Untitled Document

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This document contains "forward-looking statements". All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words "may," "could," "estimate," "intend," "continue," "believe," "expect" or "anticipate" or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement. You should, however, consult further disclosures we make in future filings of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Although we believe the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to, those referenced in or set forth in "Item 1A. Risk Factors" in this document.

Throughout this Quarterly Report references to "we", "our", "us", "Capstone", "CAPP", "the Company", and similar terms refer to Capstone Financial Group, Inc.

We file annual, quarterly and other reports and other information with the SEC. You can read these SEC filings and reports over the Internet at the SEC's website at www.sec.gov or on our website at www.capstonefinancialgroupinc.com. You can also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, NE, Washington, DC 20549 on official business days between the hours of 10:00 am and 3:00 pm. Please call the SEC at (800) SEC-0330 for further information on the operations of the public reference facilities. We will provide a copy of our annual report to security holders, including audited financial statements, at no charge upon receipt to of a written request to us at Capstone Financial Group, Inc., 2600 Michelson Drive, Suite 700, Irvine, CA 92612.

OVERVIEW AND OUTLOOK

Capstone Financial Group, Inc. ("Capstone" or the "Company") was incorporated in the State of Nevada in July of 2012 as Creative App Solutions, Inc. Creative App Solutions, Inc. was formed to design and sell mobile apps for smart phones and other mobile platforms such as tablets.

On August 26, 2013, we changed our name from Creative App Solutions, Inc. to Capstone Financial Group, Inc.

In September 2013, we effectuated a 20 for 1 forward split of the Company's issued and unissued common stock. Immediately after the forward split, the number of shares issued and outstanding increased to 90,200,000. The number of authorized shares increased from 100,000,000 to 2,000,000,000 common shares.

During the second quarter of 2013, we changed our business plan to offer financial services and consulting to businesses. In this business we relied heavily on an officer and director of the Company who holds the proper licensing to conduct such business.

On January 15, 2014, the Company completed the reverse triangular merger, pursuant to the Acquisition Agreement and Plan of Merger ("Merger"), by and among Capstone Sub Co., a Nevada corporation and wholly owned subsidiary of the Company, and Capstone Affluent Strategies, Inc. ("Affluent"), a California corporation, whereby Affluent became a wholly owned subsidiary of the Company. The sole stockholder of Affluent was Darin Pastor, and the purpose of the acquisition was to further a new business focus of the Company.

Pursuant to the Merger, the Company issued 1,000 shares of its restricted common stock in exchange for 100% of Affluent's issued and outstanding common stock.

On May 14, 2014, the Company executed a Rescission of Acquisition Agreement and Plan of Merger (the "Rescission Agreement") effectively unwinding the Affluent transaction. The motivation being Affluent's inability to produce audited financial statements as required per the Merger Agreement.

In August 2014, the Company purchased 10,987,500 shares of common stock of Twinlab Consolidated Holdings, Inc. ("Twinlab") in private transactions from 25 shareholders, for total consideration of $3,296.

Additionally, in August 2014, the Company purchased options to acquire 8,743,000 currently-outstanding shares of Twinlab's Common Stock (collectively, the "Stock Option") from 14 shareholders in a private transaction, for total consideration of $2,623. The Stock Option is exercisable at $0.0001 per share and expires in August 2015. In February 2015 the Company exercised the Stock Option. Optioners honored the exercise price as to 7,244,500 Twinlab shares. Other optioners have not yet honored the exercise, as to at least 1,498,500 Twinlab shares.

In September 2014, Twinlab issued a Series A Warrant to the Company to purchase up to 52,631,579 shares of Twinlab's Common Stock at an exercise price of $0.76 per share (the "First Warrant"). The First Warrant is exercisable from October 2014 through October 2017.

Twinlab also issued a Series B Warrant to the Company on September 2014 (the "Second Warrant"). Pursuant to the Second Warrant, the Company has the right to purchase up to 22,368,421 shares of Common Stock at an exercise price of $0.76 per share. The Second Warrant is 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 does not exercise the First Warrant by February 16, 2015 at a rate of no less than 1,461,988 shares of Common Stock ("the Minimum Amount") per month over the term of the First Warrant (the "Minimum Rate"), Twinlab has the right (subject to certain conditions) to require the Company to exercise the First Warrant monthly at the Minimum Rate for the duration of the First Warrant. The Company has not exercised the "Minimum Amount" of shares per the agreement but Twinlab has not yet exercised the put, and the Company still plans to be able to exercise the Minimum Amount.

During the first quarter of 2014 the Company changed its business plan and will use capital to acquire the outstanding stock of other companies, working closely and constructively with the management and boards of those companies, and aiming to significantly enhance their long-term earnings power and thus increase shareholder value. The Company will also seek to actively trade in our strategic investment positions and enter into private securities transactions with those positions to capitalize on price fluctuations and realize profits or minimize losses.

Capstone continuously investigates possible acquisitions of positions in new businesses, securities and assets, and evaluates the retention and disposition of our existing holdings. Changes in the mix of our businesses and investments should be expected. Capstone Financial Group, Inc. ("Capstone" or the "Company") was incorporated in the State of Nevada in July of 2012 as Creative App Solutions, Inc. Creative App Solutions, Inc. was formed to design and sell mobile apps for smart phones and other mobile platforms such as tablets.

