UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2015~~2016

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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 area code)

Copies of Communications to:

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 to Section 13 or Section 15(d) of the 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 ~~November~~May 316, ~~2015~~2016 was 94,364,148 shares.

CAPSTONE FINANCIAL GROUP, INC.

QUARTERLY REPORT FOR THE QUARTER ENDED

~~SEPTEMBER~~MARCH 3031, ~~2015~~ 2016

Index to Report on Form 10-Q

PART I	Financial Information	Page
Item 1.	Financial Statements (Unaudited)	34
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1928
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2938
Item 4.	Controls and Procedures	2938
PART II	Other Information
Item 1.	Legal Proceedings	3241
Item1A.	Risk Factors	3241
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3242
Item 3.	Defaults Upon Senior Securities	3242
Item 4.	Mine Safety Disclosures	3342
Item 5.	Other Information	3342
Item 6.	Exhibits	3343

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PART I Financial Information

Item 1. Financial Statements

CAPSTONE FINANCIAL GROUP, INC.

INDEX TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

			PAGES
Unaudited Condensed Statements of Financial Condition as of September 30, 2015 and December 31, 2014			4
Unaudited Condensed Statements of Financial Condition as of March 31, 2016 and December 31, 2015			5
Unaudited Condensed Statements of Operations for the three months and nine months ended September 30, 2015 and 2014			5
Unaudited Condensed Statements of Operations for the three months ended March 31, 2016 and 2015			6
Unaudited Condensed Statement of Stockholders’ Equity for the nine months ended September 30, 2015			6
Unaudited Condensed Statement of Stockholders’ Equity for the three months ended March 31, 2016			7
Unaudited Condensed Statements of Cash Flows for the nine months ended September 30, 2015 and 2014			7
Unaudited Condensed Statements of Cash Flows for the three months ended March 31, 2016 and 2015			8
Notes to Unaudited Condensed Financial Statements			8

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CAPSTONE FINANCIAL GROUP, INC.

UNAUDITED CONDENSED STATEMENTS OF FINANCIAL CONDITION

	September 30, 2015			December 31, 2014
	March 31, 2016			December 31, 2015
ASSETS
Investments, at fair value	$	11,861,551		$	28,838,301
Financial instruments, at fair value	$	11,280,330		$	13,161,718
Cash		~~425~~323,~~270~~947			12136,~~685~~849
Note receivable		—			603,952
Salary advance - related party		300,000			—
Prepaid expense		~~675~~3,322			864,~~209~~152
Furniture and equipment, net		711,~~039~~998			612,~~500~~645
Deposits		8563,~~000~~930			6563,~~000~~930
Total assets		1211,~~379~~983,~~535~~527			2913,~~612~~379,~~647~~294
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Accrued expenses	$	~~127~~286,~~058~~698		$	48314,~~547~~830
Accrued interest payable - related party		~~190~~—			~~4,431~~135
Short term advances payable - related party		~~180~~29,~~151~~700			9449,~~306~~600
Note payable - related party		~~68,416~~—			168,~~203,552~~416
Deferred revenue		—			116,662
Put and call option liability		608,731			619,122
Put and call option liability		387,947			9,973,684
Income taxes payable		6,602			2,400
Income taxes payable		800			—
Deferred tax liability		4,047,557			4,552,107
Deferred tax liability		4,222,599			6,742,723
Total liabilities		4,979,288			5,606,610
Total liabilities		4,987,161			18,183,905
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, 2,000,000,000 shares authorized;
94,364,148 and 94,564,648 issued and outstanding as of September 30, 2015 and December 31, 2014, respectively		94,365			94,565
94,364,148 issued and outstanding as of March 31, 2016 and December 31, 2015, respectively		94,565			94,565
Additional paid in capital		957,407			1,176,633
Treasury stock, $0.001 par value, 200,500 shares		(219,426	)		(219,426	)
Retained earnings		6,340,602			10,157,544
Additional paid in capital		1,176,633			1,176,633
Total stockholders' equity		7,392,374			11,428,742
Retained earnings		5,952,467			6,720,912
Total liabilities and stockholders' equity	$	12,379,535		$	29,612,647
Total stockholders' equity		7,004,239			7,772,684
Total liabilities and stockholders' equity	$	11,983,527		$	13,379,294

See Accompanying Notes to Unaudited Condensed Financial Statements.

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CAPSTONE FINANCIAL GROUP, INC.

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

	For the three months ended September 30,						For the nine months ended September 30,
	For the three months ended March 31,
	2015			2014			2015			2014
	2016			2015
Revenues
Services income	$	~~16,660~~—		$	3350,~~335~~001		$	~~116,662~~		$	~~33,335~~
Other income		112,~~800~~000			—			~~1,800~~			—
Interest – related party		—			11,140			14,460			29,835
Interest income – related party		—			7,446
		18,460			44,475			132,922			63,170
		12,000			57,447
Expenses
Payroll		137,048			57,926			228,593			180,081
Personnel		170,908			43,387
Professional fees		~~318~~92,~~808~~602			39260,~~745~~998			~~920,402~~			~~225,267~~
General and administrative		~~451~~447,~~862~~941			~~120~~156,~~870~~708			~~760,187~~			~~486,806~~
Interest expense – related party		~~2,200~~345			45,~~276~~056			~~10,724~~			~~16,107~~
		909,918			222,817			1,919,906			908,261
		711,796			466,149
Realized and Unrealized Gain (Loss) on Financial Instruments
Realized gain (loss) on financial instruments,
Realized gain on financial instruments, net		1,302,000			1,460,160
net		346,368			5,874			(480,088	)		19,458
Change in unrealized loss on financial instruments, net		(1,870,997	)		(1,460,160	)
Unrealized (loss) gain on financial
Loss on financial instruments, net		(568,997	)		—
instruments, net		(2,213,158	)		19,190,577			(4,069,194	)		19,187,658
Net loss before income taxes		(1,268,793	)		(408,702	)
(Loss) gain on financial instruments, net		(1,866,790	)		19,196,451			(4,549,282	)		19,207,116
Income tax benefit		(500,348	)		—
Net (loss) income before income taxes		(2,758,248	)		19,018,109			(6,336,266	)		18,362,025
Net loss	$	(768,445	)	$	(408,702	)
Income tax (benefit)		(1,076,278	)		7,283,827			(2,519,324	)		7,283,827
Net loss per share – basic and diluted	$	(0.01	)	$	(0.00	)
Net (loss) income	$	(1,681,970	)	$	11,734,282		$	(3,816,942	)	$	11,078,198
Weighted average shares outstanding – basic
Net (loss) income per share – basic and diluted	$	(0.02	)	$	0.12		$	(0.04	)	$	0.12
and diluted		94,364,148			94,564,648
Weighted average shares outstanding – basic
and diluted		94,364,181			94,089,281			94,494,161			93,353,609

See Accompanying Notes to Unaudited Condensed Financial Statements.

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CAPSTONE FINANCIAL GROUP, INC.

UNAUDITED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY

	Common Shares						Additional Paid in			Retained			Total Stockholders’
										Additional			Retained			Total
	Shares			Amount			Capital			Earnings			Equity
	Common Shares						Treasury			Paid in			Earnings			Stockholders’
Balance, January 1, 2015	$	94,564,648		$	94,565		$	1,176,633		$	10,157,544		$	11,428,742
	Shares			Amount			Stock			Capital			(Deficit)			Equity
Net loss		—			—			—			(3,816,942	)		(3,816,942	)
Balance, January 1, 2016		94,364,148		$	94,565		$	(219,426	)	$	1,176,633		$	6,720,912		$	7,772,684
Treasury stock, at cost		(200,500	)		(200	)		(219,226	)		—			(219,426	)
Net loss		—			—			—			—			(768,445	)		(768,445	)
Balance, September 30, 2015	$	94,364,148		$	94,365		$	957,407		$	6,340,602		$	7,392,374
Balance, March 31, 2016		94,364,148		$	94,565		$	(219,426	)	$	1,176,633		$	5,952,467		$	7,004,239

See Accompanying Notes to Unaudited Condensed Financial Statements.

