Capital Financial (CPFH) 10-Q 22 Aug 16 2016 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information	6 Months Ended
	Jun. 30, 2016shares
Document And Entity Information
Entity Registrant Name	Capital Financial Holdings, Inc
Entity Central Index Key	944,696
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding	1,241
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2,016

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
CURRENT ASSETS
Cash and cash equivalents	$ 1,648,621	$ 1,038,426
Accounts receivable (net of an allowance of $24,000 for 2016 and 2015)	1,740,963	1,766,030
Prepaids	102,941	115,587
Baron notes interest receivable	0	38,420
Income taxes receivable	2,121	0
Total current assets	3,494,646	2,958,463
PROPERTY AND EQUIPMENT
Oil & Natural Gas Properties, Full Cost Method of Accounting	194,602	194,602
Less accumulated depletion	(20,909)	(10,467)
Total oil & natural gas properties	173,693	184,135
Furniture, fixtures and equipment	539,076	517,192
Less accumulated depreciation	(399,519)	(375,675)
Other property holdings	86,277	86,277
Net property and equipment	399,527	411,929
OTHER ASSETS
Severance escrow	258,056	257,927
Baron notes receivable	0	500,000
Deferred tax asset - non-current	243,232	241,576
Other assets (net of accumulated amortization of $214,444 for 2016 and 2015)	175,279	180,772
Total other assets	676,567	1,180,275
TOTAL ASSETS	4,570,740	4,550,667
CURRENT LIABILITIES
Accounts payable	191,544	156,312
Commissions payable	1,771,294	1,712,109
Other current liabilities	173,329	24,366
Income taxes payable	0	61,667
Total current liabilities	2,136,167	1,954,454
NON CURRENT LIABILITIES
Asset retirement obligation	2,907	2,907
Promissory note	0	50,000
Total noncurrent liabilities	2,907	52,907
TOTAL LIABILITIES	2,139,074	2,007,361
STOCKHOLDERS' EQUITY
Series A preferred stock – 5,000,000 shares authorized, $.0001 par value; 3,050,000 and 3,050,000 shares issued and 0 outstanding, respectively	305	305
Additional paid in capital - series A preferred stock	1,524,695	1,524,695
Common stock – 1,000,000,000 shares authorized, $.0001 par value; 1,241 and 1,241 shares issued and outstanding, respectively	1,241	1,241
Additional paid in capital - common stock	10,221,515	10,221,515
Accumulated deficit	(8,016,090)	(7,904,450)
Less Treasury stock, 3,050,000 preferred shares at $0.4262	(1,300,000)	(1,300,000)
TOTAL STOCKHOLDERS' EQUITY	2,431,666	2,543,306
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 4,570,740	$ 4,550,667

CONDENSED CONSOLIDATED BALANCE3

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
CURRENT ASSETS
Allowance for doubtful accounts	$ 24,000	$ 24,000
STOCKHOLDERS' EQUITY
Series A Preferred stock, par value	$ 0.0001	$ 0.0001
Series A Preferred stock shares authorized	5,000,000	5,000,000
Series A Preferred stock shares issued	3,050,000	3,050,000
Series A Preferred stock shares outstanding	0	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock shares authorized	1,000,000,000	1,000,000,000
Common stock shares issued	1,241	1,241
Common stock shares outstanding	1,241	1,241
Treasury stock	3,050,000	3,050,000
Treasury stock, par value	$ 0.4262	$ 0.4262

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
OPERATING REVENUES
Fee income	$ 337,983	$ 301,838	$ 596,089	$ 586,484
Commissions	3,983,351	4,665,487	7,823,827	9,065,671
Oil and gas revenue	19,460	8,672	33,136	8,672
Other fee income	49,911	59,078	119,434	134,337
Total revenue	4,390,705	5,035,075	8,572,486	9,795,164
OPERATING EXPENSES
Compensation and benefits	350,741	252,220	732,593	617,529
Commission expense	3,776,517	4,371,246	7,408,766	8,469,904
General and administrative expenses	268,380	477,884	518,105	745,403
Depreciation	12,006	10,242	23,844	21,215
Depletion	4,990	0	10,442	0
Total operating expenses	4,412,634	5,111,592	8,693,750	9,854,051
OPERATING LOSS	(21,929)	(76,517)	(121,266)	(58,887)
OTHER INCOME (EXPENSES)
Interest expense	(947)	(1,248)	(1,794)	(3,451)
Interest income	76	18,855	16,359	37,716
Other income (expense)	(10,925)	6,612	(1,032)	27,171
Total other income	(11,796)	24,219	13,533	61,436
INCOME (LOSS) OF CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE	(33,725)	(52,298)	(107,733)	2,549
INCOME TAX EXPENSE	(2,618)	(4,003)	(3,907)	(69,410)
NET LOSS	$ (36,343)	$ (56,301)	$ (111,640)	$ (66,861)
NET INCOME PER COMMON SHARE:
Basic	$ (29)	$ (45)	$ (90)	$ (54)
Diluted	$ (29)	$ (45)	$ (90)	$ (54)
SHARES USED IN COMPUTING NET PER COMMON SHARE:
Basic	1,241	1,241	1,241	1,241
Diluted	1,241	1,241	1,241	1,241

