Capital Financial Holdings, Inc. (“CFH”) derives the majority of
its revenues and net income from sales of mutual funds, insurance products,
and various other securities through Capital Financial Services, Inc. (“CFS”),
the Company’s broker-dealer subsidiary.
The Company organizes its current business units into three reportable segments:
Broker-Dealer Services, Holding Company and Natural Resource. The Broker-Dealer
Services segment distributes securities and insurance products to retail investors
through a network of registered representatives. The Natural Resource segment
seeks opportunities in petroleum and natural gas exploration and production.
The Company has been engaged in the financial services business since 1987.
The Company was incorporated September 22, 1987, as a North Dakota corporation.
The Company’s principal offices are located at 1 Main Street North, Minot,
North Dakota 58703.
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.
Capital Financial Holdings, Inc. derives the majority of its revenues and net
income from sales of mutual funds, insurance products, and various other securities
through Capital Financial Services, Inc. (“CFS”), the Company’s
broker-dealer subsidiary.
CFS’s primary source of revenue is commission revenue in connection with
sales of shares of mutual funds, insurance products, and various other securities.
CFS receives commission and Rule 12b-1 servicing revenue generated from the
sale of investment products originated by its registered representatives. CFS
also receives investment advisory revenue as a registered investment advisor.
CFS pays a portion of the revenue generated to its registered representatives
and retains the balance. Commission income and the related clearing expenses
are recorded based on the trade date. The revenue earned from 12b-1 is recognized
ratably over the period received. Investment advisory fees are derived from
account management and investment advisory services. These fees are determined
based on a percentage of the customer’s assets under sponsor management
or a flat fee, may be billed monthly or quarterly and recognized ratably over
the period received. The preparation of consolidated financial statements in
conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Virtually all aspects of the Company’s businesses are subject to various
complex and extensive federal and state laws and regulations. Regulated areas
include, but are not limited to, the effecting of securities transactions, the
financial condition of the Company’s subsidiaries, record-keeping and
reporting procedures, relationships with clients, and experience and training
requirements for certain employees. The Company’s subsidiary, Capital
Financial Services, Inc. (“CFS”), is registered with various federal
and state government agencies, including the SEC.
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