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CAPSTONE FINANCIAL GROUP, INC.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

	For the nine months ended
	For the three months ended
	September 30,
	March 31,
	2015			2014
	2016			2015
CASH FLOW FROM OPERATING ACTIVITIES
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(3,816,942	)	$	11,078,198
Net loss	$	(768,445	)	$	(408,702	)
Adjustments to reconcile net (loss) income to net cash
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
provided by operating activities:
Sale (purchase) of financial instruments, net		2,841,731			(8,838	)
Proceeds from sale of financial instruments		1,302,000			940,160
Net change in unrealized gain on financial instruments		41,~~069~~870,~~194~~997			~~(19~~1,~~187~~460,~~658~~160	)
Net change in realized gain on financial instruments		480,088			—
Net realized gain on financial instruments		(1,302,000	)		(1,460,160	)
Depreciation		~~1,500~~647			—500
(Increase) decrease in assets:
Note receivable		~~400,000~~—			—(7,445	)
Accrued interest receivable – related party		(14,459	)		(28,806	)
Salary advance - related party		(300,000	)		—
Prepaid expense		~~85,534~~830			1686,~~895~~209
Deposits		(20,000	)		35,000
Increase (decrease) in liabilities:
Accounts payable		—			(12,973	)
Accrued taxes payable		4,202			—
Accrued expenses		78(28,~~511~~132	)		(85,~~569~~109	)
Accrued interest payable – related party		(~~4,241~~135	)		155,~~079~~055
Deferred revenue		~~(116,662~~—	)		~~166~~(50,~~665~~001	)
Net repayments on notes payable – related party		(1,135,136	)		(519,429	)
Deferred tax liability		(504,550	)		—
Net proceeds from short term advances – related party		85,845			—
Net cash provided by operating activities		275,414			560,667
Income taxes payable		800			—
Deferred tax liability		(2,520,124	)		7,283,827
Net cash provided by (used in) operating activities		415,639			(1,170,609	)
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
Proceeds from sale of common stock, net of offering costs		—			1,308,700
Net repayments on short term advances – related party		(19,900	)		—
Purchase of treasury stock		(1,015	)		—
Net repayments on notes payable – related party		(68,416	)		(450,000	)
Net cash (used in) provided by financing activities		(1,015	)		1,308,700
Net cash used in financing activities		(88,316	)		(450,000	)
Increase in cash		412,585			138,091
Net increase in cash		187,098			110,667
Cash at beginning of period		12136,~~685~~849			—12,685
Cash at end of period	$	~~425~~323,~~270~~947		$	~~138~~123,~~091~~352
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid	$	480		$	—

Supplemental Disclosure of Cash Flow Information:

Noncash purchase of treasury stock $ 218,411 $ —

See Accompanying Notes to Unaudited Condensed Financial Statements.

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Organization

The business focus of Capstone Financial Group, Inc. (the "Company") is to invest in ~~equity~~stock ~~securities~~ of other companies. The Company seeks to discover, unlock and grow value in privately-held or illiquid companies, including through the exercise of ~~friendly~~ influence at a company in support of operational improvements and strategic initiatives. In some cases, the Company might be one of the largest shareholders of the other company.

The Company seeks to work ~~closely and constructively~~ 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 seeks to maintain a thorough understanding of ~~how~~operations ~~they~~and ~~operate~~perform ~~and~~continual ~~evaluate~~evaluations ~~their~~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.

~~Through December 31~~Market, ~~2012,~~Credit ~~the Company had not commenced significant operations~~ and, inLiquidity accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 915, the Company was considered a development stage company. During the year ended December 31, 2013, the Company exited the development stage. Effective in 2014, the Company transitioned its business plan to its current business focus.Risk

At ~~September~~March 3031, ~~2015~~2016 and December 31, 2015 the majority of Company’s investments are ~~primarily~~ 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 ~~avoid and/or~~fund ~~satisfy~~ its ~~call~~ obligations as and when they become due ~~and/or are exercised~~. 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 ~~enable~~fund ~~full~~its ~~warrant~~obligations ~~exercises~~ or to raise additional capital to do so ~~(see Note 4)~~.

~~-8-~~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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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 2 – ~~BASIS~~SUMMARY OF ~~PRESENTATION~~SIGNIFICANT ACCOUNTING POLICIES

~~The~~Investments ~~accompanying~~of ~~financial statements have been prepared using~~ the ~~accrual~~Company ~~basis~~trade ~~of accounting~~ in ~~conformity with accounting principles generally accepted in the United States~~ ofthin ~~America~~markets ~~(“GAAP”) for interim financial information~~ and ~~the~~throughout ~~accounting and financial reporting conventions of~~ the ~~investment~~ ~~company~~year, ~~industry~~depending ~~and~~upon inmarket ~~accordance with the instructions to Form 10-Q and Article 8 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly~~conditions, ~~they~~may ~~should~~ be ~~read~~considered ininactive. ~~conjunction~~As ~~with~~a ~~the audited consolidated financial statements and notes thereto for the year ended December 31~~result, ~~2014, included in~~ the ~~Company’s~~market ~~Annual Report on Form 10-K filed with the SEC on April 30, 2015. The unaudited~~values ~~condensed~~can ~~financial~~be ~~statements~~more ~~contain~~volatile ~~all normal recurring accruals~~ and ~~adjustments~~difficult ~~that~~to indetermine ~~the~~relative ~~opinion of management, are necessary~~ to ~~present~~other ~~fairly~~securities. ~~the~~In ~~financial~~addition, ~~position~~if of the Company atis ~~September~~required ~~30,~~to ~~2015, the results of the Company’s operations for~~liquidate ~~the~~all ~~three~~or ~~months~~a ~~and~~portion ~~nine~~of ~~months~~its ~~periods~~portfolio ~~ended September 30~~quickly, ~~2015~~it ~~and~~may ~~the~~realize ~~Company’s~~significantly ~~cash~~less ~~flows~~than ~~for~~ the ~~nine~~value ~~months ended September 30, 2015. It should be understood that accounting measurements~~ at ~~interim~~which ~~dates~~it ~~inherently~~previously ~~involve~~recorded ~~greater reliance on~~its ~~estimates than at year-end~~investments. The results of operations for the three months and nine months periods ended September 30, 2015 are not necessarily indicative of the results to be expected for the full year or any future interim periods.

~~NOTE~~Basis 3of ~~– RECENT ACCOUNTING PRONOUNCEMENTS~~Presentation

The ~~Company~~accompanying ~~has~~financial ~~evaluated~~statements have been prepared using the ~~recent~~ accrual basis of accounting ~~pronouncements~~in ~~through~~conformity with accounting principles generally accepted in the ~~date~~United States of ~~this~~America ~~filing,~~(“GAAP”) for interim financial information and ~~management~~the ~~does~~accounting ~~not~~and ~~expect~~financial ~~adoption~~reporting conventions of ~~such~~the ~~pronouncements~~investment company industry and in accordance with the instructions to Form 10-Q and Article 8 of Securities and Exchange ~~have~~Commission a(“SEC”) ~~material~~Regulation ~~impact~~S-X. onAccordingly, 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 orof the Company at March 31, 2016, the results of the Company’s operations for the three months period ended March 31, 2016 and the Company’s cash flows for the three months ended March 31, 2016. The results of operations for the three months period ended March 31, 2016 are not necessarily indicative of the results to be expected for the full year or any future interim periods.

~~-9-~~ 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.

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 42 – ~~FAIR~~SUMMARY ~~VALUE~~OF ~~MEASUREMENTS~~SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 March 31, 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:

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

•

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~~ used in the fair value measurement of the Company’s Level 3 common stocks are growth ~~recent~~rate, ~~open~~risk ~~market~~premium, ~~and~~revenue ~~non~~multiples ~~open-market~~and ~~transactions~~EBITDA ~~with unrelated parties~~multiples. Increases or decreases in any of those inputs in isolation would result in a lower or higher fair value measurement, respectively.

~~-10-~~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.

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

~~The~~NOTE ~~Company~~2 ~~has~~– ~~warrants~~SUMMARY ~~and~~OF ~~call options to~~SIGNIFICANT ~~purchase~~ACCOUNTING ~~common~~POLICIES 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.(CONTINUED)

The significant unobservable inputs used in in the fair value measurement of the Company’s warrants and call options includes the price of the underlying thinly ~~traded~~ traded common stock (determined based upon growth rate, ~~duration~~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.

~~Common~~Generally, ~~Stocks~~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 March 31, 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.

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, 2015 and December 31, 2014 were valued based, in part, on subsequent transactions with unrelated third parties. These positions are classified as Level 3 securities by the Company.

Limited Liability Company Interests

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~~March 3031, ~~2015~~2016 and December 31, ~~2014~~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~~ 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.