CONDENSED CONSOLIDATED STATEME5

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)	$ (111,640)	$ (66,861)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation	23,844	21,885
Depletion	10,442	0
Provision for deferred income taxes	(1,656)	62,830
(Increase) decrease in:
Accounts receivable	63,487	131,422
Income taxes payable	(63,788)	(3,698)
Prepaids	18,139	9,270
Severance escrow	(129)	(127)
Accounts Payable	35,232	(207,776)
Commissions Payable	59,185	19,195
Other liabilities	148,963	371,893
Net cash (used in) provided by operating activities	182,079	338,033
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment	(21,884)	(10,419)
Repayment of Baron notes	500,000	0
Additions to proved properties	0	(84,625)
Additions to real estate held for investment	0	(90,000)
Net cash provided by (used in) investing activities	478,116	(185,044)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of short-term borrowings	(50,000)	(146,601)
Net cash used in financing activities	(50,000)	(146,601)
NET INCREASE IN CASH AND CASH EQUIVALENTS	610,195	6,388
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	1,038,426	1,333,323
CASH AND CASH EQUIVALENTS AT END OF PERIOD	1,648,621	1,339,711
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Cash paid for interest	$ 0	$ 3,451

1. BASIS OF PRESENTATION

1. BASIS OF PRESENTATION	6 Months Ended
	Jun. 30, 2016
Accounting Policies [Abstract]
NOTE 1 - BASIS OF PRESENTATION	The accompanying condensed consolidated financial statements of Capital Financial Holdings, Inc., a North Dakota corporation, and its subsidiaries Capital Financial Services, Inc. (“CFS”) and Capital Natural Resources, Inc. (“CNR”) (collectively, the "Company"), included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the footnotes thereto contained in the Annual Report on Form 10-K for the year ended December 31, 2015, of Capital Financial Holdings, Inc., as filed with the SEC. The condensed consolidated balance sheet at December 31, 2015, contained herein, was derived from audited financial statements, but does not include all disclosures included in the Form 10-K and applicable under accounting principles generally accepted in the United States of America. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America, but not required for interim reporting purposes, have been condensed or omitted. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (which are of a normal, recurring nature) necessary for a fair presentation of the financial statements. The results of operations for the six months ended June 30, 2016, are not necessarily indicative of operating results for the entire year. Oil and Gas Properties CNR follows the full cost method of accounting for crude oil and natural gas operations whereby all costs related to the exploration and development of crude oil and natural gas properties are capitalized into a single cost center (“full cost pool”). Such costs include land acquisition costs, geological and geophysical expenses, carrying charges on non-producing properties, costs of drilling directly related to acquisition, and exploration activities. Proceeds from property sales will generally be credited to the full cost pool with no gain or loss recognized, unless such a sale would significantly alter the relationship between capitalized costs and the proved reserves attributable to these costs. Capitalized costs are depleted and amortized on the unit-of-production method based on the estimated gross proved reserves as determined by independent petroleum engineers. The costs of unproved properties are withheld from the depletion base until such time as they are either developed or abandoned. When proved reserves are assigned or the property is considered to be impaired, the cost of the property or the amount of the impairment is added to costs subject to depletion and full cost ceiling calculations. For the six months ended June 30, 2016, depletion expense was $10,442. As of June 30, 2016, CNR held leasehold interests on acreage located in Gonzales and Taylor County, Texas, Lincoln County, Colorado and Divide and Williams County, North Dakota. CNR holds 50% non-operating working interest (36.25% Net Interest) in the Kifer Rozella 1, producing oil well, located in the County of Gonzales, state of Texas and non-operating working interest in an oil and gas property consisting of a twenty-five percent interest in three oil and gas leases covering approximately 618 acres in Taylor County, Texas. The oil and gas leases in North Dakota and Colorado are currently non-producing properties and non-operating leases. The Company assesses all items classified as unproved property on an annual basis, or if certain circumstances exist, more frequently, for possible impairment or reduction in value. As of June 30, 2016 the Company held non-producing and unproved properties in Lincoln County, Colorado and Divide and Williams County, North Dakota. Oil and Gas Revenue The Company recognizes oil and gas revenue for only its ownership percentage of total production under the entitlement method. There was no imbalance as of June 30, 2016. Asset Retirement Obligations Asset retirement obligation is included in other noncurrent liabilities and relates to future costs associated with the plugging and abandonment of crude oil and natural gas wells, removal of equipment and facilities from leased acreage and returning the land to its original condition. Estimates are based on estimated remaining lives of those wells based on reserve estimates, external estimates to plug and abandon the wells in the future, inflation, credit adjusted discount rates and federal and state regulatory requirements. The liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. As of June 30, 2016, asset retirement obligations were $2,907 and for the six months ended June 30, 2016 accretion expense was not significant.

2. RECENTLY ADOPTED ACCOUNTING

2. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS	6 Months Ended
	Jun. 30, 2016
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]
NOTE 2 - RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS	A summary of our significant accounting policies is included in Note 1 of our 2015 Form 10-K filed on March 28,2016. Update 2016-10— Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing Update 2016-12— Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients

