Duration	1 year 5 months 23 days	2 years 2 months 23 days
Risk-free interest rate		1.12%
Volatility	0.68%
Liabilities [Member] | Fair Value, Inputs, Level 3 [Member] | Maximum [Member] | Third Party Call Options [Member]
Duration	1 year 7 months 24 days	2 years 4 months 24 days
Risk-free interest rate		1.16%
Volatility	0.71%

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FAIR VALUE MEASUREMENTS (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Investments, All Other Investments [Abstract]
Net change in unrealized gain on financial instruments	$ (501,614)	$ (2,213,158)	$ (3,191,438)	$ (4,069,194)
Net realized gain on financial instruments	$ 114,954	$ 346,368	$ 1,866,263	$ (480,088)

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RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Notes to Financial Statements
Advance payment to related party	$ 68,416	$ 1,135,136

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INCOME TAXES (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Income Tax Disclosure [Abstract]
Income tax benefit	$ (528,313)	$ (1,076,278)	$ (1,754,073)	$ (2,519,324)