-11-

CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

	Quantitative Information about Level 3
	Fair Value Measurements at September 30, 2015
		Fair Value	Valuation Technique	Unobservable Inputs	Range
Assets
Common Stock	$	8,897,917	Recent sales		January 2015 – October 2015
Real Estate Company Investments		277,500	Recent sales		July 2015
2014 Call Options		974,025	Option pricing model	Duration Risk rate Volatility	0.2 – 1.2 years 0.19 – 0.80% 43 – 45%
Series B Warrants		1,712,109	Option pricing model	Duration Risk rate Volatility	0.2 – 1.2 years 0.19 – 0.80% 43 – 45%
Total assets held at fair value	$	11,861,551
Liabilities
Third-Party Call Options	$	(387,947)	Option pricing model	Duration Risk rate Volatility	2.5 – 2.7 years 0.91 – 0.98% 43%
Total liabilities held at fair value	$	(387,947)

-12-

CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Financial instruments, net are comprised of the following at September 30, 2015.

	Cost		Estimated Fair Value
ASSETS
Common Stock	$	1,005,182	$	8,897,917
Real Estate Company Investments		277,500		277,500
2014 Call Options		450		974,025
Series B Warrants		—		1,712,109
		1,283,132		11,861,551
LIABILITIES
Third-Party Call Options	$	—	$	(387,947	)
	$	—	$	(387,947	)

Financial instruments, net are comprised of the following at December 31, 2014.

	Cost		Estimated Fair Value
ASSETS
Common Stocks	$	6,212	$	8,018,621
2014 Call Options		2,492		6,644,680
Series A Warrants		—		9,947,368
Series B Warrants		—		4,227,632
	$	8,704	$	28,838,301
LIABILITIES
Warrant Put Option	$	—	$	(9,973,684	)

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(table of contents)

CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

~~During~~NOTE ~~the~~2 ~~first~~– ~~quarter~~SUMMARY ofOF ~~2014, the Company~~SIGNIFICANT ~~purchased~~ACCOUNTING ~~shares~~POLICIES ~~in a company~~ (~~other than Twinlab~~CONTINUED) 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, 2015, this investment is carried at $0 value under management’s valuation guidelines.

InInvestment ~~August 2014~~Transaction, ~~the Company purchased 10,987,500~~Related ~~split-adjusted~~Income ~~shares~~and ~~of common stock of Twinlab in private transactions from 25 shareholders for total consideration of $3,296.~~Expenses

InPurchases ~~August~~and ~~2014,~~sales ~~the~~of ~~Company~~investments ~~purchased options~~are torecorded ~~acquire~~on ~~8,743,000 outstanding shares of Twinlab’s Common Stock (collectively, the “2014 Call Options”) in~~ a ~~private~~trade-date ~~transaction from 14 stockholders, for total consideration of $2,623~~basis. ~~The~~Realized ~~2014~~gains ~~Call~~and ~~Options~~losses ~~exercise~~on ~~price~~investments ~~was~~are ~~$0.0001 per~~recognized ~~share~~on ~~and~~ the ~~term of the 2014 Call Options expired~~ first-in, ~~August~~first-out ~~2015~~method. ~~Such~~Dividend income ~~options~~on ~~were~~investments ~~immediately~~owned ~~exercisable~~is ~~and~~recognized inon ~~February 2015,~~ the ~~Company~~ex-dividend ~~exercised 7~~date,~~244,500~~ net of ~~those~~applicable ~~options~~withholding taxes.

InTreasury ~~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.Purchases

~~Twinlab~~The ~~and the~~ Company ~~also~~is ~~entered~~authorized ~~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~~repurchase ~~of no less than 1,461,988~~ shares of ~~Common Stock (~~the ~~“Minimum~~Company’s ~~Amount”)~~common ~~per~~stock ~~month~~in ~~(the~~private ~~“Minimum~~transactions ~~Rate”) over~~from ~~the~~time ~~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~~time.

~~During~~Revenue the nine months ended September 30, 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.Recognition

InThe ~~addition,~~Company ~~during~~recognizes ~~the~~revenue ~~nine~~for ~~months~~services when ~~ended~~all ~~September 30, 2015,~~of the ~~Company~~following ~~sold~~conditions anare ~~aggregate~~satisfied: of (1~~,445,360~~) there ~~shares~~is persuasive evidence of an arrangement; (~~unrestricted~~2) the ~~Twinlab~~related service ~~common~~has ~~stock~~been ~~(without~~provided ~~any~~to ~~associated~~the ~~detachable call~~customer; ~~options~~(3) the amount of fees to ~~various~~be ~~unrelated~~paid ~~third~~by ~~party~~the ~~accredited~~customer ~~investors,~~is ~~for~~fixed ~~$0.76~~or ~~per~~determinable; ~~share~~and (4) the collection of fees is probable.

Earnings per Share

The Company follows FASB ASC 260 for 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 March 31, 2016 and 2015, there were no dilutive common shares equivalents outstanding.

Concentration Risks

During the quarter ended March 31, 2016, the Company had $12,000 of sublease income from two sublessees. During the quarter ended March 31, 2015, the Company had $50,001 in revenue generated from one customer for consulting services and had interest income from a related party of $7,446.

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(table of contents)

CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

~~Twinlab~~NOTE and the Company also 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~~SUMMARY ~~(no~~OF ~~longer exercisable after November 30, 2015), one for 4,000,000 warrant~~SIGNIFICANT ~~shares~~ACCOUNTING ~~(no~~POLICIES ~~longer exercisable after March 31, 2016), one for 6,000,000 warrant shares~~ (~~no longer exercisable after July 31, 2016~~CONTINUED) 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 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. 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.

OnIncome 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 eliminated. The Contingent Call Options were valued at $0 at September 30, 2015.Taxes

InThe ~~July~~Company ~~2015,~~follows inASC ~~exchange~~Topic 740 for recording ~~$277,500,~~the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the ~~Company~~financial ~~acquired~~statement aand ~~20%~~income ~~interest~~tax inbasis ~~privately-held~~of ~~Western~~assets ~~New~~and ~~York~~liabilities ~~real~~using ~~estate~~the ~~companies~~enacted LCmarginal ~~Strategic~~tax ~~Realty,~~rate ~~LLC~~applicable ~~and~~when LCthe ~~Strategic~~related ~~Holdings,~~asset ~~LLC,~~or asliability ~~well~~is asexpected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the ~~all~~asset ~~other~~or ~~business~~liability ~~conducted~~each period. If available evidence suggests that it is more likely than not that some portion or toall of the deferred tax assets will not be ~~conducted~~realized, bya valuation allowance is required to reduce the ~~firms’~~deferred ~~majority~~tax ~~holders~~assets to the ~~extent~~amount ~~such~~that ~~other~~is ~~business~~more ~~has~~likely athan ~~primary~~not ~~focus~~to onbe ~~(a)~~realized. ~~real~~Future ~~estate~~changes ~~(subject~~in tosuch ~~the~~valuation ~~exclusion~~allowance ofare ~~certain~~included ~~specified~~in ~~projects),~~the ~~(b)~~provision ~~media/entertainment/show~~for deferred ~~business,~~income ortaxes ~~(c)~~in ~~endorsements/advertisements/personal~~the ~~appearances/use~~period of ~~likeness/monetization of celebrity~~change.

~~Fair~~Deferred ~~Value~~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 ~~Financial~~assets ~~Instruments~~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's ~~financial~~applies ~~instruments~~a more-likely-than-not ~~recorded~~recognition atthreshold ~~fair~~for ~~value~~all tax uncertainties. ASC Topic 740 allows the recognition of those tax benefits that have ~~been~~a ~~categorized~~greater than ~~based~~50% likelihood of being sustained upon aexamination ~~fair~~by ~~value~~the ~~hierarchy~~taxing authorities. ~~The~~As ~~following~~of ~~fair~~March ~~value~~31, ~~hierarchy~~2016 ~~table~~the ~~presents~~Company reviewed its ~~information~~tax ~~about~~positions ~~the~~and ~~Company's~~determined ~~financial~~there ~~instruments~~were ~~measured~~no atoutstanding ~~fair~~or ~~value~~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 and California 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 quarters ended March 31, 2016 and 2015, advertising costs of $14,930 and $21,170, respectively, were included in general and administrative expenses.