3. BUSINESS VENTURES

3. BUSINESS VENTURES	6 Months Ended
	Jun. 30, 2016
Business Ventures
NOTE 3 - BUSINESS VENTURES	On June 9, 2014, the Company launched a new wholly-owned operating subsidiary, Capital Natural Resources, Inc., by acquiring 1,000,000 shares, .001 par value common stock of Capital Natural Resources, Inc. (“CNR”) for the amount of $100,000. Capital Natural Resources, Inc. will seek opportunities related to natural resources in the United States, including petroleum, natural gas and/or other minerals, water resources and land. The new subsidiary is expected to diversify the business operations of the Company and is unrelated to any current or past business. On June 17, 2014, the Company acquired an additional 400,000 shares, .001 par value common stock of CNR for the amount of $40,000. On July 21, 2014, the Company acquired an additional 3,750,000 shares, .001 par value of common stock of CNR for the amount of $375,000. As of June 30, 2016, the Company owned 5,150,000 shares of CNR. On April 1, 2015, CNR obtained a non-operating working interest in an oil and gas property consisting of a twenty-five percent interest in three oil and gas leases covering approximately 618 acres in Taylor County, Texas for a purchase price of $90,000 paid in cash. This purchase is presented as oil and natural gas properties on the balance sheet. On December 1, 2015, CNR purchased a 50% non-operating working interest (36.25% Net Interest) in the Kifer Rozella 1, producing oil well, located in the County of Gonzales, state of Texas. The purchase price of $100,000 for CNR’s 50% interest was paid by $50,000 by a promissory note and deed of trust carried by the Seller, Origin Production Company, Inc. Said promissory note has an annual interest rate of 10% per annum and is payable in monthly installment of approximately $1,062 beginning January 1, 2016 with final maturity on December 1, 2020. The leasehold consists of approximately 193 acres. This purchase is presented as oil and natural gas properties on the balance sheet. On February 1, 2016 the Company paid off the promissory note in the amount of approximately $50,847 bringing the balance of the note to zero. Total interest paid on the promissory note was approximately $847. On July 28, 2015, CNR acquired five-year oil and gas leases on one 80-acre tract located in Williams County, North Dakota and two 80 acre tracts located in Divide County, North Dakota for a combined acquisition cost of $7,676, including lease bonus and prepaid annual rentals. The oil and gas leases were obtained from the State of North Dakota Department of Trust Lands. The leases grant the right to conduct oil and gas operations and extract oil and gas from the property with payment of royalty to the lessor of 3/16 of oil and gas produced. The leases will expire August 3, 2020 unless held by production, meaning oil and gas is being produced from the properties. On August 20, 2015, CNR acquired a five-year oil and gas lease on a 640-acre tract located in Lincoln County, Colorado at an initial acquisition cost of $1,652 including the first annual rental payment of $1,600. The oil and gas lease was obtained from the Colorado State Board of Land Commissioners. The lease grants the right to conduct oil and gas operations and extract oil and gas from the property with payment of royalty to the lessor of 1/6 of oil and gas produced. The lease will expire August 20, 2020 unless held by production, meaning oil and gas is being produced from the property. The oil and gas leases in North Dakota and Colorado are currently non-producing properties and non-operating leases. The purchase allocation for all four CNR oil and gas lease transactions was based on the estimated fair value of the assets acquired. On May 19, 2015, CNR acquired interests in 383 acres of coal rights located in Kanawha County, West Virginia with 1,483,451 recoverable tons for a purchase price of $1,275 paid in cash. This purchase is presented as other property holdings on the balance sheet. On June 11, 2015, CNR acquired 724.5 acres of mineral, water rights and surface interests in Hudspeth County, Texas for a purchase price of $83,350 paid in cash. This purchase is presented as other property holdings on the balance sheet.

4. BARON NOTES RECEIVABLE

4. BARON NOTES RECEIVABLE	6 Months Ended
	Jun. 30, 2016
Business Acquisition, Pro Forma Information [Abstract]
NOTE 4 - BARON NOTES RECEIVABLE	On June 11, 2014, June 27, 2014, and July 22, 2014, Baron Energy, Inc. issued promissory notes to Capital Natural Resources, Inc. (the “note holder”) in the amounts of $85,000, $40,000 and $375,000, respectively. The three notes carried an interest rate of 15% per annum, payable monthly, and mature on June 12, 2016, June 28, 2016 and July 23, 2016, respectively. On March 21, 2016, the notes were paid in full including all unpaid accrued interest in the amount of $82,642 bringing the receivable balance to zero. The accrued interest receivable was recorded under the current assets on the balance sheet.

5. LINE OF CREDIT

5. LINE OF CREDIT	6 Months Ended
	Jun. 30, 2016
Line of Credit Facility [Abstract]
NOTE 5 - LINE OF CREDIT	On July 14, 2014, the Company signed new loan documents for a line of credit with American Bank Center in the amount of $300,000. The line of credit had a variable interest rate of 1.509 percent above Wall Street Journal U.S. Prime Rate. The loan matured July 14, 2015. The Company set up monthly payments with an automatic payment of $25,000. There are no financial covenants associated with the line of credit. The Company made a payment of $25,000 on July 6, 2015, and a final payment of $28,578 on July 14, 2015, bringing the balance to zero. The total interest expense on this line of credit was $8,061. On July 14, 2015, the Company signed renewal loan documents for the line of credit with American Bank Center in the amount of $500,000. The line of credit has a variable interest rate of 1.509 percent above Wall Street Journal U.S. Prime Rate. The loan matures with principal due on July 14, 2016. For the period ended June 30, 2016, the Company had no outstanding balance against this line of credit before renewal. As of June 30, 2016, the Company had zero outstanding and zero interest expense against its current line of credit. There are no financial covenants associated with the line of credit.