Current Strategic Investments

As of June 30, 2014, the Company held equity securities originally purchased for $2,919 which are valued at $0.

A large number of entities compete with us to make the types of investments that we target as part of our business strategy. We compete for such investments with a large number of venture capital funds, other equity and non-equity based investment funds such as business development companies, mutual funds, investment banks and other sources of financing, including traditional financial services companies such as commercial banks and specialty finance companies. Many of our competitors are substantially larger than us and have considerably greater financial, technical and marketing resources than we do. In addition, some of our competitors may require less information than we do and/or have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than we can.

There can be no assurance that the competitive pressures we face will not have a material adverse effect on our business, financial condition, and results of operations. Also, as a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we can offer no assurance that we will be able to identify and make investments that are consistent with our investment objective.

Results of Operations for the Three Months Ended June 30, 2014 and June 30, 2013

Revenue. Total revenue for the three months ended June 30, 2014 increased from $0 compared to the same period in 2013 as trading revenues were $13,584 compared to $0 in 2013, and interest income - related party was $10,188 for the current quarter.

Payroll expense. Payroll expenses for the three months ended June 30, 2014 and 2013 were $45,821 and $0 respectively, as a result in the change of our primary business focus in the first quarter of 2014.

Professional fees. Professional fees for the three months ended June 30, 2014 and 2013 were $102,960 and $45,148, respectively, for an increase of $57,812 or 128% due to increased legal fees.

General and administrative. General and administrative expenses (other than payroll and professional fees) for the three months ended June 30, 2014 and 2013 were $186,876 and $752, respectively representing an increase of $186,124. The increase was a result of our commencement of active operations.

Interest expense - related party. Interest expense to related parties for the three months ended June 30, 2014 was $7,008 as opposed to $150 in the same period of 2013.

Results of Operations for the Six Months Ended June 30, 2014 and June 30, 2013

Revenue. Total revenue for the six months ended June 30, 2014 increased compared to zero revenues in the same period of 2013. Trading revenues net were $13,584 and interest - related party was $18,695 in the current period.

Payroll expense. Payroll expenses for the six months ended June 30, 2014 and 2013 were $122,155 and $0 respectively, as a result in the change of our primary business focus in the first quarter of 2014.

Professional fees. Professional fees for the six months ended June 30, 2014 and 2013 were $185,522 and $109,096, respectively, for an increase of $76,426 or 70% due to increased legal fees.

General and administrative. General and administrative expenses (other than payroll and professional fees) for the six months ended June 30, 2014 and 2013 were $365,936 and $1,433, respectively representing an increase of $364,503. The increase was due to full operations in the first six months of 2014.

Interest expense - related party. Interest expense to related parties for the six months ended June 30, 2014 was $11,831 as opposed to $298 in the same period of 2013.

As of June 30, 2014, we had $9,466 in cash and cash equivalents, $0 in financial instruments owned at fair value, $25,237 in receivables, $731,980 in the net receivable line of credit, net, and $175,800 in deposits. We are cash poor.
The company's inability to raise additional capital raises questions about our ability to continue as a going concern. Since inception, we have financed our cash flow requirements through issuance of common stock. As we continue and expand our activities, we may continue to experience net negative cash flows from operations.

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 in the next twelve months. Our limited operating history makes predictions of future operating results difficult to ascertain. In the future, we anticipate obtaining additional financing to fund operations through common stock offerings and related-party debt advances, to the extent available.

The following table provides detailed information about our net cash flow for the six-month periods presented in this Quarterly Report.

For the six months ended June 30,

2014 2013

Net cash used in operating activities $ (747,797) $ (110,381)

Net cash provided by financing activities 757,263 107,200

Net increase (decrease) in Cash 9,466 (3,181)

Cash , beginning - 6,140

Cash, ending $ 9,466 $ 2,959

Net cash used in operating activities was $747,797 for the period ended June 30, 2014 compared to $110,381 for the six months ended June 30, 2013. The Company implemented fair value accounting practices for its investments during the first quarter of 2014.

Net cash provided by financing activities for the periods ended June 30, 2014 and 2013 was $757,263 and $107,200, respectively and was mainly attributable to capital raised through the sale of common stock.

As we expand our activities, we may continue to experience net negative cash flows from operations, pending receipt of significant operating revenues. Additionally, we anticipate obtaining financing to fund operations through common stock offerings, to the extent available, or to obtain additional debt financing to the extent necessary to augment our working capital. In the future, we need to generate sufficient operating revenues in order to eliminate or reduce the need to sell additional stock or obtain loans. There can be no assurance we will be successful in raising the necessary funds to execute our business plan.

Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by new or emerging companies.
There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.

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.

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States 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 1 - Summary of Significant Accounting Policies in our Notes to Consolidated Financial Statements.

Capstone Financial Group Inc

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Capstone Financial Group, Inc. ("Capstone" or the "Company"

Form 10-Q/A for CAPSTONE FINANCIAL GROUP, INC.

OVERVIEW AND OUTLOOK

On August 26, 2013, we changed our name from Creative App Solutions, Inc. to Capstone Financial Group, Inc.

Current Strategic Investments