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(table of contents)

CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

	Assets and Liabilities Measured at
	Fair Value on a Recurring Basis
	September 30, 2015
	Level 1		Level 2		Level 3		Total
Assets
Financial instruments, at fair value:
Common Stocks	$	—	$	—	$	8,897,917	$	8,897,917
Real Estate Company Investments		—		—		277,500		277,500
2014 Call Options		—		—		974,025		974,025
Series B Warrants		—		—		1,712,109		1,712,109
Total financial instruments, at fair value		—		—		11,861,551		11,861,551
Total assets held at fair value	$	—	$	—	$	11,861,551	$	11,861,551
Liabilities
Financial instruments, at fair value:
Third-Party Call Options	$	—	$	—	$	387,947	$	387,947
Total liabilities held at fair value	$	—	$	—	$	387,947	$	387,947

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

	Assets and Liabilities Measured at
	Fair Value on a Recurring Basis
	December 31, 2014
		Level 1		Level 2		Level 3		Total
Assets
Financial instruments, at fair value:
Common Stocks	$	—	$	—	$	8,018,621	$	8,018,621
2014 Call Options		—		—		6,644,680		6,644,680
Series A Warrants		—		—		9,947,368		9,947,368
Series B Warrants		—		—		4,227,632		4,227,632
Total Financial instruments, at fair value		—		—		28,838,301		28,838,301
Total assets held at fair value	$	—	$	—	$	28,838,301	$	28,838,301
Liabilities
Financial instruments, at fair value:
Warrant Put Option		—		—		9,973,684		9,973,684
Total liabilities held at fair value	$	—	$	—	$	9,973,684	$	9,973,684

Recent Accounting Pronouncements

~~This~~In ~~hierarchy~~May ~~requires~~2014, the ~~Company~~FASB toissued Accounting ~~use~~Standards ~~observable~~update ~~market data~~2014-09, ~~when~~Revenue ~~available,~~from ~~and~~Contracts with Customers ("ASU 2014-09"). ASU 2014-09 specifies a comprehensive model to ~~minimize~~be ~~the~~used ~~use~~in accounting for revenue arising from contracts with customers, and supersedes most of ~~unobservable~~the ~~inputs~~current ~~when~~revenue ~~determining~~recognition guidance, ~~fair~~including ~~value~~industry specific guidance. ~~For~~It applies to all contracts with customers except those that are specifically within ~~some~~the ~~products~~scope orof inother FASB topics, and certain ~~market~~of ~~conditions,~~its ~~observable~~provisions ~~inputs~~also ~~used~~apply into ~~valuing~~transfers ~~certain~~of ~~financial~~nonfinancial assets, ~~and~~including ~~liabilities~~in-substance ~~were~~nonfinancial ~~unavailable~~assets that are not an output of an entity's ordinary activities. InThe ~~situations~~core ~~where~~principal ~~there~~of the model is ~~little,~~that ifrevenue is ~~any,~~recognized ~~market~~to ~~activity~~depict ~~for~~the antransfer ~~asset~~of goods or ~~liability~~services atto customers in an amount that reflects the ~~measurement~~consideration to which the ~~date~~transferring entity expects to be entitled in exchange. To apply the revenue model, an entity will: 1) identify the ~~fair~~contract(s) with ~~value~~a ~~measurement~~customer, ~~objective~~2) ~~remains~~identify tothe ~~measure~~performance obligations in the ~~financial~~contract, ~~asset~~3) atdetermine the transaction price, ~~that~~4) ~~would~~allocate bethe ~~received~~transaction price byto the ~~holder~~ ofperformance obligations in the ~~financial~~contract, ~~asset~~and 5) recognize revenue when (or ~~liability~~as) inthe anentity ~~orderly~~satisfies ~~transaction~~a ~~that~~performance obligation. For public companies, ASU 2014-09 is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016. Early adoption is not permitted. Upon adoption, entities can choose to use either a ~~forced~~full ~~liquidation~~retrospective or ~~distressed~~modified ~~sale~~approach, atas 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 ~~measurement~~potential ~~date~~impact of ASU 2014-09 on the 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.

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 the financial statements.

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(table of contents)

CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

~~The~~NOTE ~~following table includes a roll forward of the amounts for the nine months ended September 30, 2015 for financial instruments classified within Level~~ 3. ~~The~~– ~~classification~~FAIR ofVALUE ~~a financial instrument within Level 3 is based upon the significance of the unobservable inputs to the overall fair value measurement..~~MEASUREMENTS

~~Level~~The 3Company's ~~Recurring~~financial ~~Fair~~instruments recorded ~~Value~~at ~~Measurements~~fair value have been categorized based upon a fair value hierarchy in accordance with accounting guidance. The following fair value hierarchy tables set forth the Company’s recurring fair value measurements at March 31, 2016 and December 31, 2015.

For the Three Months Ended September 30, 2015

	Common Stock			Real Estate Company Investments		2014 Call Options			Series A Warrants			Series B Warrants			Put Option Liability			Third-Party Call Options Liability			Contingent Call Options Liability			Total
Fair value, net, July 1, 2015	$	10,649,197		$	—	$	1,138,860		$	—		$	2,366,784		$	—		$	(621,977	)	$	(225,599	)	$	13,307,265
Realized / unrealized gains (losses) included in earnings		(1,506,909	)		—		(164,835	)		—			(654,675	)		—			234,030			225,599			(1,866,790	)
Purchases 1		500,000			277,500		—			—			—			—			—			—			777,500
Sales		(744,371	)		—		—			—			—			—			—			—			(744,371	)
Settlements / exercises		—			—		—			—			—			—			—			—			—
Transfers in and /or out of Level 3		—			—		—			—			—			—			—			—			—
Fair value , net, September 30, 2015	$	8,897,917		$	277,500	$	974,025			—		$	1,712,109		$	—		$	(387,947	)	$	—		$	11,473,604
Unrealized gains (losses) still held	$	7,892,735		$	—	$	973,575		$	—		$	1,712,109		$	—		$	(387,947	)	$	—		$	10,190,472
1 Purchases of Twinlab common stock were made at various dates at $0.76 per share. Level 3 Recurring Fair Value Measurements For the Nine Months Ended September 30, 2015
	Common Stock			Real Estate Company Investments		2014 Call Options			Series A Warrants			Series B Warrants			Put Option Liability			Third-Party Call Options Liability			Contingent Call Options Liability			Total
Fair value, net, January 1, 2015	$	8,018,621		$	—	$	6,644,680		$	9,947,368		$	4,227,632		$	(9,973,684	)	$	—			—		$	18,864,617
Realized / unrealized gains (losses) included in earnings		(2,128,941	)		—		(164,835	)		(9,823,026	)		(2,515,523	)		9,849,013			234,030			—			(4,549,282	)
Purchases 1		6,505,820			277,500		—			—			—			—			—			—			6,783,320
Sales		(3,497,583	)		—		—			—						—			(621,977	)		—			(4,119,560	)
Settlements / exercises		—			—		(5,505,820	)		(124,342	)		—			124,671			—			—			(5,505,491	)
Transfers in and /or out of Level 3		—			—		—			—			—			—			—			—			—
Fair value , net, September 30, 2015	$	8,897,917		$	277,500	$	974,025			—		$	1,712,109		$	—		$	(387,947	)		—		$	11,473,604
Unrealized gains (losses) still held	$	7,892,735		$	—	$	973,575		$	—		$	1,712,109		$	—		$	(387,947	)		—		$	10,190,472

1 Purchases of Twinlab common stock were made at various dates at $0.76 per share.

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 53 – ~~MARKET,~~FAIR ~~CREDIT~~VALUE ~~AND LIQUIDITY~~MEASUREMENTS ~~RISK~~(CONTINUED)

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.

	Assets and Liabilities Measured at
	Fair Value on a Recurring Basis
	March 31, 2016
	Level 1		Level 2		Level 3		Total
Assets
Financial instruments, at fair value:
Common Stocks	$	—	$	—	$	8,598,030	$	8,598,030
Real Estate Company Investments		—		—		277,500		277,500
2014 Call Options		—		—		1,135,863		1,135,863
Series B Warrants		—		—		1,268,937		1,268,937
Total Financial instruments, at fair value		—		—		11,280,330		11,280,330
Total assets held at fair value	$	—	$	—	$	11,280,330	$	11,280,330

Liabilities
Financial instruments, at fair value:
Third Party Call Options		—		—		608,731		608,731
Total liabilities held at fair value	$	—	$	—	$	608,731	$	608,731

	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

Investments of the Company trade in relatively thin markets and throughout the year, depending upon market conditions, may be considered illiquid. 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 financial instruments.

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 nine months ended September 30, 2015 was $2,519,324 at an effective tax rate of 39.77%, 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 disclosures regarding the Company's unrecognized tax benefits at December 31, 2014 included in the Company's 2014 Annual Report on Form 10-K continue to be relevant for the periods ended September 30, 2015 as to the Company’s unrecognized tax benefits at September 30, 2015.

NOTE 7 – TREASURY STOCK PURCHASES

The Company is authorized to repurchase shares of the Company’s common stock in private transactions from time to time. During 2015, the Company repurchased 200,500 shares at an aggregate cost of approximately $220,000, which included approximately $218,000 in satisfaction of an outstanding note receivable.