6. STOCK WARRANTS, STOCK SPLITS

6. STOCK WARRANTS, STOCK SPLITS, AND STOCK OPTIONS	6 Months Ended
	Jun. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
NOTE 6 - STOCK WARRANTS, STOCK SPLITS, AND STOCK OPTIONS	The Company measures and records compensation expense for all share-based payment awards made to employees and directors, including employee stock options, based on estimated fair values. There were no compensation costs or deferred tax benefits recognized for stock-based compensation awards for the six months ended June 30, 2016 and 2015. Changes are due to the stock buyback and reverse stock split. Option activity for the twelve months ended December 31, 2015 and the six months ended June 30, 2016 was as follows: Number of Options Weighted Average Exercise Price per Share Weighted Average Grant Date Fair Value Aggregate Intrinsic Value Outstanding on January 1, 2015 336 $$5,400 $2,800 $- Granted - - - Exercised - - - Canceled 129 - - Outstanding on December 31, 2015 207 $$4,734 $4,388 $- Granted - - - Exercised - - - Canceled 28 5,000 3,670 Outstanding on June 30, 2016 179 $$4,571 $4,388 $- Exercisable options totaled 207 at December 31, 2015 and totaled 179 at June 30, 2016.

7. INCOME TAXES

7. INCOME TAXES	6 Months Ended
	Jun. 30, 2016
Income Tax Disclosure [Abstract]
NOTE 7 - INCOME TAXES	Deferred taxes arise because of different tax treatment between financial statement accounting and tax accounting, known as “temporary differences.” The Company records the tax effect of these temporary differences as “deferred tax assets” (generally items that can be used as a tax deduction or credit in future periods) and “deferred tax liabilities” (generally items for which the Company has received a tax deduction and has not yet been recorded in the consolidated statement of operations). Management reviews and adjusts those estimates annually based upon the most current information available. However, because the recoverability of deferred taxes is directly dependent upon the future operating results of the Company, actual recoverability of deferred taxes may differ materially from management’s estimates. Due to stock options forfeited, the deferred tax assets associated with stock compensation valued under the Black Scholes model were reduced. As of June 30, 2016, approximately $1,098 was recorded as tax expense for the quarter and an accumulated amount of approximately $420,459 has been recorded as tax expense since the beginning of stock options being forfeited.

8. EARNINGS PER SHARE

8. EARNINGS PER SHARE	6 Months Ended
	Jun. 30, 2016
Earnings Per Share [Abstract]
NOTE 8 - EARNINGS PER SHARE	Basic earnings per share are computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect per share amounts that would have resulted if dilutive potential common shares had been converted to common shares. The following reconciles amounts reported in the financial statements: Three Months Ended June 30, 2016 Three Months Ended June 30, 2015 Numerator Denominator Per Share Amount Numerator Denominator Per Share Amount Net Loss $(36,343) (56,301) Less: Preferred Stock Dividends Income Available to Common Shareholders – Basic Earnings per Share $(36,343) 1,241 (29) (56,301) 1,241 $(45) Effect of Dilutive Securities: Preferred Stock Dividends Stock Options and Warrants Income Available to Common Shareholders – Diluted Earnings per Share $(36,343) 1,241 (29) (56,301) 1,241 $(45) Six Months Ended June 30, 2016 Six Months Ended June 30, 2015 Numerator Denominator Per Share Amount Numerator Denominator Per Share Amount Net Loss $(111,640) (66,861) Less: Preferred Stock Dividends Income Available to Common Shareholders – Basic Earnings per Share $(111,640) 1,241 (90) (66,861) 1,241 $(54) Effect of Dilutive Securities: Preferred Stock Dividends Stock Options and Warrants Income Available to Common Shareholders – Diluted Earnings per Share $(111,640) 1,241 (90) (66,861) 1,241 $(54) Options and warrants to purchase 389 common shares at exercise prices between $3,500 and $14,300 were outstanding at June 30, 2016, but were not included in the computation of diluted earnings per share for the quarter ending June 30, 2016 and June 30, 2015, because their effect was anti-dilutive.

9. SEGMENT REPORTING

9. SEGMENT REPORTING	6 Months Ended
	Jun. 30, 2016
Segment Reporting [Abstract]
NOTE 9 - SEGMENT REPORTING	Holding Natural Resource Broker-Dealer As of, and for the three months ended: Company Activities Services Total 30-Jun-16 Commissions and fee income — — 4,321,334 4,321,334 Other fee income — — 49,911 49,911 Oil and gas revenue — 19,460 — 19,460 Other income (3,410 ) — (7,515 ) (10,925 ) Interest income 17 — 60 76 Interest expense (947 ) — — (947 ) Depreciation 688 160 11,158 12,006 Depletion — 4,990 — 4,990 Income (loss) before income tax benefit (expense) (90,442 ) (15,256 ) 71,973 (32,725 ) Income tax benefit (expense) 32,419 7,107 (42,144 ) (2,618 ) Net income (loss) (58,024 ) (8,148 ) 29,829 (36,343 ) Segment assets 558,517 872,582 3,139,641 4,570,740 Holding Natural Resource Broker-Dealer As of, and for the three months ended: Company Activities Services Total 30-Jun-15 Commissions and fee income — — 4,967,325 4,967,325 Other operating income — — 59,078 59,078 Oil and gas revenue — 8,672 — 8,672 Other income — — 6,612 6,612 Interest income 45 18,750 60 18,855 Interest expense (1,197 ) — (52 ) (1,248 ) Depreciation 965 — 9,277 10,242 Income (loss) before income tax benefit (expense) (8,110 ) (1,223 ) (42,965 ) (52,298 ) Income tax benefit (expense) (21,325 ) 480 16,842 (4,003 ) Net income (loss) (29,435 ) (744 ) (26,123 ) (56,301 ) Segment assets 786,161 801,645 3,429,385 5,017,191 Holding Natural Resource Broker-Dealer As of, and for the six months ended: Company Activities Services Total 30-Jun-16 Commissions and fee income — — 8,419,915 8,419,915 Other fee income — — 119,434 119,434 Oil and gas revenue — 33,136 — 33,136 Other income (3,529 ) — 2,497 (1,032 ) Interest income 33 16,206 120 16,359 Interest expense (947 ) (847 ) — (1,794 ) Depreciation 1,222 281 22,341 23,844 Depletion — 10,442 — 10,442 Income (loss) before income tax benefit (expense) (190,258 ) (26,317 ) 108,842 (107,733 ) Income tax benefit (expense) 41,428 11,443 (56,778 ) (3,907 ) Net income (loss) (148,830 ) (14,874 ) 52,064 (111,640 ) Segment assets 584,265 846,834 3,139,641 4,570,740 Holding Natural Resource Broker-Dealer As of, and for the six months ended: Company Activities Services Total 30-Jun-15 Commissions and fee income — — 9,652,155 9,652,155 Other operating income — — 134,337 134,337 Oil and gas revenue — 8,672 — 8,672 Other income 15,328 — 11,843 27,171 Interest income 96 37,500 119 37,716 Interest expense (3,399 ) — (52 ) (3,451 ) Depreciation 1,905 — 19,310 21,215 Income (loss) before income tax benefit (expense) (114,882 ) 5,912 111,519 2,549 Income tax benefit (expense) (23,377 ) (2,318 ) (43,715 ) (69,410 ) Net income (loss) (138,259 ) 3,594 67,804 (66,861 ) Segment assets 786,161 801,645 3,429,385 5,017,191 The Company organizes its current business units into three reportable segments: broker dealer services, natural resources and holding company. The broker-dealer services segment distributes securities and insurance products to retail investors through a network of registered representatives through its wholly-owned subsidiary, Capital Financial Services, Inc. (“CFS”), a Wisconsin corporation. The natural resources segment seeks opportunities related to natural resources in the United States, including petroleum, natural gas and/or other minerals, water resources and land through its wholly-owned subsidiary, Capital Natural Resources, Inc. (“CNR”), a Colorado corporation. The holding company encompasses cost associated with business development and acquisitions, dispositions of subsidiary entities and results of discontinued operations, dividend income and recognized gains or losses. The Company's reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies.

10. LEGAL PROCEEDINGS

10. LEGAL PROCEEDINGS	6 Months Ended
	Jun. 30, 2016
Commitments and Contingencies Disclosure [Abstract]
NOTE 10 - LEGAL PROCEEDINGS	The Company operates in a legal and regulatory environment that exposes it to potentially significant litigation risks. Issuers of certain alternative products sold by the Company are in Bankruptcy or may have other financial difficulties. As a result of such alleged failings of alternative products and the uncertainty of client recovery from the various product issuers, the Company is subject to several legal and/or arbitration proceedings. These proceedings include customer suits and arbitrations related to the failure of Medical Capital, other alternative investments alleged to be unsuitable, the bankruptcy proceedings of the various DBSI entities and the bankruptcy of other various entities. The Company vigorously contests the allegations of the various proceedings and believes that there are multiple meritorious legal and fact based defenses in these matters. Such cases are subject to many uncertainties, and their outcome is often difficult to predict, including the impact on operations or on the financial statements, particularly in the earlier stages of a case. The Company makes provisions for cases brought against it when, in the opinion of management after seeking legal advice, it is probable that a liability exists, and the amount can be reasonably estimated. The current proceedings are subject to uncertainties and, as such, the Company is unable to estimate the possible loss or range of loss that may result from the outcome of these cases; however, results in these cases that are against the interests of the Company could have a severe negative impact on the financial position of the Company. As of June 30, 2016, the Company is a defendant in three on-going suits or arbitrations as discussed above. The Company expects to vigorously defend these cases. As of June 30, 2016, the Company has booked a contingent liability in the amount of $41,000 in relation to one of the cases mentioned above. On April 5, 2011, several broker-dealers and their principals/officers, including the Company and John Carlson, President and Chief Compliance Officer, filed a lawsuit in the Superior Court of California for Orange County against Mayer Hoffman McCann, P.C. (“Mayer Hoffman”) captioned Signature Financial Group, Inc., et al, (“Signature”) v. Mayer Hoffman McCann, P.C., et al. The lawsuit arose out of reviews of the financial statements of Medical Capital Holdings, Inc. (“Medical Capital”) by Mayer Hoffman. In June 2009, Medical Capital was sued by the U.S. Securities and Exchange Commission (“SEC” or “Commission”), a finding was made that Medical Capital was conducting a “Ponzi scheme,” and a receiver was appointed to liquidate Medical Capital. The plaintiffs in the Signature lawsuit are broker-dealers and principals of broker-dealers that sold Medical Capital investments to their clients. These plaintiffs sought to recover damages from Mayer Hoffman for the losses and expenses they incurred as a result of the Medical Capital financial deceptions and resulting expenses and losses to the plaintiffs. Specific claims asserted and relief requested included fraud-intentional misrepresentation of fact/concealment of fact, negligent misrepresentation, equitable indemnity, and declaratory relief. On September 23, 2014, the Plaintiffs entered into a Confidential Settlement and Mutual Release Agreement (the “Settlement Agreement”) with Mayer Hoffman and entities affiliated with Mayer Hoffman to settle the Plaintiffs’ claims against Mayer Hoffman and all affiliated parties of Mayer Hoffman with no admission of liability or fault by any defendant. The settlement proceeds were received on December 4, 2014 and recorded as other income on the consolidated financial statements of Capital Financial Holdings, Inc. In a matter related to the Settlement Agreement, on or about October 6, 2014, the Company filed a lawsuit seeking declaratory judgment against its former errors and omission insurance carrier - Arch Specialty Insurance Company (“Arch”) - in the Circuit Court of Wisconsin for Milwaukee County (Capital Financial Services, Inc. v. Arch Specialty Insurance Company). On or about November 24, 2014, Arch filed counterclaims against the Company. These actions are for declaratory relief in connection with a dispute over whether Arch is entitled to any portion of the settlement proceeds that the Company received in exchange for dismissing the lawsuit with Mayer Hoffman. The Company cannot predict the outcome of the above matters or estimate the possible loss or range of loss, if any. Although the proceedings are subject to uncertainties inherent in the litigation process and the ultimate disposition of these proceedings is not presently determinable, management believes that the allegations by Arch in its counterclaims are without merit and that the ultimate resolution of these matters will not have a material adverse effect on the consolidated financial condition, results of operations or cash flows of the Company.