NOTE 8 – 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, 2015.

In October 2015, the Company sold 303,947 Twinlab shares to unrelated third parties for $231,000.

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED 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:

March 31, 2016	Cost		Estimated Fair Value			Unrealized Gain (Loss)
ASSETS
Common Stocks	$	1,004,478	$	8,598,030		$	7,593,552
Real Estate Company Investments		277,500		277,500			—
2014 Call Options		450		1,135,863			1,135,413
Series B Warrants		—		1,268,937			1,268,937
	$	1,282,428	$	11,280,330		$	9,997,902

LIABILITIES
Third-Party Call Options	$	—	$	(608,731	)	$	(608,731	)

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	)

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 3 – FAIR VALUE MEASUREMENTS (CONTINUED)

For the quarter ended March 31, 2016, the Company recorded a net unrealized loss on financial instruments of $1,870,997 and a net realized gain on financial instruments of $1,302,000. For the quarter ended March 31, 2015, the Company recorded a net unrealized loss on financial instruments of $1,460,160 and a net realized gain on financial instruments of $1,460,160.

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 March 31, 2016, this investment is carried at $0 value under management’s valuation guidelines.

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 March 31, 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.

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED 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. As of March 31, 2016, the Company owns 11,343,048 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 (no longer exercisable after 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 immediately after the close of business on March 31, 2016, the Company held 12,000,000 warrants under the Series B Warrant.

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 3 – FAIR VALUE MEASUREMENTS (CONTINUED)

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 March 31, 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.

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 3 – FAIR VALUE MEASUREMENTS (CONTINUED)

The following table includes a roll forward of the amounts for the quarter ended March 31, 2016 for financial instruments classified within Level 3.

Level 3 Recurring Fair Value Measurements

For the Three Months Ended March 31, 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		—			—		—		(582,813	)		10,391			(572,422	)
Purchases		—			—		—		—			—			—
Sales		(1,298,575	)		—		—		—			—			(1,298,575	)
Settlements/exercises		—			—		—		—			—			—
Transfers in and/or out of Level 3		—			—		—		—			—			—
Fair value, net, March 31, 2016	$	8,598,030		$	277,500	$	1,135,863	$	1,268,937		$	(608,731	)	$	10,671,599

Unrealized gains (losses) still held	$	7,593,552		$	—	$	1,135,413	$	1,268,937		$	(608,731	)	$	9,389,171

Quantitative information about the valuation techniques and unobservable inputs is required to be disclosed for certain recurring and nonrecurring fair value measurements.

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED 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 March 31, 2016 and December 31, 2015.

		Quantitative Information about Level 3
		Fair Value Measurements at March 31, 2016
		Fair	Valuation	Unobservable	Range
		Value	Technique	Inputs
Assets
Common Stock	$	8,598,030	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		1,268,937	Option pricing model	Duration Risk-free interest rate Volatility	0.33-0.67 years 0.52%-0.62% 50%
Investment in Real Estate Companies		277,500	Recent transaction
Total assets held at fair value	$	11,280,330

Liabilities
Call option liability	$	608,731	Option pricing model	Duration Risk-free interest rate Volatility	2.0-2.2 years 0.73%-0.75% 50%

Total liabilities held at fair value	$	608,731

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED 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
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 first quarter of 2016, the Company sold an aggregate of 1,713,159 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.

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 4 – 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 $300,000 at March 31, 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 March 31, 2016 and December 31, 2015, the unrepaid balance of such advances and direct-payments was $29,700 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.

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CAPSTONE FINANCIAL GROUP, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 5 – 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 March 31, 2016 was $500,348, which reflected an effective tax rate of 39.43%, 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 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 March 31, 2016 as to the Company’s unrecognized tax benefits at March 31, 2016.

NOTE 6 –SUBSEQUENT EVENTS

In April 2016, the Company sold 394,737 Twinlab shares to unrelated third parties for $300,000.

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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~~ 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 ~~April~~May 302, ~~2015~~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

Our business focus is to use our own capital to acquire the outstanding equity securities of other companies. We do not produce goods or services ourselves. Rather, our primary purpose is to own and trade shares of other companies. We seek to discover, unlock and grow value in privately-held or illiquid companies, including through the exercise of friendly influence at a company in support of operational improvements and strategic initiatives. In some cases, we might be one of the largest shareholders of the other company.

We 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 seek to maintain a thorough understanding of how they operate and evaluate their performance and prospects on an ongoing basis.

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 smart phones 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.

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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 our current business model. We believe our current business model is likely to result in lower expenses levels than would have been associated with our financial services company business model.

On ~~August~~May 1114, 2014, we effectively unwound ~~the~~ the Affluent merger transaction, due to Affluent’s inability to produce audited financial statements as required and the ~~change~~ 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.

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 addition, as part of the October 28, 2014 transaction we forgave the $1,089,617 net receivable from Darin Pastor under the crossing lines of credit entered into between Affluent and us in 2013, and the crossing lines of credit were cancelled. As a result of the October 28, 2014 transactions, we recorded an expense item of $1,089,617 and we were deemed to have paid a dividend to Darin Pastor in the amount of $1,484,204.

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

WeDuring ~~did~~the ~~not~~three ~~exercise~~months ~~the~~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 (“~~Minimum~~Third-Party ~~Amount~~Call Options”) ofto ~~shares~~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 ~~Put~~respective ~~Agreement~~unit sale date. In ~~April~~each ~~2015~~case, wethe ~~exercised~~sale price per unit was $0.76 and the ~~Series~~call Aoption ~~Warrant~~was asvalued at $0.156 per call option. (Our references to ~~657~~“unrestricted” shares mean free-trading shares,~~895~~ ~~Twinlab~~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-~~20-~~Party Call Options) for $1,579,480.

~~During~~In ~~the~~total, ~~nine~~during ~~months ended September 30,~~ 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~~4, ~~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~~601, ~~the sale price per unit was $0~~732.~~76.~~

In addition, in the second quarter of 2015 we sold 464,466 Twinlab shares (without any associated Third-Party Call Options) for $353,000, and in the third quarter of 2015 we sold 980,894 Twinlab shares (without any associated Third-Party Call Options) for $745,480.

In total, during the nine months ended September 30, 2015 we sold Twinlab securities for $4,120,732.

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 (the “Noncircumvention Provision”) 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; 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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	-	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.

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

- We ~~have~~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 ~~the~~2015 ~~second~~(i.e., ~~quarter~~after ofMay 28, 2015) we sold an additional ~~464~~1,~~466~~749,307 unrestricted, free-trading Twinlab shares to accredited investors.
	-	In the ~~third~~first quarter of ~~2015~~2016 we sold an additional ~~980~~1,~~894~~713,159 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 (and with at least 14 months of remaining term for 12,000,000 of the warrants).
	-	We exercised 526,316 of such warrants on July 7, 2015.
	-	We exercised 131,579 of such warrants on July 23, 2015.
	-	If not exercised by November 30, 2015, 1,342,105 of such warrants will expire on November 30, 2015.

-31-

(table of contents)

-	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 (and with at least 14 months of remaining term for 12,000,000 of the warrants).
	-	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.

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.

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 three months ended March 31, 2016 we sold 1,713,159 Twinlab shares (without any associated Third-~~22-~~Party Call Options) for $1,302,000.

As of September 30, 2015 (and also giving effect to the October 1, 2015 Amendment’s elimination of the three Contingent Call Options), our position in Twinlab securities was as follows, and we had no contingent liabilities to Twinlab:-32-

~~- We held 13,689,102 outstanding Twinlab shares~~ (~~12,373,312~~table ~~unrestricted,~~of ~~free-trading Twinlab shares and 1,315,790 restricted Twinlab shares~~contents).

-As Weof ~~held~~March 1731,~~342,105~~ ~~warrants~~2016 ~~under~~(and ~~the~~also ~~Series~~giving Beffect to ~~Warrant,~~the atMarch ~~a $0.76 per share exercise price~~31, ~~with~~2016 ~~effective~~ expiration ~~dates ranging from November 30, 2015 to November 30, 2016 (and with at least 10 months~~ of ~~remaining term for 12~~4,000,000 of the ~~warrants~~Series B Warrants)., Ifour ~~not~~position ~~exercised~~in byTwinlab ~~November~~securities ~~30,~~was ~~2015,~~as 1follows,~~342,105~~ ofand we ~~such~~had ~~warrants~~no ~~will~~contingent ~~expire~~liabilities onto ~~November 30, 2015.~~Twinlab:

We held 11,343,048 outstanding Twinlab shares (10,356,206 unrestricted, free-trading Twinlab shares and 986,842 restricted Twinlab shares).