11. REGULATORY MANNERS

11. REGULATORY MANNERS	6 Months Ended
	Jun. 30, 2016
Regulatory Manners
NOTE 11 - REGULATORY MANNERS	The registered investment advisor (“RIA”) segment of Capital Financial Services, Inc. is subject to periodic examinations by its regulator, the Securities Exchange Commission (“SEC”). During 2016, the SEC conducted a routine examination of the CFS RIA. At the conclusion of its examination, the SEC issued an Examination Report with certain findings, asking the Company’s regulated entity to increase certain disclosures in, or add clarifications to, certain documents provided to customers of the CFS RIA and to certain agreements between the customers and the Company’s registered investment adviser. The registered investment adviser is currently working with its counsel to respond to the routine examination report.

12. SUBSEQUENT EVENTS

12. SUBSEQUENT EVENTS	6 Months Ended
	Jun. 30, 2016
Weighted Average Grant Date Fair Value, Exercised
NOTE 12 - SUBSEQUENT EVENTS	None

1. BASIS OF PRESENTATION (Polic

1. BASIS OF PRESENTATION (Policies)	6 Months Ended
	Jun. 30, 2016
Accounting Policies [Abstract]
Oil and Gas Properties	CNR follows the full cost method of accounting for crude oil and natural gas operations whereby all costs related to the exploration and development of crude oil and natural gas properties are capitalized into a single cost center (“full cost pool”). Such costs include land acquisition costs, geological and geophysical expenses, carrying charges on non-producing properties, costs of drilling directly related to acquisition, and exploration activities. Proceeds from property sales will generally be credited to the full cost pool with no gain or loss recognized, unless such a sale would significantly alter the relationship between capitalized costs and the proved reserves attributable to these costs. Capitalized costs are depleted and amortized on the unit-of-production method based on the estimated gross proved reserves as determined by independent petroleum engineers. The costs of unproved properties are withheld from the depletion base until such time as they are either developed or abandoned. When proved reserves are assigned or the property is considered to be impaired, the cost of the property or the amount of the impairment is added to costs subject to depletion and full cost ceiling calculations. For the six months ended June 30, 2016, depletion expense was $10,442. As of June 30, 2016, CNR held leasehold interests on acreage located in Gonzales and Taylor County, Texas, Lincoln County, Colorado and Divide and Williams County, North Dakota. CNR holds 50% non-operating working interest (36.25% Net Interest) in the Kifer Rozella 1, producing oil well, located in the County of Gonzales, state of Texas and non-operating working interest in an oil and gas property consisting of a twenty-five percent interest in three oil and gas leases covering approximately 618 acres in Taylor County, Texas. The oil and gas leases in North Dakota and Colorado are currently non-producing properties and non-operating leases. The Company assesses all items classified as unproved property on an annual basis, or if certain circumstances exist, more frequently, for possible impairment or reduction in value. As of June 30, 2016 the Company held non-producing and unproved properties in Lincoln County, Colorado and Divide and Williams County, North Dakota.
Oil and Gas Revenue	The Company recognizes oil and gas revenue for only its ownership percentage of total production under the entitlement method. There was no imbalance as of June 30, 2016.
Asset Retirement Obligations	Asset retirement obligation is included in other noncurrent liabilities and relates to future costs associated with the plugging and abandonment of crude oil and natural gas wells, removal of equipment and facilities from leased acreage and returning the land to its original condition. Estimates are based on estimated remaining lives of those wells based on reserve estimates, external estimates to plug and abandon the wells in the future, inflation, credit adjusted discount rates and federal and state regulatory requirements. The liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. As of June 30, 2016, asset retirement obligations were $2,907 and for the six months ended June 30, 2016 accretion expense was not significant.

6. STOCK WARRANTS, STOCK SPLI19

6. STOCK WARRANTS, STOCK SPLITS, AND STOCK OPTIONS (Tables)	6 Months Ended
	Jun. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Option activity	Number of Options Weighted Average Exercise Price per Share Weighted Average Grant Date Fair Value Aggregate Intrinsic Value Outstanding on January 1, 2015 336 $$5,400 $2,800 $- Granted - - - Exercised - - - Canceled 129 - - Outstanding on December 31, 2015 207 $$4,734 $4,388 $- Granted - - - Exercised - - - Canceled 28 5,000 3,670 Outstanding on June 30, 2016 179 $$4,571 $4,388 $-

8. EARNINGS PER SHARE (Tables)

8. EARNINGS PER SHARE (Tables)	6 Months Ended
	Jun. 30, 2016
Earnings Per Share [Abstract]
Schedule of Earnings Per Share	Three Months Ended June 30, 2016 Three Months Ended June 30, 2015 Numerator Denominator Per Share Amount Numerator Denominator Per Share Amount Net Loss $(36,343) (56,301) Less: Preferred Stock Dividends Income Available to Common Shareholders – Basic Earnings per Share $(36,343) 1,241 (29) (56,301) 1,241 $(45) Effect of Dilutive Securities: Preferred Stock Dividends Stock Options and Warrants Income Available to Common Shareholders – Diluted Earnings per Share $(36,343) 1,241 (29) (56,301) 1,241 $(45) Six Months Ended June 30, 2016 Six Months Ended June 30, 2015 Numerator Denominator Per Share Amount Numerator Denominator Per Share Amount Net Loss $(111,640) (66,861) Less: Preferred Stock Dividends Income Available to Common Shareholders – Basic Earnings per Share $(111,640) 1,241 (90) (66,861) 1,241 $(54) Effect of Dilutive Securities: Preferred Stock Dividends Stock Options and Warrants Income Available to Common Shareholders – Diluted Earnings per Share $(111,640) 1,241 (90) (66,861) 1,241 $(54)

9. SEGMENT REPORTING (Tables)

9. SEGMENT REPORTING (Tables)	6 Months Ended
	Jun. 30, 2016
Segment Reporting [Abstract]
Schedule of Segment Reporting	Holding Natural Resource Broker-Dealer As of, and for the three months ended: Company Activities Services Total 30-Jun-16 Commissions and fee income — — 4,321,334 4,321,334 Other fee income — — 49,911 49,911 Oil and gas revenue — 19,460 — 19,460 Other income (3,410 ) — (7,515 ) (10,925 ) Interest income 17 — 60 76 Interest expense (947 ) — — (947 ) Depreciation 688 160 11,158 12,006 Depletion — 4,990 — 4,990 Income (loss) before income tax benefit (expense) (90,442 ) (15,256 ) 71,973 (32,725 ) Income tax benefit (expense) 32,419 7,107 (42,144 ) (2,618 ) Net income (loss) (58,024 ) (8,148 ) 29,829 (36,343 ) Segment assets 558,517 872,582 3,139,641 4,570,740 Holding Natural Resource Broker-Dealer As of, and for the three months ended: Company Activities Services Total 30-Jun-15 Commissions and fee income — — 4,967,325 4,967,325 Other operating income — — 59,078 59,078 Oil and gas revenue — 8,672 — 8,672 Other income — — 6,612 6,612 Interest income 45 18,750 60 18,855 Interest expense (1,197 ) — (52 ) (1,248 ) Depreciation 965 — 9,277 10,242 Income (loss) before income tax benefit (expense) (8,110 ) (1,223 ) (42,965 ) (52,298 ) Income tax benefit (expense) (21,325 ) 480 16,842 (4,003 ) Net income (loss) (29,435 ) (744 ) (26,123 ) (56,301 ) Segment assets 786,161 801,645 3,429,385 5,017,191 Holding Natural Resource Broker-Dealer As of, and for the six months ended: Company Activities Services Total 30-Jun-16 Commissions and fee income — — 8,419,915 8,419,915 Other fee income — — 119,434 119,434 Oil and gas revenue — 33,136 — 33,136 Other income (3,529 ) — 2,497 (1,032 ) Interest income 33 16,206 120 16,359 Interest expense (947 ) (847 ) — (1,794 ) Depreciation 1,222 281 22,341 23,844 Depletion — 10,442 — 10,442 Income (loss) before income tax benefit (expense) (190,258 ) (26,317 ) 108,842 (107,733 ) Income tax benefit (expense) 41,428 11,443 (56,778 ) (3,907 ) Net income (loss) (148,830 ) (14,874 ) 52,064 (111,640 ) Segment assets 584,265 846,834 3,139,641 4,570,740 Holding Natural Resource Broker-Dealer As of, and for the six months ended: Company Activities Services Total 30-Jun-15 Commissions and fee income — — 9,652,155 9,652,155 Other operating income — — 134,337 134,337 Oil and gas revenue — 8,672 — 8,672 Other income 15,328 — 11,843 27,171 Interest income 96 37,500 119 37,716 Interest expense (3,399 ) — (52 ) (3,451 ) Depreciation 1,905 — 19,310 21,215 Income (loss) before income tax benefit (expense) (114,882 ) 5,912 111,519 2,549 Income tax benefit (expense) (23,377 ) (2,318 ) (43,715 ) (69,410 ) Net income (loss) (138,259 ) 3,594 67,804 (66,861 ) Segment assets 786,161 801,645 3,429,385 5,017,191

1. BASIS OF PRESENTATION (Detai

1. BASIS OF PRESENTATION (Details Narrative)	3 Months Ended	6 Months Ended
	Jun. 30, 2016USD ($)	Jun. 30, 2016USD ($)
Accounting Policies [Abstract]
Retirement obligations	$ 2,907	$ 2,907
Depletion expense	$ 4,990	$ 10,442

5. LINE OF CREDIT (Details Narr

5. LINE OF CREDIT (Details Narrative)	6 Months Ended
	Jun. 30, 2016USD ($)
Line of Credit Facility [Abstract]
Interest expense	$ 0
Outstanding line of credit	$ 0