We held 12,000,000 warrants under the Series B Warrant, at a $0.76 per share exercise price, with effective expiration dates at July 31, 2016 (as to 6,000,000 of such warrants) and November 30, 2016 (as to the other 6,000,000 of such warrants).

The 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 our Warrants.

We have 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 are contingently obligated to our accredited-investor counterparties under the 3,976,647 Third-Party Call options.

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

At ~~September~~March 3031, ~~2015~~2016, the fair value of the ~~liability~~ liability under the 3,976,647 Third-Party Call Options was recorded on our balance sheet at $~~387~~608,~~947~~731.

OnThe ~~October~~determination 28of the fair value of our Twinlab stock and derivative securities as of March 31, ~~2014~~2016 is highly significant to our balance sheet and our income statement. In determining the fair value, weour ~~entered~~Board ~~into~~of Directors relied upon a ~~transaction~~valuation report dated March 2, 2016 by an inindependent third party valuation firm. This valuation report, which we ~~acquired~~commissioned, ~~from~~values ~~Darin~~Twinlab ~~Pastor~~common ~~certain~~stock ~~assets~~at ~~which~~$0.758 ~~had~~per share ~~been~~as ~~assets~~ of ~~Affluent~~December ~~and~~31, ~~assumed~~2015. ~~certain~~Twinlab ~~liabilities~~stock ~~which~~is ~~had~~essentially illiquid; accordingly, valuations such as FFG’s are ~~been~~opinions, ~~liabilities~~and ofother ~~Affluent~~observers might have valued Twinlab stock differently if they chose to emphasize other factors than FFG did. For example, ~~including~~Twinlab ~~liabilities~~issued ~~under~~significant ~~notes~~numbers of shares in ~~favor~~the second half of ~~Darin~~2015 ~~Pastor~~at prices well below $0.758 Atper share. ~~September~~If ~~30,~~we ~~2015,~~used ~~the~~in ~~outstanding principal~~our ~~amount~~financial statements a valuation of ~~and~~Twinlab ~~accrued~~stock ~~interest~~(as onof ~~such~~March ~~assumed~~31, ~~notes~~2016) which was well below $680.758 per share,~~606~~ with corresponding valuations for our Twinlab derivative securities, our net assets as of March 31, 2016 would have been significantly reduced and we would have had a significantly larger net loss in the first quarter of 2016.

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 still had not honored it as of the filing date of this Quarterly Report on Form 10-Q, and accordingly we will not reflect this “sale” in our financial statements unless the purchase price is actually paid, and until then we will treat the transaction as a non-event for financial reporting purposes.

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.

-33-

(table of contents)

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 currently are considering electing to become a Business Development Company and/or filing (or causing an affiliated company to file) an application with the United States Small Business Administration to become a Small Business Investment Company. We can give no assurance that such an application will be filed or that, if filed, it will be granted.

In addition, we are working toward substantial energy-~~23-~~related development projects and substantial international minerals trading projects. 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.

InWe ~~addition~~continuously investigate possible acquisitions of positions in new businesses, wesecurities ~~are~~and ~~working~~assets, ~~toward~~and aevaluate ~~substantial~~the retention and disposition of our existing holdings. Changes ~~energy-related~~in ~~development~~the ~~project~~mix of our businesses and investments should be expected. We ~~can~~have ~~give~~in nothe ~~assurance~~past ~~that~~taken ~~such~~preliminary ~~project~~steps ~~will~~toward ~~come~~acquisitions and toinvestments ~~fruition~~in orvarious ~~that~~companies, ifwhich ittransactions ~~does~~were never completed, itand ~~will~~we have made an unsuccessful investment (in beBlackcraft ~~successful~~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~~March 3031, ~~2015~~2016 and ~~2014~~2015

Revenues. Total ~~revenues~~ revenues (excluding gain and loss on investment securities) for the quarters ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015 were $1812,~~460~~ 000 and $4457,~~475~~447. ~~The~~There was ~~2015~~$12,000 ~~period~~of ~~included~~sublease ~~services~~ income offrom ~~$16,660~~two ~~and~~sublessees in the ~~2014~~2016 period. The 2015 period included services income of $3350,~~335~~001. 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 $~~346~~1,~~368~~302,000 realized gain on financial instruments for the quarter ended ~~September~~March 3031, ~~2015~~2016, ~~primarily~~ as a result of our sales of Twinlab shares to third parties during the quarter as ~~well~~for ~~as the cancellation of the Twinlab contingent call options liability~~$1,302,000.

We also recorded a $21,~~213~~870,~~158~~997 change in unrealized loss on financial instruments for the quarter ended ~~September~~March 3031, ~~2015~~2016, primarily as a result of the ~~reduction~~March ~~of our fair value determination~~31, ~~for~~2016 ~~Twinlab~~expiration ~~stock~~of ~~from~~4,000,000 ~~$0.76 to $0.65. Other factors included sales~~ of our Twinlab ~~shares~~common tostock ~~third parties during the quarter~~warrants.

The overall net loss on financial instruments for the quarter was $1568,~~866,790~~997.

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 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. Our judgment to reduce the fair value figure arose primarily from certain direct issuances by Twinlab of large amounts of securities, late in the third quarter and early in the fourth quarter, for meaningfully less than $0.76 per share. We believe those were extraordinary transactions that reflected unusual circumstances including a relative absence of bargaining power on Twinlab’s part and an urgency to sell to raise funds, and accordingly we did not reduce the fair value figure all the way to the values in such issuances (e.g., in the case of Twinlab’s October 2, 2015 issuance of 88,711,241 shares of common stock, representing 30% of its outstanding common stock, to Golisano Holdings LLC, for $25,000,000, $0.2818 per share). We ourselves continued to sell Twinlab shares for $0.76 throughout the third quarter and into the fourth quarter. On balance, we considered that a reduced fair value determination of $0.65 per Twinlab common share as of September 30, 2015 best reflected all of the available evidence pertaining to fair value.-34-

Although our sales of Twinlab stock in the third quarter of 2015 generated cash proceeds of $744,371, we did not record an overall net gain on financial instruments on such sales, because the sales prices (~~$0.76~~table ~~per share) were the same as the fair value we had determined for our Twinlab stock and at which we were carrying the Twinlab stock on our books. The sales merely resulted in a transfer~~ of ~~unrealized gain to realized gain.~~contents)

~~-24-~~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 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 and March 31, 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 quarter of 2016.

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

~~Payroll~~Personnel Expense. ~~Payroll~~Personnel expense for the quarters ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015 was $~~137~~170,~~048~~908 and $5743,~~926~~387, respectively; the increase in ~~2015~~2016 was primarily due to ~~increased~~ salary ~~staffing~~payments ~~following~~of ~~our~~$360,000 ~~move~~ to ~~our~~Darin ~~East~~Pastor ~~Amherst~~and ~~headquarters~~$40,000 to Tracy Pastor in ~~May~~the ~~2015~~first quarter of 2016. WeThese amounts are ~~holding~~attributable to the entire 2016 year, so $100,000 of such amounts were recognized as personnel expense for the first quarter of 2016 and $300,000 of such amounts were recorded at March 31, 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~~March 3031, ~~2015~~2016 and ~~2014~~2015 were $~~318~~92,~~808~~602 and $39260,~~745~~998, respectively. The ~~increase~~high figure for the 2015 period was primarily due to legal fees for preparing documents for production as required by legal process.

General and Administrative. General and administrative expenses (excluding ~~payroll~~personnel expense and professional fees) for the quarters ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015 were $~~451~~447,~~862~~941 and $~~120~~156,~~870~~708, respectively; the increase in ~~2015~~2016 was primarily due to ~~increased~~overseas business development efforts and increased activities following our move to our East Amherst headquarters in May 2015.

Results of Operations for the Nine Months Periods Ended September 30, 2015 and 2014

Revenues. Total revenues (excluding gain and loss on investment securities) for the nine months ended September 30, 2015 and 2014 were $132,922 and $63,170, respectively. This included services income of $116,662 and $33,335, respectively. 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 $480,088 realized loss on financial instruments for the nine months ended September 30, 2015 as a result of the effect of the May 28, 2015 transaction with Twinlab in which we surrendered the entire remaining-unexercised portion of the Series A Warrants (51,973,684 warrants), amended the Series B Warrant terms and amount (combined realized loss of $14,050,658) and terminated the Put Agreement (realized gain of $9,849,013), which outweighed our combined sales of 5,150,915 Twinlab shares to third parties during the nine months period.

We also recorded a $4,069,194 unrealized loss on financial instruments for the nine months ended September 30, 2015, primarily as a result of the reduction of our fair value determination for Twinlab stock from $0.76 to $0.65; this factor alone accounted for $2,269,378 of the unrealized loss. Other factors included our sales of 5,150,915 Twinlab shares to third parties during the nine months period (resulting in a transfer of $3,495,958 of gain from the category of unrealized gain/loss to the category of realized gain) and unrealized loss of $623,140 for the establishment of the Third-Party Call Options, partially offset by $2,366,784 of unrealized gain recorded for the Series B Warrant as amended on May 28, 2015.

The overall net result on financial instruments for the nine months period ended September 30, 2015 and 2014 was a $4,549,282 loss and a $19,207,116 gain, respectively.

-25-

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 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. Our judgment to reduce the fair value figure arose primarily from certain direct issuances by Twinlab of large amounts of securities, late in the third quarter and early in the fourth quarter, for meaningfully less than $0.76 per share. We believe those were extraordinary transactions that reflected unusual circumstances including a relative absence of bargaining power on Twinlab’s part and an urgency to sell to raise funds. Based on the nonstandard nature of those transactions, we did not give full weight in our fair value determination to the pricing of such issuances (e.g., in the case of Twinlab’s October 2, 2015 issuance of 88,711,241 shares of common stock, representing 30% of its outstanding common stock, to Golisano Holdings LLC, for $25,000,000, $0.2818 per share). We ourselves continued to sell Twinlab shares for $0.76 throughout the third quarter and into the fourth quarter. On balance, we considered that a reduced fair value determination of $0.65 per Twinlab common share as of September 30, 2015 best reflected all of the available evidence pertaining to fair value.

Although our sales of Twinlab stock in the first nine months of 2015 generated cash proceeds of $4,120,732, we did not record an overall net gain on financial instruments on those 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. The sales merely resulted in a transfer of unrealized gain to realized gain.

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

Payroll. Payroll for the nine months ended September 30, 2015 and 2014 was $228,593 and $180,081, respectively; the increase in 2015 was primarily due to increased staffing following our move to our East Amherst headquarters in May 2015. For most of the first quarter of 2014 our business focus was that of a financial services company. We are holding the salaries of our most senior officers at very low levels.

Professional Fees. Professional fees for the nine months ended September 30, 2015 and 2014 were $920,402 and $225,267, respectively. The increase was primarily due to legal fees for preparing documents for production as required by legal process, and accounting and legal fees related to required restatements of financial statements and amendments of previous SEC periodic reports.

General and Administrative. General and administrative expenses (excluding payroll expense and professional fees) for the nine months ended September 30, 2015 and 2014 were $760,187 and $486,806, respectively; the increase in 2015 was primarily due to increased activities following our move to our East Amherst headquarters in May 2015. For most of the first quarter of 2014 our business focus was that of a financial services company.

Liquidity and Capital Resources

As of ~~September~~March 3031, ~~2015~~2016, we had $~~425~~323,~~270~~947 in ~~cash~~ cash and cash equivalents, Twinlab and other securities owned which we recorded at an $11,~~861~~280,~~551~~330 fair value, and $8563,~~000~~ 930 of deposits. There is no active liquid public market for our Twinlab or other securities.

-26-

We anticipate obtaining additional financing to fund operations through common stock offerings, sales of Twinlab stock and sales of future-acquired strategic investment securities, to the extent available. There can be no assurance we will be successful in raising the necessary funds to execute our business plan. The realization of cash proceeds, if any, 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.

-35-

(table of contents)

Our current intention is to use meaningful amounts of any free cash flow we generate to make further partial exercises of the Series B Warrant, in order both to help Twinlab maintain and grow its business (thereby benefiting the value of our remaining Twinlab securities) and to avoid or reduce the risk of in effect having a “short” position in Twinlab stock (as described in the following paragraph).

The ~~$9,973,684~~March ~~warrant put option item on our December~~ 31, ~~2014~~2016 balance sheet arose from the contingent possibility that a Put Agreement obligation might arise in the future. There was no such item on our September 30, 2015 balance sheet, because our May 28, 2015 compromise agreement with Twinlab terminated the Put Agreement. However, the September 30, 2015 balance sheet included a $~~387~~608,~~947~~371 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 and/or expiration of unexercised Series B Warrants, we do not have as many Twinlab shares and/or available Series B Warrants 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). The expiration date of the Third-Party Call Options is a substantial number of months after the expiration of the Series B Warrants. If we wish to avoid being “short” Twinlab shares in the manner just described, it may be necessary for us to purchase and 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 ~~Third-Party~~$4,047,557 ~~Call~~deferred ~~Options~~tax ~~were~~liability ~~eliminated~~item ~~under~~on anour ~~October~~March 131, ~~2015~~2016 ~~agreement~~balance ~~with~~sheet ~~Twinlab.~~represents ~~Accordingly~~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 ~~balance~~Twinlab ~~sheet~~securities ~~shows~~which we held as of March 31, 2016, at a ~~zero~~price ~~fair~~resulting ~~value~~in ~~for~~realization of all of the ~~Third-Party~~unrealized ~~Call~~gain we recorded for such assets on our balance sheet (based ~~Options~~on ~~liability~~our fair value assessment as of ~~September~~March 3031, ~~2015~~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.

~~The~~From ~~$5,372,538~~time ~~deferred~~to ~~tax~~time ~~liability~~after ~~item on~~October ~~our September 30~~28, ~~2015~~2014 ~~balance sheet represents the income taxes we would owe if we sold, during tax years in which~~ our ~~taxable~~ ~~income~~controlling ~~levels~~stockholder ~~were~~Darin ~~large~~Pastor ~~enough~~has tomade ~~support~~advances ~~such~~and ~~current~~direct-payments ~~income~~to ~~taxes,~~assist ~~all~~us ~~the~~in ~~Twinlab~~covering ~~securities~~expenses; ~~which~~he weis ~~held~~not ~~as of September 30,~~obligated ~~2015,~~to atmake aany ~~price~~such ~~resulting~~advances inand ~~realization~~direct-payments ofand ~~all~~there ofcan ~~the~~be ~~unrealized~~no ~~gain~~assurance wethat ~~recorded~~any ~~for~~ such ~~assets~~advances onand ~~our~~direct-payments ~~balance~~will ~~sheet (based~~continue. onIn ~~our~~addition, ~~fair~~the ~~value~~amounts ~~assessment as~~ of ~~September~~these ~~30,~~advances ~~2015).~~and Nodirect-payments ~~such~~are ~~taxes~~reimbursable ~~would~~to behim ~~actually~~upon ~~payable~~his ~~unless~~demand ~~and~~at ~~until~~any ~~after~~time. weAt ~~sell~~March 31, ~~the~~2016, ~~Twinlab securities~~$29,700 ~~and the amount~~ of ~~actual~~such ~~taxes~~advances ~~payable~~and ~~would~~direct-payments ~~depend~~had onnot ~~the~~yet ~~actual~~been ~~sales prices~~reimbursed.

~~From~~The ~~time~~entire to$68,416 ~~time~~remaining ~~after~~balance ~~October 28, 2014~~on ~~our~~the ~~controlling~~notes ~~stockholder~~payable to Darin Pastor, ~~has~~which ~~made~~we ~~advances~~assumed ~~and~~as ~~direct-payments~~part toof ~~assist~~our usOctober in2014 ~~covering~~transaction ~~expenses;~~involving heassets ~~is not obligated to make any such advances~~ and ~~direct-payments~~liabilities ~~and there can be no assurance that any such advances and~~of ~~direct-payments~~the ~~will~~former ~~continue.~~Capstone InAffluent ~~addition~~Strategies, ~~the amounts of these advances and direct-payments are reimbursable to him upon his demand at any time~~Inc. ~~At September 30~~, ~~2015,~~plus $~~180,151~~19 of ~~such~~accrued ~~advances~~but ~~and~~unpaid ~~direct-payments~~interest, ~~had~~was ~~not~~repaid ~~yet~~on ~~been~~March ~~reimbursed~~11, 2016.

-27-

At September 30, 2015, the 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., was $68,416, plus $190 of accrued but unpaid interest.

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~~three months of our ~~2015~~2016 and ~~2014~~2015 fiscal years.