6. STOCK WARRANTS, STOCK SPLI24

6. STOCK WARRANTS, STOCK SPLITS, AND STOCK OPTIONS (Details) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Summary of option activity
Number of options, Outstanding Beginning	207	336
Number of options, Granted	0	0
Number of options, Exercised	0	0
Number of options, Canceled	28	129
Number of options, Outstanding Ending	179	207
Weighted Average Exercise Price per Share, Beginning	$ 4,734	$ 5,400
Weighted Average Exercise Price per Share, Granted	0	0
Weighted Average Exercise Price per Share, Exercised	0	0
Weighted Average Exercise Price per Share, Canceled	5,000	5,000
Weighted Average Exercise Price per Share, Ending	4,571	4,734
Weighted Average Grant Date Fair Value, Beginning	4,388	2,800
Weighted Average Grant Date Fair Value, Granted	0	0
Weighted Average Grant Date Fair Value, Exercised	0	0
Weighted Average Grant Date Fair Value, Canceled	3,670	0
Weighted Average Grant Date Fair Value, Ending	$ 4,388	$ 4,388
Aggregate Intrinsic Value, Beginning	$ 0	$ 0
Aggregate Intrinsic Value, Ending	$ 0	$ 0

6. STOCK WARRANTS, STOCK SPLI25

6. STOCK WARRANTS, STOCK SPLITS, AND STOCK OPTIONS (Details Narrative) - shares	Jun. 30, 2016	Dec. 31, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Exercisable options	179	207

7. INCOME TAXES (Details Narrat

7. INCOME TAXES (Details Narrative)	6 Months Ended
	Jun. 30, 2016USD ($)
Income Tax Disclosure [Abstract]
Stock compensation recorded through tax expense	$ 1,098

8. EARNINGS PER SHARE (Details)

8. EARNINGS PER SHARE (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Earnings Per Share [Abstract]
Net (Loss) Income	$ (36,343)	$ (56,301)	$ (111,640)	$ (66,861)
Basic shares (Denominator)	1,241	1,241	1,241	1,241
Per Share Amount, Basic	$ (29)	$ (45)	$ (90)	$ (54)
Effect of Dilutive Securities:
Diluted shares (Denominator)	1,241	1,241	1,241	1,241
Diluted, per share amount	$ (29)	$ (45)	$ (90)	$ (54)

8. EARNINGS PER SHARE (Details

8. EARNINGS PER SHARE (Details Narrative)	Jun. 30, 2016$ / sharesshares
Options and warrants to purchase Common stock, outstanding | shares	389
Minimum [Member]
Options and warrants exercise price	$ 3,500
Maximum [Member]
Options and warrants exercise price	$ 14,300

9. SEGMENT REPORTING (Details)

9. SEGMENT REPORTING (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Commissions and fee income	$ 4,321,334	$ 4,967,325	$ 8,419,915	$ 9,652,155
Other operating income	49,911	59,078	119,434	134,337
Oil and gas revenue	19,460	8,672	33,136	8,672
Other income	(10,925)	6,612	(1,032)	27,171
Interest income	76	18,855	16,359	37,716
Interest expense	(947)	(1,248)	(1,794)	(3,451)
Depreciation	12,006	10,242	23,844	21,215
Depletion	4,990		10,442
Income (loss) before income tax benefit (expense)	(33,725)	(52,298)	(107,733)	2,549
Income tax benefit (expense)	(2,618)	(4,003)	(3,907)	(69,410)
Net income (loss)	(36,343)	(56,301)	(111,640)	(66,861)
Segment assets	4,570,740	5,017,191	4,570,740	5,017,191	$ 4,550,667
Holding Company
Commissions and fee income	0	0	0	0
Other operating income	0	0	0	0
Oil and gas revenue	0	0	0	0
Other income	(3,410)	0	(3,529)	15,328
Interest income	17	45	33	96
Interest expense	(947)	(1,197)	(947)	(3,399)
Depreciation	688	965	1,222	1,905
Depletion	0		0
Income (loss) before income tax benefit (expense)	(90,442)	(8,110)	(190,258)	(114,882)
Income tax benefit (expense)	32,419	(21,235)	41,428	(23,377)
Net income (loss)	(58,024)	(29,435)	(148,830)	(138,259)
Segment assets	584,265	786,161	584,265	786,161
Natural Resources
Commissions and fee income	0	0	0	0
Other operating income	0	0	0	0
Oil and gas revenue	19,460	8,672	33,136	8,672
Other income	0	0	0	0
Interest income	0	18,750	16,206	37,500
Interest expense	0	0	(847)	0
Depreciation	160	0	281	0
Depletion	4,990		10,442
Income (loss) before income tax benefit (expense)	(15,256)	(1,223)	(26,317)	5,912
Income tax benefit (expense)	7,107	480	11,443	(2,318)
Net income (loss)	(8,148)	(744)	(14,874)	3,594
Segment assets	846,834	801,645	846,834	801,645
Broker-Dealer Services
Commissions and fee income	4,321,334	4,967,325	8,419,915	9,652,155
Other operating income	49,911	59,078	119,434	134,337
Oil and gas revenue	0	0	0	0
Other income	(7,515)	6,612	2,497	11,843
Interest income	60	60	120	119
Interest expense	0	(52)	0	(52)
Depreciation	11,158	9,277	22,341	19,310
Depletion	0		0
Income (loss) before income tax benefit (expense)	71,973	(42,965)	108,842	111,519
Income tax benefit (expense)	(42,144)	16,842	(56,778)	(43,715)
Net income (loss)	29,829	(26,123)	52,064	67,804
Segment assets	$ 3,139,641	$ 3,429,385	$ 3,139,641	$ 3,429,385