	For the nine month periods ended September 30,
	2015			2014
Net cash provided by (used in) operating activities	$	415,639		$	(1,170,609	)
Net cash used in investing activities		(2,039	)		—
Net cash (used in) provided by financing activities		(1,015	)		1,308,700
Net increase in cash		412,585			138,091
Cash, beginning		12,685			—
Cash, ending	$	425,270		$	138,091

-36-

(table of contents)

	For the three month periods ended March 31,
	2016			2015
Net cash provided by operating activities	$	275,414		$	560,667
Net cash used in financing activities		(88,316	)		(450,000	)
Net increase in cash		187,098			110,667
Cash, beginning		136,849			12,685
Cash, ending	$	323,947		$	123,352

Operating activities

Net cash provided by operating activities was $~~415~~275,~~639~~414 for the first ~~nine~~three months of ~~2015~~2016, despite our $3768,~~816,942~~445 after-tax net loss for that ~~nine~~three months period. Although our sales of Twinlab securities in the first ~~nine~~three months of ~~2015~~2016 generated $41,~~120~~302,~~732~~000 in cash proceeds, we ~~did~~the ~~not~~$1,870,997 ~~record~~net anchange ~~overall~~in ~~net~~unrealized gain on financial instruments, onwhich ~~such~~was ~~sales~~primarily due to the ~~extent~~expiration ~~that~~of ~~the sales prices (ranging from~~4,000,000 ~~$0.60~~of ~~to $0.76 per share) were below or equal to the fair value we had determined for~~ our Twinlab ~~stock~~warrants, and ~~at which we were carrying~~ the ~~Twinlab stock on our books. In addition, the~~ ($41,~~069~~302,~~194 net change in unrealized gain on (i.e., additional net loss on~~000) ~~financial instruments and the $480,088~~ net change in realized gain on ~~(i.e., additional net loss on)~~ financial instruments were noncash items. Our ~~These net changes were largely driven by our~~ determination was that the fair value of Twinlab common stock ~~had~~was ~~fallen to~~ $0.65758 per share as of ~~September~~both ~~30,~~March ~~2015~~31, ~~versus~~2016 ~~the~~and ~~$0.76 per share figure used as of~~ December 31, ~~2014~~2015.

For the first ~~nine~~three months period of ~~2014~~2015, ~~net~~ net cash ~~used~~provided ~~for~~by operating activities was $1560,~~170,609,~~667 ~~after~~for ~~adjustment~~the first three months of 2016, despite our $11408,~~078,198~~702 after-tax net ~~income~~ loss for that ~~nine~~three months period. ~~for large~~Although ~~items~~our sales of ~~deferred~~Twinlab ~~tax~~securities ~~liability~~in ~~and~~the ~~net~~first ~~unrealized~~three months of 2015 generated substantial cash proceeds, we did not record an overall net gain on financial instruments ~~associated~~on ~~with~~such sales to the ~~establishment~~extent ofthat 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 ~~initial~~we ~~positions~~were incarrying the Twinlab ~~securities~~stock on our books.

Financing activities

Net cash ~~provided~~used byin financing activities in in the first ~~nine~~three months of ~~2014~~2016 was attributable to ~~capital~~our ~~raised~~our ~~through~~final repayment of notes owed to controlling stockholder Darin Pastor and to partial prepayment of Darin Pastor’s prior 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 ~~issuance~~amounts of ~~our~~these ~~common~~advances ~~stock~~and direct-payments are reimbursable to him upon his demand at any time.

~~-28-~~The net cash used in financing activities in the first three months of 2015 was attributable to repayments on notes payable to Darin Pastor.

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(table of contents)

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. ~~See Note 2 – Summary of Significant Accounting Policies in our Notes to Financial Statements.~~

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.

As required by Rule 13a-15 under the Securities Exchange Act, as of ~~September~~March 3031, ~~2015~~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.

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~~Our~~ (table ~~Board~~ of Directors concluded in November 2014 that the previously issued audited consolidated financial statements and other financial information contained in our initially-filed Annual Report on Form 10-K for the fiscal year ended December 31, 2013 failed to properly account for certain financial information. Consequently, the Board concluded that for comparative purposes the previously issued unaudited financial statements and certain other financial information contained in the initially-filed Quarterly Reports on Form 10-Q for the fiscal periods ended June 30, 2013, September 30, 2013, March 31, 2014, and June 30, 2014, and our earnings releases and other financial communications after the filing of our initially-filed Annual Report on Form 10-K for the fiscal year ended December 31, 2013, should no longer be relied upon.contents)

We thereafter filed corrective amendments of these periodic reports.

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, 2015. 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.~~39-

~~-30-~~ (table of contents)

Our management ~~concluded~~assessed ~~that~~the aseffectiveness of ~~September~~ ~~30, 2015~~ our internal control over financial reporting ~~was~~as ~~not~~of ~~effective~~March 31, ~~and~~2016. ~~that~~In ~~material~~making ~~weaknesses~~our ~~existed~~assessment, inwe used the ~~following~~framework and criteria ~~areas~~set asforth by the Committee of ~~September~~Sponsoring 30Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework in 2014. Based on that assessment, ~~2015:~~our management has identified certain material weaknesses in our internal control over financial reporting.

Our management concluded that as of March 31, 2016 our internal control over financial reporting was not effective, and that material weaknesses existed in the following areas as of March 31, 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~~ 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 ~~engaged~~are ~~corporate~~increasing ~~and~~our ~~securities~~use ~~legal~~of ~~counsel~~experienced ~~with~~corporate ~~better capabilities~~and ~~than~~securities ~~our~~legal ~~previous provider’s~~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~~first quarter of ~~2015~~2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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(table of contents)

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 ~~April~~May 302, ~~2015~~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 (“GAAP”) 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 based on our fair value figures for Twinlab securities, readers should be especially aware of the risk.

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(table of contents)

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

We made no unregistered ~~sales~~issuances of ~~securities of~~ our securities ~~during~~ during the quarter ended ~~September~~March 3031, ~~2015~~2016.

Item 3. Defaults Upon Senior Securities

None.

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Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

OnNot ~~July 5, 2015, Twinlab and we entered into the Limited Waiver Agreement, pursuant to which we agreed to waive the Noncircumvention Provision as to a particular potential investor (B~~applicable. Thomas Golisano) whom we had introduced to Twinlab in June 2015 and to whom the Noncircumvention Provision would otherwise apply, in exchange for substantial contingent compensation in cash and Twinlab warrants calculated on the basis of the size and pricing of such investor’s purchase(s) of Twinlab securities. (We thereafter surrendered this contingent right to compensation, in exchange for the immediate elimination of the Contingent Call Options.)

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(table of contents)

Item 6. Exhibits

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

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			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
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

			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	Securities Purchase Agreement dated July 24, 2015 among the Company, LC Strategic Realty, LLC, Christopher Naugle and Lorissa Naugle	X
10.2	Members Agreement dated July 24, 2015 among the Company, LC Strategic Realty, LLC, Christopher Naugle and Lorissa Naugle	X
10.3	Non-Competition Agreement dated July 24, 2015 among the Company, LC Strategic Realty, LLC and Christopher Naugle	X
10.4	Non-Competition Agreement dated July 24, 2015 among the Company, LC Strategic Realty, LLC and Lorissa Naugle	X
10.5	Securities Purchase Agreement dated July 24, 2015 among the Company, LC Strategic Holdings, LLC, Christopher Naugle and Lorissa Naugle	X
10.6	Members Agreement dated July 24, 2015 among the Company, LC Strategic Holdings, LLC, Christopher Naugle and Lorissa Naugle	X
10.7	Non-Competition Agreement dated July 24, 2015 among the Company, LC Strategic Holdings, LLC and Christopher Naugle	X
10.8	Non-Competition Agreement dated July 24, 2015 among the Company, LC Strategic Holdings, LLC and Lorissa Naugle	X

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~~-34-~~ (table of contents)

10.9	Agreement for Limited Waiver of Noncircumvention Provision, between the Company and Twinlab Consolidated Holdings, Inc., dated July 5, 2015		8-K	10.1	10/8/2015
10.10	Amendment No. 1 to Agreement for Limited Waiver of Non-Circumvention Provision and to Compromise Agreement and Release, between the Company and Twinlab Consolidated Holdings, Inc., dated October 1, 2015		8-K	10.2	10/8/2015
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

-35-

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: ~~November~~June 208, ~~2015~~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,	~~November~~June 208, ~~2015~~2016
Darin R. Pastor	Chief Executive Officer (Principal Executive Officer)
/s/ Halford W. Johnson	Chief Financial Officer	~~November~~June 208, ~~2015~~2016
Halford W. Johnson	(Principal Financial Officer and Principal Accounting Officer)

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Filing Compare · CAPSTONE FINANCIAL GROUP, INC.